Insights

The New Normal is Here – How to future proof your supply chain contracts

November 10, 2020

One thing the pandemic has revealed across many organizations is that whatever was fragile already, only became more delicate under the pressure of the extraordinary circumstances of the last six months. If pre-pandemic your teams were overworked, or your processes were not efficient, you likely found that those cracks truly fractured this year. For supply chain contracts in life sciences, the coronavirus crisis hit like a hundred-year flood. Suddenly, what had worked for years…didn’t. Our clients found themselves trying to quickly resolve questions like:

  • “What do our contracts say about government restrictions on exports?”
  • “How do we establish new contracts where old supply chains failed?”
  • “Does the pandemic count as a force majeure event?”
  • “Do your contracts require timely delivery?”
  • “What are your remedies where timely delivery fails?”

How do you ensure supply chain contracting continuity in an extreme situation like a pandemic? Some of our clients used brute force, having to simply pile the work onto their in-house teams, with an assist from outside counsel. That works – but it’ll cost you, both in terms of internal resources and real dollars for the law firm hours. However, we also saw some organizations adopt new tools and processes to rise to the occasion, including using Artificial Intelligence (AI) and Robotic Process Automation (RPA), to create a more efficient response or drive workflows.

As life hopefully slowly returns to (a new) normal, one could easily revert to whatever worked before. But this is a great opportunity to leverage the learnings of this period and turn a response to a crisis into best practices. (Silver linings and all that.) We all hope that a catastrophic pandemic is a once-in-a-lifetime event. But seeing the stresses and strains on supply chain contracting during this time can inform ways to incorporate these tools into your business as usual processes. This can future proof you against other major contract events like significant new regulation or a large-scale event within your own organization, but also help you build a more agile and stable day-to-day process.
 

Here are four specific areas where deploying AI tools can provide real, long-term lift:

  1. Drafting tools – Putting new contracts into place requires significant new drafting. And without an organized and centralized system, this new language doesn’t convert into easily accessible precedents. At best, a lot of time is spent reinventing the wheel. At worst, the results are inconsistent. AI tools can help in both instances – they can help automate drafting based on precedents. For example, there’s been a lot of excitement around GPT-3, a new set of natural language processing models that allow for predictive content creation. All that is to say, it can help you write something new based on analyzing all your data it has seen. Tools like this are starting to make their way into the mainstream of contract drafting and not only help with the immediate issue of drafting but the contract, but also the downstream of ensuring more consistent wording that makes it easier to understand the contents of your contracts
  2. Contract pre-screening In a critical moment like the pandemic, time to contracting is everything, with teams under pressure to get the first turn of a contract that could make the difference in keeping the lights on as a business. Time spent identifying the relevant clauses creates a drag on the process and increasingly we’re seeing clients adopt AI-driven tools to allow them to speed up the process of identifying risks in new contracts so they can quickly focus on these.
  3. Contract review – For some organizations, thousands of agreements are impacted by extreme events . . . maybe. There’s often no way to know without a painfully time-consuming review to find relevant data, for example, knowing if a force majeure clause has been triggered. Using bulk contract review tools with common data models pre-trained, you can find the relevant parts of these contracts much more quickly and layer on top of human review to capture detailed information on your agreements
  4. Enforcement and tracking – Identifying impacted contracts and re-negotiating them are massive efforts; but then there is the ongoing work of enforcing new terms, tracking orders, and other day-to-day supply chain operations driven by the agreements. There are some early but exciting new resources in blockchain and smart contracting that can take some of the manual effort out of ensuring and tracking contract compliance.
     

Conclusion

AI tools aren’t a silver bullet, but in response to extreme circumstances, we’ve seen a step-change in their adoption to create efficiency in legal teams dealing with supply chains. Early 2020 is beginning to feel like the distant past, but perhaps what we learned to survive that period will help us build supply chains to thrive in more normal times.