How AI-Driven CLM can lower costs and increase efficiency for Procurement Teams


Across virtually every organization, sourcing and procurement departments are under constant pressure to reduce cost and mitigate risks. The big data revolution in digital technology has put more information at our fingertips than ever before, which represents both an incredible opportunity and a significant challenge.

The larger the volume of information, the greater the resources required to unlock the valuable insights contained within. It is neither efficient nor cost-effective to dedicate an ever-increasing number of analysts and experts to parse these haystacks in search of a few specific needles.

Advances in artificial intelligence (AI) — including natural language processing (NLP), cognitive analytics, and pattern recognition — are making it possible to derive maximum value from large volumes of data, without drastic increases in headcount and bureaucracy. Here are ten ways that any procurement operations department could benefit from a robust AI-driven contract lifecycle (CLM) solution.

Understand Internal Spend

An AI-driven CLM solution can scan through invoices and contracts, searching for keywords tied to spend categories. Using natural language processing, it can create a structured matrix of data from unstructured documents, linking line item details to costs and supplier names. This structured matrix can then be processed in a number of ways to more precisely analyze spend information, creating virtually limitless opportunities to drive value.

Risk of Taking No Action: Without an AI-driven CLM solution, your organization is leaving valuable insights locked away inside volumes of data.

Derive Global Sourcing Insights

Tracking global supply trends was a difficult task before the pandemic, and it has only gotten more difficult in the wake of covid-related supply chain disruptions. An AI-driven CLM solution is capable of intelligently analyzing licensed or publicly available third-party product and supplier insights to determine optimal sourcing strategies for that specific moment in time.

Risk of Taking No Action: Without the assistance of an AI-driven CLM solution, your organization will either dedicate tremendous resources to trying to keep up with the shifting trends in global supply, or you will fall behind the trends and find yourself at the mercy of unpredictable price increases.

Automate Compliance

Managing compliance manually is a time-consuming, resource-intensive process. Non-AI solutions for compliance management require every supplier to be onboarded into the system, which can also create additional demands on the procurement team. An AI-driven CLM solution can intelligently assess payment terms, flag discrepancies between contract and invoice rates, and identify duplicate invoices — and it does not require invoicing or contracts to be submitted in a specific format or via a particular online portal.

Risk of Taking No Action: As with most aspects of not using an AI-driven CLM solution, managing compliance manually requires a greater commitment of resources for a less efficient, less accurate process.

Extract Invoice Data

By implementing an AI-driven CLM solution, your accounts payable team can have invoice data intelligently processed to ensure payments are made on schedule, without incurring additional fees. The same process can flow that data into spend analysis reporting seamlessly, and even process historical data for a more holistic view of your organization’s spend patterns.

Risk of Taking No Action: Not taking advantage of an AI-driven CLM solution for invoice data extraction means that you risk incurring unnecessary late fees, as well as missing out on the opportunity to efficiently analyze spend.

Extract Contract Data

An AI-driven CLM solution can extract data points — such as start and end dates, payment terms, and references to master agreements —○as easily and efficiently as it can extract invoice data. These data points can be fed into project and payment management systems, to ensure all contractual obligations are met as smoothly as possible. The contracts do not need to be in a specific format — natural language processing makes it possible for the CLM solution to intelligently parse the contract for relevant terms, and machine learning makes it more efficient over time.

The flexibility of an adaptable, intelligent CLM solution is a tremendous advantage for procurement teams, who can then dedicate their employees’ expertise to analyzing only the items that the solution flags for manual review.

Risk of Taking No Action: Not only does a manual solution require a significant investment of person-hours, it also fails to take advantage of the integration into other systems that an AI-driven CLM solution can provide.

Manage Contractual Lifecycles

Taking a step back and looking at the holistic contract management lifecycle, the benefits of an AI-driven CLM solution positively impact every aspect of the process, from standardizing templates, to generating first drafts of agreements, to managing the negotiation workflow. It aggregates all executed contracts in a single location and provides a clear and transparent audit trail. And natural language processing can flag potentially problematic or pertinent contract language.

Risk of Taking No Action: Committing employee resources to monitor the minutiae of contract lifecycle management not only carries a considerable cost, it can also be a tedious process that contributes to employee dissatisfaction and makes them more error-prone.

Decrease Risk

A properly calibrated AI-driven CLM solution can reduce risk across every aspect of the procurement process. It can reduce procurement costs by monitoring global sales trends and providing intelligent historical analysis across every contract the organization has entered into. It can intelligently identify key dates and terms and turn them into automated reminders to ensure compliance with every contract. And it can parse every new contract for terms and clauses that are not a part of the organization’s standard practices.

Risk of Taking No Action: No matter how attentive your procurement team is, there is always a risk of human error creeping into the CLM process — an AI-driven CLM solution does not get tired or overwhelmed, and it can be a powerful tool to make sure that your procurement team does not either.

Report Completely

Through natural language processing, an AI-driven CLM solution can scan every invoice and contract that passes through your organization and aggregate relevant data points into a centralized, structured data matrix. This data can be structured so that it can be imported into any other tool that your organization wants to use for reporting or auditing.

Risk of Taking No Action: If your organization struggles to centralize its data or can’t process historical data, it is impossible to report accurately and can leave you vulnerable to legal compliance issues.

Improve Employee Experience

As contracts become more complex and the global supply chain makes procurement a greater challenge, the risk of employee burnout becomes real. But much of the CLM process can be automated without incurring additional risks, freeing up employees to focus their expertise on areas that need additional attention, which also tend to be more intellectually stimulating and satisfying.

Risk of Taking No Action: Requiring your employees to focus their attention on the micromanagement of CLM, which can be easily and safely automated, risks employee burnout and turnover.

Future-Proof the CLM Process

The greatest advantage of a robust AI-driven CLM solution is its adaptability. It is not a platform that requires data to be entered in a particular format, or a proprietary piece of software that only operates within its manufacturer’s ecosystem. It is designed to meet your organization where it is, and to be configured to help you fulfill your organization’s specific needs, in the most efficient way possible.

Cost of Not Doing It: New technological solutions improve the procurement process for thousands of organizations every year — but if your organization is not in a position to take advantage of them, you are missing out on all of the potential cost savings and risk mitigation they provide.

Procurement is a challenging and critical function inside of any organization. But as we have demonstrated, there are many ways that an AI-driven CLM solution can help to manage the challenges and improve outcomes across the board.

Interested in learning more about how an AI-driven CLM solution can work for your organization?