Original article was published on artificial intelligence
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Artificial Intelligence (AI) has the potential to radically transform supply chain management.
It also substantially drives down costs.
A recent study by McKinsey found that 61% of executives reported decreased cost as a direct result of introducing AI into their supply chains, with 53% reporting increased revenues. Overall, businesses are predicted to gain between $1.3 trillion and $2 trillion a year in economic value by implementing AI within their supply chains.
Supply chains are growing more complex by the year. They’re more global, competition is increasingly fierce, and supply chain leaders are tasked with overseeing large product portfolios that can include thousands of SKUs. AI can help organizations to better manage their supply chain, facilitating more informed decisions, reducing the manual workload, operating more efficiently, and mitigating risk.
According to Gartner the use of AI in supply chain management can be broken down into two categories:
- Augmentation – AI that assists humans with their day-to-day tasks, such as data analysis, to help reduce errors due to human bias.
- Automation – AI that functions autonomously without any need for human intervention.
Below are four ways these processes are being applied in supply chain management.
1. Predictive Analytics and Machine Learning (ML)
Predictive analytics and ML have the potential to improve several aspects of supply chain management.
A lack of supply chain transparency hinders an organization’s ability to make informed decisions in a timely manner. These technologies will enable more efficient supply network planning thanks to their ability to sift through vast amounts of data, identifying patterns, and conducting in-depth analyses of inventory levels to predict future demand.
The ability to perform more accurate, data-led demand forecasting could transform warehouse management and prevent problems caused by over- or understocking.
Warehouse Management Systems (WMS) can be implemented in workflows throughout the entire supply chain including supply requisition through to carrier shipment loading, and are proven to improve productivity. Amazon, which purchased WMS Kiva, reported savings of $22 million in each facility utilizing Kiva robots.
With AI, identifying and selecting suppliers also becomes more predictive. The human workforce will be needed to review findings and make final decisions based on the data provided, but predictive analytics will drive efficiency and help organizations find the best possible suppliers to meet their needs.
From a logistics perspective, ML serves to better balance the delivery and transportation of goods with supply and demand. Supply chain professionals can set parameters for success, which negates the need for lengthy and, sometimes, inaccurate human analysis.
2. Smart Warehouses
Forward-thinking organizations including Alibaba and Amazon have embraced automation to establish smart warehouses. Tedious and repetitive tasks can be carried out by automation and software, which not only means operations become more efficient, but reduces human error and enables employees to focus on more strategic tasks.
Today, Internet of Things (IoT) devices are highly-valued in warehouses, helping to reduce risk and prevent accidents via smart sensors that can monitor hazards such as high temperature or alert employees to the presence of hazardous gases and substances.
Through the synchronization of all amassed data, organizations can streamline their processes and improve output. The rise of 5G is a crucial enabler; it’s fast enough to eliminate latency, which provides a massive opportunity for warehouse and supply chain operations to improve performance across an organization’s entire IoT network.
Chatbots are becoming increasingly capable of successfully and accurately managing communications with customers. Accenture reported that 80% of all customer interactions could be handled by chatbots.
In the context of supply chain management, chatbots could be used to engage with suppliers to resolve simple issues, communicate important information (such as compliance materials) to suppliers, place purchase requests, and receive, send, or process invoices and other documentation.
4. Autonomous Vehicles
More efficient shipping saves an organization time and money, something that fully autonomous vehicles can assist with.
Autonomous vehicles will likely reduce the number of traffic accidents that occur each year, which will limit the costs associated with vehicle maintenance, and reduce the expense of hiring human drivers.
Several companies are working to produce driverless vehicles specifically tailored for shipping purposes. Mercedes-Benz is developing a semi-autonomous truck and, last year, Ford and Volkswagen announced joint projects to produce self-driving vehicles, including commercial vans and pickup trucks. China’s first autonomous cargo ship completed its maiden voyage at the end of 2019.
Image Credit: Nana Smirnova / Unsplash