Supply Chains and AI: Reduce Value-Eroding Behaviors Without Stifling Relationships

Many businesses struggle with value-eroding behavior in their supply chains. Although some impose too many controls with the intent of standardizing processes and improving buying power, others implement too few in the hopes of agility and fast-moving capabilities. Both approaches risk inviting behaviors that reduce efficiency and erode value think fraud and gamification. Let’s start with organizations with complex, control-heavy systems, ones that centralize procurement and intensify buying power. These types of firms often inadvertently encourage gamification of their bidding processes through change-order abuse. The situation usually follows this pattern: A vendor submits a lower-than-usual bid in order to secure a specific contract. Although this initial pricing is attractive, the vendor gradually makes change-order amendments which generally face less scrutiny than bids and contract-awarding to recover profits not obtained from the bid itself.