Supply Chain Intelligence

New Initiatives & Guidance in Procurement

June 2019 - Spend Analytics | May 2019 - Contract Management

Issues on

Contract Management


May 2019 – Vol 1. No. 1

THE GAME CHANGER

CONTRACTS GET SMARTER WITH BLOCKCHAIN


Supply Chain Intelligence
Published by Integratise Inc., Whitehouse Station, NJ

email: editorial@supplyintel.com
www.supplyintel.com

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In this Issue:
  • Smart Contracts with Blockchain – the game changer
  • Integrating the new Contract Mangement Tool with your existing legacy systems
  • Contracts – Flexible Approval Workflow Management
  • What can you do to repair your existing contracts database
  • Monitoring insurance certificates, deliverables and other other terms and clauses
  • Simplicity, core basic technology and ease of use is the key to contract management success
   

Smart Contracts with Blockchain – the game changer

A digital transformation is underway in the procurement and contract lifecycle management sector toward blockchain information technology, a secure method of storing and sharing high volumes of data.

As eProcurement and contract lifecycle management become increasingly complex, a digital transformation is underway in the supply chain industry toward blockchain technology, an open source digital architecture for related data and their histories. The term blockchain refers to the fact that data is stored in numerous blocks, typically on multiple servers, sometimes on the public internet, but, in the procurement and supply chain world, increasingly within a private intranet of authorized users. The data is refreshed automatically at a frequency set by the network’s designers.

Smart contract is a derivative of this blockchain technology. According to Deloitte and Wall Street Journal, Blockchain-enabled smart contracts can allow all parties in a transaction to validate outcomes and automatically execute contract terms without the need for a third-party intermediary. Simply put, it is a next generation automated contract management environment that can bring efficiency, risk mitigation, and cost reduction. Contract management activities can be resource intensive. In Blockchain enabled Smart Contracts environment, these resource  intensive activities are automated to make it easy to use and reduce the overhead of daily maintenance and operational activities of contract managers. Smart contracts monitor contracts, insurance certificates, and other risk management components.

 

Even the contract approval workflow become more flexible and efficient. Smart contracts environment also enables automated contract deliverable, terms, and clause monitoring. When integrated with key performance indicators and supplier performance matrix, it can really bring benefits to an organization.

In a recent survey by Deloitte and Wall Street Journal, 86% of the respondents reported finding value and/or comfortable contracting with Blockchain based smart contracts. Smart contracts are bringing in a new dimension in risk management. Insurance certificates and other risk management components are automatically monitored and managed. Supplier performance monitoring becomes less resource intensive and automated reports are generated. One interesting effect of smart contracts is availability of automatic triggers and alarms in contract lifecycle management systems extending to spend analytics systems.

Related links:

  1. Contracts get smarter with Blockchains: https://deloitte.wsj.com/cio/2017/03/09/contracts-get-smarter-with-blockchains/
  2. All aboard the Blockchain train: https://aerospaceamerica.aiaa.org/departments/all-aboard-the-blockchain-train/
  3. Contract Lifecycle Management: Blockchain and Smart Contracts – Are You Missing Out? https://www.capgemini.com/2017/09/contract-lifecycle-management-blockchain-and-smart-contracts-are-you-missing-out/;
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Integrating the new Contract Mangement Tool with your existing legacy systems

You cannot discard your existing legacy systems. They provide valuable data, process information, and familiarity in terms of knowledge and use. Intergaring any new system with existing systems needs planning and taking some calculated risk. Your new Contract Management System is cloud based Software as a Service (SaaS) but your ERP system is client server based in-presmises legacy system acquired years back. What do you to integrate these seamlessly to work together for higher productiovity and less duplication of work?

The simplest of integration is through manual data integration. Every legacy system allows download and upload of data in text formats. The process can be resource intensive and not ideal for large enterprise level applications. Some systems like Workday may not work as object models are involved. The second method is to employ Application Programing Interfaces (APis) if available. Sometimes legacy systems may not have the ideal APIs. APIs can be available in cloud bases SaaS applications. The third method is XML based integration through SOAP type integration services.

Think carefully if you really need integration and if yes, what level of integration. Integration cost can be a waste if you soon replace legacy systems with cloud-based SaaS systems.

