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AI in Supply Chain: Four Things to Prioritize

Management of supply networks has become significantly more complicated in recent years, driving supply chain professionals to explore AI-powered tools. Read this blog to learn about four innovations to prioritize.

Dec 13, 2022
15 minutes to read

AI in Supply Chain: Four Things to Prioritize

Management of supply networks has become significantly more complicated in recent years. More extended and interconnected physical flows reflect increasing product portfolio complexity. Enhanced by the COVID-19 epidemic, market instability has increased the demand for agility and adaptability. And heightened awareness of the environmental impact of supply chains is driving regionalization and flow optimization.

Artificial intelligence (AI)-based supply-chain management solutions effectively address current challenges. AI is a potential game-changer due to its capacity to analyze vast quantities of data, comprehend relationships in that data, help to provide visibility into operations, and facilitate better decision-making. Getting the most out of these solutions is not only a matter of technology; organizations must take organizational measures to maximize the benefits of AI. From procurement to planning to production and logistics to sales, an integrated end-to-end approach may handle the opportunities and limits of all business departments.

The evolution of AI in supply chain management

Multiple processes, including transportation, production, procurement, marketing, and sales, are interconnected via the supply chain. Integrated planning enables businesses to optimize earnings before interest, taxes, depreciation, and amortization (EBITDA) for the entire organization by balancing trade-offs across functions.

In many businesses, supply chain management has switched its focus from improving the performance of local activities to dynamically optimizing the company's global value. Recent supply-chain interruptions and increased demand caused by the COVID-19 epidemic have heightened the need for businesses to strengthen their central planning capabilities. Sales-and-operations planning (S&OP) has evolved into Integrated Business Planning (IBP) in various process industries like consumer goods, chemicals, healthcare, and metals.

More than enhancing the size of the supply chain, teams are required to achieve better performance with the existing setup. To do this, companies must tackle several other challenges, like

  • Demand forecasting across different product groups and geographies while discovering trade-offs with hundreds or thousands of interconnected variables and countless technological limitations in a dynamic manner.
  • Integrating AI solutions like process optimization, predictive maintenance, smart manufacturing, and improving master data quality to manage the broader value chain and ensure that plans are performed and can quickly respond to surprises like demand shocks, production stoppages, and transportation disruption.

4 Advantages of AI-Enabled Supply Chains

Studies indicate that AI and ML can provide exceptional value to supply chain and logistics operations. Several companies worldwide favor AI in the Supply Chain for various reasons, including cost savings through fewer operational redundancies and risk mitigation, improved supply chain forecasts, faster deliveries via more optimal routes, and outstanding customer service. Here are the four high-impact areas, including planning and scheduling, forecasting, spending analytics, and logistics network optimization, boosted with AI:

  1. Strengthening Planning And Scheduling Activities

Frequently, supply chain managers struggle to build an end-to-end system to prepare for a good supply network, particularly when confronted daily with increased globalization, more extensive product portfolios, greater complexity, and varying client demand. This endeavor is made more complicated by a lack of total visibility due to unanticipated occurrences like demand spikes, plant shutdowns, or warehousing issues. Also, items and components are regularly phased in and out in many instances, which can lead to proliferation, uncertainty, and bullwhip impacts across the supply chain.

By implementing AI in the supply chain, leaders can improve their decision-making by predicting bottlenecks, unexpected anomalies, and solutions to streamline production scheduling, which is otherwise highly variable due to manufacturing operations management's reliance on external factors. In addition, AI in the supply chain has led to accurate predictions and quantification of expected outcomes across various schedule phases, allowing for scheduling more appropriate alternatives when such interruptions occur during execution.

  1. Creating End-To-End Visibility

Manufacturers must have total visibility of the whole supplier value chain with minimal effort, given the current complicated network of supply networks. An AI-driven platform provides a data layer to uncover cause and effect, minimize bottleneck procedures, and identify improvement opportunities. All of this is accomplished with real-time data rather than duplicate historical data.

  1. Inventory And Demand Management

Maintaining optimal stock levels to avoid "out-of-stock" concerns is one of supply chain firms' most significant challenges. In addition, overstocking might result in excessive storage expenses, which also affect sales.

When AI is applied to demand forecasting, it can generate highly accurate predictions of future demand. For instance, it is simple to precisely predict the decline and end-of-life of a product on a sales channel, as well as the growth of the market introduction of a new product.

Similarly, ML and AI in supply chain forecasting ensure that material bills and purchase orders contain organized, accurate, and timely predictions. This enables field operators with data-driven operations to maintain the optimal levels necessary to meet current (and imminent) demand.

