As the landscape of supply chain management evolves, businesses continue to face significant hurdles when implementing agreements. Traditionally, legal, procurement, supply chain and finance departments have operated in silos, relying on legacy applications and processes to manage the outputs. Contracts are critical to capturing strategic value, yet many of today’s organizations fall short in effectively managing procurement activities and operations.

Because of this, businesses are looking to change how they handle their contract operations — and the market for contract operations management is expected to reach $1 billion by the year 2030.

For businesses that choose to work together, securing an initial deal is not always the hardest part. Often, it’s about managing the intricate details within a contract, such as volume discounts, rebates or pricing models dependent on fluctuating market data that tend to be overlooked over the agreement term. This leads to a lack of transparency, missed deadlines, fulfillment challenges, disputes, and an overall failure to maximize value.

Blockchain can play a pivotal role in advancing improvements to contract management. The latest blockchain-enabled applications make it possible to streamline operations into a single digital instance. This enhances visibility, accuracy, and reduces costs — all while ensuring confidential information remains private between the contracting parties.

Smart contracts can be easily managed on the Ethereum public blockchain to significantly reduce the burden of managing complex agreements between parties, with confidentiality kept intact.

Where Traditional Approaches Can Fall Short

On average, businesses are losing approximately 12% of value from procurement contracts due to “hard” leakage which can include invoicing errors and incorrect pricing. Mergers and acquisitions, the growth of outsourcing and globalization have also made direct procurement relationships increasingly difficult to manage.

Businesses are continuously seeking new ways to simplify operations with the help of technology. And yet, these advancements often highlight just how fragmented the workflows can be, revealing a need to improve collaboration and reduce risk.

As one example, regulatory changes and evolving stakeholder expectations also mean new hurdles for energy companies. The ability to identify, track and mitigate emissions across the global supply chain is a daunting task, but it can be tackled with a multi-party ecosystem to track data capture, storage and access among involved parties, all with the help of blockchain. Additionally, captured data can be used to demonstrate this in detail to prospective customers, but also supports ongoing reporting needs with less room for error.

Revolutionizing Supply Chain Operations

Half of today’s companies say they lose business because of inefficiencies in the contract management process. Typically, there are at least two stakeholders involved in managing custom agreements, which can make keeping track of every evolving detail daunting and unrealistic due to the likelihood of human error. The longer-term vision is that multiple companies can sign the same contract through automation, and receive checkpoints along the way to realize the contract value in real-time.

For organizations looking to adopt one innovative technology, blockchain and improved automation can cut cycle times by more than 90% and reduce overall contract administration times by 40%.

Smart contracts are quickly revolutionizing contract management. These self-executing digital agreements use blockchain to automate the execution of terms, reducing the risk of disputes and improving the overall flow among collaborators.

With blockchain-based smart contracts, businesses can reach new levels of transparency by creating digital records of the transactions that have an impact on the contract, providing an accurate and up-to-date view of contract performance, credits or rebates due. If and when there are challenges in delivery, all parties can work to proactively manage these issues effectively, equipped with an accurate, up-to-date, data-based view.

Improving End-to-End Visibility

Supply chain sourcing teams aren’t the only ones who can benefit from a decentralized, blockchain-led modernization of the supply chain process; consumers are eager for more visibility. If a product can be tracked, traced and authenticated, it not only improves business trust among those involved, but it adds a refreshed layer of buyer trust.

Companies that take the initiative and untangle messy supply chains will have the upper hand in data visibility, and can offer refreshed clarity to their stakeholders.

Understanding where products come from, who sourced and tested them, and if they were safely transported all relate to the fact that customers want to know more about the products they buy, just as all parties want to have greater visibility to the work they agree to.

As contract parameters continue to change, enterprises are looking to blockchain technology to rebuild a needed layer of trust. Blockchain’s inherent transparency, traceability and security features make it a much-needed tool for improving overall supply chain processes and driving greater value for organizations across the board.

Author: Clare Adelgren