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Things To Remember While Drafting Procurement Terms and Conditions

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Procurement and supply chain are two of the most important aspects of an organisation aimed at giving an effective impetus to businesses, especially the manufacturing industries. Therefore, error-free, indelible terms and conditions should be posited to ensure abrogation of uncertainty and contingent legal proceedings in the case of faltering lines along the procurement process.

There are myriads of cases where the absence of legally binding terms and conditions has landed business owners in a marsh. Hence, it becomes crucial to have valid documentation of both the parties: Suppliers and Consumers.

However, the major essence of having fool-proof documentation comes in the form of its content and the conditions upon which the supplier-consumer partnership stands. The significant points to look after are time limits, products or goods' standards, items' pricing, and ethical policies.

Essential Aspects of a T&C Document

It is crucial to analyse the conditions which form the basis of a contract forming the gateway to the implications of the quality, quantity, and other aspects of a product. The conditions have to be abided by on both sides of the agreement and should be ensured to work in the best interest of both parties.

Ensuring quality: The risk of having a substandard quality of products is one of the most minacious factors for customers. The substandard quality of raw materials in an organisation's procurement process is tantamount to the subpar quality of the furnished products. Not only does this degrade the quality of the products catered to by an organisation, but it also blemishes the image of an organisation.

However, one of the most crucial aspects of this point is the elusiveness of the word 'poor quality'. The ambiguity brewed around the quality parameter needs to be conspicuously mentioned in the documents governing the terms and conditions. What a client organisation might consider a deformity might not run on the same lines as the suppliers. Hence, the dichotomy in inference drawn from the word should not be ticked off. The need is to keep the records straight.

Often the entailment of such vague terms can supplant the whole procedure of partnership, procurement, and deals.

Ensuring the Prices Beforehand: The factor of economies is one of the most capricious dynamics out of all the threats. Prices could be highly volatile and might waver all through the process of procurement, right from production to delivery. Therefore, the conditions acting upon the price hikes and troughs must be adequately evaluated.

Quite frequently, the prices change from the time the deal seal. Obviously, suppliers would want to stick to the terms and regulations in relation to the highest price trend for the catered raw material. On the other hand, it would not be in the client's best interest to pay the highest-ranking prices. Hence, it is paramount to be vigilant in order to get clarity on the prices that are governing the deal.

One best shot to shoot would be defining the period to be considered for the change in prices. For instance, the period from January-April or 20xx-20yy would be considered while averaging the price for production and supply. In this way, the hassles of teetering prices could be palliated.

Ensuring the TAT (Turnaround Time) for the Delivery of the Product

The turnaround time is yet the most important factor to be considered while penning the conditions administering the deal. Often the good quality of products is seen strangulating the expected delivery time, while sometimes quick delivery witnesses a poor-quality grade. Hence, the documentation should mention the delivery time beyond which the suppliers would be liable to be penalised.

Clients, too, can consider the allowed delay of time due to unforeseen situations and critical delays of the delivery.

Other Conditions that Could be Considered

Apart from the above-mentioned terms, other conditions should be mentioned as well in relation to the deal as per the parties.

  • Ensuring a sustainable mode of production.
  • Restriction of the usage of a certain grade of products.
  • Ensuring no illegal practices.
  • Ensuring no sourcing of raw materials from a particular area.
  • Ensuring a healthy workforce and prevention of human violation.

Documentation and regulatory terms could be difficult to manage and implicate if the current trends, such as innovations, alternatives of products, and price dynamics, are not kept abreast. Hence, it is pivotal for organisations to consult the experts, such as Procurement Resource, to have a guided approach channelling towards the lack of anomalies in the conditions.

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