Trucking fleets work every day to draft, negotiate and execute contracts with suppliers, employees, subcontractors and customers that maximize revenue and produce efficiencies for all involved. But in a heavily regulated industry such as trucking, compliance issues related to federal, state and local laws must be directly reflected in these contracts, and that can get burdensome.
The emergence over the past decade of specialized contract lifecycle management software has helped companies manage this challenge. This technology can help trucking companies maximize their efficiency and mitigate their risk in the following ways:
• Streamline contract creation and approval;
• Limit legal team involvement in contracting;
• Ensure contract milestones are not missed;
• Identify how new and changing regulations impact contracts;
• Quantify the impact of corporate policy changes;
• Enforce contractual compliance.
Let’s review how each of these is accomplished and how they help mitigate risk.
Contract Creation and Approval
Today’s contract management technology provides a secure electronic central repository for companies to import, enter and store data and documents associated with their contractual agreements. This limits the risk of someone not being able to locate the latest version of a contract that could be stored on someone’s hard drive, misfiled in a shared folder or tucked into a steel filing cabinet.
This technology also provides access to electronic contract clause and template libraries that house preapproved contract language, as well as optional alternative language, that facilitates the authoring of contacts.
Once a contract is drafted using these libraries, automated workflows define and track its progress through the negotiation and approval process. The software captures all red-line edits and ensures that the appropriate parties required in the approval process act promptly.
Final execution includes the use of e-signature technology, which has become the norm for many companies in the trucking industry. This end-to-end automation can dramatically increase your velocity to revenue.
Limiting the Need for Lawyers
A company’s legal team can utilize contract management technology to make preapproved contract clauses and templates available to its end-user community and define the parties required to approve a final contract. This effectively empowers nonlegal team members to draft viable contracts, send them to the contracted party and manage them through the workflow process to final execution. It allows in-house or external legal resources to focus on true legal work, rather than work that can be performed by administrative or dedicated contracting staff. And by limiting a team’s ability to deviate from standard contractual language, firms limit the risk associated with terms that may not meet their corporate or legal requirements.
Managing Deadlines and Milestones
Within these platforms, firms can create automated alerts, associated with key contractual deadlines or deliverables, to remind people to take a specific action at a specific time.
Perhaps an auto-renewal date is approaching with a supplier that you do not want to renew; an alert regarding that renewal might be beneficial. Or a new pricing schedule needs to go into effect once one of your customers reaches (or fails to reach) certain milestones, and you need to implement and communicate the change. Staying on top of deadlines and milestones such as these is paramount to minimizing risk.
Identify the Impact of Regulatory or Policy Changes
One of the major benefits derived from storing all your contracts and associated documents in an electronic repository is its searchability. Imagine that a new industry regulation is slated to go into effect at year’s end. A single search for occurrences of “maximum mileage,” “weigh limit” or “limitations of liability” could uncover all contracts and supporting materials that may be affected by the change.
Similarly, suppose you’re considering a change to a corporate policy. A few keystrokes and a click of a mouse reveal all instances of “weekend delivery,” “cancellation within seven days,” or “a 5% penalty.” In either case, by identifying and quantifying the contracts affected, you can inform both your risk mitigation strategy as well as define which parties must be approached regarding the change.
Whether it is compliance commitments your company has made to third parties or industry regulations, or compliance by third parties to your organization, contract lifecycle management software puts systemic checks and balances in place to ensure that compliance.
The natural result of a high level of compliance is a low level of risk. This technology can help achieve that objective by making sure companies can always find the right version of an agreement and ensure that only approved contractual language is used. They also can get a “heads-up” well in advance of important contractual milestones and isolate agreements affected by changes to the ever-changing trucking industry environment.
Donaghy is Vice President of Technology at contract management software provider Contract Logix. He has been a thought leader in the space for more than a decade, authoring numerous articles and speaking at industry events on the topic of contract management and risk mitigation.