Supplier (Vendor) Contract Review Process

I

inayat

#1
Hi All,

I am looking at documents for the Vendor contract review processes. I want to have a look at all the vendor contracts at the end of a particular period and see if the terms and conditions have been met. Any checklist, flowchart or any other documents that can be provided will be great. Also, wanted to know if there is a technical term for this process. I believe it is Vendor Contract Review and Reconcilation.

Thanks in advance.
 
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harry

Super Moderator
#2
Re: Suppler (Vendor) Contract Review Process

Welcome to the Cove.

The term 'contract review' found here is no more in used in ISO 9001: 2000 onwards but still found in TS 16949. Basically, it consist of 2 parts - 'determination' and 'review' of requirements related to the product carried out before one enters into an agreement to supply a product or service.

This is different from the information that you are searching (related to vendor and the financial world).
 

Wes Bucey

Quite Involved in Discussions
#3
Re: Suppler (Vendor) Contract Review Process

Hi All,

I am looking at documents for the Vendor contract review processes. I want to have a look at all the vendor contracts at the end of a particular period and see if the terms and conditions have been met. Any checklist, flowchart or any other documents that can be provided will be great. Also, wanted to know if there is a technical term for this process. I believe it is Vendor Contract Review and Reconcilation.

Thanks in advance.
Welcome to the Cove.

The term 'contract review' found here is no more in used in ISO 9001: 2000 onwards but still found in TS 16949. Basically, it consist of 2 parts - 'determination' and 'review' of requirements related to the product carried out before one enters into an agreement to supply a product or service.

This is different from the information that you are searching (related to vendor and the financial world).
I agree with Harry to the extent less emphasis should be put on a title for the process than on the function of the process.

In the circumstances you have outlined, you seem to be concerned in creating a "score sheet" to determine how well existing suppliers are performing. Certainly one of the factors is comparing performance to the terms of the contract, but, often, the pesky little annoyances that create friction between customer and supplier are never included in most contracts. Without going into an exhaustive list of irritants, let me hasten to add it is rarely ONE SINGLE irritant, but an accumulation of them which result in "just one more straw" which destroys a customer-supplier relationship. Hence frequent review and instant communication about such irritants and subsequent resolution usually prevents an accumulation which ultimately destroys any relationship, whether it be customer-supplier (or a friendship or a marriage!)


One of MY irritants (not necessarily anyone else's) is an attitude of trying to fix blame, rather than working toward a solution. I recognize this irritant is a two-way street and so I consciously avoid rushing to blame and, instead, try to say, "How can WE fix this together?" instead of the accusatory threat, "YOU better fix this or else . . . !"
 

somashekar

Staff member
Super Moderator
#4
Hi All,

I am looking at documents for the Vendor contract review processes. I want to have a look at all the vendor contracts at the end of a particular period and see if the terms and conditions have been met. Any checklist, flowchart or any other documents that can be provided will be great. Also, wanted to know if there is a technical term for this process. I believe it is Vendor Contract Review and Reconcilation.

Thanks in advance.
Welcome to the cove inayat ~~~
There can be several types of contracts between vendor and buyer like:
Supplier quality agreement
Purchasing agreement
Rate contract
Non disclosure agreement
Sub-contracting norms ... etc,
each of which are for a specific purpose.
As a part of supplier re-evaluation, do you want to check how the terms of any of such contracts have been continually respected ?
Reconciliation is more of an accounts term if I am correct. Can you be more specific what you would like to do ?
 
Last edited:
I

inayat

#5
Welcome to the cove inayat ~~~
There can be several types of contracts between vendor and buyer like:
Supplier quality agreement
Purchasing agreement
Rate contract
Non disclosure agreement
Sub-contracting norms ... etc,
each of which are for a specific purpose.
As a part of supplier re-evaluation, do you want to check how the terms of any of such contracts have been continually respected ?
Reconciliation is more of an accounts term if I am correct. Can you be more specific what you would like to do ?
Thank you all for your replies. I think that I was not specific in my requirements. I am talking about large organization entering in to a contract with the vendors. At some point of time especially in large organizations they have penalties if a particular condition was not met... Here the base process would be to check all the Purchase Orders and their respective deliveries. In other words I just want to look at contract compliance and report accordingly. I am looking for an overall general flowchart or any other document which will give me an outline of the process. Any help will be appreciated. Thanks in advance.
 

