AI Contract Management — 5 Use Cases in Procurement

In recent years and in the future, AI contract management is set to change our approach to procurement contracts and supplier partnerships.

Automation, natural language processing (NLP), and machine learning (ML) are all features that make it possible to streamline contract management with AI assistance.

This is not to say that we no longer need humans to manage contracts. Contracts require comprehensive review before approval. In this article, I will explore how AI changes contract management, its five key use cases, and more. 

Overview of AI in Contract Management

Procurement professionals regularly review and handle contracts, and having to handle contracts while communicating with suppliers and making sure deadlines are met, using AI is a game-changer.

We can leverage AI in many areas of contract management. Traditional methods call for manual work, meaning that you would have to sift through every single document yourself and review all its contents.

Artificial intelligence offers a better and smarter way to manage contracts. With automation, natural language processing (NLP), and other techniques, AI makes procurement more efficient. 

Reports by McKinsey state that procurement productivity increases by over 50% with ChatGPT automation. Overall, ChatGPT can significantly improve the contracting phase and change our approach to contract auditing and renewal.

5 Use Cases of AI in Contract Management

Using AI in contract management can boost your efficiency and help you negotiate and manage procurement better. Below we’ve listed the top five use cases of AI in contract management.

1. Analyze Contracts

AI models like ChatGPT can review massive volumes of data. In contract management, AI quickly processes contract terms, clauses, and obligations using natural language processing (NLP) techniques.

Because AI can scan contracts rapidly, it helps procurement professionals find potential errors or red flags in an agreement.

This gives procurement professionals a data-backed perspective and better prepares them for meetings, negotiations, and other communications with suppliers. 

Example prompt: “I have a tight deadline for a supplier negotiation. Can you quickly scan this contract and flag any potential errors and highlight critical obligations?

2. Contract Lifecycle Management (CLM)

In procurement, AI-supported contract lifecycle management (CLM) systems can automate different areas and phases in the contract lifecycle.

From creating, negotiating, approving terms, and renewing the contract, AI can notify teams if there are important deadlines or reminders about a contract. 

Example prompt: “I’m managing multiple contract lifecycles. Help me do this more quickly. Attached is an anonymous contract; draft a report on any important deadlines.”

3. Identify Risks

Because AI tools can process and review documents, you can leverage them to analyze contracts. In this process, AI can look at all the details in a contract or pinpoint key information to identify risks in an agreement.

Some of these risks can be a lack of compliance, vague contractual language, unfavorable terms, and more. 

AI notifies procurement managers early on in the process, allowing them to address these issues before they can lead to legal repercussions or company losses.

Example prompt: “Attached is an anonymous contract. Study it and pinpoint red flags regarding vague or unfavorable terms. Recommend a risk management strategy for addressing these risks using AI.”

4. Translate Diverse Languages

Organizations that deal with international suppliers likely also deal with contracts in different languages. Translation tools that have NLP capabilities can translate contracts between different languages.

This feature makes contracts clearer, more understandable, and accurate. Additionally, companies are better equipped to communicate with suppliers and stakeholders from different cultural backgrounds.

Example prompt: “I have a few contracts that are written in Dutch from Netherlands-based suppliers. Can you translate them and summarize the contents?”

5. Monitor Compliance

AI can help uphold compliance with legal requirements and contractual terms and even help enforce internal policies. It can monitor performance in real-time and detect changes.

Alerts and reminders can be automated to notify stakeholders, employees, and managers of inconsistencies in compliance. This allows teams to address risks proactively before they cause further damage.

Example prompt: “Help me track the compliance of suppliers to our contract. Study the attached reports from the last 5 months and notify me of any lapses in compliance.”

Companies That Use AI in Contract Management

More companies are offering AI solutions to help procurement professionals manage supplier contracts. Below are five companies that offer next-generation AI-powered contract management.

1. Icertis

Icertis is a leader in contract lifecycle management (CLM) and is recognized by other big companies as a leader in CLM, such as Mercedes-Benz, Johnson & Johnson, Microsoft, and more.

Contract intelligence with Icertis offers visibility of your entire enterprise, actionable analysis and insights, and better business performance. Icertis can create contracts, analyze them, find potential risks, and suggest actionable ways to handle contract concerns.

2. ContractPodAi

ContractPodAi specializes in legal AI assistance and contract management. Their GenAI model, Leah, offers assistance to legal projects and tasks involved in contract management.

Their contract management app has various capabilities for automating CLM in various processes, including procurement. Moreover, ContractPodAI offers solutions that help in sectors like CPG, healthcare, software, energy, and others. 

3. DocuSign

DocuSign is recognized by Fujifilm, Canva, and other companies and industry experts. Known for its electric signature solutions, it eliminates paperwork by providing agile solutions to help organizations save time and money while building secure agreements.

It can help professionals prepare for negotiations and streamline the contract lifecycle. Additionally, DocuSign can be integrated with over 400 platforms, such as Google, Salesforce, Microsoft, Slack, and Zoom. 

4. Lawgeex

Lawgeex’s AI solutions cut the time spent reviewing contracts by 80%, and help deal-closing time go 3x faster. 

Lawgeex’s technology also understands contractual context and position, helping professionals navigate contracts with impressive speed and accuracy. 

Moreover, Forrester’s report on Lawgeex revealed a 209% ROI and more than 6500 hours saved in contract management.

5. Conga

Conga offers multiple products for CLM, contract intelligence, and process automation. Its unified data model allows professionals to get answers to all questions about contracts. 

This includes the effectiveness of pricing agreements, the legal advantage in contracts, full data governance, and more. 

Conclusion

To sum up, AI has changed the way we approach contract management. It equips procurement professionals with support from analytics and natural language processing (NLP).

AI contract management is the ideal tool for professionals aiming for more accurate and efficient contract auditing, approval, and review. Furthermore, organizations can become more inclusive with AI translation tools, allowing them to understand contracts that come in different languages.