Contract traceability: Connecting the dots with suppliers & systems

Host Matthias Toepert is joined by Ganga Siebertz, a supply chain and procurement transformations leader with over two decades of experience working for global companies such as Whirlpool Corporation and The Coca-Cola Company. They discuss contract traceability, the combination of process design and technology implementation, and why efficiently managing contracts is not an option, but the need of the hour.

Author

Umashankar Natarajan

29/07/2022

1 min read

Many procurement teams go into panic mode on a misplaced contract. From simply finding a signed contract to establishing a complex trail between MSAs and relevant SOWs, NDAs, and amendments across its lifecycle improves visibility. Connecting these further to active spends with suppliers, purchase orders, and invoices can significantly drive savings, improve cash flows, eliminate unintended risks, and transform contracts into a competitive advantage. 


Host Matthias Toepert is joined by Ganga Siebertz, a supply chain and procurement transformations leader with over two decades of experience working for global companies such as Whirlpool Corporation and The Coca-Cola Company. They discuss contract traceability, the combination of process design and technology implementation, and why efficiently managing contracts is not an option, but the need of the hour. 


Here’s how it goes: 


Matt: Hi, I'm Matt, and I would like to welcome you all to this episode of Clause & Effect, a podcast presented by Simply Contract. Joining us today is Ganga Siebertz. Ganga is a supply chain and procurement transformations leader with over two decades of experience in digitizing procurement soups to nuts. 


She has deployed digital solutions for source to contract, procure to pay, spent analytics, and supply chain management in global companies such as Whirlpool Corporation and the Coca Cola Company. At Coca Cola, Ganga successfully led global strategic initiatives and digital procurement transformation programs that led to high efficiency and new savings and cash flow opportunities across the $45 billion of spend. Since stepping out of corporate life, Ganga serves as a strategy and transformation advisor for several Fortune ranked enterprises and fast growing startup companies. 


Ganga, we are honored that you're joining us today on this podcast, and I'm excited about having this conversation with you. 


Ganga:Hi, Matthias. I'm glad to be here and looking forward to this conversation. 


Matt: Fantastic. Excellent. Then I would suggest let's jump straight in. Look, we would love to obviously be having an established leader in the procurement profession here, so we'd love to just have you participate as a little bit on your vast trove of experience in procurement, with a focus on managing contracts, in particular in large enterprises. Right. If we look at contract management, contracting has a specific role in the procurement process. And, that role has to do with increasing the speed to market, improving the quality of interactions between the company, the buyers and the supply side, recording facts and having them centrally available throughout the execution of the contract, and then managing the contracts crucially to deliver value. Right. So the notion of creating value from a contract seems to be ultimately linked with the notion of tracing contracts throughout their lifecycle as they live in the organization, in the enterprise. Right. So let's speak a little bit today about this notion of contract traceability in delivering value from contracts. What is that, in your experience, all about? What are challenges that you are facing in large enterprises and bringing this concept to life? 


Ganga: Yeah, that's a good topic to discuss. Contract traceability. Yeah. I can share so much about this topic, but in the interest of time, let me hit some high points. Just like in your personal life, when you make an expensive purchase, you have some form of documentation that says what item you bought or service, what you bought, who you bought it from, when you bought it, the price you paid for it, the terms and conditions, especially the warranty and penalty. That document simply means a contract. When something goes wrong or whatever valid reason you need to revisit that contract, you need to trace your purchase to that document. Similarly, what I think companies are purchasing millions and billions of dollars worth of goods and services and they typically enter into a contract. Hopefully it's an explicit contract and it's traceable.


