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Market Transformation: A Call to Arms for Contract Digitization in Retail and CPG

By Scott Mars

The last 18 months have provided a stark lesson in the need for agility, particularly in the retail, food, and CPG sectors, with supply and demand fluctuating wildly. In the first half of 2021, World Commerce & Contracting interviewed representatives from more than 30 organizations in the retail and CPG space about the disruptions they had experienced during the previous year. Their testimony, in a report entitled “Reimagining Retail and CPG Relationships as an Ecosystem of Contracts,” illustrates just how fragile the industry became and how important it is to have effective control of contracts to manage a rapidly changing market.

Many of these organizations felt a pressing need to amend and revise existing contracts or onboard new commercial partners. In one eye-opening example, online grocery revenues increased by 72.7%, placing tremendous pressure on the existing distribution, logistics, and warehousing models and requiring major adjustments to existing contracts and the formation of new agreements.

Some interviewees admitted that they discovered too late that they lacked the technology that would streamline these contract changes—a digital platform that could provide rapid access to key contract data and identify rights and obligations. Rather than addressing their supply chain issues with agility, these companies were forced to spend time and resources manually identifying impacted contracts and aggregating data from separate repositories and systems. This delayed their decision-making and response to the changing landscape. The lack of technology also negatively impacted their ability to quickly onboard new vendors who could improve the supply chain situation.

Others acknowledged that even when impacted contracts could be efficiently identified, the contract language provided little guidance because the terms and conditions embedded in them were never designed to deal with such dramatic events and levels of uncertainty. Organizations were therefore required to work around their contracts because they had not envisaged such a disruptive event—exposing their organizations to significant risk.

This approach is not sustainable. Compliance, risk, and market opportunities are driving the need for better contract management, which can only be achieved through digital transformation that provides effective and consolidated data control. Supply chains become more agile, adaptive, and resilient when the contracts governing them are digitized and accessible throughout a business within a contract lifecycle management (CLM) platform. Advanced CLM accelerates vendor onboarding, and structures and connects the data within executed contracts so companies can monitor contract performance in real time to identify risks and opportunities.

Contracts are the golden thread—not just within a transaction or relationship but across interdependent transactions and relationships. This point is frequently missed because contract data is fragmented across multiple systems, and contracts are often not designed to act as operational tools.

But as the retail, food, and CPG sectors continue to wrestle with uncertain and volatile market conditions, a move to "contract intelligence" will allow leaders to increase control and transparency by reimagining the business as an ecosystem of contracts. Among the report’s interviewees, those who had digitized their contracts and had real-time access to contract data were better able to take the swift action needed to pivot their contractual relationships and respond to this fluid landscape.

Furthermore, these organizations said that the pace of change shows no sign of slowing. The need to rethink operating models, including just-in-time inventories, and supply relationships remains urgent—and technology will continue to require new models to be successful.

Want to learn more? Access the full report from World CC here.

Scott Mars leads Icertis' retail organization.Scott has spent the last 17 years working in the CLM industryand has worked in roles ranging from strategy consulting,professional services, pre-sales, sales, and sales leadership.