How AI and Automation Benefit the Supply Chain

When the global shutdown began, consumers experienced an unusual phenomenon for industrialized nations: bare shelves.

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When the global shutdown began, consumers experienced an unusual phenomenon for industrialized nations: bare shelves. The sudden dearth of everyday necessities shone a glaring spotlight on how important the supply chain is, as well as on how consumers tend to behave when the chain breaks. The pandemic’s quarantine is an unprecedented event that no one could have predicted, but this fact underscores the need for supply chain resilience all the more.

Changes must be made. 

In the past three years, 39 percent of respondent businesses had experienced a negative risk event in their supply chains, according to a recent survey by Oxford Economics. Fortunately, AI and automation technologies are quickly changing the supply chain to become more intelligent, decreasing the likelihood of such incidents.

Creating an Intelligent Supply Chain 

Oxford Economics asked leaders what their main strategic goals were for the organization. The majority of them highly ranked “using automation to perform routine tasks” – especially when it came to the supply chain. Leaders were far more focused than others in the survey on using intelligent technologies to create greater efficiencies in their daily operations. They’re also using these technologies to gain real-time data insights, become more customer-centric and sustainable, and improve their resilience. 

At about the same time, MHI released a report that found only 12 percent of supply chain professionals said their organizations were currently using AI – although 60 percent expect to be doing so within the next five years. 

There are several important reasons for the growth of AI adoption within supply chain management. The intelligent supply chain is not just about planning, but also about execution and intervention at every level of execution if need be.

Sometimes you may have all the data you need, made a plan based on that data, and can execute that plan flawlessly. But it’s possible to put too much effort on the planning side of things while overlooking the execution to make it resilient enough. What can happen then is that if any link in the chain breaks, it creates havoc.  This has happened with many organizations as the pandemic has unfolded. 

This is why an intelligent process is so important. Enterprises need to be proactive and prescriptive to ensure that what is planned is happening on the ground. For instance, some organizations have ordering systems that are susceptible to lock-out if an order isn’t finalized within a certain timeframe. You might think the order has gone through, but it hasn’t, and that can lead to a stock shortage, customer disappointment and revenue loss. Managing these situations with a close-loop autonomous application can help proactively detect these types of errors and fix it before it’s too late – saving a world of hassle and potential loss. 

Organizations that aren’t enabling an intelligent supply chain are going to fall behind. It’s almost a requirement of doing business these days. According to a McKinsey Global Survey on the adoption of AI, 61 percent of executives report decreased costs and 53 percent report increased revenues as a direct result of introducing artificial intelligence into their supply chains. 

Instead of remaining in a reactive stance, supply chain management can use AI to become proactive. In addition, it helps re-focus employees on higher-value activities as opposed to monotonous and repetitive ones; you don't want to invest your talent on tasks that can be done by a machine.

Then supply chain staff will be freed to apply their judgment toward situations when human intelligence is needed to ensure the right decisions are made. This frees workers from boredom, unnecessary stress and frustration. 

Implementing an intelligent supply chain provides many benefits. Three of the most notable are:

  1. Optimized resources: Intelligence is about making the most of the resources deployed to manage the supply chain. And as noted above, that includes employees’ morale and productivity.
  2. Better relationships with vendors: These relationships are highly integrated and important. You can’t simply demand that they adhere to your processes at all times. Growing a happy vendor network is very important, and intelligent supply chain management will help achieve that. 
  3. Competitive edge: If a consumer comes in several times and you’re missing the item they want; they probably aren’t going to come in yet again but go elsewhere instead. With intelligent supply chain management, your products will be on the shelf where and when the customer wants to buy them – which protects your revenue. If you are able to manage your supply chain effectively, your cost structure will be lower, increasing profit.

It took a global shutdown to reveal the weaknesses inherent in many organizations’ supply chains. Unfortunately, this was very bad timing across the board; bare shelves during a time of uncertainty and fear is not the ideal scenario to learn that your approach needs an upgrade.

But difficult circumstances spur change, and the pandemic has led to greater adoption of AI and automation within supply chain management. The research cited above is clear: implementing these tools will help organizations succeed going forward. For supply chain management teams, the vendors they work with and the customers they serve, an intelligent supply chain is the approach that serves everyone and enhances business continuity goals.

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