Your procurement strategy forms the basis for every business relationship, so it's vital to nail it with the best data and analysis you can get. Contract intelligence uses advanced AI models to ensure you make the best decisions from the start. In this article, we’ll examine how AI and contract intelligence improve each step in your procurement strategy for better supplier relations.
What Is a Contract Intelligence Solution?
A contract intelligence solution understands complex contracts through natural language processing and organizes them within a centralized repository. AI-powered contract analysis produces advanced analytics with speed and accuracy. These software solutions improve decision-making in several areas of your business, including procurement.
Benefits of Contract Intelligence for Procurement
When artificial intelligence runs your procurement process, you will quickly see improvements in several areas. The increased speed and accuracy of contract analytics frees staff to focus on making decisions based on actionable insights. They no longer need to carry out the monotonous tasks around data entry and analysis.
Intelligent contracts perform better in risk mitigation, compliance assurance, and overall cost savings. Once staff are trained to interact with the new AI system, your business will enjoy smoother, more efficient workflows. Artificial intelligence tools aren’t meant to replace team members. Instead, they allow your business to optimize every stage of the procurement process.
How To Use Contract Intelligence Throughout the Procurement Lifecycle
AI has several applications throughout the procurement lifecycle. Here are four stages and how contract intelligence can optimize each.
Strategic Sourcing
AI contract sourcing improves the whole process right from the start. AI models quickly understand vast datasets for market analysis, identifying trends and pricing benchmarks. This gives you a comprehensive overview of the current market situation and what to aim for.
Once you understand what is available in the market, AI systems can analyze potential suppliers. You no longer need to spend days going through suppliers’ business and legal documents. AI can quickly and accurately identify suitable suppliers based on your specific goals and requirements.
Your AI system will give all potential partners a full risk assessment and rank them in order of reliability. This analysis is easy to consume and invaluable in the decision-making process to minimize your risk exposure.
Once you have created your shortlist, AI automates the request for proposal (RFP) process. Natural language processing handles the whole process of creating RFPs, distributing, and evaluating responses. This means that you can target a larger list of potential suppliers in a much shorter time while still keeping communications personalized and targeted.
When negotiating contracts, AI continues to play a pivotal role. At this stage, it has already collated, analyzed, and summarized a wealth of information to put you in a strong negotiating position. Beyond that, if you do get stuck during a negotiation, AI can offer real-time insights into negotiation strategies as soon as new information comes in.
Contract Management
Artificial intelligence in contract management starts by automating contract creation. Systems can easily follow templates or guidelines while adding company-specific information. This ensures that contract structure remains consistent, but each contract is appropriately individualized for its purpose.
While the contract is created through negotiation, an artificial intelligence contract review will highlight any potential points of contention. An intelligent contract plans for risks in the future in addition to current ones. Predictive AI brings these potentially hidden traps to light through deep analysis.
Even if your company has not dealt with a specific issue before, AI can anticipate them. Using a broader dataset from multiple companies within the market, the AI tool has the experience of a larger number of relevant companies. After running a scenario analysis, the appropriate team members will receive a ranked list of potential risks.
Your AI system will monitor market data and continuously track compliance regulations. This will keep you aware of any regulatory changes that could affect the contract terms. AI understands contract clauses and can highlight legal changes promptly to ensure continued compliance.
Supplier Relationship Management
Supplier relationship management is integral to the whole contract lifecycle management process. You can use AI in several ways to maintain great supplier relationships throughout your agreements.
Predictive AI anticipates any potential points of contention that may arise. This means you can deal with issues proactively before they become a bigger problem. In addition, natural language processing can automate regular correspondence with suppliers, freeing staff for other tasks. This automation provides timely responses, as AI is always working.
AI's ability to continually monitor key performance indicators (KPIs) within current contracts alerts team members in real time to any issues that must be addressed. If targets are not being met, your AI system can recommend corrective actions to achieve your desired outcome.
Spend Analysis and Optimization
Your AI system will start by aggregating data from various sources and contract types. Once it collates this information into a unified platform, it is ready for analysis.
As always, this starts by setting benchmarks based on historical company and market data. Once you clearly define your goals, your AI model will begin to identify trends. This pattern analysis makes it easy to highlight anomalies that lead to valuable insights into hidden costs.
Once you address current spending anomalies, it’s time to use your AI system to predict future opportunities. Predictive AI analyzes historical pricing and spending data to recommend proactive budgeting and cost-controlling strategies. These allow you to make decisions more confidently as you know they are future-proofed based on the best data available.
Machine learning continues to analyze data, run scenarios, and improve its recommendations. This means that over time, suggestions will become even more accurate.
Terzo: The Ultimate Contract Intelligence Solution
The right AI contract management software turns an otherwise opaque procurement process into an opportunity to minimize costs and improve business relationships. Get ahead of your competitors with a solution like Terzo, built to unlock the insights trapped in your contracts.
If you’re ready to see how AI can transform your business's procurement process, contact Terzo today. Our experts will walk you through exactly which AI tools are the most appropriate for your needs and recommend tailored solutions.
