Once a vendor manager (VM) found himself inundated with multiple onboarding requests from various channels, requests for documents needed for contracting, the task of tracking performance and formulating improvement plans. He faced challenges in effectively monitoring risk, compliance, and keeping vendor documents up-to-date, which hindered their ability to gather the necessary data for formulating improvement plans and identifying alternative suppliers.
On the other hand, in the same organization, a contract manager (CM) was frustrated by several issues, including extended supplier onboarding times, a lack of awareness regarding supplier risk and past performance, a protracted process for requesting additional documents during contracting, and a notable absence of visibility into the onboarding and information request procedures.
Well, this is not the tale of any one organization. Such puzzles with missing pieces exist everywhere. Whether you are a Chief Procurement Officer (CPO) or Chief Legal Officer (CLO), navigating daily decisions without certainty will surely be your daily nemesis.
Wouldn't it be a game-changer if the entire organization could navigate the same data more smoothly? Is it possible to untangle the complexities of vendor and contract management and streamline processes, eliminate uncertainties, and bring clarity to departmental roles? However, the road to success is often paved with challenges that arise when two crucial functions, legal and procurement, operate independently.
In this blog, we delve into the key hurdles faced by Vendor Managers and Contract Managers when unconnected and explore innovative solutions that promote a connected and streamlined experience.
FOUR Key Challenges Faced by Vendor Managers and Contract Managers When Systems are Disconnected
1. Lengthy Cycle Times
Extended procurement cycle time and isolated processes are common outcomes of unconnected Vendor and Contract Management. These inefficiencies act as roadblocks, impeding the flow of progress and hampering timely decision-making. As a result, both Vendor Managers and Contract Managers face frustration in their efforts to efficiently manage contracts and suppliers. The siloed approach undermines the fluidity of operations, resulting in missed opportunities and elongated cycles that impact the entire organization's effectiveness.
2. Compliance Concerns
Navigating compliance requirements is a paramount concern for Vendor and Contract Managers. The lack of connection between their functions can result in overlooked regulatory and legal obligations, exposing organizations to unnecessary risk. For instance, data privacy regulations like GDPR and industry-specific standards such as HIPAA certifications can be inadvertently disregarded, leading to potential legal consequences and reputational damage.
3. Selecting the Right Vendors
Navigating the landscape of vendor selection is a challenge that requires precision. For Vendor Managers, this task is particularly intricate, as they must determine which vendors are appropriately onboarded while ensuring that none slips through the cracks. However, the absence of a cohesive system can complicate matters. This lack of unity can lead to confusion, missed opportunities, and misaligned priorities. Imagine a scenario where a vendor perfectly aligned with the organization's needs goes unnoticed due to the lack of streamlined procedures.
Conversely, if a contract manager contracts with a risk, it can lead to continuity risk or reputational risk. A seamless system not only unifies the vendor selection process but also safeguards against overlooked prospects, ensuring that organizational priorities stay aligned while optimizing Contract Managers' efforts. It makes critical information like risk and performance available across the Source-to-Pay processes.
4. Monitoring Vendor Performances
Monitoring vendor performance becomes challenging when contracting and vendor data management operate in separate silos. This isolation can result in data inconsistencies, lack of integration, incomplete information, delayed responses to issues, inefficiencies, missed opportunities for improvement, compliance risks, and communication challenges.
These difficulties hinder the ability to assess vendor performance effectively, potentially leading to financial and operational risks and hampering overall vendor relationship management. Integrating contracting and vendor data processes is essential to address these challenges and enable a more streamlined and informed approach to vendor performance monitoring.
Stats Speak: The Cost of Not Leveraging a Connected Experience
Leveraging a connected Vendor and Contract Management experience is not just a luxury – it is a necessity. The data does not lie. With the absence of a unified approach, these organizations encounter significant repercussions. Increased costs become a reality, procurement cycles extend beyond their optimal timelines, and the chances of compliance breaches rise to concerning levels.
- 65% of Legal professionals identify time lost on administrative tasks (like vendor onboarding, risk, and compliance checking) as their biggest pain point according to a global legal survey.
- According to Gartner, a lawyer spends 25% to 40% of their time on non-legal work, which results in 27 million dollars in lost productivity.
The stark statistics underline the urgency of embracing a connected experience for Vendor and Contract Management.
Aavenir Contractflow - A New Dawn: Integrated Solution and Use Cases
Vendor onboarding might appear as a straightforward step, whether done concurrently with contract signing or before/after. Yet, this often-overlooked process carries significant importance. Thorough due diligence must precede vendor onboarding. Organizations may also review existing suppliers, deciding to renew contracts or engage new vendors for fresh agreements.
If we take an example of healthcare industry, and specifically provider contracting, extensive provider verification, elongated provider onboarding processes, multiple stakeholder collaboration, adherence to regulatory requirements and tracking providers obligations have always been a challenge. In such scenarios, having a purpose built and pre-configured provider contracting solution that provides a connected experience can help address the risks and challenges of healthcare organizations.
Numerous vendor onboarding and contract management solutions populate the market. Often, these operate in isolation as different departments handle them separately. However, the practice of working on identical data within two distinct systems, managed by separate departments, inadvertently creates silos and hampers efficiency—rather than enhancing it.
And hence, an AI-powered solution like Aavenir Contractflow steals the limelight across Source-to-Pay operations with digital workflows. This innovative and industry-agnostic solution is not just built on ServiceNow platform but also infused with the prowess of AI and digital workflows.
