Monitoring: Meaning and Items | Contract Management

After reading this article you will learn about the meaning and items of monitoring for the contract.

Meaning of Monitoring:

Though it is essential for the exporters but it is equally important for the importers as well. The exporter can monitor the various activities which collectively result in the delivery of the goods to the importer, and the importer can also monitor the various activities which collectively result in receiving the goods in time and to synchronize the “arrival” with other down the line activities which start after the receipt of the goods from the exporter.

A contract is a bundle of numerous activities, each inter linked to the other, each acts as a link to the total chain called the contract. A snapped link at any stage would result in disruption of the contractual performance.

The contracting parties must understand the knowledge of each link and its importance to the contract so that it can be implemented smoothly and in the shortest available time. This brings us to the question as to what are the various activities that must be collectively monitored to perform the delivery of the contract.

For a general Import/Export trade contract following are the major activities for exporters and the importers:

Items to be Monitored:

A. Exports:

1. Procurement of the raw materials/components,

(i) Purchase orders;

(ii) Payments;

(iii) Transportation up to the processing plant;

(iv) Storage;

(v) Utilization schedules.

2. Inspection of the raw material/components

3. Documentations for import/export license/taxes/duties.

4. Production schedules,

(i) Shipment schedules;

(ii) Processing/production;

(iii) Finishing.

5. Inspection schedules

(i) In process quality checks;

(ii) Pre-shipment inspection;

(iii) 3^rd party inspection (if required);

(iv) Inspection reports.

6. Shipping (vessel/carrier) arrangements; if required under the contract.

7. Documentation.

8. Packing.

9. Forwarding.

10. Payment/ LC.

11. Insurance (local and ocean).

12. Local transportation up to the loading port.

13. Port clearance.

14. Loading into the vessel.

Out of the above 14 items, the most critical ones are the transportation, processing, inspection, shipment,, payment. The delays in shipments are grossly affected by these factors. Any delay in these items, there is total disruption of timely execution of the contract.

B. Imports:

For the import cargo the monitoring would be on the following pointer:

1. Procurement of the Import License.

2. Payment of the local taxes and duties (import tariffs).

3. Insurance.

4. Receipt of the shipping documents.

5. Appointment of the customs house clearance agent.

6. Arrangements for post shipment credits.

7. Opening of Letter of Credit or any other form of payment as agreed in the contract.

8. Notification to the exporter for the payment availability.

9. Receipt of the cargo.

10. Local transportation to the warehouse, point of consumption or any other pre-designated point.

11. Verification of the imported cargo to be in- conformity with the contract.

12. Inspection of the cargo (packing, individual items or lots as the case may be).

13. In the event of rejection initiation of the remedial actions as provided explicitly or implicitly in the contract.

14. Recovery of the rejected material and or compensation as provided in the contract.

Once the contract is signed, find out the time available and using this time as the limiting factor, prepare an elaborate plan of action taking into account the calculated time required between and for each activity in such a way that the net sum of the time elements does not exceed the given over all time frame, if it exceeds the time frame than redo your time allocation activity all over again.

The best option for the exporter is to always keep a week or two up his sleeves to meet any unknown delay/contingencies.

The monitoring is an associated activity meaning many persons and/or departments gets involved in reaching the target. As such the plans which are drawn up without any pre consultation with the concerned persons/departments, are bound to create heat sooner or later.

Notify each concerned department for their share of specific activities and available time with them. Get their consent for conformity. If necessary have mutual consultation to impress upon them the importance of the time schedule and get their unconditional commitment.

Each activity that is mentioned above is time bound, meaning it requires certain time for completion. Assign such time slots to each activity. There will be certain activities requiring long time slot and some requiring shorter time slots. Again there will be some, which are critical and some non-critical.

Further there will be some activities which will have a number of sub-activities like processing/production (receipt of raw materials, selection of components for production, production sequence, quality control, final inspection and/or third party inspection before/after goods are sent to packing department etc.)

Arrange the activities in the order of priority of action. Than based on the above pointers and respective time slots, the exporters or the importer can draw up a suitable chart to monitor the progress.

The overall monitoring has to be centralized to one individual to whom everybody concerned will report and who will issue directions to everybody concerned. This person can be referred to as the Central Coordinator. The prime duty of the CC is to implement the task entrusted to him by all means.

The communication channels to and from this coordinator should be smooth and instant with back up arrangements to meet any emergency or contingency. He should be instantly accessible to all concerned and be able to access all concerned. He should have the authority for spot decisions and his decisions should be final.

The availability of this person should be for 24 hours which means he must have communication channels like fax, phone, e-mail, cellular phone, transport etc. ready for use instantly on requirements directly and/or indirectly associated with the task on hand.

The progress chart has to be as simple as possible so that each concerned supervisor or concerned person can easily understand for its implementation and implication. The most commonly used chart is a Bar Chart.

This bar chart has to be made available to all concerned persons/departments. It must be made clear to each concerned that 100% compliance is required. Any slippage has to be reported immediately to the central coordinator and countermeasures taken.

It is also a good idea to form case teams if the order on hand is appreciable and of recurring type. The team can be entrusted with specific customer, market, or orders. Their job must be confined to implementations of the orders on hand. The more they work for specific jobs the more experience they will get, and they will also learn how to handle emergencies and contingencies.

Another factor that has to be habitually followed is the regular meetings of the departmental heads concerned with the case. The regular review meetings help each other to discuss and find solutions to minor or major problems.