“A contract lifecycle management platform drives processes for you. That drives your price down, your risk down, and you get the best of all worlds like procurement wants.” – Paul Bagley, Director of Commercial Contracting at Acosta
Art of Procurement recently teamed up with Ironclad to poll the procurement community about the way they store and manage contracts. Over 70 percent of respondents said they save their supplier contracts as PDFs on a company drive, while a small percentage are leveraging a contract lifecycle management tool for digital contract management.
What was most surprising is that not one respondent said they were using AI or an AI-powered tool for contract management.
To discuss these results and the current and future states of digital contract management in procurement, Kelly Barner and I recently spoke with Paul Bagley, Director of Commercial Contracting at Acosta, and Toby Laforest, Director of Product Marketing at Ironclad. They explained why contracts are far too often viewed as a legal formality, a nuisance even, on the road to getting deals done. This outdated mindset misses the critical strategic and value-driving asset that well-management contracts represent.
In our discussion, they explained how and why procurement should take a more intelligent approach to digital contracts and the technology they’ll need to facilitate the process. But, perhaps most importantly, they also explained the enormous potential for benefits and opportunities procurement has if they stop viewing contracts as rarely-used static documents and, instead, recognized and leveraged them for what they are: key strategic business assets that can generate insights, value, and opportunity for the business.
Here are just a few of the ways a CLM, especially one that utilizes AI or machine learning capabilities, can benefit procurement and the business as a whole:
- Enhanced Efficiency and Productivity
Traditional contract management involves a lot of manual work, from drafting to approval and storage. A CLM tool automates these processes, reducing the time and effort required to manage contracts so procurement can significantly speed up the entire contract lifecycle from creation to renewal. - Improved Accuracy and Compliance
Manual contract management is prone to human error, which can lead to costly mistakes and compliance issues. A CLM tool ensures that all contract details are accurately captured and maintained or even analyze contracts for compliance with company policies and legal requirements, flagging any discrepancies or potential issues before they become problematic.
- Better Contract Visibility and Accessibility
One of the significant challenges in contract management is maintaining visibility over numerous contracts or across different teams and tools. Having one comprehensive CLM tool provides a centralized repository where all contracts are stored and easily accessible for every stakeholder, including suppliers. Advanced search functionalities in the tool can help everyone generate insights from contract data.
- Data-Driven Decision Making
Procurement’s decisions are only as good as the data they have access to. AI-driven digital CLM tools analyze vast amounts of contract data to provide actionable insights. These tools can do things like identify trends, predict future outcomes, and offer recommendations based on historical data. This data-driven approach allows procurement leaders to make more informed decisions and optimize contract terms.
- Streamlined Collaboration and Communication
Contracts often involve multiple stakeholders, including legal, finance, and other internal and external stakeholders. A CLM provides a collaborative platform where all stakeholders can work together seamlessly, without getting tripped up on conflicting or redundant data.
- Cost Savings and ROI
Many in procurement might be surprised to learn that they can actually generate bottom-line value for the business through their use of digital contracts. For example, an AI-powered tool can analyze contracts for cost-saving opportunities, like identifying favorable terms or highlighting areas where renegotiation could be beneficial.
- Improved Risk Identification and Mitigation
Contracts often come with inherent risks, whether related to compliance, financial exposure, or operational performance. Digital CLM tools help identify and mitigate these risks by providing a clear overview of contract terms and obligations.
Procurement is long overdue for a complete mindset shift in the way they manage, leverage, and communicate the value of their digital contracts. Today, if you’re saving your contracts as non-searchable PDFs on some massive drive, looking at them maybe once a year or term, you’re essentially doing the modern-day equivalent of storing them in a dusty old filing cabinet.
We all know that technology, especially AI, is moving fast, and procurement – like most other functions – is scrambling to figure out how to keep up. Making the transition from old, outdated processes around contract management to a more intelligent, efficient, and value-driven approach with a CLM is one way procurement can leverage the power of emerging technologies to start delivering differentiating value to the business now.
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