How is Artificial Intelligence (AI) changing the Procurement Contracting Process? has been saved
How is Artificial Intelligence (AI) changing the Procurement Contracting Process?
Advances in contracts management technology can help your department drive value, enhance reporting, and save time.
By Thomas London and Abhishiri Ghosh
Concurrent trends in procurement are forcing contracts management to adapt and evolve. The events of 2020 have thrust Source-to-Contract processes into the spotlight, demonstrating how rapid contracting is critical for businesses to mitigate risk. In response to this, new technologies driven by AI are making procurement departments more agile and time-efficient.
Here are three key points driving AI within the Procurement Contract space
1. Standardising contracts content
A critical benefit delivered by contracts management solutions is standardised metadata reporting, removing the need for category managers and legal counsels to manually read contracts to gain insights into the commercial elements of their supplier relationships. Supplier base visibility was highlighted as a key pain point in Deloitte’s recent CPO Flash Survey and contracts management platforms are vital to solving this problem.
Further, by coupling your contracts tool with an AI-based e-discovery solution, procurement and legal teams are multiplying time savings through automated clause extraction from agreements.
2. Data & process automation
Data is recognised as pivotal to transformation as without it decisions are often blind, uninformed and therefore can run a high degree of risk of programme failure. The same is true for contracting within procurement as data will elevate the teams understanding of their suppliers and associated contracts. These data enhancements will enable the use of automatic benchmark routines to understand market effectiveness, strengthening their negotiating positions. Process automation enhanced with data will also provide the direction for procurement to make informed decision around spend, purchasing behaviours, supply markets, and general industry changes.
3. Direction of travel
There has been a year on year increase in the evolution of procurement technology over the last two decades. As the value of procurement is widely recognised but technology has taken time to automate what are in essence standard processes. A good example is within contracts, with digital signatures now a commonplace and with most procurement technologies improving their clause libraries, the ability to create a contract as never been more efficient and easier. There is significant value in adopting these forms of technology as it enables routine contracts to be automated, empowering more junior employees to manage this type of activity, whilst senior staff are able to focus on the strategic and complex topics. There is a natural cohesion between the legal and procurement functions and to maximise this type of functionality requires these teams to work together. However, delivering these improvements relies on a strong engagement between procurement and legal teams.
How will AI deliver change in your Source-to Contract processes? Let us know your thoughts on LinkedIn.