Using artificial intelligence and chatbots to handle contract negotiations for shippers and suppliers may seem like science fiction, but Pactum believes it has created the technology that could arrange better deals for everyone.
Mountain View, California-based Pactum uses AI and machine learning to automate contract negotiations with the aim of getting the best deals for both parties without harming each other.
“The majority of commercial deals today are negotiated by people, but people are not good with large amounts of data, complex data and fast-moving data,” Martin Rand, CEO and co-founder of Pactum, told FreightWaves. “Most business deals have those aspects. That means people are leaving money on the table when negotiating those deals or simply ignoring and rolling over all old deals each year.”
The global contract life-cycle management (CLM) software market was $1.7 billion in 2021, according to a recent report from Research and Markets.
The CLM market could reach up to $3.3 billion by 2027 because “the demand for CLM software is rising in the public, health care, manufacturing and financial service sectors across the globe,” according to the report.
Pactum was founded in 2019 by Rand, Kristjan Korjus and Kaspar Korjus. The 3-year-old startup has raised more than $15 million to date. The company already has some of the biggest companies in the world as clients, such as ocean carrier Maersk and retailer Walmart.
Rand and his partners want to open the door to all businesses with the belief they could benefit from AI’s optimization potential for most contract negotiations. The goal is to handle 80% of a company’s nonstrategic spend negotiations, freeing up people “to focus on the 20% of the most important vendors.”
“With Maersk, they came to us and said the world is changing, logistics used to be run by annual contracts, but it is very hard to sustain this kind of relationship if the inflation is rampant and if the energy prices are constantly fluctuating,” Rand said.
“We asked Maersk, ‘What would you do if you had an unlimited amount of people with unlimited capabilities?’ Maersk said, ‘We would do more short-term agreements that will always be market but that would enable the other side to plan as well.’”
Pactum’s solution for Maersk was arranging AI-based contract negotiations while the company’s ships are still on the ocean, a couple of weeks before they arrive at a port.
“We reach out to the local truckers and we agree on those lanes and so the truckers get the guaranteed volume and everything is not done in firefighting mode and everything is market,” Rand said. “Only the machine has such a capacity to do that.”
Rand said large trucking companies have begun reaching out to Pactum about using the software.
“Many of the big trucking companies who we have been negotiating with on behalf of Maersk have reached out to us and said, ‘Why do we have to do this thing all over again with people? Can you put a bot on our side as well?’”
Click for more FreightWaves articles by Noi Mahoney.
More articles by Noi Mahoney
Angeles Equity Partners acquires majority stake in reefer carrier Freymiller
Logistics company DB Schenker announces layoffs in Texas
Latin American e-commerce SMBs have big cross-border opportunities