Use Case | Application of the Generative Model for Supplier Contract Validation

Application of the Generative Model for Supplier Contract Validation

General Description:
In the purchasing department, it is essential to ensure that supplier contracts include clear terms, meet the company’s expectations, and minimize operational and legal risks. This model automatically analyzes contracts in PDF format, identifies strengths and weaknesses, and selects the best or flags the worst contract based on predefined criteria.

How It Works:

1. Uploading Contracts:
   • The user uploads the supplier contracts directly to the system in PDF format.
2. Automatic Model Analysis:
   • The model thoroughly reviews each contract, looking for key aspects such as:
     • Delivery Terms: Does the contract specify clear deadlines?
     • Quality Standards: Are minimum quality requirements mentioned?
     • Penalties: Does the contract include penalties for breaches or delays?
     • Dispute Resolution: Does the contract establish a procedure for resolving conflicts?
3. Evaluation and Comparison:
   • The system analyzes all the uploaded contracts, scoring them based on the level of compliance with these criteria.
4. Report Generation:
   • The model generates a clear, concise report highlighting:
     • The Best Contract: The one that meets most or all of the expected conditions.
     • The Worst Contract: The one that has the most omissions or represents the highest risk.
     • It also includes specific recommendations for improving or renegotiating less favorable contracts.

Example Use Case:
Scenario:
A company is evaluating five contracts with suppliers of key products. These agreements must ensure timely deliveries, adequate quality, and penalties for non-compliance.

Simplified Process:

1. Upload:
   • The manager or user uploads the five contracts to the system.
2. Automatic Evaluation:
   • The model reviews each contract and answers questions such as:
     • Does the contract clearly define the delivery dates?
     • Are penalties specified if the supplier does not comply?
     • Are there clear quality standards for the product?
     • Does it specify how to resolve disputes in case of conflicts?
3. Results:
   • Best Contract: Contract A, with all terms clearly defined.
   • Worst Contract: Contract D, which omits penalties and has ambiguous delivery terms.
4. Generated Report:
   • Contract A: Ready for approval, no changes needed.
   • Contract D: Recommendation to renegotiate and include clear terms on penalties and delivery dates.

Benefits for End Users and Managers:

1. Time Savings:
   • Contracts are automatically evaluated in minutes, eliminating the need for extensive manual review.
2. Informed Decision-Making:
   • The report clearly identifies the strongest contracts and highlights critical areas needing attention.
3. Risk Reduction:
   • Ensures contracts meet expected standards, minimizing future issues with suppliers.
4. Ease of Use:
   • No need to understand the technical aspects of the system; the results are presented in accessible, action-oriented language.
5. Optimization of Business Relationships:
   • By identifying the best agreements, supplier relationships are strengthened and aligned with the company’s strategic objectives.

Summary of Generated Report:

• Contracts Analyzed: 5
• Best Contract: Supplier A
  • Meets all delivery, quality, and dispute resolution terms.
  • Recommended for immediate approval.
• Worst Contract: Supplier D
  • Omits penalties and has ambiguous delivery dates.
  • Recommendation: Request adjustments before signing.

Conclusion:
This generative model simplifies the validation of supplier contracts by automatically analyzing terms and generating a clear, actionable report. This enables managers and end users to make quick, informed decisions, improve purchasing management, and reduce risks in business operations.