From efficiency to defficiency
Less than a year ago, supply chain efficiency was a heated topic. At business events, in workshops or webinars, experts were constantly talking about supplier optimization, large margins, and cutting costs. All while forgetting a crucial aspect: efficiency is nothing without effectiveness.
When you strive for efficiency alone, you sacrifice adaptability. You select only the fastest, cheapest, and most responsive links of your supply chain. But here’s the deal: they’re also the most fragile.
If demand surges or plunges, your systems can’t handle the change. If your preferred supplier fails to deliver, you have no procedure to replace it. If your transport company is overcrowded, you have no way of guaranteeing deliveries. The same goes for extending deadlines or delaying payments.
Putting constant pressure on your partners makes your supply chain paper-thin. And this has become painfully visible in the past year. In a world torn between a health crisis and an economic one, supply chains everywhere started to falter. At the beginning of the year, no less than 75% of all big US companies encountered significant disruptions. And things haven’t improved significantly since.
So, what’s the solution? Well, we believe that the issue lies not with your business ecosystem, but in the way you report to it. If you really want to take control of your supply chain, you must first take control of the processes behind it. This is the only way to achieve efficiency without sacrificing effectiveness. And we know the best place to start from…
How Contract Management Fits In
A few documents lie at the heart of your supply chain, none more important than the contract. Before the goods get ordered, received, and invoiced, you must first have a signed contract with their supplier. In that aspect, contracts are the glue of your supply chain. They define the relationship between you and your partners. Contracts set prices, deadlines, discounts, and interests, and most of all, they establish responsibility. Managing them efficiently means managing your partners.
Automating your contract lifecycle management (CLM) seems like a natural first step towards business resilience. The time you save with paper handling, the reduced overhead, and the perfect compliance are benefits you can see from your first weeks. In fact, increased revenue and reduced costs are often cited as the main reasons to automate. And we’ve talked about them in detail. But CLM automation can do much more than manage creation, execution, and storage. It can help your business adapt.
According to a recent Forrester study, many, lower maturity organizations use CLM for faster contract creation and compliance (60%). By comparison, higher maturity companies use it for those purposes, but also to gain insight across all business functions (64%) and improve spend visibility (61%). In other words, leading companies realized that the contract is not a static asset. It’s a gateway to their business ecosystem.
The same study identifies six stages of CLM maturity. The first three, (the electronic repository, the contract analysis, and the automated creation) form the basis of contract management. The next two (integration with upstream apps and transactional systems) are the foundation for the last: optimization. Other organizations, such as IACCM and Capgemini split those stages into 14 capabilities, going from contract drafting to portfolio analysis.
For brevity’s sake, we’ve narrowed the process to four stages, each with its own goal.
The same Forrester study comes with an answer. More than 50% of the interviewed companies fully integrated CLM with procurement and sourcing platforms. That came as no surprise, as more than 75% high-maturity companies, and half of the low-maturity ones used CLM for buy-side and sell-side contracts.
In other words, they already used CLM as a part of the Procure-2-Pay process. It made perfect sense to integrate. Why? Because much like your contract management process, P2P affects every link of your supply chain.
It’s easy to see how these features can be of great aid during disruption. They bring your supply chain’s efficiency and effectiveness on the same level and increase your ability to change. But disruptive periods are not the only times integration can help.
On the long term, integrated CLM will become a fully-fledged asset of your business activity, improving:
- Agility, through the ability to quickly renegotiate, renew or terminate a contract.
- Accountability, since you will know at any time who is reponsible for which part of the contract.
- Profitability, as pricing, payments, and early discounts will be a click away.
- Financial insight, with in-depth analytics allowing you to compare contract terms with actual results.
- Compliance, with leaner and standardized contract templates and audit trails.
- Business risk, offering you the ability to quickly manage force majeure clauses or unexpected breaches.
- Business continuity, with better supplier management allowing you to always have a back-up.
Business Ecosystem Automation: the 360° approach
At its inception, contract management was deemed a job for the legal and occasionally for the financial department. In late years, things have changed dramatically.
The same Forester study also documents the high interest contract management is getting from members of the C-Suite. In fact, in almost half of organizations, the CFOs have become directly involved in the CLM stategy. And why shouldn’t they? It’s a strategic tool that can empower financial decisions across the company.
The truth is that integrated CLM impacts all your departments. Not just by providing insight, but by allowing your organization to adapt to its ecosystem. And this why you need a partner that sees the whole picture and offers integration out-of-the box.
We offer you a next-generation cloud platform that helps companies streamline and automate processes. DocProcess shapes the future of how companies of all sizes run their business by enabling them to take control of processes through their whole partner ecosystem and by connecting them digitally with their clients, suppliers or financial and logistics partners.
Thanks to the flexibility of the platform, companies can mix solutions to fit their changing business needs and connect all aspects of their business workflows: Purchase-2-Pay, Order-2-Cash, logistics, reconciliation, payments and, of course, integrated contract management. All cross-referenced against document management and electronic archiving.
But don’t take it from us: take it from our clients. If you want to see how a top 10 coffee producer streamlined its CLM and is preparing for integration, simply download our case study.