 Let us say a company with a 10 to 30 billion spend. We are talking literally about thousands of vendors you contract with. You can see the magnitude there, right? If you have good traceability, you should be able to trace every dollar you spend to a contract. What I've seen as a patent, even with most established corporations, they have poor traceability. Sometimes it's hard even to find a hard copy of that contract. So what I have seen in my two decades of career - medium sized company, big sized company, global companies, it doesn't matter. So they face mergers and acquisitions. They do refranchising, you have to do contract renewals. There will be staff turnover, major cost cutting, working capital improvements or savings initiatives that contract traceability becomes so important to make that timely and right decision. Not just for your company, but overall for all stakeholders. So what I have done many times I had let many search and find contract rescue initiatives. So what I typically do, I start to run a report on all my active spend and cross check if there's an active contract. That's when the painful journey starts, realization sets in, and it's unbelievable what you would discover. No contracts. I'm talking about active spend, right. No contracts, expired contracts, perpetual contracts and sometimes there's no correlation between the contract that I've signed and if the spend I'm doing with that particular supplier. And in many cases you have to get a copy of your contract from the supplier and the list goes on - this is not a good situation to be in. 


Matt: I love that notion that you said of the search and rescue for contracts. So let's double down on that a little bit, Ganga. What does good look like here? What is good contract traceability; in your view, having gone through all of the pains of having searched and rescued contracts over your lifetime? 


Ganga: Yeah. One of the other things I wanted to share with you before I get to answer your question. It's so interesting when I go look for these contracts or the team of people that I lead to look for those contracts and I get answers like probably “it's in the dumpster on his way out” or “any home cabinet”, or “it is a handshake - we trust our suppliers, so we don't need a contract.”  One notable point - lack of contract traceability crippled a lot of companies during Covid. People are working remotely and now you have to react to supply assurance. 


The first thing you are looking for is a contract. Okay. After dealing with all the complexity and magnitude, what I think is when you are able to trace that spend to a contract. The hard task of digitizing that contract is not just a soft copy of a contract. This back to your question, right? What do I do? So first is of course looking for the contract. And sometimes you have a digital copy. So if you have a hard copy, then you convert into a digital copy or soft copy. That's just the first step. What's more important is to capture that metadata, which will make it easy for effective contract analytics, for decision support. That's what it is, right. It's so important that you have all the right information about the contract structured and captured in some system. So bottom line, the first thing companies should do is simplify and standardize your contract lifecycle management process. That's important. And then you top it up with a smart contracting system to ensure traceability of your contracts and not having to do a reactive search and rescue operation. 


Matt: That answered my question. So you said, right. First of all, obviously simplify the contracting process, make it seamless, and then top it up with a smart contracting system. So what's the role of technology here, Ganga in creating contract traceability?


Ganga:  Many companies have already hundreds of pages of contracts. The first thing is if you already have a repository, that's good. If you don't have one, you need to take all those hard copy, digitize them. Just having a copy in a system, just like a PDF is useless because you can't mine the data. So you need to be able to pull it up. We call it the metadata or the important things about the contract, like earlier I mentioned, Who did you buy from? In a contract probably you're looking at - Who's the vendor? What am I buying? What pricing? What are some of the terms and conditions and other important clauses? All those pieces of information need to be captured in a structured way, in a tool. Then you can see the power of contract analytics. 


Like one category manager was telling me, “Ganga, I'm new and I have no clue. They told me I'm in charge of this $70 million logistics contracts. The first thing I'm asking is, where are those contracts” So when he came to me, I said, let's look at the category called logistics and see who are the logistics suppliers we are buying services from (with those carriers). And, when we looked at, it was like more than 200 logistics carriers we had. But then where are the contracts? So we went into the contract repository. It was just a mountain of digital copies and the poor guy had to spend like three months just shifting through all those contracts with a team of five, six people. And he was wasting so much time. 


Just imagine if all those contracts had the right data already in the system. All he had to do was run some analytics and he would have known who he’s buying from and all these other important information. Those are existing contracts. Companies also have an opportunity - once they have a contract lifecycle system or contract management system, they can start from the beginning of any contract the minute they award to a vendor that particular purchase. Then you can start from day one from turning to a contract. So you are using standard templates, standard clauses creating that contract. Most companies do have standards, right. The legal will tell them these are the standards and you go through that process from the beginning to the contract. The whole contract lifecycle system in a tool if you have an opportunity to start from day one. So two, step one, most of the companies are existing, they have existing contracts, so you have to digitize it. Two, all new contracts should go through a contract lifecycle process. So from day one you are capturing from the beginning to the lifecycle of that contract. Then traceability becomes that much easier. 


