The Value Chain Analysis of Contract Management on Small and Middle Business Guibin Suo, Guojie Zhao Abstract: In this paper, the present condition of the contract management is introduced and the contract department, human resource, institution and the business process are discussed by means of the value chain method in which the contract management is divided into the fundamental value activity and assistant activity. On doing so, the meaning of the contract value chain is put forward. Keywords: contract management: value chain; small and middle business In the modern SMB systems, contract, as a part of credit economy is becoming more important representative form, which runs through the enterprises complete process of the product development, production and management. The economic come-and-go among the modern SMB is mainly carried out by means of the contract. Contract management is regarded as one of the most important content of the modern SMB counselor-at-law systems, whether or not to mange contract efficiently and safely is an important factor of the management and an important signal of competitive advantages in the modern SMB. So the concept of the value chain analysis of contract management emerges as the times require. 1. The current situation of contract management in SMB Under the conditions of market economy, the level of SMB contract management is coming better and better, contract management becoming normal day by day, the quality of human resource advancing and the informationized level of contract management improving year by year. However, we should realize the shortcomings of fundamental managements and process managements in home SMB. (1) The fundamental work of contract management Contract centralized management by special departments is done insufficiently and departments function is less exerted. Many SMB set up and consummate their contract management institutions and they are equipped with special and sideline contract manager by which they make up a set of contract management network of vertical to bottom and horizontal to side. However, some SMB couldn t set up the special contract management institutions for centralized management by special departments. They carry out disperse and function-unclear management system. Contract is managed by each business departments according to contract category. In the SMB which have set up the special management institution, contract checks up doesn t go through relative departments. Even more they sign the contracts with an official stamp or company administration stamp. Contract management departments do not bring the centralized management by special departments into practice and couldn t master the condition of the company contract management completely. Contract management keeps chaos. Contract management system isn t perfect and many rules aren t done sufficiently. Contract management system, as fundamental rules that contract management should obey, is a embodiment of a company contract management ideas. In the present, most of the SMB have set up some contract management system such as authorization trust, special contract stamp, contract information management and contract disputes management etc. But some SMB haven t set up complete contract management system. Even some SMB haven t fulfilled the contract management system exactly and effectively which lead to no law to abide by and not to obey the law in contract management. Except the contract management system and contract management rules, there are some problems in the SMB such as abnormal contract texts, unfeasible contract management accounts and unstable contract statistics and analysis etc. GuiBin Suo(1968-), post doctor in School of management, Tianjin University, prelector in school of management science and engineering, Shijiazhuang University of Economics, Major research field is STS(science technology society). Guojie Zhao(1950-),professor,doctor tutor, Major research field is STS(science technology society). Address: school of management science and engineering, Shijiazhuang University of Economics, Shijiazhuang China,Postcode:050031; Email: gbsuo@126.com 1381
(2) The contract process management In the practice, contract managers in SMB often pay more attention to the contract signature than the contract fulfillment. They attach importance to the contract static management and neglect the contract dynamic management. The credit investigation is important before contract signature which determines the success or lose of the contract to some extent. However, owing to the asymmetry of information, the enterprises only carry on the investigation and checkup from the opposite-part s history condition of keeping a promise, registered capital and production scale etc. In fact, opposite-part s credit and ability of keeping a promise show on in the contract fulfilling procedure. The information by credit investigation only represents the past condition of opposite-part s credit. The realistic condition of fulfilling ability is reflected by contract fulfilling supervision and information feedback. Therefore, it is absolutely impossible to go on the work of contract management and guarantee the legal right for the enterprises which think it is OK after the contract signature and don t take care of the contract fulfillment. In the contract fulfillment, contract management departments should take part in the check and accept and balance and checkup etc. By doing so, they play the role to escort and convoy the enterprise for the natural operation. In the practice, there exists something which is no contract in dealing and contract signature after dealing. With the deeply development of contract management, enterprises boost up their consciousness of contract signature according to the law and contract fulfillment. Many enterprises adhere to the idea of emphasizing the contract and keeping faith and bring it into the whole process from contract signature to contract fulfillment. They deal gravely with the signature and fulfillment of each contract. Nevertheless, some enterprises don t sign the contract or sign the contract randomly. They don t regard the contract signature as a serious legal action and make a gentleman s agreement or intentions contract. Such attitude to contract signature and contract fulfillment is not careful and serious. Even they don t sign the contract or supplement the contract after the business. It is common fault to default the contract which brings much economic loss even productive maladjustment and management confusion. (3)The contract human resource The educational background and the title of a technical post of the contract managers are being upgraded in most SMB, so is the principal of the department. But there are some shortcomings in contract managers arrangement, for example, poor specialty quality insufficient with the management need. Contract management and counterclaim are complex and general work of high intelligence, strong specialty and technology. Contract managers need comprehensive knowledge including a grasp and acquaintance of law, enterprises management and economics. However there is long distance between the quality of contract managements and the demand of contract management which hinder the improvement of contract management. Contract management departments and contract managers are divided into specialty and sideline. In the SMB, there is lack of special contract managers and most are part-time. Although, the enterprises carry on the special training aiming at contract managers, contract managers sufficient with the need of contract management are less. The scare condition of eligible contract managers will last for some time. As mentioned as what is said, this paper put forward the concept of contract value chain analysis aiming at normalizing contract management, strength the responsibility of contract managers and keeping operation risk away. 2. The conception of the contract value chain management in SMB The term value chain is firstly brought up by Michael E. Porter in the competitive advantages. In Porter s opinion, every enterprise is a set of design, production, marketing, delivery and other auxiliary activities (support activities). Here, the term value chain is used for the purpose of considering that every contract administration department is assembled by the activities of contract establishment, contract declaration, contract checkup and approval, contract signature, contract fulfillment, contract archaism, and something assistant for contract management. All the activities can be expressed by the value chain, which is meant that the value chain method can be used to analyze the procedure of contract management. (Fig.1) 1382
