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Process Details

  • Inputs: Executed supplier contracts. Purchase order data. Supplier invoice data
  • Outputs: Discrepancy reports (PO vs. Contract, Invoice vs. Contract from procurement perspective). Automated alerts for contract milestones and potential non-compliance.
  • Systems: Contract Lifecycle Management (CLM) Systems (SAP Ariba, Coupa) ERP Systems (SAP S/4HANA, Oracle NetSuite) – for PO and supplier data

Contract Compliance and Milestone Management

Agnostic

Use Case Overview

An AI agent that proactively monitors active supplier contracts to ensure compliance with key terms (e.g., pricing, volume commitments, service levels) and tracks important milestones (e.g., renewal dates, price adjustment windows, reporting deadlines). It alerts procurement professionals to deviations, upcoming obligations, and potential risks.

Challenges

  • High potential for costly errors from manual data handling.
  • Significant time and resources are spent on repetitive, low-value work.
  • The manual process is difficult to scale without increasing headcount.
  • Process bottlenecks lead to delays and missed deadlines.

Solution

This use case solution follows these general steps at a high level:

  1. Contract Data Extractiona) ingests active supplier contracts from a Contract Lifecycle Management (CLM) System (e.g., SAP Ariba, Coupa) or document repositories. b) extract key metadata and specific clauses including: pricing tables, volume tiers, renewal dates, termination clauses, service level agreements (SLAs), payment terms, reporting obligations, and compliance requirements.
  2. Obligation & Milestone IdentificationIdentifies and categorizes contractual obligations for both the company and the supplier, along with key dates and milestones. Populates these into a tracking calendar.
  3. Purchase Order (PO) vs. Contract Terms Verificationa) Compares PO line item pricing, quantities, and payment terms against the negotiated terms in the corresponding supplier contract. b) Flags discrepancies (e.g., off-contract pricing, incorrect payment terms applied to POs) for review and resolution.
  4. Invoice vs. Contract/PO VerificationCompare supplier invoices (data from AP system) against contract terms and PO details, specifically identifying discrepancies in pricing, discounts, or non-compliant charges before payment.
  5. SLA & Performance MonitoringCompares actual performance against contracted SLA targets and flags underperformance.
  6. Compliance Reporting & Risk Flagginga) Generates reports on overall contract compliance, upcoming milestones, identified discrepancies, and supplier performance against SLAs. b) Flags contracts with high risk of non-compliance or those needing urgent attention.

Primary Benefits

  • Increase EfficiencyDramatically reduce the time and manual effort required to complete the process.
  • Enhance AccuracyEliminate human error to ensure data integrity and reduce financial risk.
  • Empower EmployeesFree your team from monotonous tasks, allowing them to focus on strategic work that requires their expertise.
  • Improve ScalabilityHandle growing volumes of work without a proportional increase in operational costs.
  • Ensure TransparencyMaintain a complete, auditable trail of every action the AI agent takes, described in plain English.

Related Use Cases

The AI-powered agent can:
Recognize and Parse Tables: Identify pricing or volume rebate tables within a contract and extract the specific tiers, rates, and effective dates.
Understand Key Phrases: Identify and interpret key clauses related to renewal dates, termination notice periods (e.g., “90 days prior to the end of the term”), and specific SLA commitments (e.g., “99.9% uptime,” “4-hour response time”).
Categorize Obligations: Classify each extracted item as a price, a date-based milestone, a performance obligation, etc., so it can be monitored correctly.

The agent maintains a complete audit log for every check it performs. For any flagged discrepancy, you can see:
A link to the specific contract and clause that was violated.
A link to the specific transaction (PO or invoice) that was non-compliant.
The date and time the discrepancy was identified.
Who was notified.

Value leakage is the difference between a negotiated deal and the actual results. The agent prevents it in several ways:
Price Compliance: It catches when a PO is issued or an invoice is received at a price higher than what was contracted.
Rebate Management: It flags when your total spend with a supplier has passed a volume tier, prompting you to claim your negotiated rebate.
SLA Enforcement: It notifies you when a supplier’s performance (e.g., delivery times, uptime) drops below the agreed-upon service level, which can trigger service credits or other remedies.

Implementation is a structured process to digitize and activate your contract portfolio, typically taking 4-6 weeks.
Integration: We set up secure connections to your contract repository (e.g., CLM, SharePoint) and your transactional systems (e.g., ERP).
Ingestion: The agent ingests your entire portfolio of existing contracts, both new and legacy.
AI Analysis & Validation: The agent extracts key terms from all contracts. Your team reviews the output for a pilot batch to validate accuracy and build confidence.
Configuration & Go-Live: We configure the alerting rules and workflows, and then activate the agent for continuous, ongoing monitoring.

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