The risks associated with ethical sourcing have never been higher. How can you go global without compromising your ethics?
For enterprises with complex, global supply chains, the risks and challenges associated with ethical sourcing have never been higher. Over the past decade, supply disruption has gone from being an exceptional event to at least an annual – if not quarterly or monthly – occurrence. Most organisations are simply not prepared, even though they may have checked the box with fairly narrow supplier risk management assessments.
One reason for the increased risk? Contract visibility. The ability for companies to instantly locate, retrieve, analyse and track contracts across the enterprise, continues to be suboptimal at many large companies. When these contracts are sitting as unstructured data in a repository that’s difficult to search — or even worse in someone’s desk — bad things happen.
For example, one technology consulting firm missed $1.5 million in revenue recognition when a manually-tracked contract expired, but work was still performed against it. Discounts and rebates are overlooked, and unwanted renewals happen on autopilot. Poor contract management can also lead to reputation and brand damage when companies unknowingly use unethical suppliers.
So what can we do? Gaining visibility into commercial engagements can help.
Blockchain-based contract management is changing the game
As organisations become more and more concerned about supply chain risk, the need for better visibility is more critical than ever before. Enterprise contract management software provides that visibility by tracking what a firm’s worldwide obligations, entitlements and business relationships truly are.
This software gives organisations a firm grasp on their supply chain, key suppliers, the composition of the products they’re purchasing and the locales in which they’re operating.
Technologies like AI, Machine Learning and Blockchain are proving key for enterprises to mitigate risk in the future. This contract management space is a hot sector and continues to experience rapid growth. According to MGI, the market itself is worth $20 billion. This is reflective of large enterprises’ desire to digitally transform their commercial foundation. This helps them save money, reduce risk and improve compliance.
For example, customers like Mercedes-Benz Cars have already taken advantage of this technology. They have done so by utilising smart contracts on the Icertis Blockchain Framework to create an immutable distributed ledger of transactions.
This helps to ensure global sourcing and contracting practices adhere to Mercedes-Benz Cars’ strict requirements for sustainable, ethical and secure sourcing.
The future of ethical globalisation
I recently attended The Big Ideas Summit, a great event for procurement professionals that brings together the top figures in the industry to discuss the current business landscape and bring unique, innovative ideas to the table.
Right now, we’re in the early stages of technologies like blockchain and just starting to see major impacts. Three years from now we’ll have conclusive data on how blockchain has helped increase visibility into, and compliance among, supply chains.
Already, these blockchain and distributed ledger technologies are significantly changing the way organisations do business with vendors, partners, and customers, impacting the way companies approach, execute and enforce business contracts.
Although most organisations associate blockchain technology with the financial services industry, it has potential use within the manufacturing, government, healthcare and education sectors as well. This includes how those industries execute and enforce contracts.
For example,the Icertis Contract Management (ICM) platform is already used to manage 6.5 million contracts at companies like 3M, Airbus, Daimler, Microsoft, Sanofi and Wipro in more than 40 languages across 90 countries. The AI-powered platform allows customers to increase contract velocity and agility, proactively manage entitlements and obligations, as well as surface commercial insights and intelligence.
One day, blockchains that utilise distributed ledger technology may even allow for contracts that are self-verifying, self-executing and autonomous. Companies can exchange terms, events, and information throughout the lifecycle of a contract without relying on brokers or middlemen.
This streamlined approach to supply chain management will help reduce costs and solve the hardest contract management problems on the most easy to use platform, thereby improving the bottom line.
To learn more about Icertis’ contract management software, visit the Icertis website.