In recent times, and especially during the last two years, the retail industry has reached a definite Y-point. With advancements in technology and evolutions in consumer behavior, the sector has to rise up to the challenges of a fast-changing industry landscape. For instance, in the United States alone, over 100 retailers have declared bankruptcy and about 30,000 stores have closed within the last three years [1].
Business processes are not immune to such massive shifts in the industry. Businesses have had to adapt the way they operate and carry out day to day operations. One aspect of the business process that has become even more critical is contract management. Contract Lifecycle management is the process of managing all contracts and agreements – from initiation to execution.
The importance of contract management
Given the rapidly evolving scenario of the sector, contracts have emerged as the foundation of the retail industry. They define the ever-changing relationships both within and outside the organization covering staff personnel, managers, suppliers, customers and business partners. Additionally, they encapsulate the entire gamut of an organization’s risks, obligations, entitlements and authorizations.
As contracts affect every aspect of the business, intelligent contract management systems have emerged indispensable. These new-age systems lead to better decision-making, quicker fulfillment of obligations and, therefore, faster response to change. Thus, organizations need to embrace an efficient contract management system that can help them chart course through the choppy waters of uncertainties.
Contract management in the retail sector
Retailers have to simultaneously understand customers’ preferences, ensure supply chain continuities, follow quality norms and manage warehousing and staffing resources. This need to engage multiple stakeholders at once, while meeting all underlying obligations results in increasing complexities in the process.
Multiple delivery touchpoints, multiple contracts
The success of any retail business primarily depends on its ability to fulfill customers’ demand. To ensure efficient delivery, multiple stakeholders such as warehouse executives, stock managers, transportation players and delivery staff have to synchronize their efforts. These multiple touchpoints lead to multiple paper-based, bulky contracts.
Contract visibility
Stock warehouses, suppliers, customer-care executives, delivery agents and central office managers are all distributed across geographies. This segregated network of individuals gives rise to a complex and a geographically dispersed web of contracts. For efficient contract tracing and follow-ups, executives require the contract management system to offer a bird’s eye view of obligations of all contracts irrespective of their locations.
Compliance management
Today’s industry trends demand a retailer to take operations beyond local boundaries. Besides scale efficiencies, such cross-border operations also mean a myriad of compliance obligations. Abiding with varying tax laws in different locations, safeguarding intellectual property rights and adhering to payment norms is essential to avoid unforeseen penalties and compliance costs. To achieve these, contract management solutions must ensure timely compliance with all regulatory norms.
Pricing and promotions
As the industry embraces digitization, pricing and promotions assume a dynamic form. This often requires the organization to enter into flexible and responsive contracts with suppliers. Organizations require their contract management system to capture these dynamic pricing and promotion terms.
Supplier onboarding
Suppliers are a critical component of the retail industry. As businesses grow in size and scale, onboarding new suppliers becomes even more frequent, sometimes, done on a daily basis. Given its significance, faster-contracting turnaround times and efficient supplier onboarding have a direct impact on achieving greater sales and customer satisfaction.
Bringing a supplier on board includes undertaking thorough due diligence to assess the risk involved. It also entails keeping the new supplier abreast of the organization’s requirements –legal, financial and quality. Chalking up an agreement with a new supplier, therefore, includes huge investment in terms of risk acceptance and resource commitment. A contract management system must facilitate easy collaboration without causing delays and cost overruns.
Controls and authorizations
Given the various stakeholders involved in the operations, it’s a standard practice in the retail industry for the contracts to have strict controls and authorizations. For example, a purchase manager should have access to contracts with suppliers but should be restricted from accessing contracts related to human resources.
Inefficiencies of traditional contract management systems
Given the number of stakeholders involved in the retail industry and their distribution across geographies, paper based contracts lead to inefficiencies. Contract execution becomes a tedious affair which further exacerbates the contract management system’s drawbacks. The most challenging setbacks are:
Drafting hassles
Be it a small store or a worldwide giant, a retail brand endeavours to be thorough before entering into a commercial activity with either a new supplier or a new distributor. To prevent the loss arising from lack of groundwork, executives rely on past performance data, information from previous partners and tax officials. This leads to a huge investment of time which only contributes to a longer time-to-revenue while drafting a contract.
Inability to provide real-time data
Customers, suppliers, inventory managers, transporters and managers are all trying to extract as much real-time information as possible as goods traverse through the supply chain. However, in the case of a traditional paper-based contract management system, this information is usually opaque. This leads to inefficiencies as supply bottlenecks are left unaddressed and deliveries get delayed.
