The holiday season brings joy and festivities around the world, but it also presents unique challenges for companies with complex supply chains. Recent news about counterfeit aircraft parts disrupting the airline industry and recalls of holiday-themed food ingredients may seem unrelated, but they both raise concerns about a company’s trust in its suppliers and supplier fraud. It highlights the critical need for transparency and visibility to avoid conduct. There is significant disruption to the holidays. As consumers prepare for holiday shopping and travel, the risks posed by counterfeit products and unethical practices in the supply chain can impact companies’ bottom lines.
Today’s global economy relies on a network of contractors and subcontractors who work together to help develop and deliver the parts and products that form an essential part of our daily lives. This includes manufacturing the parts for the planes we fly and producing the food we spend billions of dollars on during the holiday season. The economic impact of shopping, dining and traveling over the Christmas period is significant. In fact, total sales for the 2023 holiday season are predicted to reach $957 billion.
Regardless of industry, unethical supplier relationships can damage a company’s reputation and, worse, lead to long-term financial, regulatory, and consumer safety implications. When supply chain fraud occurs, it not only causes disruption, it also erodes trust with consumers, partners, and investors, and has far-reaching implications.
As Warren Buffett said, “It takes 20 years to build a reputation, but five minutes to ruin it.” This adage is especially true during the busiest times of the year when profits and security are at stake. This applies to companies at risk.
How can business leaders mitigate (or protect against) such risks? The answer lies in one of the most unexpected places: contracts.
AI and commercial relationships
Contracts are the basis of commercial transactions. They manage funds within and outside the company, determining what goods and services are provided, where they are sourced, and how much the company is charged. However, manually processing large volumes of complex contracts may mean that important agreed obligations are not properly tracked, managed, or fulfilled. For example, legal and procurement teams are responsible for overseeing the creation and approval of contracts, surface cost savings, avoid dereliction of obligations, and ensure ongoing compliance throughout supplier relationships. This can be difficult when managing thousands of commercial contracts.
By digitizing supplier contracts and deploying AI technology to analyze critical enterprise-wide contract data and gain insights into supplier practices, companies can identify red flags and deviations from compliance standards and improve supplier eco-friendliness. Ensure safety and ethical behavior throughout your system. Such contract intelligence, a new approach to traditional contract management, allows companies to improve supplier relationships across the enterprise and stay informed about activities further down the supply chain. .
Here are four ways companies can leverage AI to proactively manage risk and maintain ethical standards across their supply chains this holiday season.
AI streamlines the due diligence process Ensure you choose ethical and trusted partners by automating the evaluation of supplier credentials, certifications, and compliance history. Natural language processing (NLP), machine learning, and data analytics work together to improve accuracy, uncover relevant information in contracts, and automate the contract creation process, eliminating the time and effort required for manual review and drafting. reduce.
AI increases visibility and transparency Strengthen supplier relationships by facilitating proactive, real-time monitoring of supplier activity and performance. Machine learning algorithms analyze contract terms and conditions to identify potential risks, such as unfavorable clauses that may suggest or condone unethical behavior. Alerts are generated when there are deviations from industry standards or discrepancies in contractual obligations. This feature informs decisions during negotiations, reduces friction, and ensures post-signing results that foster business relationships.
Achieving predictions with AI-powered predictive analysis Examine contract renewal rates and assess the potential impact of external factors such as weather events, port delays, geopolitical events, labor stoppages, and social unrest. By using AI to identify potential supply chain weaknesses and conduct risk assessments, companies can proactively close gaps, diversify supplier contracts, and improve continuity in the face of unexpected events. Ensure compliance.
AI helps businesses collaborate Evolving environmental, social and governance (ESG) regulations. Companies can leverage AI to strengthen and demonstrate their commitment to sustainability and ethical practices with their suppliers. Building trust by achieving pre-agreed goals, such as sustainability goals, can lead to increased market competitiveness, increased productivity and long-term growth.
AI-powered contracts are reshaping the way companies navigate and grow within complex supply chains and changing global economic regulations. These solutions are not only essential tools, but also valuable enterprise-wide platforms to help businesses manage risk. By adopting AI technology, companies can proactively address supply chain non-compliance and ensure customer trust and safety well into the holiday season and beyond.
Shannon Kirk is Director of Global Legal Industry Solutions at Icertis.