Matt: Understood. That role in a nutshell, the way that you describe it is very much from simply finding a right contract, to creating contracts, metadata capture and allowing contract analytics, analytics on the set of contracts that you have in the enterprise to all the way down to enabling full four way matching to linking the contract to order. So that is something Ganga, that I also would find very interesting to understand. How do you now connect the dots between suppliers, between contracts, between technology systems? 


Ganga: Yes, I would interpret your question. I can give you an example. So, when I was managing massive back end operations, every time the commercial contract is signed, you literally have armies of people taking the commercial contract and pulling out some of the price, the commercial terms, and then what we call it as an operational contract. So that when a PO goes out, its referencing all the right information that needs to go on the PO. So if you have a system that doesn't only help you with the source to contract piece of the whole process, you can help the procure to pay downstream process. So you pretty much are eliminating massive data entry of price and commercial terms when you digitize - all the way from the commercial contract to operational contracts. With data entry, you have human errors, with one decimal error, you can end up overpaying the supplier millions of dollars. And this really happened in my experience, several times, all the controls broke, all the way even to the bank, the controls broke. We’re talking about literally millions of dollars. Sometimes one decimal error and that one goes to the supplier. Sometimes it takes a few days - you are holding on to your cash flow here. By the time the supplier finds out, there's an overpayment. Or sometimes we don't even find out for months or sometimes I've seen for years. Sometimes an audit catches it. 


Sometimes the supplier is a good supplier and he will call and say, “hey, you have overpaid me.” So to not only avoid these kind of errors, eliminating the human error and to drive more efficiency, that will drive down your or reduce your operational cost, just think of a system that has traceability in place, you already have the data there. It has been done and I've done that connecting that source to contract to prepare to pay the back end. So every time you sign a contract, all this information is there it can flow into your operational system. Life is easy! Subsequently there could be for some SKUs or material or you want to call it part number, part level, you may have many price changes within a given time. So in that situation, that tool should also allow for that price changes that happened multiple times in a given year. They should be able to track all that price. And, I have seen some very advanced system also allowing through a portal for the supplier to update the new price. It goes to a workflow that goes to the buyer. And you say, yes, that's the price change that I agree. And systematically it flows into your back end system where the PO gets created. So this is very important. So your CLM system should have functionality that allows you to capture price changes through the contract lifecycle without having to incur massive legal expenses every time you make a price change or even a pay term change, you don't want to revisit the contract in six months and that's not practical. So these are some of the stuff you should be looking into a CLM system. Makes sense?

Matt: Makes sense! Now, one more question for you. Knowing now or knowing then what you know now, that's the better question. Having implemented these systems, having gone through the process design to create that cohesive governance for contract processes, what would be your recommendation for somebody who is setting out on their let me call it ‘Journey to excellence’ in this combination of process design and technology implementation. What would be your top of the head, your top recommendations, the do's and don'ts, the tips and tricks, the pitfalls to avoid? 


Ganga: I think you always start with the process. You look at your sourcing process, how you're avoiding that contract to XYZ vendor. So you have everything integrated that way. The flow of data is there. So you don't have recreation of the data. And once that process is simplified all the way from you pretty much have to start from the sourcing to the wall to the contracting. If all these are linked, the data is flowing from one process to another process. So you got to design your process in such a way from end to end. How do I manage my contract lifecycle? That's step one. 


Step two is very easy. There are very good contract management system out there. Right now, it's more and more advanced and some of it has good AI and ML kind of functionality. Look for those kind of systems that not only take your existing contract, but any new contract you're creating, it gives you the accuracy and the speed to go through that's key. Three, you must look at the analytical capability. If all this data, what use it is, if you cannot mind the data efficiently to support your decisions or even to see where you are, how much compliance is happening, spend under contract. For you to be able to do that, the system has to also be able to not only start from sourcing, but even though the CLM system might not actually do sourcing, but it should be able to connect with the sourcing system all the way to the operationalization of that contract. So those are the few watch outs. And many times I see the analytics are pretty weak. So that's something you want to focus on because with category managers, you cannot give them mines of data, like pages and pages and pages. What are they going to do with all that data? So the analytics power has to be there with high level and they should be able to drill down, they should be able to look at site by side comparing their contract terms, something that will help them ingest the data to make those decisions they need to make. So the speed and accuracy is very key. 


