Like their counterparts in other industries, corporate legal departments (CLDs) at manufacturing companies are under pressure to increase efficiencies and cut costs. Rising material costs and supply chain disruptions have made serious impacts on the industry, reducing budgets across functions. Meanwhile, CLDs are expected to continue delivering positive litigation outcomes, protecting the company’s intellectual property, addressing labor and other regulations, and acting as drivers of business success.
With so many critical concerns to be vigilant about, manufacturing industry legal teams are particularly challenged to make material improvements to their processes and find opportunities for cost savings. Staying up-to-date with legal operations best practices is one key to achieving continued success in these areas.
Here are three areas CLDs at manufacturing companies should modernize to ensure their spend management capabilities are up to par.
Billing guidelines
For far too many CLDs, managing billing guidelines entails handing an attorney a large stack of invoices to review—an outdated methodology that is both time-consuming and mistake-ridden. Common billing issues such as duplicate line items and block billings can cost legal departments millions of dollars a year, which manufacturing companies cannot afford in the current landscape. Some departments think they’re on top of billing compliance simply because they have an e-billing system in place. But as the pace of change accelerates and the pressure to control spend grows, CLDs need to implement artificial intelligence (AI) to supercharge bill review.
Most CLDs understand the importance of billing guidelines in principle. But, while over 80% of CLDs provide guidelines to outside counsel, less than two-thirds regularly enforce them. That’s where AI comes in. In addition to scanning for irregularities and violations, AI can flag trends that indicate budget overruns or lost revenue, while also predicting the cost of specific matters and firms. Plus, relying on AI to enforce billing guidelines frees up attorneys for higher-value tasks, which can improve legal outcomes.
Visibility
Another key component of spend management is visibility. CLDs must be able to see precisely where their budget is going. Without detailed visibility into spend, timekeeper hours and rates, budget forecasts, and KPIs, CLDs won’t be able to weather change and support the business as well as they should. Full visibility requires centralizing invoices and consolidating reports from disparate systems. For example, if a CLD is still receiving paper invoices, AI should be used to digitize them or convert them to PDFs before sending them to a centralized location accessible to anyone who needs them. Centralizing data access can help teams make better decisions about resource allocation, staffing, fee arrangements, and more.
Complete visibility is so important because it lays the foundation for data-driven analysis that can help CLDs and law firms become mutually successful. For instance, CLDs can collect bids from different firms about pricing, matter management plans, and more. This data can help CLDs ensure they choose the right law firm at the right rate.
Data can also help CLDs communicate clearly and accurately with the C-suite. Manufacturing companies must juggle a wide range of projects and regulations, which cannot be done effectively if reporting is siloed by region or market. They need a system that can integrate seamlessly with various platforms and combine disparate data and reports into a single view. This breeds actionable insights and allows CLDs to easily share pertinent information proactively with higher-ups.
Vendor management
Soliciting RFPs for firms and asking them to submit competitive bids is a great way to gauge potential costs and improve outside counsel selection. Firms can be asked to submit strategic and staffing plans, their pricing structures, and more before a single matter is touched. CLDs can base their decisions about which firms to use on the answers provided in the RFPs.
Engaging early with outside counsel in this manner can also help both CLDs and outside counsel form stronger relationships right out of the gate. CLDs can articulate expectations around billing guidelines, goals and priorities, pricing, and so forth. Meanwhile, firms will have a better understanding of what’s expected of them so they can target their performance against established goals. Both parties will have measurable metrics they can use to gauge the success of the relationship as it progresses.
Altogether, the time is now for manufacturing industry CLDs to modernize their spend management capabilities in preparation for the changes that lie ahead. Like their colleagues running the production line, manufacturing industry legal teams must look to innovative technology and continuous process improvement to remain efficient and effective. To learn more about how to improve spend management, download our whitepaper, Innovations for legal operations efficiencies in manufacturing.
