Contract management might not be the flashiest part of your supply chain operations, but it is likely costing you more than you think. Research shows poor contract management causes organizations to lose an average of 9.2% of their annual revenue – money that could otherwise boost your bottom line.
Here’s how modern workflow automation is solving the three most expensive contract problems plaguing supply chains today:
1. The Costly Chaos of Missed Renewal Deadlines
Supply chain leaders know the pain all too well: You discover that critical supplier agreement auto-renewed with unfavorable terms, or worse — a key materials contract expired without anyone noticing, bringing production to a screeching halt.
Starbucks faced similar challenges before implementing a solution that saved them over $500 million in just two years, with a substantial portion coming from improved contract management.
Modern contract automation software eliminates this expensive risk through:
- Automated renewal tracking: AI-powered systems extract key dates from contracts and create a centralized deadline dashboard
- Proactive notifications: Customizable alerts notify the right stakeholders before critical deadlines
- Workflow triggers: Automated renewal workflows launch at predefined intervals, ensuring proper review before deadlines hit
“Contracts moving a lot more smoothly” is how Jamie Garfield, VP of Sales at a payment solutions provider, described the impact of implementing such automation.
2. The Hidden Cost of Compliance Failures
When supplier compliance goes unchecked, the costs spiral quickly. From regulatory penalties to supply disruptions and quality issues, non-compliant suppliers create expensive headaches.
Agricultural equipment manufacturer AGCO faced this challenge after growing through acquisitions. Their solution? Implementing centralized contract lifecycle management with automated compliance tracking that helped cut inbound logistics costs by 28% and boost network performance by 25%.
Workflow automation addresses compliance risks through:
- Compliance verification workflows: Automatically route contracts through appropriate review channels
- Obligation tracking: Extract and monitor specific supplier requirements from contracts
- Risk assessment automation: Flag high-risk clauses and trigger appropriate mitigation steps
These capabilities transform compliance from a reactive cost center into a strategic advantage.
3. The Efficiency Drain of Fragmented Contract Repositories
Perhaps the most insidious cost comes from scattered contract data that makes strategic supplier management nearly impossible. The Journal of Contract Management estimates that 71% of businesses can’t locate at least 10% of their contracts.
Many organizations face this challenge with critical contracts representing significant portions of their operating budgets. After implementing a centralized contract repository with workflow automation, companies can significantly increase successful contract management by streamlining approvals and eliminating process bottlenecks.
Modern workflow solutions solve this through:
- Intake forms: Capture all essential contract details upfront in standardized forms
- Smart classification: Automatically categorize and tag contracts by type, supplier, and business unit
- Search and analytics: Transform contract data into actionable insights for supplier negotiations
The Bottom Line
Workflow automation is not just about efficiency—it is about recapturing millions in lost value. Organizations implementing these solutions typically see impressive ROI, with significant hard cost savings and strategic benefits given that the average company loses 9.2% of its bottom line due to ineffective contract management.
For supply chain leaders, the choice is clear: continue losing nearly a tenth of your revenue to contract mismanagement, or implement a contract management software that transforms agreements from liabilities into strategic assets.
About the author:
Matt Lhoumeau is the CEO and co-founder of Concord, the leading provider of AI-powered CLM solutions. With over a decade of experience transforming how businesses manage contracts, Matt helps supply chain leaders unlock strategic value from their agreements and turn contracts from cost centers into profit drivers.
