Artificial Intelligence In Supply Chain Management

Artificial intelligence, or AI, is being touted as a game changer to the business world. As a matter of fact, it is considered as one of the pillars of the ongoing Fourth Industrial Revolution, aka Industry 4.0.

The supply chain industry, arguably one of the most critical aspects of business operations, can also benefit a lot from AI. From helping optimize various processes, like warehouse and inventory management, to automating tasks like delivery and transportation of goods, AI can help improve the supply chain in a number of ways.

The demand for AI in supply chains was valued at USD 5,610.8 million in 2021, according to a new analysis by the strategic consulting and market research firm BlueWeave Consulting, and it is anticipated to significantly boost to USD 20,196.6 million by 2028. This expansion is attributed to the numerous advantages gained from the implementation of AI and IoT. AI is a stealthy technological partner that completes tasks on demand.

Questions regarding the capability of AI, specifically their advantages and their limitations, however, are still aplenty. This post will try and address some of them.

What Does Supply Chain Management Mean?

Supply chain is a complex process. Consider the life-cycle of a product. You start with raw-materials, which is then transported to various factories or plants for refining, manufacturing the components, and assembling the products, which can then be shipped for sale, and are finally delivered to the customers. All of these processes involve lots of moving parts that each need to be individually managed and can span huge geographical areas, including different countries.

The network of all of these processes and parts is the supply chain and the optimized central management of the supply chain is what is known as supply chain management. Supply chain management is crucial for a few different reasons. Not only does it help reduce costs across the board, it also makes the entire process of manufacturing and releasing a product more efficient.??

According to Gartner, supply chain organizations expect the level of machine automation in their supply chain processes to double in the next five years. At the same time, global spending on IIoT Platforms is predicted to grow from $1.67B in 2018 to $12.44B in 2024.

AI In Supply Chain Management: What Can It Do?

Because of its many moving parts, supply chains can be incredibly complex and the complexity increases the more you scale up. The world of business is highly competitive and for businesses to stay ahead of the pack, they will require the supply chains to be as optimized and efficient as possible, reducing down-times and costs, while maintaining quality. This is where AI can be very useful for supply chain management. Here are some of the things AI can do for supply chains:

• Artificial intelligence can improve and help optimize inventory management

Ensuring a proper flow of items across the supply chain requires ensuring that the inventories are properly managed, which can be a challenging process. Here’s where AI can make things easier. AI based IoT technology can monitor not only the quantity of materials within a warehouse, but can also be used to maintain optimal environmental conditions without having the need of human intervention. Moreover, AI and machine-learning based tools have the power to process high amounts of data more efficiently, that can help analyse and interpret inventory datasets quickly and provide accurate forecasts related to the demand and supply. AI automation can also help increase warehouse efficiency. Moreover, AI based tools can be centralized using software services and solutions, making the entire process a lot simpler.

• Artificial intelligence can improve delivery and transportation ?

Not only can AI be used for inventory management and optimizing warehouses, it can also help do the same for delivery and transportation. From real-time location tracking and optimal route analysis to automated climate control for sensitive goods, AI can help improve a number of facets within the transportation and freight part of the supply chains, which is a very crucial part of it all.

• Artificial intelligence can help reduce operation costs across the supply chain

AI automation can help reduce manual labour for things like warehouse management, as well as transportation and delivery of goods. It can also help with automated customer support and management. Moreover, AI based tools can help increase the efficiency of the supply chains, reducing errors which are often cause by humans, thus helping to reduce wastage, and prevent delays in delivery and manufacturing.

According to Capgemini’s Accelerating Automotive’s AI Transformation report, major automakers will be able to increase the operating profits by 16% through the deployment of Artificial Intelligence in production facilities and in supply chain operations. Gains will come from reductions in operating costs, including raw materials, labor, administration, logistics, maintenance, and inspection.

• Artificial intelligence and machine learning can help make better business decisions

Machine learning powered predictive analytics is a powerful business tool that can help supply chain managers and business owners to make decisions based on accurate market forecasts. AI can observe market trends easily and in real-time, allowing business to stay ahead of the game.

Limitations of AI in supply chains

While all of this does sound promising and AI is certainly going to change how businesses operate going forward, there are still some limitations and challenges related to AI is supply chains.

• Complexity and scalability – The larger the supply chain is, the more data points it will have. This increases the complexity of these systems quite a bit. And while AI tools should be able to manage large swaths of data, bandwidth limitations in different countries and the necessity of human interference means that AI can’t be used to its full potential yet.
• Cost of training – AI can help automate a lot of processes, but the technology still isn’t 100% efficient and still requires the human touch. Which means that, in order to use AI technology, the workforce has to be trained or new workers who can operate and maintain the technology need to be hired. This implies additional costs for the supply chain company.
• Initial investment required can be large – AI based tools can require additional machinery which can utilize the technology, such as automated heavy machinery and data server farms. This can be a huge undertaking for a company.?
• The technology just isn’t there yet – AI and machine learning can automate many tasks and help make accurate predictions. However, there are still limitations in the technology itself which prevent it from completely replacing a human workforce.

Here Are My Concluding thoughts

In the wake of many issues plaguing the supply chain industry, artificial intelligence-based tools and machinery can certainly help supply chain managers to not only reduce operational costs in the long term, but also increase efficiency across the board by optimizing inventory management and allowing automating various processes. However, limitations such as hardware and bandwidth limitations, cost of training, and a high cost of entry still exist. While AI is being adopted at a much faster rate, there is still time before it can completely take over the industry. As it is now, AI works best alongside a traditional human workforce.??