Managing Stringent Customer and Supplier Contracts: How to Reduce Risk, Save Time, and Use AI Effectively
By MHEDA
Contracts are no longer a simple formality. Across the material handling landscape, customer and supplier agreements are becoming longer, more detailed, and more risk-shifting. What once fit into a few pages now often spans dozens, with expanded terms covering liability, compliance, cybersecurity, delivery performance, and supply continuity.
For distributors, manufacturers, and integrators, this is more than a legal concern, it’s an operational and strategic challenge. Slow contract cycles delay revenue. Missed clauses increase exposure. And teams are expected to move faster while accepting more risk.
This article outlines why contracts are becoming more complex and practical ways organizations can streamline contract review, including how to use artificial intelligence (AI) responsibly.
Why Contracts Are Becoming More Complex
There isn’t one reason contracts have become more stringent. It’s a combination of forces that are reshaping how business gets done.
- Pricing volatility adds another layer of pressure. Price shifts can occur between quoting, order placement, and shipment, especially for products tied to volatile inputs like steel. In categories such as racking, material costs can fluctuate significantly in short periods. Customers increasingly expect fixed pricing protections in contract terms. This forces distributors to commit to margins before supply costs are fully locked in. Without clear contract language addressing price escalation, profitability can quickly erode.
- Uncertainty has become the new normal. Supply chain disruptions, labor shortages, geopolitical instability, and shifting trade policies have pushed companies to lock down protections wherever they can. As a result, clauses that used to show up only in high-risk deals are now standard in many customer templates.
- Customers are pushing risk downstream. More organizations are using aggressive indemnification language, flow-down requirements, and expanded insurance obligations to shift responsibility to distributors, suppliers, and integrators. In many cases, companies are being asked to take on liability for factors outside their control.
- Compliance expectations keep expanding. Even companies outside heavily regulated industries are now seeing contract language related to data privacy, sourcing requirements, audit rights, and compliance programs that were uncommon just a few years ago.
- Technology has raised the bar. Digital procurement systems and contract lifecycle management platforms have made contracts more standardized, more trackable, and more rigid. Deviations stand out faster and are often less tolerated.
The Real Problem: Contract Risk Isn’t Just Legal
More complex contracts slow down business in real ways.
- Sales cycles drag out while agreements bounce between internal teams
- Operations inherit obligations they may not fully understand
- Leadership is forced to choose between closing deals and accepting risk
Another major challenge is limited legal resources. Many small or growing distributors, dealers, and integrators don’t have in-house legal counsel readily available. As a result, they’re often forced to outsource contract review at added cost or rely on internal sales or operations teams to interpret legal language—neither option is ideal. Outsourcing increases expense and slows timelines, while internal review without legal expertise can unintentionally expose the organization to significant risk.
In an environment where contracts are growing longer and more technical, this creates a resource gap that makes consistent risk management even harder.
How to Reduce Contract Cycle Time (Without Losing Control)
You don’t need a large legal team to improve contract review. Small process changes can have a big impact:
Use a tiered review process with clear ownership. Low-risk agreements can follow a fast-track path using approved templates, but should still be reviewed by designated, trained team members, while moderate-risk deals receive targeted internal review and high-risk agreements (such as those with uncapped liability) are escalated for legal review and formal approval.
Build a clause library. Standard language, fallback positions, and defined “no-go” terms reduce negotiation friction and help internal teams, at any level, stay consistent.
Require a one-page deal summary. Capturing key information upfront (scope, value, delivery dependencies, subcontractors) helps reviewers focus on the most important risks.
Track recurring redline issues. If the same issues keep coming up with certain customers or templates, track them. Over time, this helps teams anticipate problem clauses and negotiate proactively.
Where AI Fits into Contract Review
AI is increasingly being used in contract workflows, but its value is strongest as a support tool, not a replacement for human judgment.
Used correctly, AI can help:
- Summarize long agreements quickly
- Extract key obligations and deadlines
- Flag clauses related to liability, indemnification, termination, audit rights, and cybersecurity
- Compare contract language with standard company positions
When paired with a clause library, AI becomes a powerful triage tool that helps teams focus human expertise where it matters most. That said, contracts depend heavily on defined terms, context, and nuance—areas where AI can misinterpret meaning or oversimplify risk. Human review is still essential.
Guardrails for Using AI Responsibly
Before using AI in contract workflows, organizations should establish clear guidelines:
Protect confidentiality. Contracts should only be reviewed using AI tools approved by IT and legal leadership. Sensitive agreements should never be uploaded into public or unsecured platforms.
Maintain human oversight. AI can speed up the first pass, but it should never be treated as a decision-maker. Human review remains critical for accuracy and risk assessment.
Key Takeaways
Contract complexity isn’t going away. The organizations that succeed won’t just review faster, they’ll review smarter.
By standardizing intake processes, defining negotiation positions, and using AI responsibly, businesses can reduce contract cycle time, improve consistency, and manage risk more effectively.
The goal is not to eliminate negotiation, but to ensure obligations are clearly understood, aligned with operational realities, and accepted intentionally.
Sources
KPMG – Supply Chain Risk Trends
Cutter Consortium – Force Majeure & Supply Chain Health
Dorf Law – Supply Chain Risk Mitigation
White & Case – Regulatory Risk Outlook
World Commerce & Contracting – AI and Contract Lifecycle Management
American Bar Association – Ethics Guidance on AI
