Transforming Manufacturing Agreements for a Digital-First Future

Agreements have long been one of the manufacturing sector’s slowest areas for innovation. Overreliance on paper-based systems, a general reluctance to alter established practices, and mistaken assumptions about contract management technologies have caused manufacturing to lag behind other sectors.

The pandemic marked a turning point, with manufacturers moving away from sluggish, siloed agreement processes. The upheaval forced a fresh look at digital technologies and the promised benefits of automation and AI to navigate increasingly dynamic and unpredictable markets.

For a deeper dive into digitization and how it’s changing the landscape of manufacturing agreements, we sat down with John Dougherty, head of manufacturing for the Americas at ServiceNow. With over two decades of experience in manufacturing and supply chains, Dougherty has witnessed firsthand how digital technologies are reshaping agreement processes for greater cost efficiency and a bigger competitive edge.

The pressure to digitize agreements is on 

Dougherty cited a combination of increased agreement activity and the pressure to streamline operations and cut costs as key trends driving digitization in manufacturing agreements:

Increased agreement workloads from supplier recertification and onboarding

The post-pandemic drive for supplier diversification pushed manufacturers to seek out and onboard new suppliers and business partners. At the same time, a flood of new regulations and firms’ increasingly ambitious ESG targets mean that procurement and production teams are reevaluating and recertifying supplier agreements to ensure compliance with these new goals.

“It's a very time-consuming process. Think about the sheer volume of paperwork involved in these reviews and the fact that it's not just one department—it's dozens of stakeholders across multiple teams." 

Dougherty noted that, as legal teams face growing workloads from renegotiating contracts and drafting new agreements, digitization and automation are key to enhancing cross-departmental communication and collaboration and improving visibility into contract data.

An urgent need to optimize legal and HR operations

As operational costs soar and budgets tighten, manufacturers face the challenge of achieving more with fewer resources. “Most of these companies have small legal and HR departments,” said Dougherty. “And burdening them with tedious manual work isn’t the wisest use of those resources.”  He added that to help ease those bottlenecks, many firms in the sector are turning to AI.

“We’re seeing more companies move beyond basic digitization and integrate generative AI for tasks like locating clauses or terms within agreements and drafting initial documents.” 

With AI taking care of repetitive, low-level tasks, negotiators can concentrate on higher-impact areas and relationship-building.

Gaining a competitive edge in an increasingly tight labor market

Dougherty highlights employment agreements as a major concern for manufacturers.

 “In 13 executive briefings with CEOs from ServiceNow client companies last year, the top challenge cited was onboarding new employees." 

This challenge involves several elements—all driven by the persistent skills shortage in manufacturing:

• Updating and renewing employment agreements: To succeed in a highly competitive talent market and adapt to a new world of work, manufacturers have had to update employment agreements to accommodate everything from new benefits to flexible working schedules.
• Fast-tracking onboarding procedures: In a tight labor market, a slow and complicated onboarding process puts companies at a disadvantage. It increases the chances that candidates will abandon recruitment and onboarding processes and delays new hires' time to productivity.
• Enhancing employment agreement visibility: A workforce in constant flux means a greater volume of agreements and increased risks. In addition to compliance issues, poor visibility into employment agreements elevates financial risk and leads to operational disruptions.

AI’s expanding role in agreement management

Manufacturers are discovering that the benefits of AI and automation go well beyond simply automating routine tasks. Dougherty pointed to four areas where companies are leveraging AI to optimize agreement processes and seeing benefits like cost savings and more successful negotiations: 

Data aggregation and analysis

Dougherty highlighted that companies are sitting on vast and valuable amounts of agreement data that few have the time to go through. 

“Whether it’s analyzing every transaction they’ve had with a given supplier or identifying patterns across multiple agreements, generative AI enables them to unlock insights that would be too time-consuming or complex to uncover manually.” 

He shared that insights from this data can benefit manufacturers seeking opportunities to negotiate better pricing with suppliers, consolidate vendors, or benchmark performance against negotiated terms.

Enhanced visibility and compliance

He noted that ensuring suppliers fulfill the entitlements specified in their agreements is another major area of concern for manufacturers, but it frequently doesn’t get the vital attention it deserves. 

“Calculating compliance rates for dozens of individual terms and conditions can be an extremely time-consuming task. So, quite often, companies won’t have accurate data on how well their suppliers are adhering to agreed-upon terms.” 

He added that manufacturers can leverage AI-aggregated data to streamline compliance rate calculations and gain greater visibility into their suppliers’ overall performance.

Entitlement management

In addition to insights from aggregated data, Dougherty stated that AI-powered tools with capabilities such as pre-defined rules settings and trigger alerts are proving particularly helpful for streamlining compliance checks and ensuring consistent adherence to contractual terms.

“Companies leave so much money on the sidelines by providing services outside contract entitlements. Once that happens, recouping those earnings can be very difficult.” 

Why a strong agreement process is key

Dougherty underscored that, without an efficient agreement process, even the best technology won't yield the expected results. “I see so many companies being held back by outdated and inefficient processes—they’re simply not set up for the speed of modern business.” He offered an example of a manufacturer facing issues renewing a supplier’s contract to illustrate how technology is not a stand-in for efficient processes.

“When the supplier returned the document, it sat in legal review for close to two months,” he shared. “Just think of how much time, resources, and effort were wasted—not to mention the risk that the procurement team could’ve been working off the old contract.” 

According to Dougherty, establishing a good agreement process is not enough. One key best practice he recommends for manufacturers is stress-testing agreement processes to ensure they can stand up to challenges like exceptions and shifts in supplier relationships. “Pressure test those process flows, make sure your team knows how to deal with exceptions, and create a strong playbook to deal with those exceptions outside standard process flows.”

It’s time to hit the go button on digitization

Although many manufacturers are adopting agreement digitization, Dougherty pointed out that many remain reluctant. Manufacturing is one of the most cyberattacked industries, so “there are a lot of folks who are still worried about putting their contracts in an environment where unauthorized parties may gain access to them,” he said.

In a fast-moving market that demands flexibility and agility, the benefits of digitizing agreements are substantial, and Dougherty advises manufacturers to vet contract management providers carefully to ensure secure processes:

“Look for providers that adhere to globally recognized security standards like ISO or GDPR. Ensure that agreement management platforms come with built-in compliance and security checks. And choose partners with strong safety, transparency, and security cultures.”

Intelligent Agreement Management (IAM) is a new category of AI-powered cloud software that helps streamline and automate agreement processes.

Docusign IAM empowers manufacturers to digitize the entire agreement lifecycle securely. Contact us to learn how it can help you unlock the full power of your agreement data and transform it into smart, data-driven decision-making that moves your business forward.