Companies caught mining data to manipulate suppliers will be closely examined by the Ombudsman.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said her office was looking into the practice of businesses using supply chain fiance products to mine data to squeeze suppliers as part of the Ombudsman’s Review of Supply Chain Financing, launched in November.
The office has been consulting with both large and small businesses and supply chain finance providers to examine finance practices, particularly in regards to offerings for early payments. Many small businesses have already contacted the Ombudsman to report financing issues in regards to the practice.
Ms Carnell said the office had received reports big businesses were using AI to calculate the largest discount they could leverage from a supplier, which she described as “disturbing,” adding the practice often took advantage of desperate suppliers.
“Small businesses have raised their concerns with my office about the use of artificial intelligence and big data to determine and target discounts,” Ms Carnell said.
“It’s clearly not OK for big businesses to use their dominant position and access to technology to further squeeze small business margins. Unfortunately the only way to level the playing field is through further regulation and legislation, which means more red tape.”
In a statement issued by the Ombudsman, Ms Carnell said when used correctly, supply chain finance could be an effective tool to free-up cash flow for small business, but warned against businesses using it to replace existing payment terms of 30 days or less from invoice.
“It is imperative small businesses are paid on time. We know that late payments equate to a $7 billion drag on the economy,” she said.
The final report will be published in April.