Agility is the key to staying competitive in a rapidly evolving business landscape.
Whether you are a small startup or a large enterprise, the ability to adapt quickly to changing circumstances is crucial. This principle extends to all aspects of your operations, including your contracting process. Renovating your contracting process for agility is not just a good idea; it's a necessity in today's dynamic market.
For almost 12 years across 10 editions of the Deloitte Global CPO Survey, CPOs have talked about procurement getting a seat at the table. Following the COVID-19 pandemic, the unprecedented levels of supply chain disruption, and the growing need for procurement to enable growth, mitigate inflation, and drive significant levels of value, that day has arrived. There is a clear imperative to build agility and resilience into supply chains (and other functions), and more specifically, we have uncovered how leading organizations are effectively delivering across the broader value proposition that seems to get broader every year.
Top 3 CPO Priorities to Increase Agility
- 74% view operational efficiency as a top priority.
- 72% are looking to enhance ESG/CSR.
- 72% view digital transformation as a priority.
The Need for Agility in Contracting
Before we delve into the renovation process, let's understand why agility in contracting is essential: In an era defined by rapid technological advancements, dynamic market landscapes, and unforeseen global events, traditional approaches to contracting are proving increasingly inadequate. The need for businesses to navigate through ever-changing conditions, seizing emerging opportunities, and swiftly adapting to challenges has never been more crucial. Agility in contracting isn't merely a buzzword; it embodies a strategic imperative. It's the key to not just surviving but thriving in an environment where flexibility, responsiveness, and innovation is the currency of success. As we explore the nuances of the renovation journey, it becomes evident that embracing agility in contracting is not an option—it's a fundamental requirement for businesses aiming to stay resilient and competitive in the face of constant flux.
- Changing Business Environments: The business landscape is constantly changing. Market conditions, regulations, and customer demands can shift rapidly. Your contracting process must be agile enough to accommodate these changes without causing disruption.
- Competitive Advantage: An agile contracting process allows you to seize opportunities and react to threats faster than your competitors. This agility can give you a significant edge in the market.
- Customer-Centricity: Modern customers expect flexibility and personalized solutions. Agile contracts can be tailored to meet these expectations, leading to improved customer satisfaction.
- ESG/CSR Principles: Beyond immediate market concerns, there's a pressing need to embed Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) principles into business operations. Agile contracting plays a pivotal role in this integration. By designing contracts that prioritize sustainable and ethical practices, organizations contribute directly to ESG and CSR goals. This alignment fosters a positive societal impact and positions the business as a responsible player in the market.
- Efficiency and Cost Savings: While most CPOs spend 74% of their time on transactional and operational activities, Deloitte found high performers spent approximately 63% (~15% less) of their time on these types of activities. An agile contracting process can streamline workflows, reduce bottlenecks, and cut unnecessary delays, leading to cost savings and improved efficiency.
Now, let's dive into the steps to renovate your contracting process for agility:
- Review Existing Processes
Start by taking a close look at your current contracting process. Document each step, the people involved, and the tools used. Identify bottlenecks, delays, and any redundancies. This will serve as your baseline for improvement.
- Standardize and Simplify
Streamlining your process is the first step toward agility. Remove unnecessary steps, redundant paperwork, and complex approval hierarchies. The simpler your process, the easier it is to adapt.
- Implement Digital Contracting
Embrace digital technology to manage contracts. Digital platforms enable easy access, tracking, and management of contracts, making it easier to adapt to changes. Consider investing in a Contract Lifecycle Management (CLM) system that can automate many tasks, ensuring greater efficiency.
- Define Clear Contracting Roles
Clearly define the roles and responsibilities of individuals involved in the contracting process. This ensures accountability and helps prevent delays and misunderstandings.
- Automate Routine Tasks
Automate routine and repetitive tasks such as contract approvals, notifications, and reminders. Automation reduces human error and speeds up the process.
- Adopt E-Signatures
E-signatures are legally binding and speed up the signing process significantly. They also provide a secure and convenient way for parties to sign contracts remotely.
- Flexibility in Templates
Create contract templates that are easily adaptable to different situations. This flexibility saves time and ensures that your contracts can be quickly tailored to new circumstances.
- Implement Advanced Contract Analytics
Contract analytics tools can provide insights into your contracting process, helping you identify areas for improvement and monitoring compliance. These insights are invaluable for making data-driven decisions.
- Maintain a Centralized Repository
Keep all your contracts in a centralized repository that is easily accessible to authorized personnel. This ensures that everyone is on the same page and can find the necessary information quickly.
- Cross-Functional Collaboration
Foster collaboration among different teams involved in the contracting process. Encourage open communication and information sharing to reduce delays and misunderstandings.
- Agile Approval Workflows
Create approval workflows that are agile and adaptive. Allow for quicker approvals when necessary and incorporate flexibility for urgent changes.
- Continuous Training and Education
The digital transformation of your contracting process might require your team to acquire new skills. Offer continuous training and education to ensure everyone is up to speed with the latest tools and processes.
- Compliance and Risk Management
Develop a robust compliance and risk management strategy. This ensures that your contracts are not only agile but also compliant with relevant regulations and pose minimal risks.
- Monitoring and Feedback
Continuously monitor your newly renovated contracting process. Collect feedback from your team and other stakeholders. Make improvements and adjustments based on their input.
- Integrate with Upstream and Downstream Systems
Your needs are bound to evolve in the business world and it’s crucial to have a CLM provider that can adapt alongside you. Integrate popular business solutions seamlessly to provide a lower total cost of ownership (TCO) and improve adoption for your business users. Consider integrating with ERP, CRM, eSignature, and more.
- Invest in Next Gen Technologies and Artificial Intelligence
Investments in advanced digital solutions are a key enabler for success. Nearly all CPOs understand the power of digitization, which is why digital transformation
is the second most cited procurement strategy (behind supplier collaboration) and why 55% of Orchestrators of Value cite it as a “top 3” strategy (compared to just 36% of Followers). In fact, when Deloitte asked how CPOs would spend additional budget, Followers said their first choice would be hiring more FTEs, but the Orchestrators, having already more fully implemented automation (with more than half having deployed or currently scaling RPA and other next-gen technologies), said they’d invest in analytics first and external intelligence second. FTE hiring and improving data quality tied for third place.
Being agile in procurement requires failing fast on a smaller scale to get to a great solution more quickly. CPOs with the most impressive combination of performance attainment and ambition are the ones thinking in exactly this manner.
In an ever-changing business world, your contracting process must be as agile as your company's strategies. By renovating your contracting process for agility, you can adapt quickly, reduce operational inefficiencies, and maintain a competitive edge.
The steps outlined in this blog post provide a roadmap for your contracting process renovation. Keep in mind that the process may require time and effort, but the long-term benefits in terms of efficiency, cost savings, and competitiveness are worth the investment. Agility is not just a buzzword; it's the key to success in the modern business landscape.