Could AI help enhance your supply chain?

Inventory planning, route optimisation and enhanced productivity are some of the key areas that AI can help improve in supply chain management.

Global adoption rates
more than doubled
between 2017 and
2022,¹ and the market
is expected to be worth

$500 bn

by 2024.²

Rapid advancements in artificial intelligence (AI) are transforming the way business is done. Global adoption rates more than doubled between 2017 and 2022,¹ and the market is expected to be worth $500 billion by 2024.²

There are many business functions where AI can play a beneficial role, with applications able to analyse large amounts of data to make predictions and recommendations that can improve efficiency, reduce costs, and increase customer satisfaction.³ And, as AI systems learn over time, they can become increasingly accurate as more data is processed.⁴

Supply chains are one of the areas where AI can make a big difference. For some businesses it already is. And it’s not just large organisations that can benefit – smaller businesses are able to share in the benefits too, particularly with the many off-the-shelf products already available. In fact, Gartner suggests that 80% of new supply chain management technology applications will use AI and data science in some way by 2025.⁵

So, should you implement AI into your business? Here are a few ways you could benefit:

Rather than trying to guess what your customers will want months ahead of time, AI could help to predict future buying trends more accurately and make being overstocked or understocked less likely.⁶ Inventory management systems that use AI can outperform those that use human analysts and manual methods, with research showing AI demand forecasting can cut supply chain errors by 30-40%.⁷ This can translate into a big impact on business performance. Figures from the U.S., for example, show that approximately 34% of businesses have unintentionally sold a product that was unavailable in their inventory, resulting in delays to order fulfilment, while other research shows that businesses can achieve a 10% reduction in inventory costs by reducing overstocking and understocking.⁸

AI can quickly analyse – and continue to learn from – huge amounts of data, so using it could give you greater insights when making long-term, strategic decisions.⁹ For example, AI systems could be used to correlate a range of data to predict raw material shortages years in advance, as well as monitoring and identifying potential supply chain disruptions.¹⁰ Being able to use insights such as these could help to reduce uncertainty and increase confidence when making important business decisions.

AI can perform many of the tasks previously carried out manually. This could free-up your staff to get on with other jobs or allow you to increase workforce efficiency.¹¹ For example, administrative tasks such as order processing, order fulfilment and stock management can take up large amounts of employee time, but many of these can be automated using AI systems. This allows workers to concentrate on more complex jobs, which can mean their time is used more productively and overall efficiency improves.¹²

Being able to forecast and respond to market fluctuations helps you stay proactive and could give you an edge over your competitors.¹³ For example, AI systems are able to analyse large amounts of data such as customer feedback, market trends and competitor insights, enabling them to identify patterns and predict consumer preferences. This can help businesses design or stock products that resonate better with their customers.¹⁴

AI can use live and historical data on a range of factors – including traffic patterns, weather conditions and delivery times – to find the best routes for delivery drivers. This can have a range of business benefits, including a dramatic reduction in the amount of time it would take a person to work out the optimum routes themselves. It can also help lead to an associated reduction in fuel costs and emissions, as well improved customer satisfaction through faster deliveries and the ability to provide more accurate delivery schedules.¹⁵

Figures show that 61% of manufacturing executives who have incorporated AI into their supply chains have seen decreased costs, and 53% reported increased revenues.¹⁶ If you want to join them, here are five ways to help you get started.

AI can operate in many ways and across many business functions. A great way to narrow down where to start is to know what problem you are trying to solve first. If there’s more than one, then prioritise. Once you’ve done that, you can start identifying the AI tools and solutions that could help make a difference.¹⁷

AI is a broad and growing field. One of the keys to getting the best out of it is to familiarise yourself with what it is and how it could help your business.¹⁸ More than that though, it’s important to know where the value is coming from. There will be a cost attached to implementing AI in your business, so before you start you should have a clear understanding of how that investment will generate more revenue or profit.¹⁹

Depending on the solution and the task at hand, adding AI to your supply chain may require a certain level of knowledge and expertise. So, know what you are capable of internally, and consider whether you should bring in any experts with deeper knowledge and understanding of the tech and how to make the most of it.²⁰

In many respects, AI systems are only as good as the information they are trained on, so the data that’s fed into the system should be as high quality as possible. Achieving that may mean you need to do some preparatory work integrating different data sets from across the business or resolving any inconsistencies. But doing so should help you get the best performance from the technology.²¹

AI solutions include bespoke ones developed to individual specifications, as well as thirdparty products that are integrated into the business. For many organisations, ease and cost considerations (plus their own size and scale) could mean that third-party solutions are most appropriate. Lots are available, and many of them can integrate with others to increase the benefits on offer.²²