When I spent six miserable months hunting through filing cabinets for contracts at a $6 billion telecom company fifteen years ago, I realized something was fundamentally wrong.

I had to spend months just looking for the contracts, then reading them one by one to build an Excel spreadsheet with 52 columns and 500 rows.

And then I spent more months sending Word documents back and forth to hundreds of people to renegotiate these contracts.

This was 2009 – not 1979. We had software for everything else in that company. But contracts?

Those were still buried in cabinets, managed manually, passed around as Word documents.

Contracts Are Business Processes, Not Legal Documents

What I’ve learned over the past decade working with over 1,500 companies is that a contract isn’t really a legal document. A contract is a business process. It’s actually the most central business process you have in a company. Whether you buy something, sell something, or hire someone, there’s always a contract in the middle.

Yet according to McKinsey’s latest research, while 60% of companies now have visibility into their tier-one suppliers, they’re still missing the critical decision-making data locked in their contracts. This disconnect is costing them dearly.

The World Commerce & Contracting Association calls this “contract value leakage” and estimates it costs businesses up to 9% of their annual revenue. For supply chains specifically, this means millions in avoidable costs and massive missed opportunities for resilience.

The Contract Revolution Is Already Happening

What’s been very interesting about the last few years is we’ve seen a massive shift in companies, especially in the SMB and mid-market, about the way they manage their contracts. Back in the days, if I tell you “contracts,” you immediately think about legal. This is going to be the lawyers of the company managing this.

What we’ve seen over the past few years, and it’s accelerating right now significantly with AI, is that smaller and medium-sized companies actually will not manage their contracts through legal teams. Who is managing contracts today? Operations and finance – and legal is quite often not even involved anymore whatsoever.

I’d say about 65-70% of our customers don’t have a legal team. They may sometimes have just one paralegal, and that’s it. Everything else is outsourced when they really need it.

AI Isn’t Creating This Shift – It’s Accelerating It

I think what’s interesting about AI is that I don’t think AI is fundamentally changing things. I think it’s just accelerating what we’ve already seen. AI has been around for at least 42 years now. It’s been really started to be adopted by companies over the last year or so. But not of the changes that we’ve seen were created by AI.

The changes that I mentioned about contracts being less of a focus for legal teams and more focus for CFOs and COOs – that’s something that we already noticed years ago. Typically around COVID, that’s when people started to realize they need to change the way they approach contracts.

And so AI right now is just helping that movement accelerate, but didn’t create it per se.

Unlocking Decision Intelligence From Your Contracts

When you think about what’s actually in your supply chain contracts – pricing tiers, volume commitments, lead times, quality specifications – this isn’t just legal documentation. It’s the fundamental decision architecture of your supplier relationships.

Here’s how forward-thinking supply chain organizations are transforming how they manage contracts through contract analytics software:

1. Real-time operational decisions Modern contract management software connects contract terms directly to operations. If you look at your contracts, you basically know what money is coming in and out from your contract. You know exactly when, you know how much, you know for how long.

As BDO’s research shows, advanced data analytics is essential for building resilience and agility in supply chains. The more data you have, the quicker you can respond to disruptions.

2. Financial forecasting and planning What we’re helping CFOs do now is to actually start building forecasting, not just based on past expenses, but on their actual commitments. You’ll be able to know that this is all the money coming out per month from a company for the next 10 years based on the contract that you have.

Technically you could do it in the past. The contracts were already there, but you’re not going to have someone review the contracts all day and putting data somewhere. AI can do it for you today.

3. Process bottleneck identification Another example for CFOs is that they’re managing operation and efficiency in the company. What AI can help you do today is just make sure that you don’t have any bottlenecks in your contract process. Making sure that your contracts in sales are not staying stuck for a week because a clause is constantly being negotiated and you might just want to change it in your template to make it simpler.

The Future of Contracts Is Already Here

I don’t have a crystal ball like everyone else, but here’s what I see happening with contracts in supply chains:

First, knowledge and experience is not something that really matters anymore when it comes to your teams. AI gives you all the knowledge and experience that you want at your fingertips. So you don’t really need that from people anymore.

Second, we’re going to see a change in contracts themselves. If tomorrow we have a world where there is absolutely no contracts, we forget about everything that humans have done for the past centuries, and we have AI and we ask AI, “Hey, I need to build a certain relationship with that customer or my vendor and I need to formalize that agreement.” Do you think that AI would write contracts the way we have been written them for the past centuries?

I don’t think so. When you look at contracts, they’re extremely inefficient. Every contract is different. Sometimes the important parts are in the middle of 15 clauses – you don’t really see it. It’s just not a very smart way to build that relationship.

I think what we’re going to see with AI-ready contracts is probably, over time, AI getting free from what we have done in the past as humans and start automating and having something that is more efficient.

What could it look like? Well, like what we typically do on complex agreements – you have a term sheet. A term sheet with a very simple table that tells you exactly what are the terms of the contracts. That’s what contracts are going to look like more and more in the future.

Start Small, Then Expand

If your company is looking to start leveraging this approach, here’s my advice: go small at the beginning. People tend to over-engineer what they want from contract management when they start. They want to automate everything and plug everything with their different tools.

The thing is, you don’t want to automate something that you’re not sure is really solving your problem. At the beginning, you might want to just keep it small, make sure you actually are improving your processes, and once you know that, you can start automating.

So go step by step, go by typically one category of contracts and then expand to different teams. The big revolution where overnight you have all your contracts automated everywhere typically doesn’t work very well because it’s a learning process for an organization.

Also, when you start using a contract lifecycle management system, start focusing on the contracts that you’re building every day, the contracts of tomorrow. Don’t focus as much on the contracts from the past. Past contracts are there, and you can import them, but quite often the biggest pain is really in the contract processing itself.

Building Your Supply Chain’s Decision Intelligence

I believe long term – that’s more like 10 years from now – there won’t be contracts anymore. I mean, they’ll be there, but I think no human will actually review them. You’ll see more and more AI and computers being able to negotiate between them and automate everything.

But until then, the companies that will thrive in tomorrow’s supply chain environment won’t be those with the most rigid control or the lowest costs. They’ll be the ones who can adapt fastest, collaborate most effectively, and make better decisions using the intelligence locked in their contracts.

Supply chain leaders at the forefront of this shift are already seeing tremendous benefits – from faster response to disruptions to better supplier collaboration, according to research from Information Systems and e-Business Management.

The technology exists today. The question is: Will your organization continue to treat contracts as legal artifacts, or will you transform them into the dynamic decision engines they were always meant to be?

Matt Lhoumeau is the co-founder and CEO of Concord, a contract management platform used by over 1,500 companies worldwide. Before founding Concord, Matt worked with Nicholas Sarkozy during the 2007 French presidential campaign and later for a major telecom company, where his frustration with manual contract management inspired him to transform how businesses handle agreements.