AI in Manufacturing Contracts: Leveraging Efficiency Without Losing Human Oversight

There may be advantages to using artificial intelligence (AI) for speedy data analysis when comparing contract terms against an organization’s objectives.

However, AI solutions are not a substitute for the human eyes who should be reviewing and negotiating contracts.

A recent article from Supply Chain Brain titled “AI Technology Ensures Supply Chain Integrity Beyond the Holidays” highlighted four ways AI can improve supply chain issues:

  • Streamline due diligence processes
  • Enhance visibility and transparency
  • Enable predictive analytics
  • Align businesses with the moving target of regulation

The article illustrates how this technology can be introduced into an organization’s contracting processes in ways that can influence supply chain performance.  But it also reveals, in our assessment, the potential to put an organization at risk by minimizing or even substituting the irreplaceable value of human oversight and judgment during contract development, negotiation, and management of the awarded work.

Maintaining the Human Touch in AI Integration

So, one might wonder “Why bother using precious people hours to review contracts when AI can do it for me?” One good reason: People still have the responsibility (and in many cases, the duty of law) to manage and enforce contract terms.

While technology has always been a disruptor of past practices, there is still good reason for parties to exercise caution before abdicating their responsibility to review contracts for the presence of:

  1. Deviations, whether materially significant or not, that could be thought to potentially corrode over time the integrity of an organization’s preferred terms
  2. Requirements that could be perceived to disproportionately benefit or penalize one of the parties
  3. Administrative or financial expectations that could be onerous upon one party to fulfill, thereby potentially dissuading interest in contract participation.

Here’s why. AI can highlight discrepancies, bring attention to problematic terms, and suggest corrective actions.  Those are valuable actions, and the attending speed of execution is attractive.  However, AI is unlikely to apply an understanding of things like contracting vision or organizational culture in such a way that would result in critiquing and crafting contracts with an eye towards eliminating extensive negotiation, thereby defeating the advantages of any speedy upfront parsing of terminology.

There will always be variations in risk controls, quality systems, fulfillment capabilities, labor laws, and even overarching corporate regulations (to name just a few things) that will cause one party to object to a condition and force a negotiation. That’s not what AI does yet — and arguably won’t until humans allow themselves to be bound by computers negotiating with other computers.

The allure of AI in the supply chain is undeniable for precision parts manufacturing, but don’t get stuck in the “hype cycle” of adopting technology without considering all the angles.

Augmenting current practices with AI for Gasket Manufacturing

According to McKinsey, manufacturing is not using AI as much as other industries yet.

For accuracy and time’s sake, manufacturers acting in their dual capacity as supplier and buyer could benefit from the use of AI for some of the activities suggested in Supply Chain Brain’s article.

Augmenting current practices with AI can deliver an efficiency that reduces task time and cost.  As an automation initiative, one must recognize the varied benefits to staff utilization and expense.  An elevated consistency in project and documentation management is also obvious.  What’s uncertain is whether this new methodology can thrive as an additive force to amplify a contracting team’s efforts, versus being adopted as a substitutive staffing strategy that introduces sterile decision making or other relational barriers to the goal of assembling the best buyers and sellers in a chain.  And because we don’t know how an AI technique could potentially disrupt contracting practices or compromise their compliance, most would suggest a carefulness in its adoption.

Not ready to fly alone

Even as AI increases its presence in data processing and contract management tools, it’s not yet equipped to deliver the final result without significant and necessary human intervention. For responsibility and liability’s sakes, manufacturers still need to employ skilled resources and reserve time for those team members to interpret information, conduct negotiations, and modify contracts placed under their oversight.

As AI continues to make inroads into those tools, one limitation become clear.  That limitation underscores a fundamental aspect of technology adoption in the supply chain: accountability cannot be transferred to computers. Computers cannot be held liable in the same way humans can for any breaches in judgment or performance.   It’s unlikely this will change in the foreseeable future.

So, while AI offers significant advantages in streamlining certain aspects of contracting and supply chain management, it is not a panacea. The human element— our ability to reason, negotiate, and make nuanced decisions — remains paramount. At KLINGER IGI, a premier gasket manufacturing company, we believe in leveraging AI to enhance our efficiency and accuracy, but not at the expense of the critical human oversight that ensures the integrity and success of our supply chain operations.