Artificial intelligence is becoming more prevalent in supply chain management. It can increase productivity and help companies be more competitive for the foreseeable future.
One of the most important aspects of AI is predictive analytics, which, if successfully implemented, can provide superior results with less time and resources.
Predictive analytics is defined as the capability of a computer to use past experiences, data points, and historical information to make a prediction or decision. AI provides predictive analytics in the form of machine learning algorithms.
Therefore, AI has the potential to provide substantial advantages to supply chain management by increasing efficiency and productivity.
Supply chain management comprises five phases: manufacturing, distribution, procurement, transportation & warehousing, and customer service.
The product lifecycle consists of multiple phases: making products, manufacturing products, and transporting products throughout the supply chain from the manufacturer to its final destination (e.g., warehouse or customer).
What Is Artificial Intelligence In Supply Chain
The definition of artificial intelligence (AI) varies greatly between fields. In supply chain management, AI is the capability to learn, reason, and act autonomously. Within supply chain management, AI is implemented through machine learning.
Machine learning analyses data to make predictions based on knowledge and experience from the past. The Internet of Things development (20%), scan and intelligent data capture (18%), and cloud computing (25% completely implementing) were identified to be the top three areas of technology investment for supply chains, according to the poll.
Machines can learn from data points and better understand the human world based on their experiences in that environment. These machines can reason and make decisions independently, in contrast with humans relying on experience to decide the best course of action for themselves or others.
Benefits Of Artificial Intelligence In Supply Chain
Supply chain managers are always looking for ways for supply chain optimization. One way they are doing this is by using AI to help with supply chain operations.
Supply chain leaders in the supply chain industry are using AI to help with things like forecasting and inventory management. This is helping to improve efficiency and accuracy in the supply chain.
According to a McKinsey study, adopters of AI-enabled supply-chain management have reduced their logistical costs by 15%, increased their inventory levels by 35%, and increased their service levels by 65%.
1. Eliminates The Risk Of Sudden Changes
A machine learns through data. It cannot make a risky decision without information from previous data points. Businesses that use artificial intelligence have the capability to foresee changes and react accordingly, which prevents them from taking risks.
These businesses are also able to analyze their markets and competitors, which helps them develop strategies for executing their plans in a reliable manner and reduces risk
2. Increases Productivity Of Project Managers
AI helps the project manager take on more responsibilities, as a result of increased productivity. The project manager can create detailed summaries for their team and report on the progress to higher-ups in less time than if they were responsible for everything with no help.
These summaries and reports are more accurate, as they rely on information from the team and other sources of information.
3. Improves Data Distribution
Businesses that use artificial intelligence have access to more data than those without it. This provides these businesses with more options for decision-making and allows them to make better decisions, which is a competitive advantage in this digital age.
It also improves the quality of decisions because the data used to make them is greater in volume and accuracy, as it has been checked by machines as well as humans.
The quality of decisions made based on the data improves with artificial intelligence, making these businesses more effective at customer service (e.g. sales and customer service), production, and other areas of the business.
4. Enables Personnel To Identify Issues Faster
The development of AI can enable companies to identify potential issues before they occur in the supply chain. The issue can be from an employee or a machine, but with AI, companies will have a window into both options.
Companies that develop solutions for these issues before they happen increase their profits and chances for growth due to increased productivity and sales.
This reduces the possibility of problems that, if not addressed in a timely manner, could cost the business money or disrupt business operations. AI is not a miracle cure. It cannot solve problems with supply chains or inflation, warns Jonathan Wray, co-founder of Aible.
5. Provides The Ability To Make Data-Driven Decisions
Data is the foundation of all business. Artificial intelligence in supply chain management provides a more accelerated approach to data acquisition and analysis.
This provides companies with the ability to make data-driven decisions at faster rates than if they were relying on human decision-making processes.
6. Enables A Company To Customize Its Approach Based On Its Unique Needs
Companies can tailor their AI solutions and train their machines based on their unique supply chain needs. Even without extensive training, these machines can identify issues, compare them among themselves, and adjust accordingly based on what they’ve learned from the data they have encountered and learned from previous experiences with similar issues.
This makes companies more efficient at figuring out solutions for issues before they occur or may cause problems.
7. Helps Companies Compete More Effectively
Companies that adopt AI in the supply chain can compete more effectively, as machines can make better decisions than humans. These companies also have access to a greater amount of data, which helps them predict and measure the impact of their actions on other aspects of the company, such as human resources, sales and marketing, among others.
AI is also effective at identifying and eliminating unnecessary byproducts and redundancies within the supply chain, which enhances its competitive advantage.
8. Provides The Ability To Monitor Everything At All Times
AI allows companies to monitor issues as they develop and access information on all aspects of the company and its supply chain. With this, companies can make decisions more quickly, which helps them compete effectively throughout their industries.