Contract establishment Contract declaration Contract counterpart management Contract checkup and approval Contract signature Signature authorization management Contract fulfillment Contract archivism Fig.1 Contract management operation procedure The value chain management of contract is to discuss the contract management operation procedure on the ground of contract basis facilities, systems and staff equipment, and then to normalize the contract running, to integrate the contract management system, to save the management cost, to create economic benefits, and to provide better support to the enterprises management. 3. Contract value activities in SMB Every part of the contract value chain is visually expressed in Fig.2.That is the contract value activities. All the contract value activities can be sorted out into two parts: one is basic activities, the other is assistant activities. (1) Basic activities Basic activities contain six ordinal procedures which are contract establishment, contract declaration, contract checkup and approval, contract signature, contract fulfillment, contract archivism. Now make a statement separately as follows: 1) Contract Establishment It includes putting forward contract, the basis of singing contract, the decision of business selection, the examination and approving of inviting public bidding documents, and the static state of filling in and submitting form of the inviting public bidding results, and so on. 2) Contract Declaration It includes the basic information of contract, contract texts and relative data and first trial. 3) Contract Checkup and Approval It includes special technology of contract, economic management, law and rule and superior checkup and approval. 4) Contract Signature It includes contract texts print and relative information forms, procedure traction of contract signature and register of factual contract signature. 5) Contract Fulfillment It includes dynamic checkup of payout contract, dynamic supervision of earning contract and the declaration, checkup and approval of abnormal contract fulfillment. 6) Contract Archivism It includes clearance of contract texts and relative information, set-up of contract files store and managements of contract files. 1383
Fig. 2 Contract procedure value chain (2) Support activities Support activities are used to help the contract value activities to finish the targets of contract managements. In includes concretely as follows: 1) Contract department structure Contract basic structure is made up of all contract institute setting, personnel condition, managements system, contract basic information managements and so on. The primary motility of the quality of contract managements is from the adaptation of contract department structure and management development. Many activities of contract managements must be can carried out, done and controlled by means of contract departments structure. Contract department structure is involved in both the support and managements of internal activities and inner-department relation. 2) Count part s managements In this, contract count part s information is recorded, then the evaluation and classification of the count parts, management by grade, market admittance, network declarations, checkup and approval of client s authorization is done. Count part s managements include not only the managements of upper suppliers, but also the managements of lower clients. By means of count part s managements, the value of suppliers and clients is being added and the value of the company is being added simultaneously. This runs through the whole procedure of contract procedure managements. 3) Human resource managements Human resource managements are pointed the managements of invitation, employment, training and prompting of the contract managements personnel needed. They provide support not only for some special monomial activity (lawyers, counselor invitation), but also for the whole value activities of contract managements. Human resource managements are related to the every business program of contract managements like other support activities. 4) Signature authorization 1384
Signature authorization is the applications and approvals of the authorized under system authorization and special authorization by non-legal signature mode. Signature authorization includes long authorization and special authorization. The confine of long authorization is determined by contract category and target sum. The confine of special authorization is pointed to the contract that must be signed by the entrusted. Signature authorization guarantees the legality, normality and eligibility of the signers from the system. It is also the support to the value activities of contract managements including of contract declaration, contract checkup and approval, contract signature and contract fulfillment, etc. 4.The significance of the value chain managements of contract in SMB Under the background of hot competitive, the upper contract value-chain analyses is of much meaning and lay solid base for further study in SMB. (1) By value-chain managements, enterprises can review their contract value procedure. From the comparison of benefits and cost, the advantage and disadvantage is found. Analyzing the contract value chain, we can find the sector that could add contract value. By doing so, we can make a study on the driving factor of cost to reduce resource consumption and production cost, maximize the benefit of contract managements, finally fulfill the managing target. (2) After the contract fulfillment, we can deal with the contract managing information to optimize and improve the contract value chain. That is a cycling procedure without end. With the present level of contract managements, contract value chain could control the contract risk in some extent such as contract modification and entanglement. What s more, we could find out the weakness of contract value chain by means of the feedback information. Then the self-adaptation and correction procedure could optimize the contract. By doing so, the contract management make a progress. References: [1] Da-lai ZHAN. The present condition and development of enterprises contracts managements [J], Research on China's Industrial and Commercial Management, 2004,(6):39-40 [2] Fei WANG, Fu-min JIA, Hao WANG. The practice and experiment on strengthening enterprises contracts management [J]. Technology Supervision in Petroleum Industry. 2004,(6):45 [3] Porter, M.E. Competitive advantage [M]. Huaxia publishing house, 2003 [4] Jin-sheng HE. Enterprises strategy managements[m]. Tianjin University publishing house, 2003 1385