AI in the supply chain
In this episode of DLA Piper's 'Better Contracts' podcast series, Greg Tulquois catches up with Peter Brook and Jake Abrahams to explore the issue of artificial intelligence (AI) in the supply chain. They explore the complex web of legal, contractual, and regulatory challenges that businesses can face when AI is used in their supply chains and highlight key legal considerations - as well as strategic questions - for any business deploying AI solutions.
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Strategic considerations
AI has the potential to transform supply chains across industries. The integration of AI into supply chain operations is becoming increasingly common, offering opportunities for increased efficiency, productivity, and a competitive advantage. However, a business needs to understand where and how AI is being used, if that use creates risk or regulatory challenges for it, and whether it is even comfortable with that use.
With that in mind, the podcast kicks off with a look at various current examples of AI application in the supply chain - from predictive analytics and route optimisation to automated inventory and supply contract management – picking out some of the potential concerns and benefits. Our panel highlights that many customers may be unaware that AI is being used by suppliers in the provision of services and suggests key questions for a business to ask when defining its own approach to AI.
Practical and legal considerations
The panel discusses key issues that a business should be considering around use of AI, including:
- the state of the market (eg, market maturity and potential vendor lock-in)
- legal risks and challenges, such as data use and ownership, intellectual property rights, and regulatory compliance
- internal readiness (eg, internal governance structure, in-house expertise and knowledge, and integration with existing systems)
The speakers touch on the different approaches to AI regulation taken in each of their respective jurisdictions (the EU, the UK, and the USA), reinforcing the need for businesses operating internationally to remain aware of divergent regulatory regimes. The discussion also covers the EU AI Act and the EU Data Act, key EU legislation that is relevant for AI use – much has been said and written about the impact of the AI Act, but fewer people may be aware of the consequences of the EU Data Act for AI-enabled equipment and supply contracts, for example.
Key contract considerations
The final part of the podcast turns to contractual considerations and the key areas that businesses should be addressing in their contracts to manage AI risk. The panel covers a range of issues from compliance and data governance to audit rights, change management, and exit rights (including what should happen to AI-generated output on termination).
Given the many different ways in which AI can be used in the supply chain, there is no one-size-fits-all contract solution for AI. Each business will need to:
- understand the particular AI use case and associated risks in the jurisdictions in which it operates
- understand its status under the AI Act, where applicable
- use its contracts to appropriately allocate responsibility for those risks, and
- consider what AI-specific contract clauses may be needed.
For further guidance on AI matters, as well as information on the various products that DLA Piper offers (including our EU AI Act app): Artificial Intelligence and Data Analytics Lawyers.