Contracts – Flexible Approval Workflow Management

Contract Lifecycle Management (CLM) systems support approval workflows. In a typical organization, several individuals in several departments can be involved in approving the contracts. The approval workflow can flow from one set of individuals in a department to another sequentially or in parallel. For example, contract manager may first send it to legal, then accounting followed by data privacy and other departments. Within these departments several individuals may be required to approve the workflow or one of many can approve the workflow.

CLMs are normally designed to handle sequential or parallel approval processes. The sequence who approved who approves it first followed by who. It can be important as the contract gets edited based on inputs from different approvers. Within a department several individuals can approve the contract at the same time or one after the other. What happens when someone is on vacation? Approval delegation is also part of the needed flexibility. A flexible approval workflow may be critical in the success of an enterprise level contract management system. Another important task is to closely monitor the approval process to avoid bottlenecks.

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What can you do to repair your existing contracts database

The state of a software application is its data. The behavior of a software application is its functionality. Contract Lifecycle Management (CLM) systems are no exception. Unless a contract repository is well managed, over time it can be damaged due to data corruption and lack of data integrity. What can you do to repair existing contracts database without discarding the whole repository and start rebuilding the same?

Contracts repositories are normally based on relational databases. What it means is that different data elements in the database are linked through relations. When contracts are deleted or moved and the corresponding related data elements are not changed or deleted, it can cause data integrity issues. For example, what happens when a Contract Administrator (CA) leaves the organization and the corresponding tasks are taken over by another CA? What if you delete a contract in the system – is the system adjusting all the related data elements to make sure data corruption does not happen?

The trick lies in designing a simple and straight forward contract database. Also important is the simple easy to use contract management systems. Complex contract management systems are more difficult to maintain. Cloud based SaaS systems can also complex and not well maintained. Modular CLM systems are less prone to data corruption. If you have difficulty using the CLM, it is more probable your contract repository will lack data integrity in the long run.


When a contract database is corrupted because of data integrity issues, progressively the CLM will become slow and eventually become unusable. At that stage the contract database may need a step by step data migration into a new contract repository. Before a data migration decision which can be expensive, ask the data administrators if they can use SQL or ETL tools and processes.
Simply put, select and use CLM that are based on simple contract repositories. Avoid complex hard to use systems.

Monitoring insurance certificates, deliverables and other other terms and clauses

Monitoring insurance certificates, deliverables and other other terms and clauses can be very resource intensive. These activities are part of a modern Contract Lifecycle Management (CLM) system. Smart contracts environment can automate these processes. Triggers, alarms, automated actions can be programmed in a CLM to guarantee mandatory continuous monitoring of risk management components like insurance certificates. Similarly the CLM system can be programmed to trigger alarms and actions for supplier deliverables, and contract terms and clauses.

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Simplicity, core basic technology and ease of use is the key to contract management success

Disruption in business processes is the name iof the game in todays economy. Contract Lifecycle Management (CLM) tools are no exception. New technologies are making newly acquired CLM tools obsolete. Government agencies and corporations are adopting complex contract management systems and personnel are getting trained for days for using the same – only to find a modern cloud based SaaS CLM is far more efficient because of its simplicity and modular architecture.

When you evaluate CLMs look for simplicity in addition to functionalities. Complex CLM environements are more like to be replaced by simple easy to use CLM environments. A simple contract management system does not require days to learn. It is intuitive enough to see a short video and get youi started. Simple CLM data repositories are simple and straight forward with less chance of data quality problems.

Another important factor for the success of a CLM tool is less dependency on third party tools for visual analytics and other base functionalities. If a system uses simple base technologies like JSon and Javascript, it is easier to maintain and can be easily enhanced with required functionalities. Use of third party tools based on copmplex technologies developed years back can be soon replaced by newer tools. One simple test you can use to ask for an

enhancement from your CLM vendor. More time it takes to make the change, more is the complexity of the tool.
Simply put, look for simple and easy to use CLM SaaS systems that uses basic technologies. You should need just a standard browser to use the SaaS system.

In our next issue:

THE REAL INSIGHT
SPEND ANALYTICS

Diversity Spend Stats, Noncompliant Spend, Spend Benchmarking over time and other organizations, spend categorization, Cost Savings with Spend

Supply Chain Intelligence
Published by Integratise Inc., Whitehouse Station, NJ

email: editorial@supplyintel.com
www.supplyintel.com