Voice of the Industry

Contract compliance: simple solution to chaotic complexity

Monday 26 January 2015 09:59 CET | Editor: Melisande Mual | Voice of the industry

Robert Banther, Ariba: It is human nature to simply shut down and avoid information overload

Think life is getting more complex? You’re not alone…and you’re not wrong. As just a few everyday examples, there are:

• Over 800,000 apps in the Apple app store
• About 20,000 words on typical credit card contracts (up from 400 words in 1980)
• 19,972 words in Apple iTunes terms, and 36,275 words in PayPal Terms (That’s more words than Shakespeare’s Macbeth and Hamlet respectively…and far less engaging!)

So let me ask you, what is your natural response when confronted by a click-through agreement like iTunes when updating to latest version? Do you:

a) Judiciously pore over every clause, word, jot and title to ensure Apple is planning nothing sinister with your data?
b) Start reviewing, only to fall headlong into your keyboard drooling and babbling like a madman trying to make sense of the linguistic Gordian knots created by teams of sadistic lawyers?
c) Automatically click “I agree” and get on with the business of downloading your song?

According to this article in the WSJ, you might be wise to read through the terms as one lucky person did and claimed the USD 1,000 prize hidden inside (while others not so fortunate were apparently so into their video games that they literally signed away their souls to Gamestation). However, if you are like most people with an actual life, you likely skip straight to choice D and get on with that life.

It’s called information overload, and it is human nature to simply shut down and avoid it as best we can.

In business, particularly as regards non-networked processes, this often means overpaying for goods and services by millions upon millions of dollars!

Take for example the situation of a major airline I worked with who has a services contract with a provider who cleans and stocks their airplanes at airports across the US. There are literally hundreds of potential line-item charges for the various services provided. Additionally, each of these charges can vary depending on such factors as:

• The type of airplane
• How that airplane is configured inside
• What airport it is at when serviced
• What time of day the service takes place
• What the weather is at the time of service
• …and a host of other variables.

Multiply that by the hundreds of airplanes being serviced multiple times each and every day, and this airline faced the daunting monthly task of manually reviewing and approving a consolidated invoice that was 500 pages long, packed with thousands of line-item details, all of which were supposed to match up with the corresponding price matrix on the original contract.

Talk about complex!

And without the ability to automatically connect the data dots between the contract and the invoice, they did exactly what you and I do with the iTunes agreement…they simply approved it and paid it. And in the process, they overpaid their vendor by millions of dollars every year.

The company finally solved this when they connected their disparate processes and their suppliers to one business network. This allowed them to automatically compare every invoice line item to the original contract terms and ensure price compliance to those terms at the time of invoice submission. By automating this manual process behemoth, this airline is able to ensure the capture of tens of millions of dollars annually that were previously lost.

Connecting the right information at the right time to the right processes to make business run better…and tame the chaos of complexity… that’s the power of the Networked Economy, and it is revolutionizing the way companies do business.

How much money can your company save by joining the revolution?

About Robert Banther

Robert Banther is Manager, Solutions Marketing, for Ariba, an SAP company. He is responsible for solution marketing programs that educate finance, procurement, supply chain, and other business professionals on the transformational potential of the Ariba Network and Ariba’s cloud-based financial solutions.

 About the company

Ariba is the world’s business commerce network. Ariba combines industry-leading cloud-based applications with the worlds largest web-based trading community to help companies discover and collaborate with a global network of partners. Using the Ariba Network, businesses of all sizes can connect to their trading partners anywhere, at any time from any application or device to buy, sell and manage their cash more easily.

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Keywords: Robert Banther, Ariba, contract compliance, e-invoicing, electronic invoicing, case study, e-invoice, Ariba Network, finance, procurement, supply chain, SAP
Countries: World