Wes Bucey

Quite Involved in Discussions
#6
Thank you all for your replies. I think that I was not specific in my requirements. I am talking about large organization entering in to a contract with the vendors. At some point of time especially in large organizations they have penalties if a particular condition was not met... Here the base process would be to check all the Purchase Orders and their respective deliveries. In other words I just want to look at contract compliance and report accordingly. I am looking for an overall general flowchart or any other document which will give me an outline of the process. Any help will be appreciated. Thanks in advance.
My belief and practice is that it's more important to have good communication with suppliers so they willingly come forward BEFORE a deviation from a contract occurs to alert the customer. With notice, possible damage to the customer can be avoided or at least ameliorated. I find this approach much more valuable than scouring contracts and matching performance against the contract so the customer can play "GOTCHA!" with the supplier.

I guess the word "penalties" really sticks in my craw because it is so closely tied to "punishment."
 
I

inayat

#7
My belief and practice is that it's more important to have good communication with suppliers so they willingly come forward BEFORE a deviation from a contract occurs to alert the customer.
I guess the word "penalties" really sticks in my craw because it is so closely tied to "punishment."
I agree with you. However we are an outsourcing company and we are receiving some inquiries regarding this. Before we can go ahead and start rolling this out to the customers we need to completely understand the same. We have got some of the documents but just wanted to see if there are any flow charts or process related documents before we can roll this to the customer.
 
C

cbabin

#9
I am new to this position as QA manager but have 20+ years in quality. I have created many documents but for the life of me I am having a problem with creating a contract review template. So if anyone out there has suggestions or maybe a template they care to share I would greatly appreciate it.
 

Wes Bucey

Quite Involved in Discussions
#10
I agree with you. However we are an outsourcing company and we are receiving some inquiries regarding this. Before we can go ahead and start rolling this out to the customers we need to completely understand the same. We have got some of the documents but just wanted to see if there are any flow charts or process related documents before we can roll this to the customer.
OK
Here's the deal as I see it.

Almost everything hinges on the original supplier approval process.

I advocate different processes for different suppliers based on any or all of these criteria (not a compete list):

  1. custom made or off-the-shelf?
  2. large stable organization with long history and good reviews from others (I do NOT mean ISO registration here)
  3. common product available from many suppliers or sole [or limited] source?
  4. product critical to customer's process?
  5. will supplier use customer's materials or tooling?
  6. does supplier need governmental license or registration?
  7. what's the worst that can happen if supplier delivers: late? nonconforming goods? partial shipment?
Depending on the answers to those and other questions, the customer can make contract provision for any or all of the following:

  1. short notice audit to view work in process
  2. instant reclamation of material or tooling (lots of reasons for this provision)
  3. tickler system to check on license/registration status
  4. split order between two suppliers, each with knowledge of the other
  5. create safety stock backup (maybe offsite in neutral warehouse - to avoid triggering payment prior to actual need) - in practice, product is delivered to warehouse and FIFO to customer, maintaining sufficient safety to continue production in case of ANY problem with original supplier delivering conforming goods on time.

Note: my method is to cover as many contingencies as possible before entering into a contract by working very hard on a smooth, efficient approval process. Then, to make the contract contingencies (safety stock, alternate supplier, etc.) as open and transparent as possible so no one gets into finger pointing when the supply chain hiccups.

All issues can then be resolved WITHOUT punishing or penalizing a supplier or arguing over whether the hiccup is due to blame or "act of God."

There are plenty of consultants around who can help an organization craft such a process to assure as smooth a supply chain as possible. It is a very small part of my own practice, but I frequently work it into an overall business strategy for client organizations. I'm sure many other consultants do something similar.

Some may argue this is an unnecessary expense, but I see it as risk management to avoid the horrendous expense and disruption which ensue when such contingencies are NOT provided. It all depends on how risk averse the organization and its managers are.
 
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