The Future of Supply Chains: Why AI is a Game Changer

Modern value or supply chains are complicated. They involve terabytes of disparate data that may be in one depository such as an ERP, but most likely is scattered throughout your technology infrastructure. Your supply chain team spends too much time on required routine tasks, but too many other tasks are put on to-do lists and never completed because of the workload.

Of course, these days, Artificial Intelligence (AI) seems to be the answer to every question, regardless of what was asked. So, we wondered, how can AI help make our value chains more nimble, accurate, and efficient?

Let’s begin with how popular AI is as part of the value chain. The global market for AI in the supply chain industry is expected to grow to a staggering US $20 billion by 2028 with a compound annual growth rate (CAGR) of 20.5 percent. That’s real money.

There are different kinds of Artificial Intelligence. Generative AI is what is used when you interface with ChatGPT, Siri, or your Alexa. It’s great for images and text. Machine Learning is a type of AI that can learn and adapt using algorithms and statistical models to conclude data patterns. Both are used in supply chain algorithms.

It’s important to understand what AI is good at. Think of AI as a tool – much like a hammer - it needs a human hand to guide it and make it work. The same is true for AI, without humans, it doesn’t work. People are required to write algorithms, which are the instructions the application needs to do its job. What AI is efficient at is looking after all of the rote tasks that need to be completed, leaving the more complicated jobs for your people to complete. What AI can also do is anticipate and identify supply chain challenges long before they can affect your business. And that is a good thing. So, what are the different ways AI is being developed for supply chains?

First, AI will simplify Supply Chain Management (SCM). If your current infrastructure has data silos that can’t be integrated, you know how frustrating that can be. Siloed procurement and value chain practices lead to information gaps, inefficiencies, and higher costs. Digging through data to find what’s needed is both time-consuming and inefficient. Legacy ERPs usually have bolted-on S2P functions and struggle to keep pace with modern technology platforms regarding innovation, agility, and user experiences. Generative AI interfaces or dashboards allow staff members to ask specific questions the same way ChatGPT answers, but the answers are based on corporate data, and it becomes more accurate the more it’s used. It can provide data location, real-time guidance, industry trends, and training on what best practices look like. Modern technology can bridge any information gaps, enabling real-time insights, data-driven decision-making, and enhanced resilience. An AI tool like this can integrate those silos in a way that enables data and human efficiency, leading to achieving those KPIs.

Next, AI can provide robust risk management that prevents all kinds of nefarious acts both internally and externally. AI can be used to find data anomalies such as changes made to master data, suspicious account information, and banking or corporate info to reduce or eliminate fraud. It can alert staff to changes made without authorization or for their own (most likely fraudulent) purposes. AI can also use data to predict events and situations around the world by plowing through enormous amounts of data, some of these events include market fluctuations and some natural disasters. Using AI as a risk mitigation tool can allow supply chains to see into the data collected to improve their ability to plan and react to risky or hazardous circumstances before they occur.

AI can also provide strong and reliable inventory optimization. Many facilities moved to a just-in-time inventory strategy that fell apart during the COVID pandemic when nothing was being shipped. An AI-enabled inventory system analyzes supply and demand, historical data, market trends, and pressures, and can forecast inventory levels more accurately. Forecasting and reordering with AI becomes infinitely easier. AI ensures inventory levels are at an optimum throughout the organization.

Another way AI is being used in the value chain is in supplier management. Too many organizations have real issues with their suppliers and vendors, including language and cultural barriers, government regulations and reporting requirements, contracting, negotiating, and dispute resolution. AI manages the data-centered details so your team can focus on more complex, human-centric tasks.

The real benefit of using artificial intelligence is that it can handle the routine tasks your people are currently completing. Tasks such as checking for duplicate data, three-way matching, and compliance checks on uploaded documents from vendors. If people are worried about what their staff will do when AI is enabled, you can be assured that they finally have the time to do the kinds of tasks that there wasn’t time for in the past. Considering how to improve processes, planning, strategizing, and working with the rest of the organization to remove friction, enable open communication, and encourage a collegial environment makes organizations more stable and more profitable, and your people will be far more fulfilled at work.

Artificial intelligence isn’t going away. It’s estimated that right now, about 35 percent of businesses are using AI[1]. And for those worried that AI will replace people, it will absolutely change the HR landscape for many organizations, but according to BusinessDIT, 85 million jobs will be lost to AI by 2025; yet AI is also projected to create approximately 97 million new jobs by the same year, 2025. That’s a net positive of 12 million jobs.

Generative AI is revolutionizing the supply chain and procurement industries, and succeeding in an AI-first economy requires organizations to act quickly. The interplay between AI and humans is referred to as augmentation since the technology does augment human ingenuity. The technology is there that will anticipate challenges better than humans and generate solutions faster than a human can. Humans can now spend their days doing what we do best – thinking, considering, solving problems, and continually improving.

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