The disruption caused by COVID-19 sent shockwaves across different sectors around the world. Travel, leisure, and supply chains were among the worst-hit. Ever since the pandemic ruptured the global economy, both private and public organizations have been scrambling to get their procurement departments back on track.
Procurement teams find themselves in a tough spot, with the burden of restarting business operations and serving an increasing number of consumers falling directly on them. So how can procurement teams speed the procurement process to get business back on track? The answer is using technology known for making business processes incredibly efficient: artificial intelligence (AI).
AI-powered automated contract review can help streamline procurement processes by employing powerful machine learning-based tools to review and markup contracts more efficiently than ever before.
Most businesses have dozens of vendor contracts up for review at a given time. These contracts all come with their own fees, pricing structures, legal costs, renewal terms, mandatory licensing agreements, etc. The sheer amount and complexity of the data to be reviewed here makes manual contract review extremely tedious and, in some cases, outright impractical. This is where AI-powered contract tools can help.
AI-powered contract review tools can help review and markup vendor contracts in minutes rather than hours. These tools are capable of reading and understanding common fields, terms, and semantics in vendor contracts, and can review and redline them, just like a human. AI can learn directly from a company’s standards and requirements to then instantaneously review and markup vendor contracts. AI contract tools can also help draw up vendor contracts much quicker and allow procurement teams to review low-risk vendor contracts themselves, without needing to escalate them to legal.
Procurement teams can use artificial intelligence to solve complex problems more effectively and integrate it with a variety of applications, including spend analysis, contract management, and strategic sourcing.
With AI contract tools, procurement teams are able to make better decisions about routing and workflows, such as decreasing the chance of a document sitting with an irrelevant party before it is forwarded, which is a waste of time and money. Here are more ways how AI contract tools can streamline traditional procurement processes making them extremely efficient:
The most crucial detail of a procurement contract is how much it costs the business. To arrive at a gross estimate, managers need to pick out the different material costs, taxes, licensing fees, etc., mentioned in the contract and calculate a net figure. Doing this for hundreds of contracts can be tedious.
However, AI can be trained to skim through contracts for these numbers and present them to the users in an efficient, tabulated manner. The users are then free to analyze and compare these numbers to judge the procurement contract.
When it comes to procurement, most businesses only aim to deal with trusted suppliers. AI can be used to crunch your existing procurement data to highlight suppliers with whom the company has interacted most frequently over the last few years. Contracts from these suppliers can then automatically be prioritized using AI.
AI can also be trained to perform predictive analysis on procurement contracts. The predictive analysis identifies the context and data and juxtaposes them against previous/standard ‘high risk’ models. This helps the program weed out risky contracts. The algorithm can also perform more intensive tasks like calculating the risk involved in a contract based on a few well-defined parameters. Contending vendor contracts can then be arranged according to their ‘risk score’ to make active risk management faster and much more efficient.
Routing and Institutional Knowledge
AI can be trained to learn and retain the information they are fed. This means that business rules, once defined, can be used to quickly review procurement contracts, thereby saving a lot of time and administrative effort. These rules can also define a specific chain of approval for procurement contracts. For example, contracts that cost the company above $10,000 need authorization from a managerial employee. These contracts will then directly be sent to them while the others are assigned to members of the procurement team.
One of the biggest pain points for procurement teams in the contract negotiation phase. It often takes large companies 3-6 months to negotiate even the smallest contracts. Contract review takes this long because it is typically a highly manual process that is very time and labor-intensive. The more people who touch a contract, the worse and lengthier the process becomes. Automated contract review tools can speed up these inefficient, risky, and time-consuming processes, eliminating hours, weeks, or even months off the time it takes to procure goods and services.
Automated contract review tools can help businesses review procurement contracts efficiently and cost-effectively, and BlackBoiler is at the forefront of this movement. Our comprehensive pre-execution platform allows users to review and redline contracts within minutes.