In the best of times, the procurement process can be daunting. Navigating thousands of vendor contracts, NDAs and negotiations while staying compliant to multiple industry regulations and simultaneously appealing to numerous stakeholders and decision makers, is not a simple task.
When the COVID-19 pandemic took the world by surprise in early 2020, these matters were further complicated by the unexpected changes that arose, such as the nearly universal and immediate move to remote work. Over the course of the year, as businesses around the world learned to adjust to the new dynamics, one thing became abundantly clear. Proper management and procurement of contracts had never been more important. Facing unprecedented universal challenges, these critical assets had to be protected and optimized now and for the future.
In response to the crisis, the companies that have prepared themselves to not only be more resilient and robust internally, but also able to account for future changes that will take place as operating models and supply chains are re-defined, will fare far better in the long run.
As we move toward the new realities of a post-COVID-19 world, three emerging trends shed light on why contract management and procurement must be a top priority for organizations seeking long-term sustainability and success.
More businesses are being deemed essential. Since the pandemic began 16 critical infrastructure sectors have been identified as those whose assets, systems and networks, whether physical or virtual, are considered so vital to the United States. These include healthcare, food and agriculture, critical manufacturing, chemical and more.
As a result, virtually every organization, essential or not, has gained heightened awareness of its significance to the customers it serves. This realization has helped companies bring into sharp focus the importance of concentrating efforts on prioritizing the goods and services as per their customers’ critical business needs. In order to do this effectively, the procurement and contract management process must be efficient and centrally managed.
Granite Construction Inc., which calls itself “America’s Infrastructure Company,” is an example of an essential business. For Granite, this meant that its business had to continue despite the outbreak of COVID-19. With its crews in the field, back-office departments had to transition to working from home without missing a step. Fortunately, Granite already had an automated contract management software system in place. But prior to this, Granite would have had serious challenges because subcontract administrators would have had to spend much of their time managing contracts that historically had been stored in in-boxes, local hard-drives or filing cabinets. Completing reviews and approvals was a matter of physically walking them down the hall. For obvious reasons, these methods would have created many challenges in a work-from-home situation.
The COVID-19 health crisis has brought to light the importance of procurement and contracting. While essential businesses may have experienced the first urgency to be prepared for any situation, all businesses are recognizing that they are at risk without a centralized and streamlined procurement process and contract management system.
Agreements are more complex, and needed quicker. Today’s businesses operate in a world guided largely by contracts. As companies mature and international borders dissolve thanks to the Internet, contracts are growing in complexity as the teams that create and maintain them struggle with a barrage of new regulations affecting agreements on a global scale.
For example, a group purchasing organization for a large number of hospitals was required to find new sources for protective supplies locally as international supplies were hit. The hospitals needing this were at the forefront of the national response to the pandemic. Procurement was required to screen 3,000 potential suppliers in a period of eight weeks, while ensuring their quality and signing complex contracts that would allow different and unrelated legal entities to buy and pay against same umbrella contracts without compromising on any compliance requirements of the Healthcare industry. The vice president of procurement mentioned that with the company’s new automated processes, they were able to accomplish this in about 12 weeks. This volume would previously have taken them nine to 12 months in spite of having all hands on-deck.
This speaks directly to why contract management is needed to navigate through times of uncertainty. In order to achieve post-pandemic success, organizations must consider how to handle the many complexities associated with contracts, including critical issues such as governance, in a way that will not put them at risk.
The acceleration of cloud technology. Organizations are moving their data to the cloud faster than ever in response to the business challenges raised by the COVID-19 pandemic. In fact, according to new research, the global pandemic has accelerated cloud transformation for nearly half of organizations. Cloud platforms can make it possible to keep systems available and running without the need for dedicated resources or further capital investment. So it is no surprise that this trend is impacting procurement and contracting as well.
Cloud-based contract lifecycle management solutions offer significant benefits. Access to a centralized and automated contract repository hosted in a secure cloud environment provides organizations with complete contract visibility, eliminating wasted work hours and improving efficiency. By providing a single source of truth for the rights and commitments a company holds in its contracts, contract management software greatly reduces the risk of missed deadlines and penalties, or worse, litigation. Additionally, it accelerates the procurement process, ensures contract compliance and optimizes agreement performance, from contract creation to reporting.
The acceleration toward the cloud opens many doors for organizations and in terms of managing contract data, they are finding immense value when applying it to intelligent contract management solutions during this critical economic environment.
The bottom line is that innovations in contract lifecycle management are disrupting the norm, and the current pandemic is highlighting the importance of procurement and contract management in an uncertain world. Proactive and intelligent approaches to these key processes will enable businesses to have much greater visibility and derive actionable intelligence that translates directly into bottom line impact.
Vivek Bharti is general manager of product management at Icertis.
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