The food and agriculture industry plays a more than essential role in the French economy, contributing to both economic growth and the country's food security. And as we enter a new post-Covid-19 era, marked by growing concerns over health, quality, traceability, sustainability and flexibility, companies in this sector face new challenges and opportunities.
To drive this transformation quickly, they need to increase their capacity to react and adapt their production and supply chain models according to markets and the requirements of their clients and end consumers. This is illustrated, in particular, by the search for new partners and a complete overhaul in the selection of suppliers and service providers.
One consequence of these developments is an increase in the complexity of commercial and contractual relationships. In such cases, contract management proves to be an essential tool for companies seeking to successfully navigate this type of challenge.
Unfortunately, even though it has more than proven its worth in other sectors such as aerospace, energy and IT/telecoms, it suffers from a genuine lack of awareness among players in the fast-moving consumer goods (FMCG) world.
In this article, we share our experience of the impact this discipline can have in the food and agriculture industry.
A clear lack of maturity in contract management
Despite its rise in France over the past fifteen years, contract management remains little known in FMCG industries, and particularly in the food and agriculture sector, which dominates it.
Confusion with the role of the lawyer
As we have already mentioned in our previous publications, and this is not unique to the food and agriculture sector, there is first of all confusion between the role of the lawyer and that of the contract manager, which are nonetheless different.
While the lawyer's role tends to focus more on contract administration (deadlines, termination, archiving, as well as analysis and summarising) or on guiding decisions on purely legal aspects, the contract manager's role focuses on the operational aspects of the contract lifecycle. They complement the lawyer perfectly through their knowledge and handling of financial elements and technical matters, and their ability to manage projects end to end and coordinate all stakeholders.
This conflation has the effect of perpetuating the lack of understanding of the contract management function and limiting its development among food and agriculture manufacturers.
A lack of maturity
Today, the FMCG sector accounts for around 1% of contract managers' assignments. This figure explains the low level of use and maturity of this function among these companies. The companies concerned tend to turn to this discipline to deal with slippages or following failures on major projects, but rarely as part of a proactive approach aimed at protecting their margins and better understanding the increasing complexity of their commercial and contractual relationships.
Yet the operational, proactive approach and the broad scope of intervention of the contract manager, from pre-contract through to execution monitoring, make them a partner of choice at the heart of projects.
Why call on a contract manager?
Companies have realised that a contract must be properly managed from start to finish. And while this function was previously focused on major projects, today every strategic or long-term contract requires rigorous monitoring in terms of contract management.
Poor contract management & administration can lead to a fall in a company's revenue of up to 10%. In a difficult economic climate, growth targets are already hard enough to achieve without adding this risk of losing competitiveness or creating tension with business partners. To address this, companies now need specialist professionals capable of mastering the operational, technical, financial and even legal aspects of their projects.
Strengthening a 360° view of the project
This involves, in particular, increasing interactions between stakeholders and constantly bringing clarity and transparency to the contractual process.
Because a contract has several dimensions, and a contract is not just a contract, the contract manager's role, in order to best protect the interests of the parties, is to fully support all departments in taking their needs and constraints into account, with the greatest possible precision. Highly operational, they naturally take an interest in the legal aspects, monitor project progress and the technical issues that arise along the way, the required quality levels, and also take the financial side into account.
This 360° and long-term view gives them undeniable added value, making them a central player in the project, and this is how they perfectly complement the legal department, where one exists.
Strengthening performance and growing margins
The contract manager produces material, reports, summaries, advice, support, performance and management indicators, contractual and financial analyses, and alerts. They actively take part in project, governance and strategic meetings, ensuring that all expressed needs are always given due consideration. They also understand technical issues (even though they are not an operational expert), and know the purchasing strategy, which they can highlight during contract negotiation and drafting.
More specifically, for food and agriculture companies, their work will, for example, enable:
- the operations or manufacturing department to better sequence the project according to the prerequisites of other departments within the company, and to better define the specifications;
- the procurement department to better define tender criteria;
- costs and losses to be optimised and reduced in line with the finance department's objectives;
- them to act as a bridge between the legal department, working to protect the company's interests, and the operational teams, more focused on delivering the project;
- them to help the supply chain department address issues specific to logistics management (efficiency of supply flows, remedies for shortages, timing compliance, etc.), transport, product delivery, and the management of penalties and disputes;
- and, more broadly, relieve the workload of teams, particularly the operational/manufacturing department and legal teams.
This approach necessarily fosters better-quality coordination between different departments, which was one of the main requests on the projects we have supported. We have also observed better consideration of opportunities (going further in process automation, reviewing supply and supplier selection policies), and it helps identify levers for improving margins, in particular by easing pressures and disputes with large retail (GMS) clients.
When should they get involved?
As we have seen above, one of the differences between a lawyer working in the food and agriculture sector and a contract manager lies in the fact that the latter's role is dedicated to managing the entire contract lifecycle from an operational standpoint. The lawyer, on the other hand, is generally called upon to handle the company's various legal matters, which does not allow them to be in this position.
This allows the contract manager to get involved right from project initiation, to ensure that the needs of all stakeholders are properly gathered, that performance objectives are set and understood by everyone, and that the company's standards are upheld, particularly during the tender phase. During the delivery phase, they become the watchdog responsible for ensuring consistency between the project and the contract.
Conclusion
Contract management therefore brings together functions traditionally handled by finance, legal and sales departments, with which the contract manager remains in constant contact. Their distinctiveness lies in the closeness they establish between these specialist skills and operational functions. By following the contract from its drafting through to project completion, they define and implement a genuine performance strategy based on a precise command of all aspects of the project.
This is genuine added value in anticipating risks, protecting margins and financial gains, and seizing opportunities, which food and agriculture companies must seize without delay in order to meet the challenges and requirements of their clients and consumers, and also to bolster their competitiveness.