This groundbreaking tool seamlessly unites Vendor and Contract Management and extends its influence across your entire Source-to-Pay operations. Uncover its revolutionary capabilities through these compelling use cases, providing a vivid demonstration of how Aavenir Contractflow delivers an unparalleled connected experience, effectively bridging the gaps between vendor onboarding and contract management:
1. Simultaneous Onboarding and Vendor Information Request – Accelerated Sourcing and Contracting
From contract authoring to contract analytics and beyond, Aavenir Contractflow extends its capabilities to effortlessly facilitate the creation and onboarding of new vendors. By creating a new vendor directly from Aavenir Contractflow and onboarding them seamlessly, Vendor Managers can initiate proper due diligence, avoiding cumbersome back-and-forth communication and enhancing efficiency.
In this interconnected environment, contract managers no longer need to approach vendor managers separately for due diligence or request additional information. If a contract manager identifies that certain documents like certifications, insurance, or tax forms are missing, they can initiate an additional request directly from Contractflow. This streamlined approach prevents unnecessary circular communication between contract managers and vendor managers.
2. Selective Process Enablement – Enhanced Control over Vendor Activities
Aavenir Contractflow offers Vendor Managers the capability to implement a selective process during vendor onboarding. For example, where a vendor is designated exclusively for contracting purposes and not invoicing, This feature not only streamlines operations but also minimizes errors, improves the efficiency of the contract management process, and enables the withholding of invoice payments to non-compliant vendors.
If vendor documents like insurance, licenses etc. are not up-to-date, procurement teams can initiate contract authoring, create sourcing events, and request information; however, they reserve the right to withhold payments and contract signing until the documents are provided. This selective process optimizes vendor interactions, allowing businesses to manage contracts efficiently and adhere to stringent compliance requirements.
3. AI-based Risk Scoring –Minimized Risks
Aavenir Onboardingflow seamlessly manages vital supplier information across their lifecycle, a critical asset for contract managers who benefit from improved compliance, negotiation, and efficient contract management. Aavenir Contractflow complements Onboardingflow by providing a connected experience without the need to switch systems. This streamlined integration simplifies downstream processes, allowing for the direct verification of essential information like financials, compliance, and diversity within the platform.
Furthermore, Aavenir Onboardingflow easily integrates with third-party risk providers like Dun & Bradstreet, Eco Vadis, Lexis Nexis, and GRC platforms, including pre-configured integration with ServiceNow VRM and GRC. Drawing from diverse risk information sources, Aavenir AI generates risk recommendations. For example, if a supplier is identified as financially risky Aavenir’s AI powered risk engine will provide recommendation to include financial stability and reporting clause, material adverse change, bankruptcy notification, etc. to minimize risks during contracting.
Further, Aavenir’s AI powered risk engine can identify specific geo-political risk factors such as Tier-2 suppliers based in Russia and can provide clause recommendations to Contract Managers, who can integrate corresponding clauses into contracts proactively.
Moreover, this connected solution offers a tiered approach to vendor management. From strategic vendors, with whom regular transactions take place, to vendors of lower importance, all are accessible in the same place for vendor information and risk assessments. This comprehensive approach of AI-powered risk scoring, and recommendations ensures that businesses have a clear understanding of their vendor landscape, enabling well-informed decision-making and risk management.
4. Vendor Feedback and Performance Surveys - Informed Decision Making
Incorporating a centralized system for connected contract data, organizations can improve overall performance of contract management. For example, Contract and procurement managers can use pre-configured vendor feedback and performance questionnaire as a survey tool as contract renewal approaches and a vendor's contract end date nears to gather stakeholder feedback on vendor performance. This feedback aids in making informed decisions about contract renewals or termination, ensuring ongoing quality and alignment with business needs. Vendor feedback and performance data can inform negotiations for improved terms in contract renewals.
5. AI-powered Obligation Analytics – Improved Performance
AI-driven obligation analysis extracts obligations and Service Level Agreements (SLAs) and matches them against the compliance checklist defined in Governance, Risk, and Compliance (GRC) to provide compliance recommendations, including GDPR and breaches of agreed-upon terms.
Moreover, it proves invaluable in recognizing instances where suppliers deviate from agreed-upon terms, leading to outcomes like missed delivery deadlines. Furthermore, AI can play a pivotal role in identifying recurring breaches that may trigger contract termination or give rise to financial penalties.
When supplier information, contract terms, and compliance requirements are seamlessly available on single data model, the system can trigger automated alerts and notifications when compliance milestones or contract obligations are approaching or not met. This allows for proactive management of compliance issues and ensures that contracts remain up-to-date and compliant at all times.
For instance:
- It promptly identifies contracts where suppliers fall short of environmental (ESG) standards mandated by regulatory authorities.
- The AI model can pinpoint contracts where supplier data management practices violate data privacy regulations, such as GDPR.
In Conclusion
The challenges faced by Vendor Managers and Contract Managers in unconnected environments are real, but the solutions are within reach. Embracing integrated platforms and use cases can revolutionize the way these functions operate, leading to shorter cycles, improved compliance, and enhanced decision-making. The time is ripe to bridge the gap between Vendor and Contract Management and unlock a world of efficiency and success.
Explore the endless possibilities of a connected Vendor and Contract Management experience. Download the Aavenir Contractflow Datasheet Now!
