The Place for Artificial Intelligence (AI) in Supply Chain Management
- What is AI?
- Artificial Intelligence: Its Place in Supply Chain Management
- AI, SMEs and the Future
What is AI?
AI stands for Artificial Intelligence. This is a broad term that can be used to define a range of technologies, from machines and computers which think exactly like humans, to systems which are able to act in a flexible and agile way that mimics the human adaptability of thought.
While directly replicating human thinking may be one goal of AI development, the most common application is to create interfaces that are intuitive and can adapt to variations in circumstances. This has been achieved with the development of machine learning (ML), whereby differing sets of data over time are analyzed in order to enable the interface to adapt to changing situations in the future.
The most obvious example of this is in customer service. Online purchasing has inevitably led to an increasing reliance on automation, and this has not always been successful due to a lack of innate flexibility.
However, organizations such as Amazon have leapt on AI. The fully-automated customer interface at Amazon tracks customers’ purchasing habits and uses this information to make recommendations for other products that may be of interest to each person, as well as storing their personal information to enable repeat transactions. This has helped to personalise the process and tailor recommendations to individual tastes.
Artificial Intelligence: Its Place in Supply Chain Management
SCM can be revolutionised through the use of AI. There are three key areas where AI can be introduced:
Supply Chain Planning
AI can be used to analyze huge data sets to provide in-depth analysis of trends in supply and demand to better inform the procurement process. By applying an agile analysis of seasonal and ad-hoc changes in supply and demand, the flawed element of human analysis can be removed, freeing the time of supply chain managers for strategic decision-making.
Juggling supply and demand is impossible without accurate stock oversight. AI can be used to track each item in each warehouse and ensure that stock levels are optimised to supply and demand. Excess stock can also be easily moved to where there is a deficiency.
Supplier pricing and risk can make or break a successful supply chain. AI can analyse and audit potential and current supplier data in real time to ensure that the supply chain always benefits from the best procurement practices.
Again, Amazon is a perfect example of AI in action. Their AI takes the form of a “flywheel”, whereby purchasing information is instantly shared throughout the organisation. This accurately compares stocking levels with demand and informs procurement decisions with the best information available. In the same way that an engine flywheel absorbs and re-transmits energy to where it is needed, Amazon’s AI ensures that the data generated keeps the supply chain moving with the greatest efficiency.
AI, SMEs and the Future
For SMEs the cost of implementing AI can seem prohibitive. However, the human element of supply chain management is often an ongoing drag on the bottom line, as well as being slow, inaccurate and flawed. While it is impossible for many SMEs to fund their own research and development, there are many organizations producing off-the-shelf SCM AI products at affordable prices. Business analysts McKinsey estimates that tech giants spend $20-30bn on developing and acquiring AI products a year, and it is increasingly becoming available to small enterprises.
The human element in the supply chain is quickly becoming a thing of the past, and this will enable distribution networks to get up and running quickly without the human element increasing the risk of failure. With many existing ERP systems being retro-compatible with emerging supply chain AI, AI will soon become the norm across the distribution sector – leaving workers free to grow their business elsewhere.
Looking to join in on the action? Here’s one way you can implement automation into your supply chain and leverage AI.