It’s been a well known statistic going back all the way to 2009 that at least 30% (and often 40%) of identified value in a sourcing event is never realized when Mickey North Rizza of AMR Research (acquired by Gartner in 2010 in an acquisition game of the 64,000,000 pyramid) published her classic 3-part series on Reaching Sourcing Excellence with Part 1 titled How to Keep 30 Cents of Every Dollar Spent. The reality is that while many leading organizations adopted strategic sourcing quickly during its first heyday in the mid-2000s, often before Procurement, because of the huge savings opportunities that were identified with good reverse auction platforms (in markets where supply exceeded demand) and good sourcing optimization (regardless of market conditions), as sourcing optimization identified an average savings of 12% consistently (compared to reverse auctions which saw significant drops every time they were applied to the same category), most of these leaders who identified savings of 10% or more never saw half of the identified savings. This is because savings requires more than just identification and a signature on a contract, it requires execution!

Execution that, at a minimum, requires:

• making sure you order on the contract
• … on time to receive delivery on time using the preferred shipping method
• making sure you receive defect-free goods that meet the spec before paying for them
• making sure the amount you are billed is the amount as per the contract
• … and that you are not billed for expediting fees or surcharges you DID NOT agree to
• making sure you pay on time (to avoid penalties)
• … and only ever pay for any good or service once (using an m-way match)
• making sure you terminate or renegotiate before an evergreen renewal
• … and that you have verified the supplier has all the certifications and insurances in place before placing an order or renewing the contract
• … etc.

It comes back to the concept of the perfect order which must be

• on time,
• complete,
• damage free,
• correctly documented,
• correctly billed, and
• adherent to all contract terms

This is not easy to do unless you

• have a good procurement system
• have a (carrier that has a) good WIMS (Warehousing and Inventory Management) system

and, the part that most people miss,

• have a good contract lifecycle management system that manages the contract execution post signing

And when you look at the majority of contract management systems, they tend to fall into three categories:

• a glorified e-filing cabinet / document repository where you can store your contracts and search their metadata (and literally no better than what a high school student with Microsoft Access and minimal coding skills could build 20 years ago)
• a contract creation system that will allow you to quickly draft contracts using:
  • contract templates, from your, or their, legal department, tagged by region and category they can be used for,
  • clause libraries and templates, possibly with multiple version support based on territories and categories, or, today
  • Gen-AI drafting of templates through specification of category, region, requirements, and risks that must be covered as well as e-versions of all previously signed contracts in the category, region, business requirement, or risk categories (which then need to be mildly to moderately edited by a Legal expert)
• a signatory platform with negotiation support (version control, dynamic redlining, audit trails, etc.)

Which is all fine and dandy, and well implemented can make your Legal team and Sourcing teams considerably more productive during the negotiation process, but does diddly squat when it comes time to actually helping you manage the contract execution. Now, you might think that you can do that in the Supplier Management system, because you’re ultimately managing a supplier, or the Risk Management system, because you’re ultimately managing a risk, and you can, to a point, and specifically the point at which those systems allow you to define contract tasks, but none of these are set up to let you holistically manage a contract — contract 360 if you will. This is especially the situation if you have a master contract with a number of sub-contracts, and those sub-contracts have sub-contracts as well. This will be the case if you are buying off of a contract tied to a GPO master contract, a holding company master contract (if your company is part of a group of companies), or in construction / engineering / shipbuilding industries where your main supplier will need to subcontract to a number of smaller suppliers for custom parts or services and your organization needs to manage that for regulatory or risk reasons.

In other words, the only contract lifecycle management solution that is truly valuable to Procurement is the solution that allows the contract to be managed from post signature to termination, helping the organization ensure all of the obligations are met and rights are received.