Enterprise resilience and risk management are at the heart of sourcing and procurement (S&P). Streamlining S&P processes is key to bolstering supply chain agility. However, recent studies reveal that 59% of executives see a major disconnect between S&P and supply chain executive priorities, making it a pain point in their organizations. The truth is many businesses are too focused on the value that data brings to individual systems instead of taking a broader look at the value of data holistically. 

Contracts are often segmented by department, with no reference back to counter-party master documents, making it virtually impossible for companies to leverage contract insights to make informed decisions or push data downstream. Business systems like S&P, sales, production and others can’t operate with true effectiveness as stand-alone functions; they must work together for businesses to harvest the most value from their data. 

Bridging the Disconnect

Companies in every industry face challenges in connecting disparate systems across the enterprise to achieve a holistic view of their business. Enterprise data silos limit operational efficiency, stifle collaboration, and restrict access to accurate, real-time information. Overcoming these challenges requires companies to integrate systems, centralize their data and establish unified platforms to ensure seamless communication, improved decision-making and productivity. This starts with ensuring the right systems are in place.

Many major enterprises have turned to AI-powered contract lifecycle management (CLM) solutions as a catalyst for breaking down data silos, centralizing contract data and strengthening connections between S&P and supply chain functions. CLM threads the needle between upstream and downstream systems and enables seamless data exchange across the organization. It connects the upstream systems that generate contracts with downstream systems that handle procurement and/or payment activities. Bridging the two functions provides much-needed visibility into contract data and increases business agility. 

Enabling End-to-End Visibility 

From sales to contract creation, and from purchase orders to invoicing, the S&P cycle can seem quite repetitive. This is where details can fall through the cracks and mistakes can impact the company in significant ways. The reality is that all contracts bring unique conditions and commitments to the table, and contract mis-alignments can lead to supply chain disruptions as well as service level agreement (SLA) fines. An AI-powered CLM system provides real-time visibility across the contract portfolio, and ensures a synchronized flow of information throughout the contract lifecycle.  

Enterprises with an advanced CLM strategy are able to automate S&P contracting processes, create smarter contracts, and automatically monitor supplier performance. A CLM platform also identifies risks and unlocks insights that strengthen supply chain operations. For example, an end-to-end CLM solution can instantly surface broader obligations within a contract, such as net payment terms, and connect the dots from the sourcing department all the way to the payments department — creating end-to-end visibility throughout the contract’s lifecycle. AI-powered CLM can also calculate inflationary adjustments — information that can be used to discuss changes with the customer regarding pricing systems and other issues. 

Improving Performance 

In addition to creating end-to-end visibility, AI-driven CLM enables companies to automate their contract creation process through templates that include approved company clauses and guidelines. Organizations can also analyze contract drafts, suggest favorable terms, highlight missing clauses, identify contract terms that stray from preferred positions, and more. Automating the contracting process frees up employees to focus on critical tasks, while the risk of human error is reduced throughout the S&P cycle. 

With a full-lifecycle CLM solution in place, organizations can ensure that the post-signature components of their supply chain are aligned with their performance. This can result in improved supplier collaboration, and minimize disputes, through shared contract and performance data. 

Reducing Risk and Promoting Compliance 

In today's complex business landscape, managing contracts and ensuring compliance with regulations can be daunting, especially when dealing with numerous third-party relationships. However, an AI-powered CLM system provides a powerful tool for mitigating risk and promoting compliance across the entire contract portfolio. Proactive risk identification in the drafting process enables stakeholders to address potential issues before they escalate into costly problems. Companies are able to react faster to unanticipated events such as the pandemic, which forced chief procurement officers to pore through their contracts to measure their risk exposure.  

AI-powered CLM reinforces compliance monitoring by continuously analyzing contracts and related documents against legal and regulatory requirements. By comparing contract terms with the ever-evolving legal landscape, these systems alert organizations to any deviations, enabling proactive compliance management. In addition, the performance of vendors and suppliers is more easily monitored. By tracking and analyzing contract terms, key performance indicators (KPIs) and SLAs, organizations can quickly identify under-performing parties, address compliance gaps and mitigate risks associated with third-party relationships. 

Increasing Supply Chain Resiliency 

Business leaders must be able to adapt to supply chain disruptions in real-time, and investing in AI-driven CLM makes this possible by delivering valuable business insights on-demand in addition to offering end-to-end visibility into business data, contract performance, financial risk and compliance standards. It’s clear to see why so many major global enterprises have discovered that CLM provides an absolutely indispensable tool for bridging the disconnect between S&P and supply chain priorities in order to create a more agile, resilient organization. 

Scott Quinn is vice president and global head of CLM transformation at Sirion.