Challenges in storage, retrieval and renewal
A retail organization processes multiple contracts on a daily basis. In their paper form, these contracts consume a significant storage space. An average retail player is seldom equipped to organize such a huge volume of documents. Further, retrieval and renewal of these contracts is yet another challenge that has a cascading negative effect on day-to-day operations of the organization.
Inefficient version control
Dynamic pricing and promotions are intrinsic to the retail sector. However, contracts, especially those available with different sources, are not synchronized with updated pricing and promotions. This leads to disruptions in operations as various agencies dispute the claims by their counterparties. These challenges in contract executions slow down the settlement of obligations and have a cascading effect on the company’s bottom line.
Security lapses
While understanding customer requirements to fulfil their underlying needs, sellers need to adhere to privacy laws and security standards. Security requirements assume a significant role as retailers work across geographies and in varying jurisdictions. While governments across the globe have adopted stricter privacy laws, paper-based contracts suffer from their inability to plug security loopholes.
Slower conflict resolution
Traditional contracts often resort to a one-size-fits-all strategy as they are drawn from age-old templates. It’s also tough to incorporate changing circumstances and business arrangements real time in such contracts. Given the manual processes involved in conflict negotiation of such contacts, conflict resolution tends to be slower.
The need for an intelligent contract management system
While paper-based contracts suffer from multiple drawbacks, digital contract management systems offer significant features to overcome these inefficiencies. They leverage the power of data and technology to deliver efficiencies that positively affect all aspects of the business.
Comprehensive automation
An intelligent contract management system improves all the parts of a contract’s lifecycle – right from drafting to execution. Seamless digital technology transforms laboriously manual processes to automated ones, thereby leading to resource optimization. Pricing and promotions can be quickly incorporated into digital contracts in contract management systems. As digital copies with all the stakeholders undergo synchronized changes, disputes take a backseat. Overall, the end result is a frictionless contract routine that accelerates processes and generates value for the organization.
Smooth collaboration
A digital contract system scores over the traditional system when it comes to third-party checks for risk assessment. This leads to value creation even before executives draft the contract. With the power of automated workflows, collaboration hassles vanish even though signatories such as warehouse managers, delivery agents, sales personnel and managers are dispersed geographically. Organizations experience a faster completion even in the case of regulatory compliances. For example, SignDesk’s smart contract system touches all operational touchpoints such as sourcing, warehousing, pricing and payments. It also has built-in capabilities to facilitate e-payment of government fees and stamp duty which ensure quick legal compliance.
Actionable insights
A smart contract management system can indicate key variables and extract crucial data from contracts. It can analyze contract contents and user behaviors to deliver actionable insights to contract managers. This leads to better productivity for the business as the contract management system is self-sufficient in suggesting clauses, AI-assisted drafting, evaluating risks and estimating the time to execute a contract.
Faster supplier onboarding
Slower supplier onboarding leads to undesirable clogging of resources. These bottlenecks become more pronounced while replacing an old supplier as customers experienced slow order fulfilments. An intelligent contract system can overcome these inefficiencies due to automated workflows. Digital contracts facilitate quicker onboarding as they can be drafted immediately, shared online and signed instantly using eSignatures. Faster supplier onboarding leads to easing up of resources, faster turnaround times and quicker time-to-market – a win-win situation for both, the retail company and the supplier.
All-purpose dashboard
With their digital capabilities, smart contract management systems emerge as self-serving contract monitors. Analytical tools help executives to track deviations from obligations and extract useful insights based on customized criteria. All these tools come neatly packaged on a friendly, easy-to-use dashboard of the contract management system. For example, a retailer using SignDesk’s contract management system can track signature statuses, receive notifications and alert signatories by using its smart dashboard. This unlocks the underlying value of contracts as search and retrieval become astoundingly easy compared to a traditional contract management system.
Confidentiality
While paper-based contracts are prone to theft and misplacement, a smart contract management system adheres to the current trends of stringent cybersecurity norms. Be it a customer or a supplier, all stakeholders experience a heightened sense of confidence while dealing with an organization that adopts such a new-age contract management system. For a retailer, adopting a new-age contract management system, such as one designed by SignDesk, leads to a better rapport with all contractual parties, and thereby helps in stronger long-term relationships.
In summary, a smart contract management system touches all the bases of a retailer’s operations – be it sourcing to staffing to storage to sales. It promises to deliver cost optimizations on the back of faster drafting, smoother execution and convenient monitoring. As executives become free from the repetitive yet time-consuming nature of handling paper-based contracts, organizations can unlock the true value of contracts. With this wide range of advantages, it is of utmost importance for a retail player to adopt an intelligent contract management system at the earliest.