Suggestions for a practical way to manage Contract Review

R

rdesmond

#1
Hello! I was hoping for some ideas / suggestions for a practical way to manage Contract Review. Specifically, our non-Medical part of the business, we have a relatively varied customer base & a high volume of orders. Many customers send a multi-page terms & conditions which would truly require a team of lawyers on staff to pore through and vette. I was hoping (?) that we might be able to, as part of our Order Confirmation process indicate, here are our T & Cs - we comply with X, Y, Z standards, delivery precision requires non-ground terms (i.e. we have many instances where customers want Ground and ding us for a day early on delivery & even get CA requests to fix it! That we confirm our ship date & note that ground has no guarantee - I wonder if some combination would be acceptable. Any help is appreciated!! Thanks!! :bigwave:
 
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S

silentrunning

#2
Re: Contract Review Question

Desmond, your customer is the one to ask. Every company has different requirements as you know. I don't see how you could sell to several types of businesses and cover all contract review with one blanket process. Unfortunately, going over the purchase orders is a part of my job and it takes hours. If I miss one item it can cost us money or worse! I hope some people will jump in with good ideas because I too could use some relief on this.
 

Wes Bucey

Prophet of Profit
#3
Re: Contract Review Question

Yep! Customers can be a big Pain in the Axel, especially when they want to gig you for early delivery.

Be sure to make a differentiation between a request for quote and an actual purchase order. RFQ is an invitation to negotiate on ALL terms, not just price. Your quote and P.O. should be compared point by point for differences, then for the impact of those differences and whether they are agreeable and achievable. A P.O. with different terms than your quote should be considered a counteroffer to your quote and an opening to renegotiate EVERY term and condition. Your quote should say something to the effect "no terms or conditions may be added or subtracted without specific notice outlining the changes to be negotiated and jointly agreed." Your company attorney should be able to give you boilerplate language to cover this aspect.

There are "some" streamlining tips, but mostly suppliers have to make sure they don't agree to the impossible.

First, you can divide most customer requirements into a few categories. I found in the high tech machining business that these were the categories which affected us:

  1. product specifications - these were absolutely crucial
  2. inspection and documentation criteria (always jointly agreed and often negotiated before agreement)
  3. delivery dates - we would only agree to "windows" of several days unless the customer agreed to a surcharge for priority shipping and handling. JIT usually only works when supplier ships in his own vehicles - trains, planes, boats, and trucks operated by 3rd parties can't be guaranteed. (That said, customers usually have a legitimate reason to forbid early shipment, often having to do with storage and production logistics.)
Minor issues usually involved response time to ANY communication or a requirement for electronic notice of shipment. Rarely, some customers would require special packaging - always at an adjusted price. Nobody got an opportunity to slip in a requirement not present in the original quote.

Issues like price rarely became an issue. Once we had a customer issue an order for a small quantity at the same price we had quoted for a much larger quantity. We just phoned and said, "Price at this quantity should be X dollars per unit, not Y dollars. Pleased issue a corrected purchase order to reflect either the quoted quantity or the new price." We received the corrected order by FAX while we remained on the phone.
 
R

rdesmond

#4
The more I look into this subject...eep! We have customers who send us a P.O. referencing their "terms & conditions" which, in some cases, state "anything stated in your quote is trumped by our T & C & by accepting our P.O. that constitutes acceptance of all of our conditions even if we stated them in our quote." I am coming up w/ a proposal for communicating w/ customers which outlines our 'rules of the road,' however we are a small company & have multi-billion dollar customers. The delivery issue is the most problematic. There is an insistence on using ground delivery - of course for cost & we simply do not control logistics companies. We make our best plans - err on the side of early, however we are getting more & more dings for early deliveries w/ CA requests. That calendar not business days are used for calculation is particularly problematic.

I also have the issue of many requested delivery changes from customers - for which we accommodate if we can - even though we have these requests via e-mail (in writing), our customers do not update their P.O.s - same deal - we get dinged - have to research & provide - here's all the communication showing date changes & in fact, we complied with all customer terms. It takes time, resources - all non-value added. Any help is very much appreciated!
 

Ninja

Looking for Reality
Trusted Information Resource
#5
The more I look into this subject...eep! We have customers who send us a P.O. referencing their "terms & conditions" which, in some cases, state "anything stated in your quote is trumped by our T & C & by accepting our P.O. that constitutes acceptance of all of our conditions even if we stated them in our quote." ...<snip>
Howdy,
The language on their PO came from a lawyer. Before laying down "rules of the road" with customers...run them by your own lawyer.
There are good suggestions up above from folks who aren't lawyers (assumed).
And some of those suggestions are....get a lawyer invloved.

