The Impact of AI in Supply Chain Management and the Way Forward

Muhammad Ahasn Zulfiqar   May 30, 2024  9:53 a.m.

Disruptions are critical. Disruptions are growth-killer, and nobody wants disruptions, especially when business operations across multiple departments are functioning smoothly, like a well-oiled machine. Yet, there are times when you cannot predict what’s coming next – until you adopt AI. Among multiple business operations, supply chain and logistics are often considered to be the backbone of large organizations and without the induction of AI, the system is marginally away from a failure. Just like many other business functions, the use of AI in supply chain management is growing, and organizations around the globe are leveraging it to bring unprecedented, fruitful results.

The Real Use of AI in Supply Chain Management

Have you ever considered the complex journey that your favorite products embark on before they reach your hands? This rather complex process is known as Supply Chain Management, and it’s being profoundly transformed by Artificial Intelligence (AI). But what is a supply chain? A supply chain is a network of interconnected stages – from raw material procurement to the delivery of the final product. Now, think of an intelligent system that can streamline this entire process with minimal human intervention. That’s exactly what AI does, and the use of AI in the supply chain is revolutionizing how logistics and supply chains are managed more efficiently.

7 Benefits of Using AI in Supply Chain Management

AI was a buzzword a couple of years ago. Today, it is found everywhere, complementing various industries, improving their business operation, and integrating multiple functions, including supply chain. The graph below shows the AI adoption rate worldwide in 2022 and the expected adoption of AI in the supply chain by the year 2025. The graph by Statista shows a clear increase in the overall adoption of AI in the supply chain, including the companies and businesses that think AI is critical for their business to stay competitive and not become obsolete.

Lower Operational Expenses

AI in supply chain management is a cost-effective solution. By integrating AI, businesses can cut operational costs and streamline their buying and production processes, boosting efficiency. This can lead to significant business benefits and result in better growth.

Enhanced Productivity and Lower Labor Costs

AI has the potential to automate manual tasks, increasing productivity while lowering labor costs. It’s estimated that AI can automate up to 40% of activities during the sales process, resulting in significant savings. This efficient outcome can be a major advantage when competing in low-margin, high-competition regions.

Strengthened Relationships with Partners

AI doesn’t just improve internal operations but also strengthens relationships with external partners through various features. Fostering effective collaboration, facilitated by AI, helps companies avoid overstock or understock scenarios, ensuring smooth operations and customer satisfaction.

Faster and Timely Deliveries

On-time deliveries are critical. AI in the supply chain aids in tracking shipments and analyzing data patterns for timely deliveries. Companies such as Walmart, Target, and more are already leveraging AI to optimize inventory levels, ensuring products are available when customers need them.

Optimized Transportation Networks and Routes

AI in the supply chain revolutionizes the transportation and logistical aspects as well by identifying the most efficient routes and networks and designating vehicles smartly. By considering factors such as the number of trucks, fuel usage, and travel times, AI ensures cost-effective and efficient transport of goods.

Minimized SCM Risks

Potential risks can significantly impact businesses, especially when there’s manual work involved. With AI’s ability to provide comprehensive warehouse management data, companies can identify potential hazards and proactively address them, creating a safer and more efficient work environment.

Improved Decision-Making Abilities

When making critical decisions, speed and accuracy are paramount. AI can quickly analyze vast amounts of data and provide increased visibility and insights, leading to more accurate and efficient decisions. AI doesn’t aim to replace humans but rather to augment human decision-making capabilities.