In today’s fast-paced business environment, procurement departments are expected to stay ahead of the curve. They must deliver continued cost savings and process innovations across a global supply chain. A supply chain that is now defined by constant disruption, rising inflation, and increasing demands for responsible sourcing. To meet these challenges, procurement teams must operate with an unparalleled level of transparency and agility across their supplier network.
Artificial intelligence has emerged as a formidable force, reshaping the way organizations manage all business processes. The integration of AI technologies has unlocked incredible opportunities for procurement professionals far beyond cost savings. It is transforming the way they work, improving efficiencies to help the enterprise perform at its best. Through natural language processing (NLP), machine learning, and data analytics, AI tools improve accuracy, surface critical business insights, and automate operations. This results in a reduction of the time and effort required for businesses to realize strategic outcomes.
The Role of Contracts in the Enterprise
Contracts are the foundation of commerce, governing every dollar in and out of an enterprise. They act as a single source of truth for business relationships. They define the connections between suppliers, partners, and customers. However, average contract value erosion is now nearly 9%, creating a significant bottom-line impact for businesses that manage thousands of commercial agreements. This underscores the importance of incorporating AI into contract management to identify and address value erosion and protect financials. Ultimately, AI can help serve objectives to enhance supplier relationships and drive long-term value for the business.
In procurement, a significant chunk of time is dedicated to managing suppliers, identifying contracts, and grappling with supply chain complexities. AI technology steps in to alleviate this burden. Instead of poring over contracts, searching for deviations, and laboriously resolving issues, AI streamlines the process with automation and efficiency. Through simple prompts and quick responses, it extracts critical insights from contract data. In turn, this enables procurement to respond instantly to an influx of business inquiries and tackle supplier performance issues, as well as various other challenges and questions that arise within the organization.
Risks and Rewards
Without sufficient intelligence about the terms and parties represented in contracts, it can be very difficult for companies to avoid risks, maintain compliance, and ultimately negotiate the best possible outcomes. By harnessing AI technology to surface critical insights from contract data, procurement streamlines the source-to-contract process for faster deals and more favorable results. Procurement teams leveraging AI in contacting processes gain speed and valuable time that can be redirected towards strategic pursuits and real-time issue resolution for the business, resulting in cost savings and overall productivity gains.
Furthermore, factors like inflation, sanctions, or indexing clauses can be easily forgotten over time because they may not be immediately triggered after contracts are signed. AI emerges as a valuable ally in these situations. It can rapidly surfacing these clauses as they become relevant, pinpointing the suppliers that may be impacted. It also guides necessary steps or adjustments to regulatory compliance language to more effectively address new sanctions or government-enforced guidelines.
A driving example for AI
Consider Daimler, one of the world’s largest producers of premium cars and commercial vehicles. Recognizing the need to enhance its agility in response to the rapidly changing business environment, Daimler undertook a digital transformation. At the time, the company’s systems for managing its sourcing processes were antiquated. It grappled with a sprawling network of over 500,000 suppliers dispersed across various platforms. The solution was to embrace a digital-first approach to procurement through a modern contract management system powered by AI. With AI technology, Daimler now manages its entire roster of suppliers and enables its procurement team to streamline the source-to-contract process.
Daimler and other organisations exemplify the multifaceted ways AI and machine learning can empower procurement teams to transcend their daily to-do lists and play a more strategic role within the enterprise. A recent AI Impact Report revealed that nearly half of C-suite leaders agree AI will affect their bottom line in 2024. In fact, 56% of leaders are prioritizing AI use cases that have an immediate impact on revenue or cost. In an era defined by constant change and complexity, AI is the key to unlocking procurement’s full potential and driving value that bolsters the business long term. By leveraging AI, procurement becomes a strategic force, enhancing efficiency, agility, and overall performance.
With unmatched technology and category-defining innovation, Icertis pushes the boundaries of what’s possible with contract lifecycle management (CLM). The AI-powered, analyst-validated Icertis Contract Intelligence (ICI) platform turns contracts from static documents into strategic advantage by structuring and connecting the critical contract information that defines how an organization runs. Today, the world’s most iconic brands and disruptive innovators trust Icertis to fully realize the intent of their combined 10 million+ contracts worth more than $1 trillion, in 40+ languages and 90+ countries.