Matt: It sounds like a very comprehensive transformation program really that you are running there. So do you have for our listeners here just some guidance? How long does a program like this take typically? What does it take in terms of resources, both from a people perspective but also from a financial perspective. From your experience Ganga, what would you say? 


Ganga: So I've worked for several companies. Now I'm consulting with several companies. It all depends on the size of the company. But bottom line, you wouldn't buy a house without a contract. Right. Why do you need a contract? So you're safeguarding yourself against all the risk you've got to manage. It’s not something like it's a choice. It's something you need to do. And procurement is the place where when you think about a company, a lot of money, the bottom line impact is going through the procurement organization. So this should be a high priority for any company. And, especially the procurement organizations need to have a decent tool to protect the company's investment or company's spend. Very important. Look at your process and get the buying. It's easy for procurement to justify because they are the ones who are spending a lot of money. When I spending means they're negotiating all these contracts. Right. So they should pay attention to focusing a lot on the process. And the process is not about one person, there's a lot of interdependency. 


So when I run programs like this, I make sure all the right stakeholders are engaged. So it's not just the procurement, it's also finance, legal, your controls, accounts payable. These are some of the stakeholders you have to engage to look at how does contract affects the different groups, what are their contribution? Finances to give approval for a lot of these purchases, depending on how stringent your process is and then the controls guys with the policy, they are also involved in it. So when you are going to invest in a system, make sure that all these stakeholders are also leveraging that system. It's not just about just procurement. And also the type of people you want to recruit in this is people are very process minded, and you need a good representation from the category teams because they are the ones who will say what kind of data they need to do their negotiation. So these are group of people. Right. And then you have IT support definitely to ensure that the interface is smooth interface with all the interdependent systems and to flow the whole process end to end. These are some of the things a company should consider. And of course, once you have these requirements really nailed and it's easy to look for a CLM system that will support your needs, your business requirements, and make it easy for everybody to use the system. The Usability is very important. 


Matt: So in summary, number one, good contracting is not an option. So you better invest the effort and the funds that you need on time. Number two, make sure that you bring the rest of the enterprise with you on the journey. Don't look at this siloed in procurement or in legal or in sales, but across the functional boundaries of the enterprise. And number three, make sure that you do it, otherwise, you're just going to spend a lot of time, effort, and money in search and rescue and firefighting, which you don't want.


Ganga: Exactly. I mean, we can talk about this thing the whole day. Right. But bottom line, you have to be responsible for all the spend that's happening in the company. If you are a procurement organization to a large degree. And then having all these other stakeholders be part of the whole process is what is going to make it very efficient. 


Matt: And what you're saying is right, if you use and I don't want to make this a technology argument, the right process as well, then you are actually going from contracting pain, which is what many procurement professionals feel like. Right?  Contracting pain to contract delights, because you can bring the contract to life and the contract can really help you in your mission of value delivery for your company. Fantastic, Ganga! Thank you so much. I'm sure it was a very edifying conversation. At least it was for me, hopefully also for the rest of the audience. Thank you so much for joining us today. And we're looking forward to speaking to you again very soon. 


Ganga: Thanks, Mattais, for this opportunity. I hope your audience got some of my experience.


Matt: So, listeners, that was Ganga Seibert sharing her views on contract traceability on the value of combining process design with technology implementation and by efficiently managing contracts is just not an option anymore, but the need of the hour. Good contract traceability will simplify the contracting process. It will eliminate human errors and it will drive efficiencies, which will all help to materially reduce operating costs and risk. 


Those were some great anecdotes from Ganga's professional experiences over the years and we have many more interesting conversations with industry leaders in the upcoming so stay tuned and catch us on the next episode of Clause and Effect. Subscribe to the podcast and visit simplycontract.com for more information.