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How AI Is Transforming Supply Chains

COVID-19 has upended global supply chains, underscoring a longstanding need to make them more agile and resilient to the effects of inclement weather, natural disasters, trade wars, and other disruptions. And as supply chains continue to grow in size and complexity, managing them with legacy systems and tools will become increasingly difficult.

According to an article in Forbes, consumer goods corporation Procter & Gamble has over 75,000 suppliers, retail giant Walmart counted over 100,000 suppliers and Total — the French oil company — has more than 150,000.

Legacy supply chain systems were built to manage only certain segments of the process. As a result, data from siloed systems isn’t always shared, making it challenging to react quickly to demand and supply swings.

Supply chains must integrate various data sources to support real-time, informed decisions and orchestrate operational efficiency by applying AI.

An AI-powered supply chain platform can connect all transactional data stuck in isolated systems and integrate with external data to provide greater adaptability and flexibility and drive better analytics, insights, and business outcomes.

Artificial intelligence, real benefits

Global research firm Gartner predicts that the full potential of AI in the supply chain will be realized in the next few years — with particular impact on analytics, decision support, and automation. That’s because humans alone can’t extract, model, and analyze complex supply chain data quickly enough to bring about real-time, effective decision-making.

Many enterprises are already experiencing the transformative power of AI across various supply chain functions. A key benefit of AI is improved capacity forecasting accuracy.

A leading global manufacturer of industrial equipment, with a broad product catalog and vast network of suppliers, was struggling to stay within budget amid rising procurement costs. The enterprise was paying a high price for its lack of visibility into supplier lead times and capacity constraints.

The manufacturer used an AI-powered supplier collaboration tool to get insights into supplier capacity and inventory and optimize purchasing decisions. As a result, the companywas able to significantly cut down input costs, shorten lead times and optimize inventory.

AI-based forecasting also enables more effective demand planning, helping enterprises optimize their purchasing and supply operations.

Better demand planning is critical, especially in the case of products with longer production cycles, or where storage isn’t possible due to shorter shelf life.

A global provider of fresh produce was struggling with excessive wastage and occasional stockouts due to demand fluctuations. To avoid these situations, the company focused on improving its demand planning process by using an AI-powered tool with machine learning capabilities to identify patterns, capture demand signals, and generate more accurate demand forecasts.

The tool also helped the company with various what-if scenarios, simulating changes to forecasts in real time and planning proactively for a range of possible demand situations and conditions.

In-the-moment management

Another important benefit of AI in supply chains is real-time inventory and warehouse management, particularly during disruptions. At the start of the pandemic, retailers were out of many essentials. Manufacturers had to stop production because raw materials and key components weren’t available. Governments struggled to get personal protective equipment to hospital and nursing home workers.

A global medical device manufacturer needed to identify supply chain bottlenecks to ensure timely delivery of critical equipment to customers. The manufacturer established an AI-powered supply chain control tower for comprehensive visibility and control over the flow of goods across its plants and warehouses. The tool also offered predictive and prescriptive insights to optimize inventory and warehousing operations.

With these new capabilities, the manufacturer is now able to ensure supply continuity of life-saving medical devices to its customers without any delays.

AI is here to stay and grow

Data powers the modern supply chain. And as enterprises embrace digital, the volumes of data will only go up.

Managing this vast volume of data, analyzing it, and deriving actionable insights from it won’t be possible without the processing power of modern, AI-powered supply chain platforms.

Certainly not at the speed at which decisions must be made today. In the time it takes humans to analyze relevant insights, opportunities will likely have been lost.

The adoption of AI in supply chains is rising, with 60 percent of organizations expecting to use AI in their supply chain operations in the next five years — up from the current 12 percent, according to the 2020 Annual MHI Industry report.

For companies eyeing AI-powered supply chains, success depends on smart, optimized data management and a digitally savvy team. Increasing adoption of AI requires an analytically strong and diverse workforce that is open to continuous learning.

AI-powered, intelligent supply chains will enable organizations to swiftly adapt to disruptions and shifting market dynamics. They will set apart successful businesses from the rest in the future.

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