Economist Impact Survey Reveals Big Shifts in Supply Chain and Procurement Strategies Due To Generative AI

A new two-part survey by the Economist Impact on how companies are building next-gen supply chains has revealed the top concerns for procurement and supply chain professionals and how they are leveraging Generative AI to resolve these issues.

For the survey commissioned by GEP, 400 executives in the U.S. and Europe familiar with their organization’s procurement and supply chain operations were interviewed between January and March 2024.

Here’s what they said:

1. Procurement and supply chain decisions are increasingly influencing the company's business strategy

94% of senior executives say procurement and supply chain decisions now heavily influence their firms’ overall strategy. Nearly two-fifths describe the impact as “major.”

However, 41% of companies’ top supply chain executives are still below the C-suite level.

2. There is growing fear of major supply chain disruptions, making substitutability and diversifying geographies top priorities to mitigate risk

55% of executives anticipate significant supply chain disruptions in 2024. And their way to build risk resilience includes:

• Increasing substitutability
• Adopting technology to increase supply chain visibility
• Diversifying supply chains by expanding the supplier base

“Visibility into Tier-2 and Tier-3 supply is essential to guarantee both continuity of supply and to drive the necessary improvements in sustainable and responsible sourcing,” says Sami Naffakh, chief supply officer at Reckitt.

3. Most organizations plan to invest in AI and automation to enhance supply chain operations over the next year

Nearly all supply chain leaders (93%) say their management is more supportive of AI-related investments than before.

More than two-thirds of the executives ranked adoption of technology (68%) and digitally transforming their supply chains (70%) as a high priority.

And in the next 12 months, 57% of businesses plan to invest in AI and 44% in advanced automation to enhance their procurement and supply chain operations.

4. Gen AI is going to further transform supply chain management

67% of executives say that of all investments in procurement and supply chain technology, up to a quarter will go into Gen AI. A further 29% believe such investments will be between 26%-50%.

This is because a notable 65% of chief supply chain officers surveyed anticipate that Gen AI can optimize/ automate between 26% and 50% of their operations over the next three years.

Procurement and supply chain functions want Gen AI for demand forecasting, inventory optimization, transportation and logistics optimization, supplier evaluation and spend analysis.

However, there are worries too. 65% rank regulatory uncertainty and evolving standards as the top concern regarding Gen AI implementation . Then there are data privacy and security compliance concerns (39%).

A.K. Karan, global senior director for advanced engineering and integrated supply chain at healthcare company Baxter International, says: “We no longer require strictly structured data [to integrate Gen AI into diverse data environments]. Gen AI can work with unstructured data, like videos or audio notes. This flexibility allows us to leverage much more data for insightful decision-making.”

5. Gen AI will create more jobs, not lead to job losses. But you’ll need AI-related skills, quickly

Gen AI is seen as a catalyst for new job opportunities by 49% of procurement and supply chain executives. They also anticipate a transformation in traditional procurement and supply chain roles given increased AI integration into the function.

Also, 11% of respondents believe that AI’s integration into business operations will necessitate accelerated in-house training to improve data literacy. However, 16% express concerns about potential job displacement due to automation.

Steve Armato, vice-president of transportation services and technology at Amazon, says a more probable scenario is a ‘hybrid’ approach, where existing operations and jobs are aided by Gen AI, not replaced by it.

Download your copies of the two reports:

Next-Gen Supply Chains: The Transformative Role of Supply-Chain Leaders in Today’s Business

Next-Gen Supply Chains: The Current and Future Use of Gen-AI in Supply Chains

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