  1. Unlocking Fleet Management Efficiencies

Fleet management is one of the most undervalued components of the supply chain. Fleet managers are accountable for the uninterrupted flow of commerce and choreograph the critical link between the provider and the consumer. In addition to increased fuel prices and personnel constraints, fleet managers face ongoing data overload problems. In supply chain and logistics, AI enables real-time tracking methods to get timely insights, such as the ideal times for when, where, and how deliveries must and should be delivered. Such potent multidimensional data analytics also aid in minimizing unscheduled fleet downtime, optimizing fuel economies, and recognizing and avoiding bottlenecks. It offers fleet managers the intellectual armor necessary to combat the otherwise daily occurrence of fleet management challenges.

Choosing the right AI solution: A congested environment

The good news is that AI-based solutions are affordable and readily available to assist businesses in achieving next-level supply chain management performance. Early adopters have reduced logistics costs by 15%, inventory levels by 35%, and service levels by 65% by using AI-enabled supply chain management. Demand forecasting models, end-to-end visibility, integrated business planning, dynamic planning optimization, and automation of the physical flow are all features of the solution based on prediction models and correlation analysis to better comprehend the causes and effects in supply chains.

Given the high stakes, numerous solutions have evolved. Companies with market-disrupting technologies are entering the competition. Their offerings include

  • AI and ML based Demand planning
  • Real-time inventory management made possible by IoT and connectivity, and
  • Dynamic margin optimization of end-to-end supply chains using digital twins.

For instance, FMCG, retail, and e-commerce are at the fore of demand forecasting.

But the selection of the optimal solution is crucial. To effectively handle the complexity of the modern supply chain, new solutions must be intelligent and tailored to specific use cases. Additionally, they must align with the organization's strategy. This alignment allows businesses to approach crucial decision-making points with sufficient understanding while avoiding excessive complexity. However, adoption can necessitate substantial investments in technology and people, raising the stakes.

Starting strong with an AI in Supply Chain: Four Things to Prioritize

A supply chain transformation is an ambitious endeavor, and businesses must be aware of the obstacles. However, the potential benefits are substantial. Companies that can manage four distinct areas concurrently will attain vastly improved visibility and decision-making, all powered by AI.

  1. Identification, plan, and road map for value creation

As a first step, businesses must identify and prioritize all pockets of value creation across all functions, including procurement, production, logistics, and commercial. Less than one-third of companies do an independent diagnostic from the onset, yet this process can ensure that businesses have an accurate list of all potential for value development.

Establishing a digital supply chain strategy supports the company's business plan and improves its digital program's alignment. In addition, a solution-agnostic assessment permits businesses to identify the necessary process redesign, organizational changes, and skills to improve performance and develop a strategic road map.

  1. Solution design and vendor selection

The complexity of supply chains, including demand forecasting, planning optimization, and digital-execution tracking, makes it more debatable whether a single source can handle all these requirements. Executives should know that the optimal solution for their organization may differ from the one advised by suppliers, whose objective is frequently to promote a single end-to-end solution.

Designing solutions and selecting vendors can support the digital supply chain strategy. Frequently, the optimal process consists of a combination of solutions from many vendors and systems integrators. Companies that choose a package of solutions must prioritize integration.

  1. System design, implementation and integration with the existing systems

Many businesses lack experience in deploying enterprise-wide technologies. Companies must select solutions to stay on time and within budget while maintaining sight of the primary aim of correctly addressing value-creation levers. Twenty-five percent of supply chain leaders believe their objectives are aligned with their systems integrators' incentives.

Companies should approach implementation and system integration holistically. By optimizing end-to-end value, businesses can implement solutions that provide value in the short term and are more sustainable in the long term.

  1. Change management, capability development, and value generation

Even while focused on technological solutions, businesses must pay attention to essential supporting components such as organization, change management, and capability development. Only 13% of CEOs report that their firms are adequately equipped to handle talent gaps.

Companies must engage in change management and capability development to guarantee the adoption of innovative solutions. Employees will need to adopt new working methods, and a concerted effort is required to educate the workforce on the necessity of changes and incentives to encourage desirable behaviors.

Ikigai's operational BI platform transforms the way businesses make tactical decisions. Business-user-friendly UI/UX enables anyone to infuse and prepare data and run robust AI-powered analyses to achieve their business goals.

Ikigai combines data analytics, visualizations, and automation with its proprietary technologies, such as aiMatch and aiCasting time series forecasting, and translates them into more precise decision-making data. Let's connect for a quick chat.

In this article:

Authors:

Team Ikigai

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