The case for AI and automation in the supply chain

July 8, 2020
The intelligent supply chain benefits customers, supply chain teams and the vendors with whom they work.

Bare supermarket shelves, most notably in the paper-goods aisle, have highlighted the critical role that the supply chain plays in modern society—and the panic that can ensue when they fail. No one could have anticipated the worldwide shutdown that the pandemic caused, but it demonstrated that today’s supply chains require greater resilience. It is clear that supply chain management needs an overhaul.

In a recent survey by Oxford Economics, 39% of respondents had experienced a negative risk event in their supply chains in the past three years. Fortunately, AI and automation technologies are quickly changing the supply chain to become more intelligent, decreasing the likelihood of such incidents. 

What is the intelligent supply chain?

In that survey, leaders were asked about their top strategic goals for the overall organization. The majority of them highly ranked “using automation to perform routine tasks”—especially when it came to the supply chain. Leaders were far more focused on using intelligent technologies to create greater efficiencies in their daily operations. They’re also using these technologies to gain real-time data insights, become more customer-centric and sustainable, and improve their resilience.

A concurrent industry report from MHI revealed that only 12% of supply chain professionals said their organizations were currently using AI—although 60% expect to be doing so within the next five years. 

AI is growing in adoption within supply chain management for several important reasons. The intelligent supply chain is not just about planning but also about execution and how you can intervene at every level of execution, if need be. Sometimes, for instance, you may have all the data you need, you have plans based on that data, and are able to execute the plans flawlessly. But it’s possible to put too much effort on the planning side of things while overlooking the execution to make it resilient enough. What can happen then is that if any link in the chain breaks, it creates havoc. 

This has happened with many organizations as the pandemic has unfolded. 

Thus, the importance of an intelligent process. Organizations must be proactive and prescriptive to ensure that what they have planned is actually happening on the ground. For instance, some organizations have ordering systems that are susceptible to lock-out if an order isn’t finalized within a certain period of time. You might think the order has gone through, but it hasn’t, and that can lead to a stock shortage, customer disappointment and revenue loss. Managing these situations with a close-loop autonomous application can help proactively detect these types of errors and fix them before it’s too late—saving a world of hassle and potential loss. 

The intelligent supply chain is the future

According to a McKinsey Global Survey on the adoption of AI, 61% of executives report decreased costs and 53% report increased revenues as a direct result of introducing artificial intelligence into their supply chains. Organizations that aren’t using technology to make their supply chain more intelligent are going to fall behind. It’s almost a requirement of doing business these days.

Using AI, supply chain management can become proactive rather than reactive. In addition, it helps re-focus employees on higher-value activities as opposed to monotonous and repetitive ones; you don't want to invest your talent on tasks that can be done by a machine. Supply chain staff can be freed to apply their judgment toward situations in which human intelligence is needed to ensure the right decisions are made. This frees workers from boredom, unnecessary stress and frustration.

Three of the most important benefits of implementing an intelligent supply chain are:

  • Stronger vendor relationships: In today's world, vendor relationships are highly integrated. You can’t simply demand that they adhere to your processes at all times. Growing a happy vendor network is very important, and intelligent supply chain management will help achieve that. 

  • Heightened competitive positioning and brand: If a customer comes in to seek your brand experience several times and you’re missing the item they want, they probably aren’t going to come in yet again. With intelligent supply chain management, your products will be on the shelf where and when the customer wants to buy them, which protects your revenue. If you are able to manage your supply chain effectively, your cost structure will be lower, increasing profit.

  • Resource optimization: Intelligence is about optimizing the resources deployed to manage the supply chain. And as noted above, that includes employees’ morale and productivity. 

The intelligent choice

The global quarantine shined a bright light on the frailty of many organizations’ supply chains. This harsh reality is spurring increased adoption of AI and automation for better supply chain management. Future success is on the side of those who heed research that clearly demonstrates the benefits of integrating these tools. The intelligent supply chain benefits customers, supply chain teams and the vendors with whom they work. 

Rajiv Nayan is head of Americas at Digitate