Gartner predicts that by 2027, 50% of organizations will support supplier contract negotiations through the use of Artificial Intelligence (AI)-enabled contract risk analysis and editing tools. It’s easy these days for a company to claim it’s “AI-enabled,” though far fewer can truly call themselves “AI-native.” I’ll save that distinction for another post, but the underlying concept is similar: treat the contract as a data structure and use AI to unlock the value hidden within it.
In my last post, I discussed how spend management remains a crucial area that demands both accountability and visibility. Now, AI is extending that visibility into contract management, giving organizations a clearer view of how spend actually materializes across supplier relationships. Armed with the core strength of ingesting text, spotting patterns, and surfacing insights, AI positioning here as a change agent shows potential for major efficiency gains and real savings for organizations.
A Practical Example
Imagine I’m a Supplier Relationship Manager (SRM) at a mining company.
Earlier this year, I negotiated a contract with a supplier delivering a key chemical for plant operations. Negotiations ran long due to a few tricky clauses, but overall, the deal seemed mutually beneficial.
Six months later, geopolitical instability disrupts the supplier’s region, followed by new tariffs affecting the plant’s operating country. I immediately contact legal to assess the impact. Legal thanks me for the heads-up and promises to review the contract, but it takes several days before they confirm that a few SLA clauses are affected and that the contract is nearing expiration. As the SRM I contact the supplier…
Let’s break down this process:
- SRM reads the news that could affect operations
- SRM manually contacts legal for impact analysis
- Legal takes several days to review
- Legal sends back results
- SRM decides how to act based on those findings
Points 1–4 describe a highly manual, reactive process that breaks down at scale. Monitoring global events across thousands of suppliers isn’t feasible for any human team and yet that’s the reality many procurement and business teams face today. This example is representative of the the common theme in supply chain where more the bulk of times is spent in manual processes versus strategic thinking.
The Root Problem: Contracts as “Digital Tombs”
At the center of this challenge lies the contract itself. Too often, contracts are treated as digital tombs, static PDFs buried in shared drives, and disparate files only exhumed at renewal time or after an issue arises.
It doesn’t have to be this way. Contracts hold rich, dynamic data that should be continuously referenced and analyzed throughout their lifecycle. In fact, if we think about category management, the gold standard for strategic procurement units, it’s while purpose chalks up to leveraging category knowledge to achieve better contracting, more cost savings, and elevated alignment with business goals. In this sense, treating contracts as they have been historically is antithetical to the very purpose of Procurement.
AI is challenging this old paradigm, transforming contracts from static records into living, searchable systems of intelligence. This shift goes far beyond “Ctrl+F” searches or collaborative drafting. It’s about enabling proactive, data-driven decision-making from day one.
Let me pitch another scenario.
The Solution: Contracts as “Glass Boxes”
Imagine this - instead of a black box contract buried away in a SharePoint, the contract is represented as a living data model that calls out key metrics.
- The SRM opens a contract dashboard displaying:
- Key contract metadata (dates, scope, pricing, etc.)
- Time spent negotiating specific clauses
- Real-time market signals impacting the supplier
- Identified areas of leverage within the agreement
- The SRM uses this live data to anticipate risk and take action proactively.
AI does the heavy lifting the data for you and now you take advantage of:
✅ No time spent chasing after data
✅ More time spent actually fixing the problem
✅ Easier collaboration between cross-functional partners
✅ Real time market insights
Just as a glass box offers a clear view of what’s inside, Glass Box Contracts give organizations visibility into the moving parts of their agreements, transforming contracts from static documents into living, actionable systems.
Stay tuned for a memo on why Funk appears like a rocket ship in this space.
