Share:

AI Is Good at Picking Qualified Suppliers. It Still Struggles to Pick the Best One.

Companies are rapidly integrating generative AI into procurement and sourcing decisions. The promise is obvious. AI can read thousands of pages of supplier proposals faster than any human team, summarize technical requirements in seconds, and create the appearance of consistency and objectivity in evaluation.  But there is an important distinction managers are starting to overlook.

The same AI system that performs extremely well at identifying whether a supplier meets minimum requirements may perform much less reliably when judging which supplier is truly better.

Recent research published in the Journal of Business Logistics examined this issue by comparing how large language models evaluated supplier bids against evaluations completed by experienced procurement professionals. It analyzed 123 supplier proposals tied to 31 public procurement projects conducted by the State of Ohio between 2023 and 2024. The projects involved complex IT services contracts, many containing large, text-heavy bid packages requiring evaluative judgment rather than simple arithmetic comparisons.

The researchers tested three reasoning-oriented AI models: OpenAI o3, Grok-3-Mini, and DeepSeek R1. They then compared their evaluations against human procurement scores.  The findings revealed a surprisingly clear pattern.

AI performed well when evaluating compliance signals. These are signals tied to baseline qualifications and technical requirements. Does the supplier meet the required certifications? Do they satisfy the mandatory specifications? Did they include the required documentation? Are the implementation requirements addressed?

On these types of tasks, the AI models showed relatively high agreement with human evaluators and relatively stable scoring behavior across repeated evaluations.  But the results changed once proposals shifted from compliance to differentiation.

When suppliers attempted to distinguish themselves through strategic capabilities, innovation claims, implementation approaches, past experience, or value-added propositions, AI scoring became far more volatile. The same proposal could receive meaningfully different evaluations across repeated AI runs even when the prompt and underlying content remained unchanged.

That volatility matters.

In procurement, the most important decisions often occur after baseline qualification has already been established. Most serious bidders can satisfy the minimum requirements. Competitive advantage comes from identifying which supplier will create superior long-term value, adapt better during uncertainty, collaborate more effectively, or reduce implementation risk in ways that are difficult to fully codify.

Those judgments require interpretation, contextual reasoning, and tradeoff assessment. Humans are imperfect at this too, but experienced procurement professionals rely on domain expertise and pattern recognition developed over years of evaluating suppliers and managing outcomes.

Large language models work differently. They generate probabilistic outputs based on statistical relationships in language rather than genuine understanding of supplier quality or operational fit. That distinction becomes especially important in ambiguous or strategically nuanced evaluations.

Many executives currently frame AI adoption as a replacement question: “Can AI evaluate suppliers as well as humans?” That is the wrong question.  A better question is: “Which parts of supplier evaluation are structured enough for AI to handle reliably, and which parts still require human judgment?”

The answer emerging from the research suggests a hybrid approach.

In the first stage, AI can handle qualification screening. It can rapidly process proposals, verify compliance requirements, identify missing information, summarize technical content, and flag inconsistencies. This reduces administrative burden and allows procurement professionals to focus their attention where it matters most.

In the second stage, humans should take the lead in evaluating differentiation. This is where procurement teams assess strategic fit, implementation realism, innovation potential, relationship quality, operational flexibility, and long-term value creation. These decisions are often embedded in subtle contextual cues that AI systems do not evaluate consistently.

One of the most interesting findings from the study is that AI volatility itself may become a useful management signal.  When repeated AI evaluations produce highly inconsistent scores, managers should interpret that inconsistency as a warning sign rather than a nuisance. In many cases, volatility may indicate that the proposal contains ambiguous, subjective, or strategically complex content requiring deeper human review.

In other words, AI uncertainty may serve as a diagnostic tool for identifying where human expertise is most valuable.  This has implications beyond procurement.

Many organizations are currently deploying generative AI into judgment-heavy workflows involving hiring, performance evaluations, contract review, lending decisions, and strategic analysis. In many of these contexts, AI may excel at standardized screening tasks while struggling with contextual differentiation and nuanced tradeoffs.  Managers should resist the temptation to confuse speed with understanding.

The real opportunity is not eliminating humans from decision processes. It is reallocating human attention more effectively.

The organizations that benefit most from generative AI will likely be those that understand where automation creates leverage and where human expertise still creates advantage.

Supplier selection sits directly at that intersection.

 

Based on research published in the Journal of Business Logistics

Finnegan A. McKinley, Anne E. Dohmen, and Vincent E. Castillo, “Do Humans and GAI See Eye to Eye? Implications of LLM Scoring Volatility in Supplier Evaluations,” Journal of Business Logistics, 2026, 47. https://doi.org/10.1111/jbl.70072.

More Blogs

Blogs
November 6, 2025

Leading Transformation in the AI Era: Why Digital Success Starts with People

In today’s supply chain landscape, digital transformation is no longer optional—but as the panelists in the latest Supply Chain Now webinar revealed, it’s also not just about technology. Hosted by Scott Luton and Jake Barr, this conversation brought together two powerhouse leaders: Eliza Simeonova, Quality Supply Chain Operations Officer at Haleon, and Philip Vervloesem, Chief Commercial & Markets Officer at OMP. Together, they tackled one of the most pressing challenges of our time—how to lead meaningful, people-centered transformation in an age increasingly defined by AI. A few insights stood out: Technology isn’t the hero—people are. True digital transformation begins with clarity of purpose, disciplined simplification, and leaders who stay close to the work. AI amplifies human intelligence, it doesn’t replace it. The most successful organizations empower their teams to collaborate with technology, not compete against it. Waiting for perfection is the biggest risk. Progress comes from experimentation, agility, and the courage to act before every variable is known. From redefining leadership mindsets to practical strategies for upskilling teams, this discussion offered an inspiring roadmap for supply chain leaders ready to embrace what’s next. Watch the full webinar on demand: Register to view the replay »Download the companion resource: 5 Must-Know…
AI warehouse optimization
Blogs
February 19, 2026

Automation That Adapts: Romain Moulin of Exotec on Building Warehouses for an Uncertain Future

Uncertainty Is the New Baseline At Manifest 2026, Scott Luton spoke with Romain Moulin, CEO and co-founder of Exotec, to discuss how warehouse automation is evolving in an era defined by volatility. “The big trend of last year was uncertainty,” Romain said, reflecting on 2025’s tariffs, economic tensions, and shifting trade dynamics. “Anything that would be done needed to deal with uncertainty.” Rather than waiting for stability, companies are designing operations that assume change is constant. “Anything that is going on now must be projects that are able to reorganize themselves,” he explained. Warehouses must be robust, agile and flexible as to whatever the next disruption brings.   From Conveyors to Configurable Robotics Exotec is known for inventing 3D warehouse robots (Skypods) that move across the floor and climb racks up to 14 meters (46 feet) to retrieve totes and deliver them to operators. But beyond the visual wow factor, the real transformation is simplification. “The time of bespoke complex warehouses tailored to a very specific need is over,” Romain said. Customers are moving toward more generic, adaptable warehouses. Exotec replaces hardware complexity with intelligent software. “We don’t program the solution,” he noted. “We let the software find the best…