The procurement function is constantly changing and improving. Old school purchasing was about acquiring goods and services for your company for the best price, whereas modern procurement is about giving executives data and direction on making more informed business decisions. The function has gone from a mostly operational role to a strategic one that goes beyond simple expenses. In doing this, procurement has taken on a good deal of legal and regulatory risk while providing internal stakeholders with invaluable intelligence.
Because of the changing technological landscape, transactions within the supply chain are now much more complex as they can interface with every area of the business. There are also now added players in the procurement space, including third-party sellers, and service and maintenance providers. With the increased responsibility and complexity of procurement, visibility into contract data is increasingly more important. Such visibility has the ability to save money and optimize outcomes for both the procurement function and the company at large.
We should never treat any single contract as an island. By understanding the high-level view of all of their organization’s contracts, procurement can better drive performance and reduce risk. But to do this, all of your contract data must be in a structured and easily accessible format with a database that is integrated into existing infrastructure.
By having visibility into contract data, procurement can now use artificial intelligence and machine learning to extract metadata that informs us about the status of contracts as a whole. Some of the insights gained could be fairly fundamental, such a cost and quantity, but metadata can also give insight into greater issues such as financial and geopolitical risk. The value that metadata can give us in terms of searchability and reporting is invaluable.
Metadata is what elevates contract data from simple data storage into strategic insights. It takes the data from contracts and turns it into actionable information that executives can use to make informed strategic business decisions.
By streamlining your contract management system, procurement teams can more effectively analyze individual contracts and use this data to improve the delivery of contracted services. On a very basic level, this means that you can address immediate concerns to keep the contract on track. But you can also use performance data to improve supplier performance and negotiate stronger contracts in the future.
As we mentioned above, no contract should never be viewed as an island, but that doesn’t mean that each individual contract should be handled the same way within your larger contract ecosystem. The contract management approach that works for some contracts is counterproductive in other types of contracts. In order to have this strategic information available to you, contracts must be centralized and administrative roles must be standardized and established. Once you’ve reached this stage you can take insights learned from your contract data to continually progress towards better, more competitive outcomes for your business.
One of the biggest benefits that procurement departments see when they implement new contract management practices to improve data visibility is the ease of increased compliance.
Giving your compliance team access to your central database of contracts allows for contract terms to be easily accessed in situations where there are concerns regarding compliance. This also allows for easier changes to be made to contracts when there are fluctuating conditions that may impact a contract.
Using automated contract management systems means that you’re up to date on any changes to contracts and you also have standard templates that can be used to ensure that every new contract made is compliant. Centralized policies and both a macro and micro view into your contract data will work wonders in terms of reducing risk in the long run.
By improving visibility into contract data on a macro-level, more strategic decisions can be made. On an individual level, contract data gives organizations the power to carefully examine distinct elements of contracts, to ensure that they remain compliant and to establish more competitive contracts in the future. In this data-driven era, if companies don’t take advantage of the information available to them they’re exposing themselves to profit loss or greater risk.