What is AI in Supply Chain Management?
AI or Machine Learning is a subset of Artificial Intelligence that enables machines to learn from previous data to take decisions and perform tasks without human intervention. When applied in supply chain management, AI algorithms analyze, interpret data patterns to optimize supply chain operations and provide better visibility of the workflow. AI algorithms help businesses identify the bottlenecks that can cause delays and quality issues in supply chain operations and take corrective measures to prevent these issues from causing significant challenges.One of the most crucial benefits of using AI in supply chain management is its ability to predict demand patterns and make better anticipatory decisions. Predictive analytics can analyze consumer behaviour and forecast sales, enabling businesses to limit overproduction and underproduction, saving significant costs by reducing inventory and improving customer satisfaction.
The Impact of AI on Supply Chain Management
In the current era of globalization, organizations are aiming to reduce their costs and enhance their organisational performance. Thus, managing supply chain operations optimally is of utmost significance. The use of AI in supply chain management has a significant impact in the following areas:
1. Inventory Management
Traditionally, inventory management involved maintaining safety stock, which required significant resources, cost and less accurate. With the use of AI, companies can understand the demand patterns and dynamic variations of their products and make intelligent decisions. AI can provide an accurate forecast of demand, enabling businesses to adapt to the changes to ensure they have the right stock at the right time and location. Thus, AI can help businesses save costs by reducing inventory and wastage.For instance, earlier, the logistics company DHL had limited visibility of their inventory levels and faced a challenge in predicting the future demand patterns. However, after the implementation of AI, they improved their order accuracy by up to 80%, reduced stock standard error by 30%, and significantly increased inventory accuracy.
2. Logistics Optimization
The optimization of logistics is another area where AI can have a massive impact on supply chain management. Inefficient routes or unsafe transportation can cause delays and quality issues which could result in the loss of business, revenue, and customer trust. With AI algorithms, businesses can optimize route planning, ensure timely inspections of the transportation equipment, and ensure that all compliance and safety regulations are adhered to.AI can also benefit organizations in reducing the carbon footprint by optimizing the transportation routes or choosing eco-friendly means of transportation. For instance, PepsiCo introduced an AI-powered fleet management system in 2015, which is expected to result in reducing its carbon emissions by 20%.
3. Quality Management
Ensuring quality at every stage of the supply chain is critical, considering it influences customer satisfaction and brand reputation. With the use of AI, companies can perform quality checks at every stage of the supply chain, from product development, manufacturing, to shipping. AI can analyze the products’ data patterns to identify potential quality or safety issues and notify the concerned teams or provide recommendations.AI can also combine previous data patterns to help identify issues that might lead to non-conformance. For instance, automotive manufacturer BMW upgraded its quality control system with AI. It uses computer vision to detect quality imperfections such as scratches or dents and weighs the product to ensure it meets the set standards, thereby improving customer satisfaction and brand reputation.
4. Transparency and Traceability
Transparency in the supply chain is critical to identify and minimize the risks such as counterfeiting, child labor, and other issues that could damage the brand reputation. AI can track products through the supply chain and provide complete transparency and traceability of the product from raw materials to the customer. This helps to identify potential issues and take corrective measures before they become significant challenges.For instance, French retailer Auchan implemented blockchain technology in their supply chain operations to track the origin of the products’ raw materials, from farm to factory to consumer. It enables Auchan to have end-to-end transparency and to identify issues such as contamination at any stage of the supply chain, thus strengthening the brand trust and loyalty.
5. Customer Service
Customer service plays a pivotal role in any business’s growth and success. Providing excellent customer service has an impact on brand perception, reputation, and retention. With AI, companies can understand customer behaviour, preferences, and feedback, enabling them to make strategic decisions.AI-powered chatbots can provide 24×7 customer support, enabling customers to track their orders, seek assistance for any issues, and provide feedback. Moreover, AI can analyse customer data to anticipate their requirements and provide personalized recommendations.For example, Walmart implemented AI chatbots to provide customer support to their customers. It enables them to track their orders, get assistance without waiting in queue, and get personalized recommendations, which has resulted in improved customer satisfaction.
The Future of AI in Supply Chain Management
The use of AI in supply chain management is still in its nascent stage, and businesses are still identifying ways to leverage its potential fully. However, as the benefits of AI in supply chain management become more evident, businesses are likely to adopt it on a broader scale.As businesses continue to integrate AI into their supply chain operations, the technology will become more advanced. For instance, AI algorithms will be able to interact with other technologies such as the Internet of Things (IoT) and blockchain to provide more enhanced solutions.Further, AI will play a critical role in supply chain sustainability by optimizing the use of energy sources, reducing wastage, and limiting carbon emissions. Thus, businesses can reduce their carbon footprint, contributing to environmental protection and sustainability.
Conclusion
AI has the potential to revolutionize supply chain management and provide businesses with an opportunity to optimize their supply chain operations and maintin organizational performance optimization. With the use of AI, businesses can enhance transparency, optimize inventory management, and logistics, improve quality management, provide enhanced customer service, and contribute to sustainability. The future of AI in supply chain management is bright, and businesses that embrace this emerging technology are likely to improve their efficiency and succeed in the marketplace. See you again in another interesting article.
