The importance of contracts in supply chains goes far beyond enforcing legal rights and remedies. Contracts frame dynamic business relationships, identify the components of value creation, set out a timeline for deliverables, and specify requirements for goods and services.
Although post-execution contract obligations and related business operations touch on nearly every aspect of a company, contracts remain disconnected from enterprise software systems. Clause bridges this gap. It brings contracts into their natural place at the heart of modern enterprise systems by connecting legal agreements to accounting and payments software, IoT data, and enterprise resource planning, transportation management, and other systems.
The Limits of Integrating Without Contracts
A hallmark of today’s digital economy is creating value by connecting software systems. Integrating with PayPal and Stripe, for example, makes it possible for any website or mobile application to add payments functionality. Salesforce created a massive enterprise ecosystem with its App Exchange integration platform. These integrations are enabled with the recent rise in companies making their software widely accessible via standardized application programming interfaces (more commonly known as “APIs”).
The fundamental value propositions of software integration include:
- bringing functionality from one platform into another so as to not disrupt workflows
- consolidating data into a single and transparent source of truth
- automating and reconciling changes among systems
As in other areas, the logistics industry is also being transformed by software integration. Logistics is characterized by numerous sources of data and multiple, disconnected software systems. This reflects the complex nature of logistics, which includes many types of documents, ranging from freight bills to bills of lading, and a wide variety of types of costs, metrics, and methods for calculating prices.
These characteristics lead to numerous pain points, such as
- disputes about carrier charges
- mismatches between payment terms and freight orders
- shippers and carriers using different methods of calculating charges
- a lack of transparency over price calculations
- inefficiently loading and utilizing transportation vehicles
For example, shippers are often charged “accessorial” fees for additional carrier activities outside of standard delivery that are difficult to measure and costly to audit. Specialized transportation management systems and other logistics software seek to solve pain points by being integrated into, streamlining, and even replacing existing systems. Slync.io, for example, specializes in resolving exceptions and unplanned issues in delivery, and provides value by integrating with a wide variety of systems, from legacy IT to email.
Yet despite the vast improvements that logistics software and technology continue to bring to the industry, many practices still involve paper-based and manual processes, siloed and unstructured data, and a lack of visibility into costs and service levels. This is because contracts are not fully integrated into enterprise systems.
Merely digitizing or automating contracts obligations that relate to pricing and charges provide only partial benefits. Other components of a contract, such as those that deal with invoicing, payment terms and instructions, and early payment discounts, must also be integrated to provide full visibility of the shipper-carrier relationship and much broader automation and syncing between systems.
For example, automating the invoicing of carrier charges but failing to integrate payment terms still leaves aspects of a shipper-carrier relationship disconnected and prone to error. Likewise, consider the example of a freight broker that uses a transportation management system (TMS) to manage the dispatch process. Even if the TMS supports e-signature and uploading of the signed rate confirmation, making contractually obligated payments and confirming adherence to any special instructions, such as delivery requirements, would require the TMS to create processes to replicate what could otherwise be automated and digitized from within a contract itself.
How Full Contract Integration Improves Logistics Operations
The Clause platform and API for connected contracting provides the last mile in enterprise digitization by integrating legal agreements. Clause connects contracts post-execution to external sources of data and business software to digitize and automate the performance of legally binding contract obligations.
By doing so, Clause gives shippers, carriers, brokers, and third-party logistics providers more visibility into finance and operations, more thorough automation, and fundamentally new ways to reduce administrative costs by aligning data and processes company wide.
These benefits are possible only when entire contracts are integrated into enterprise systems so as to avoid the problems of partial digitization noted above. The benefits of full contract integration also increases when parties have numerous agreements between them whose terms are different and change over time. Post-signature contract integration also makes it possible to connect logistics agreements to supply chain systems for even broader benefits and coordination.
A Connected Transportation Agreement
A Transportation Agreement on the Clause platform can connect all payment and other business terms in the Agreement, including all of the charges typically found in a schedule at the end of the document, to external data sources.
Connecting a Freight Charges clause or other clause to external data is accomplished by replacing the clause with a Smart Clause® template. A Smart Clause® template is a legally binding contract clause whose pricing, quantity, and other objective terms are integrated with other systems.
One source of external data that feeds into the Basic Freight Charges clause is the freight bill. The bill can be completed on an external e-signature platform, signed, and have its terms be integrated with Clause.
Another source of data for the smart Freight Charges clause would be a mileage platform that feeds data about any particular shipment into the clause.
All clauses in the Transportation Agreement’s Schedule that relate to other measurable charges, including for congestion and detention charges, can likewise be replaced with Smart Clause® instances to receive data about charges from external sources. These external sources include IoT data about how long a truck has been detained, and fuel price data for a smart fuel surcharge clause.
Per the terms of the Transportation Agreement, Clause can issue an invoice directly or send invoices out to an accounting platform through an accounting system integration. Clause can also automate the payment of an invoice or subject its payment to approval by the shipper.
All of these contract actions are recorded in an audit log on the Clause platform. Importantly, the audit log shows the exact time that the smart Freight Charge clause is triggered upon the carrier’s arrival, hence reducing disputes about arrival dates.
Clause is the only platform that provides users with the ability to integrate legal agreements and related documents into the increasingly integrated logistics software ecosystem. By doing so, Clause further bolsters the existing trend of digitization and automation and, more importantly, provides the only means to gain full end-to-end visibility, automation, and overcome contracting pain points.