The COVID pandemic has exacerbated market volatility, triggering unprecedented challenges in supply chains. This tumultuous period was marked by the rising complexity of product portfolios, the conscious buying behavior of customers, and increasing demand for regional and sustainable/responsible sourcing.
Therefore, companies started focusing more on optimizing flows, agility, and flexibility of value networks and resilient sourcing channels. AI in supply chain is often considered a potent instrument for organizations struggling to keep up with the changes. Artificial Intelligence is a cutting-edge technology that works in the presence of data; hence, incorporating the same within the value network would mean an integrated end-to-end visibility of all business functions, from procurement to sales.
Supply chain visibility would eventually transcend into improved partner relations and informed decision-making. AI is, therefore, the potential game-changer for supply chains, but the technology will reach its full potential only when organizations take measured steps toward it.
AI in Supply Chains – A Reformed Supply Chain Management Solution
A company’s supply chain is a web of networks linking multiple functions, from logistics to production, procurement to planning, marketing, and sales. Integrated planning and management of the flow of goods, data, and finance enable companies to balance tradeoffs and optimize earnings. However, recent disruptions in the supply chain have amplified the need for higher operational sustainability, superior service levels and short-term demand signals, and resilient operations through integrated logistics and manufacturing channels. These changes stretched supply chain management functions and stressed the importance of a centralized planning muscle. Given the present situation, companies are compelled to take additional measures, namely:
- Forecasting demand across multiple product segments and geographies
- Identifying dynamic tradeoffs with numerous interlinked variables and technical constraints
- Integrating AI solutions to manage the broader network of value chains
- Ensuring the timely execution of plans adaptable to multi-variables
AI-based supply chains improve the management of the network and cater to the changing requirements, as stated above. Demand forecasting, end-to-end transparency, integrated business planning, dynamic planning optimization, and automation of the physical flow are built on prediction models and correlation analysis for a better understanding of causes and effects in supply chains. As a result, AI solutions have enabled early adopters to witness a significant improvement in logistics costs, inventory levels, and service levels compared with slow-adopting competitors.
Benefits of AI in Supply Chains
Artificial Intelligence and Machine Learning capabilities are considered a blessing in disguise for owners and stakeholders. For example, AI in supply chains enabled many to survive the challenging period following the pandemic. Therefore, from a business standpoint, its benefits are immense, optimizing the network and driving value to day-to-day supply chain and logistics operations.
Reliable demand planning
Anticipating future customer demands, predicting changes in market trends, forecasting seasonal demand, discovering new habits of buyers, and identifying new and existing market competitors are some of the primary benefits of using AI in supply chains. This technology improves supply chain visibility by breaking the existing siloes and allowing a seamless exchange of vital information on time. These features minimize the costs of overstocking unwanted inventory.
Accurate inventory management
This is one of the primary benefits of using AI in supply chains. Artificial Intelligence supports the accurate management of inventories and ensures the smooth flow of the right items in and out of a warehouse. It prevents overstocking, understocking, or inadequate stocking issues for owners.
Improve warehouse efficiency
AI-based automation tools allow timely retrieval of stored items from a warehouse for smooth and safe delivery to the customer. In addition, AI technology is leveraged to address various storage issues before time, preventing further damage to inventories. And AI-driven efforts can significantly reduce human dependency and associated costs of operations.
Enhance worker and material safety
AI-based automated tools in supply chains offer smarter planning and efficient warehouse management, thereby safeguarding material and workers from any damage or loss due to accident or otherwise. Further, AI and ML capabilities capture and analyze workplace safety data and inform manufacturers about possible risks, enabling companies to react swiftly while keeping warehouses secure and compliant.
Reduce operational costs
With diminishing dependency on manual efforts, human oversight-led errors and workplace incidents are aptly averted. AI in supply chain further automates critical operations, supporting error-free workflows for longer, from customer service to warehousing and delivery. Greater speed and accuracy achieved elevate productivity levels and reduce operations costs.
