From irresponsible vendors to untimely deliveries, the risks of poor procurement are many. Mediocre procurement processes can result in numerous wasted hours spent in chasing documentation and figuring out errors. In order to tackle probable risks effectively, technology needs to be in place that not only ensures competent contract authoring but also helps forecast potential risks. This can now be achieved with the help of a contract lifecycle management platform.
Many procurement departments may think of a contract lifecycle management system as a luxury. But, over the years, numerous research reports have established that CLM can effectively change the procurement function for the better. From helping reduce costs, making procurement expeditious, and reducing risks to improving overall business performances, a sophisticated contract management platform can do it all.
The most common procurement risks enterprises encounter
1. Feeble needs analysis
A successful supply chain is a result of having a clear understanding of the needs of your enterprise. What is needed, when is it needed, who will get it for you in time, and how you will get it at the best price are the questions that need to be answered if you want a consistent and seamless supply chain process.
If there is obscurity in this bearing, it may happen that: you may invest too much, or not buy enough, or end up buying unreliable service at sub-standard costs without the advantage of economies of scale that well-negotiated contracts bring with them. In situations like these, maverick spending becomes a significant concern that can take both your procurement strategy and financial planning for a toss. You won’t be able to connect actual purchasing patterns to set budgets, resulting in a faulty audit trail that jeopardizes your financial security.
Resolution: Big data and AI have changed the way procurement works today. You can now have transaction analysis for every purchase, which helps you determine patterns that can be used to develop favourable contracts with your suppliers as well as come up with crafty supply chain strategies.
2. Mediocre supply chain management
A transparent, intelligible, and centralized vendor assessment system paired with well-equipped methods for requests, approvals, purchases and payments, is what makes supply chain management successful. In case of poor management in the supply chain, you might be forced into rogue spending resulting in huge financial losses and a great deal of wasted time.
Resolution: Cloud-based contract management platforms today use artificial intelligence for vendor management and evaluation. Apart from tracking vendor performances, you can also assign roles to individual owners for approvals, payments, purchases and even requests. With AI’s intervention, it is possible to identify negotiation opportunities and cut significant costs by speeding up the P2P (procurement to payment) process.
3. Inept contract management
No more are contracts mere agreements to buy. Today, procurement decision-makers and managers in an enterprise consider contracts to be strategic opportunities to build mutually rewarding partnerships with all kinds of vendors. However, if you don’t have an effective contract management system for these partnerships, you expose yourself to compliance issues and forgoing substantial cost savings.
Resolution: An effective CLM platform takes care of the entire lifecycle of a contract – right from requests to renewals. It also has contract repositories that make contract authoring simple, making the review and approval process faster. Thanks to the AI capabilities of CLM platforms, you also have access to reports from various verticals like marketing, legal, finance and top management, making negotiations less complicated. Analytics and insights also help detect new sourcing opportunities, making conditions favourable for you, when it’s time to renew a contract.
Ignorance is bliss, but not when it comes to mitigating procurement risks. CLM platforms with their cloud-based services powered by AI capabilities are now seamlessly reducing procurement risks for enterprises. So, if you aren’t on board with a contract lifecycle management system yet, now is a good time to see how it can help make your business more profitable.