AI enables the company to operate efficiently and effectively throughout the supply chain. This can also be critical during an outage, as AI can identify potential problems before they happen, reducing downtime and making more money available for product development
Risks Of Artificial Intelligence In Supply Chain
Supply chain professionals are always looking for ways to improve inventory levels and supply chain data. One way to do this is to improve supply chain visibility. This can be done by improving the way supply chain tasks are carried out.
According to the PwC survey, there is increased executive concern about supplier risks. Of those surveyed, 27% see the inability to obtain raw materials from suppliers as a major risk, followed by 24% who are worried about operational issues with suppliers and 21% who are concerned about their financial stability.
Global supply chains are becoming increasingly global, and supply chain AI is playing a role in demand planning and inventory management. By using AI to predict demand and optimize inventory, businesses can improve their supply chain performance.
1. AI As A Threat To Human Jobs
Artificial intelligence can be used in supply chain management to improve the decision-making processes of human workers and managers. While these machines can make decisions faster than humans and with more precision, they are prone to errors, which is why AI is not completely replacing humans in the supply chain.
The error rate of AI is still relatively high, so businesses that use this technology must have a way to monitor its work and assess the accuracy of its decisions. Some jobs may be lost because of this increase in efficiency, but this loss is countered by the effectiveness that comes from AI’s faster data processing and decision-making capabilities .
2. Accurate Data Is Necessary For Effective AI
Companies that use AI in the supply chain must gather accurate data. If these businesses are not able to get access to quality data, the decisions made by their machines are prone to errors and could result in wasted money and harm the reputation of the companies using artificial intelligence.
Employees also need to be able to access this data when they need it, as well as companies outside of IT that rely on AI, such as customers and competitors .
3. Employees May Mistrust Products With Artificial Intelligence
Employees may distrust products that have artificial intelligence because of its risks for job loss; however, businesses can avoid this problem by hiring more employees or reducing their work hours.
The transparency of the AI system also helps build trust with employees and customers because they can see what’s going on, and they understand the importance of their jobs in terms of maintaining a safe workplace and supply chain.
Companies need to take measures to ensure that the AI is not making errors and that these errors are not hurting worker productivity, customer satisfaction, or employee morale .
4. Employees May Not Want Data Used For AI
Some employees may object to the use of their data for artificial intelligence in supply chain management because it could lead to potential problems later on down the line. Some businesses want as much employee data as possible so they can inform their artificial intelligence systems about their workforce.
However, employees have the right to privacy, and employers are not allowed to force their employees to provide their personal information. If an employee feels uncomfortable providing this kind of data, they can create a contract with the company and state that they will not give up any personal information .
5. AI And Human Decision-Making Can Be Conflicting
The PwC poll also reveals that only 23% of respondents fully believe that they have the requisite digital skills to accomplish future goals, and 58% of respondents report that their organisations are experiencing higher-than-normal turnover among supply chain professionals.
Decisions made by artificial intelligence in supply chain management may conflict with human decisions. This could be detrimental to an organization’s supply chain if it relies on human decision-making processes for its operations.
AI should be built in a way that does not conflict with human decision-making processes because of the potential harm that could be caused if it does .
6. AI Can Create A False Sense Of Certainty
Artificial intelligence can give companies a false sense of certainty when it comes to the accuracy of its findings and decisions.
These machines tend to rely on metrics that mirror those that humans use, but there is no way for anyone to tell if these machines are making the same mistakes as human decision-makers. The algorithm and data used by the AI are created by humans, and these could be subject to errors .
7. There Is No Way To Prevent AI From Becoming Distrustful Of Humans
One of the ways artificial intelligence can be beneficial in supply chain management is by trusting its findings and decisions more than human employees do. However, there is no way for AI to understand that human employees are simply trying to perform their jobs as best as possible when they make decisions.
While artificial intelligence can develop trust with both humans and computers, this does not mean that it will be able to prevent itself from making judgments that are not trustworthy in the future .
8. AI Could Be A Threat To Human Lives
“The bullwhip effect is well known to supply chain professionals. It occurs because supply chains are run by responding to already-taken-place occurrences. One of the best things about artificial intelligence is its capacity to make judgments more quickly than a person could, but this effectiveness also comes with risks.
Automation leads to the inability for humans and machines to communicate with one another; therefore, it can result in dangerous decisions being made incorrectly by either party.
Final Note
Supply Chain Management is a process of procurement, production, and distribution of goods and services. The success of any business is highly dependent on the supply chain management. And with the growing demand for a faster global supply chain, technological advancement has helped make the supply chain more efficient and effective.
Nowadays, artificial intelligence has gained special interest regarding its usage in managing the supply chain both by academic researchers and practitioners due to its ability to provide better accuracy than humans as well as reducing cognitive load of humans’ decision making processes.
Last Updated on October 8, 2023 by Parina Parmar
