Contracts are especially useful for high cost, long-term purchases. You can more easily manage supplier and budget commitments; negotiate better discounts by basing the discounts on future purchases; experience significant productivity improvements and cost savings; receive a faster Return on Investment (ROI).

Contracts can provide improved supplier compliance and process visibility, and enable suppliers to more accurately forecast demand.

See the Ariba Contract Compliance Guide for information about how to implement Ariba Contract Compliance.

A contract is a legal document that allows a buyer to establish a commitment with a supplier for goods or services. Ariba contracts can be specific or open-ended, and are flexible enough to accommodate other types of long-term contracts.

A contract contains line items for specific products, commodities, or services with fixed pricing, minimum order levels, optional minimum and maximum commitment levels, and effective and expiration dates. Designated users can create releases (called release orders) against the contract, using a standard requisition. Each release order references the contract ID (the contract ID is used as the basis for the release order ID, which enables users to identify the associated contract.) Once the goods or services are delivered by the supplier, users receive against the release orders.

A contract can be set up so that users must know it exists and be given permission to use it; or a contract can operate in the background, so that a user who creates a requisition for items covered by the contract automatically receives the appropriate discounts, and the total is deducted from the contract. Since the contract goes through a strict approval process, releases may require few or no approvals. Contracts can be defined to be accessed from a single partition or from all partitions (known as global contracts).

Both contracts and global contracts are useful – compare them carefully to determine which best meets your business needs. In addition, review considerations that can help you obtain maximum benefit from using contracts and global contracts.