Please accept this as my seconding of "get a lawyer involved".
 

Wes Bucey

Prophet of Profit
#6
Yep! Customers can be a big Pain in the Axel, especially when they want to gig you for early delivery.

Be sure to make a differentiation between a request for quote and an actual purchase order. RFQ is an invitation to negotiate on ALL terms, not just price. Your quote and P.O. should be compared point by point for differences, then for the impact of those differences and whether they are agreeable and achievable.

A P.O. with different terms than your quote should be considered a counteroffer to your quote and an opening to renegotiate EVERY term and condition. Your quote should say something to the effect "no terms or conditions may be added or subtracted without specific notice outlining the changes to be negotiated and jointly agreed." Your company attorney should be able to give you boilerplate language to cover this aspect.

There are "some" streamlining tips, but mostly suppliers have to make sure they don't agree to the impossible.
<SNIP>
  1. delivery dates - we would only agree to "windows" of several days unless the customer agreed to a surcharge for priority shipping and handling. JIT usually only works when supplier ships in his own vehicles - trains, planes, boats, and trucks operated by 3rd parties can't be guaranteed. (That said, customers usually have a legitimate reason to forbid early shipment, often having to do with storage and production logistics.)
Minor issues usually involved response time to ANY communication or a requirement for electronic notice of shipment. Rarely, some customers would require special packaging - always at an adjusted price. Nobody got an opportunity to slip in a requirement not present in the original quote.

Issues like price rarely became an issue. Once we had a customer issue an order for a small quantity at the same price we had quoted for a much larger quantity. We just phoned and said, "Price at this quantity should be X dollars per unit, not Y dollars. Pleased issue a corrected purchase order to reflect either the quoted quantity or the new price." We received the corrected order by FAX while we remained on the phone.
Before doing ANY of the things I suggest, make sure the top bosses in your outfit are on board with it - there are some bosses who do NOT like employees to take initiative! Those bosses "may" need to consult with attorneys. Good if they do, but not disastrous if they don't.

The more I look into this subject...eep! We have customers who send us a P.O. referencing their "terms & conditions" which, in some cases, state "anything stated in your quote is trumped by our T & C & by accepting our P.O. that constitutes acceptance of all of our conditions even if we stated them in our quote."
The simple to say, but often difficult to do when bills are pressing and competitors aren't quite so choosy, solution is to REOPEN the negotiation. Any lawyer will tell you that what you describe is a "counter proposal" if ANY of the terms are changed and invalidates your previous quote or proposal - when a customer unilaterally changes terms, only weak suppliers accept such change without a fight.
I am coming up w/ a proposal for communicating w/ customers which outlines our 'rules of the road,' however we are a small company & have multi-billion dollar customers. The delivery issue is the most problematic. There is an insistence on using ground delivery - of course for cost & we simply do not control logistics companies. We make our best plans - err on the side of early, however we are getting more & more dings for early deliveries w/ CA irequests. That calendar not business days are used for calculation is particularly problematic.
Delivery is a crucial factor in many operations, both customer and supplier. Sometimes you need a top officer in the supplier to negotiate with someone higher up in the customer company than the purchasing clerk who often has no latitude to make exceptions. Holding stock for JIT [to avoid early delivery] is an extra expense which needs to be factored into price.
I also have the issue of many requested delivery changes from customers - for which we accommodate if we can - even though we have these requests via e-mail (in writing), our customers do not update their P.O.s - same deal - we get dinged - have to research & provide - here's all the communication showing date changes & in fact, we complied with all customer terms. It takes time, resources - all non-value added. Any help is very much appreciated!
When email became a factor versus snail mail or faxes, we simply printed out the email change and attached it to the shipping document with a big bold notice of the change, referring to the attached copy of the change - never had a problem with a clerk not "getting in the loop" on the changes after we made that small change. In general, it is OK to assume the customer's internal communication is SNAFU and to attach copies of ANY changes (designs, specs, quantities, delivery dates, packaging, etc.) to the shipping documents. Often the extra cost in paper, copying, and manpower to prepare such attachments saves dozens of times that just by eliminating one "ding" which has to be explained or alibied, often with many more copies and manpower than if the strike had been preemptive versus reactive.
 
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