Support on-time delivery
AI in supply chain reduces dependency on manual efforts, thereby speeding up the planning and production process to facilitate the timely delivery of goods as per the commitment. In addition, it removes daily operational bottlenecks across the network to help achieve daily targets effortlessly.
Boost planning and scheduling activities
Planning for profitable operations becomes a significant challenge with increasing globalization, expanding product portfolios, greater complexity, and fluctuating customer demand. Adding to that are the challenges of poor visibility into existing product portfolios and lack of awareness about unplanned events, such as plant shutdowns or congestion in the distribution network. By leveraging AI technology, enterprises can easily predict building up bottlenecks and even unforeseen events to streamline production planning and scheduling and decide optimal alternatives during execution.
Garner informed decisions
An AI-led supply chain captures intelligent data across various touchpoints for predictions and recommendations on optimal actions. This improves overall supply chain performance and drives time, cost, and revenue benefits for owners and stakeholders.
Enable end-to-end visibility
Today, businesses operate in a complex network of supply chains. Hence, complete visibility of end-to-end processes is exceptionally vital to ensure the steady flow of operations. An AI-driven value network provides a unified view of crucial data to help overcome obstacles and bottlenecks in operations and find more opportunities for improvement.
Provide actionable insights
Actionable insights in real-time are a treasure chest of crucial business information that enables owners to detect patterns and quantify tradeoffs earlier. This data also accommodates timely decision-making to help owners meet their speed and agility goals effectively.
Boost operational efficiency
Supply chain components are critical nodes for data. For instance, the increase or decrease in product, procurement, or distribution prices influenced by on-demand trends, product life cycles, or stacking products against the competition can disrupt the chain of operations. Timely availability of such information can prevent massive resource wastage, delayed production cycles, high costs of end goods, delayed delivery, and increasing customer dissatisfaction.
Unlock fleet management efficiency
Logistics is essential to supply chain management, forming the vital connecting dot between suppliers and consumers. Fleet managers are responsible for the uninterrupted flow of commerce. But rising fuel costs, labor shortages, and data overload issues are daunting challenges affecting the entire distribution network, causing delivery delays. With AI technology, data about the above-mentioned challenges are made available before time, allowing owners to prepare contingency plans beforehand. Further, AI in supply chains helps managers optimize fuel efficiencies, detect and avoid bottlenecks and ensure smooth operations.
Streamline enterprise resource planning
AI in supply chain streamlines the entire ERP framework, connecting people, processes, and data on a single network. It proactively processes event-driven data to learn, quantify, and prescribe remedies, preparing enterprises for an unpredictable future.
How to Implement AI in Supply Chains
Any new change takes time to build up, and transformation following the difference is often met with many hurdles. Transforming a traditional supply chain is, therefore, not an easy endeavor. Despite the promising benefits, a poor planning and execution strategy can easily prevent owners from fully optimizing the potential of AI solutions. For owners to enjoy AI’s fruits in supply chains, four significant areas should work in complete tandem.
Identification, strategy, and roadmaps: Companies should perform an absolute value diagnostic and prioritize pockets for improvement. Then, a clearly defined digital supply chain strategy should be designed to align with the company’s digital program.
Design of target solution and vendor selection: Solution design and vendor selection support a company’s digital supply chain strategy. They can opt for a suite of solutions and select vendors accordingly to derive maximum value.
Implementation and system integration: A holistic approach to system integration offers an optimal end-to-end value in the short term and is more sustainable over the long term.
Change management and capability building: Companies must invest in change management and capability building to successfully adopt new solutions.
The Final Takeaway
Businesses are resorting to AI solutions to address various pressing challenges, including the ones currently faced by the global network of supply chains. AI in supply chains is reshaping how enterprises manage their value networks and keep up with changing customer demands. The tangible benefits encourage more advanced applications to scale effective logistics and supply chain operations and gain a competitive advantage in the volatile market.
