The rise of predictive agreementTM
Does the procurement or purchasing process in your company currently look something like this?
- Identify a few qualified vendors with which your company would like to do business;
- Request and obtain quotes;
- Compare prices and review reputations;
- Decide on vendor with whom to do business;
- According to the information you have gathered i.e. price charged by other vendors and reviews of previous services they have rendered negotiate on quoted price for the work you want them to do;
- Cobble together a mediocre contract that everyone kind of agrees on but with lots of room for improvement;
- Engage in endless back-and-forth email discussions;
- After a long time and a lot of headache reach an agreement with the vendor.When you take into account the time it takes for your contract managers to engage in this entire process, is it actually saving you money to take the time to compare prices of available vendors and negotiate on price? Obviously there comes a point where the costs of negotiating outweigh the actual investment being negotiated. How do you ensure that does not become the case? How do you know what is a fair price without spending a ton of money on consultants or studies?
This is where predictive agreementTM can assist (leveraging machine learning techniques). Past data is used to help improve the procurement and contracting processes so agreement can be reached more quickly and predictably. It will look more like this:
- Enter a specific service type in the system’s search engine and the system will query the data set, generate the related vendors and rate them based on current proposal and past performance;
- The system could then suggest the optimal price that should be agreed upon so as to truncate the need for a prolonged negotiation;
- The system could then automatically trigger a pre-approved contract draft with terms and conditions that have been proven to be effective in the past and well accepted by buyers and suppliers to ensure the least amount of friction and variance from the standard language;
- Execute the agreement either digitally or on paper, and the data from this completed transaction will be added to the data set to continually improve future decision-making (by tapping the “collective intelligence” of ALL your organization’s negotiations over time).
This second process not only ensures less time will be spent in the procurement process and negotiation, but also that a fairer price (and conditions) will be agreed upon. This is because the price will be based upon the decisions made by many, and not the few.
Some contract management software/ collaboration software allows for this second more efficient process for procurement negotiation through data analytics.
ContractRoom – making the world more agreeable one happy contract at a time.
Negotiate less. Agree More!