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How is AI Trailblazing a New Route in Supply Chain Management?

June 30, 2023
Artificial intelligence is overhauling traditional logistics operations. Its versatile applications and unique potential make it a staple in most industries. How is it transforming supply chain management?

Supply Chain Concerns AI Addresses

As of 2022, over one-third of supply chain businesses expected widespread artificial intelligence (AI) utilization. Its rapid growth will likely only increase as more become aware of its benefits.

AI implementation can address the most significant logistics concerns:

  • Downtime: Businesses can face costly downtime when they don’t anticipate supply chain delays. With AI, they can recognize potential holdups in time to seek solutions.
  • Inventory management: Managing product distribution can be a complex process. To create an accurate record, businesses must account for fulfilled, pending and returned inventory. AI can streamline the process by performing routine tasks like cataloging orders or counting warehouse stock.
  • Last mile delivery: Last mile delivery accounts for 53% of the total shipping costs — the highest share in the process. Businesses can utilize AI to analyze expenses and develop more affordable alternatives.
  • Fluctuating demand: Product demand fluctuates as consistently as waves in a rough sea. Algorithms can analyze past and current market trends to forecast changes.
  • Labor costs: Leveraging a technological solution can decrease labor costs significantly. AI operates without human input, so it can easily take on many routine tasks.

Every industry faces similar issues, so it’s about time for a widespread solution. AI is transforming supply chain management because it’s a single technology addressing various common concerns.

Opportunities for AI Implementation

Businesses have many opportunities to implement AI in their supply chain management process because it’s uniquely versatile. They can train it on any information and direct it to carry out any task they want.

1. Warehouse Optimization

Huge e-commerce websites have shifted the traditional business model to fast-paced competition. If one business offers a two-day delivery, it’s nearly a guarantee that another will introduce single-day shipping. Companies must adapt as consumers evolve to expect faster fulfillment. Effective inventory management is a significant part of doing so.

AI can optimize many warehouse operations. For instance, it can find the most efficient route to a product for a warehouse picker. Alternatively, it could count stock and organize the resulting data in a spreadsheet. Optimizing multiple minor functions simultaneously with the power of an algorithm can significantly improve supply chain management. Reducing processing time by a few minutes gradually adds up, dramatically increasing productivity.

2. Workforce Automation

Workforce optimization is a crucial function of AI in supply chain management because businesses often need more employees. In 2021, the rate at which supply chain managers left their roles increased by 28% from the previous five years because of high stress. AI can help solve labor shortage issues by automating many routine processes. It can drastically reduce an employee’s workload, resulting in higher retention. Plus, businesses using it will likely need fewer workers.

AI-powered robots and management software can handle administrative and physical labor. Some experts claim it can completely remove the need for humans at every level of the supply chain. While people will likely always remain in the industry in some capacity, the confidence in this technology emphasizes its usefulness.

3. Route Enhancement

Transportation is one of the most significant aspects of supply chain management. AI is useful in this aspect because it can significantly increase savings. For example, it can analyze traffic density, fulfillment priority and weather changes to determine the most efficient delivery route. It would increase fulfillment speed, reduce fuel costs and prolong vehicle life.

4. Administrative Improvement

While businesses typically utilize robotic process automation technology for administrative duties, they often can’t perform well with edge cases due to limited processing capabilities. This is where AI steps in. It can take over daily tasks without the need for human intervention. In addition, it can operate outside of strict computational bounds because it’s capable of decision-making.

Supply chain managers can confidently hand over their job duties to an algorithm. For instance, a natural language processing AI can understand speech and interact in a human way. It could reduce communication barriers between suppliers, increasing efficiency. In addition, it could count stock, automate payments or coordinate purchasing orders. Once a business gives it a task, it functions incredibly well independently.

5. Delay Prediction

The supply chain often experiences delays that cause significant ripple effects. In an ideal world, businesses would have a tool to tell them exactly when such a situation is about to occur. This technology may not exist yet, but AI can have suspiciously accurate insight into upcoming events. For now, it’s as close as many will get to predicting the future.

A machine learning model can continuously learn from the data it analyzes. In the supply chain, its prediction applications could revolve around potential delays. An algorithm can use geographical, atmospheric and historical input data to inform businesses of potential challenges.

Also, it can always use recent events to forecast outcomes because it processes information much faster than humans. It rapidly analyzes current trends and risks to come to a conclusion nearly instantaneously. Companies can ensure they remain aware of possible challenges and work to avoid them.

The Importance of AI in Supply Chain Management

With consumers craving faster shipping, distribution and transportation, organizations must excel to keep up. They must work around the clock to ensure timely fulfillment because online stores don’t shut down when the regular working day ends. Investments in automation technology can help them meet demand.

An algorithmic support system is a practical choice in supply chain management. Unlike conventional technological systems, AI can perform duties without human intervention. In addition, it can adequately function even under extreme operating parameters. An efficient solution is necessary for a fast-paced industry.

AI is Overhauling Supply Chain Management

Continuous advancement is the nature of AI. Unlike many other technologies, it can adapt and grow over time. Its automation and predictive capabilities make it an appealing — and arguably essential — aspect of supply chain management. In the digital age, any logistics process is only complete with a fast-paced technological solution.

About the Author

Emily Newton

Emily Newton has eight years of creating logistics and supply chain articles under her belt. She loves helping people stay informed about industry trends. Her work in Supply Chain Connect, Global Trade Magazine and Parcel, showcases her ability to identify newsworthy stories. When Emily isn't writing, she enjoys building lego sets with her husband.

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