Supply Chains with AI: Pandemics, geopolitical affairs, and natural disasters are among the common reasons behind large-scale supply chain disruption. Recent COVID pandemic, concurrent natural disasters in different parts of the world, are adding to severe distress in the global supply chain. These constant disruptions lead to price rises of essential commodities, affecting the daily life of consumers across sectors.
However, thanks to AI in manufacturing and AI supply chain, there’s a way out. The growing adoption of supply chain resilience makes it an imperative tool for survival rather than budgeting for a strategic luxury.
New technologies like predictive analysis and machine learning are helping supply chain operators predict disruptions and take preventive measures accordingly. Here’s a comprehensive study on how AI is bringing supply chain from constantly facing disruption to predicting disasters and standing tall against them.
Why are AI Supply Chains so Important?
Ernst & Young LLP ran a survey on the senior-level supply chain executives of global companies in the year 2020, 2022, and 2024. The study revealed 57% of organizations being disrupted by the pandemic, with 72% reporting a negative impact.
Adding to that, geopolitical affairs also have grave effects on the supply chains. Trade wars and geopolitical tensions between countries affect cost and disrupt established supply chain routes.
Many companies switch to new supply chain solutions and alternative suppliers by shifting their sourcing strategy to a new method. Regulatory changes, changes in labor laws, and trade agreements also affect the supply chain.
Natural disasters also count as major disrupters for supply chains. How can we forget the 2011 Tsunami in Japan? The event had a widespread effect on production facilities. Major companies like GM, Toyota, and Nissan were forced to stop their production in Japan and in the U.S.
That’s where supply chain operators can train AI models with historical data related to disruption. It will help identify areas of supply chain that need protection from unprecedented events.
AI Supply Chain- Transforming Supply Chain with the Power of AI
Supply chain industry is still changing and transforming. The power of AI is behind this all-out transformation in the supply chain sourcing, logistics management, and supply chain optimization. Global supply chain leaders are transforming their business with a focus on three key areas of supply chain with the use of AI.
1. Using Predictive Analytics
The most important contribution of AI to the global supply chain is the use of predictive analytics. With this new AI-powered tool, supply chain operators are no longer reacting to disruptions; they are actively predicting them before they happen. This leads to better preventive measures, and decisions to minimize impact.
Some key tools that help bring this transformative change include:
- Demand Forecasting: According to AnalyticsInsights, leading firms are training AI models with external and internal data to reduce the mean absolute error forecast by 20% to 50%.
- Inventory Management: Additionally, AI-driven supply chains are more capable of balancing inventory, eliminating excess stock in the process and reducing stockouts by a massive 30%. This is a great way to maintain operational efficiency in the global manufacturing industry.
- Risk Detection: Deep learning algorithms can predict disruption up to nine days in advance. The accuracy of such detections is 87% positive.
To give a real-world example of AI-powered supply chain development, we can mention Industry Leader DocShipper. They use predictive logistics solutions to predict shipping delays, leading to 87% accuracy in results.
2. Using AI in Logistics
AI supply chains implement the power of real-time analytics and tracking tools to improve the overall supply chain efficiency through logistics. AI-powered algorithms calculate fastest routes and provide fuel-efficient delivery routes, optimizing both delivery cost and emissions in the process.
In addition, real-time tracking features with the use of IoT sensors and AI tools provide both logistic workers and customers with granular details about the shipment process. Logistics AI such as Logiwa and 7bridges are already picking up traction in the supply chain industry.
3. Supply Chain Optimization with AI
AI supply chains are using AI for supply chain planning, procurement, and delivery. AI-driven procurement uses different parameters of consideration such as price, risk, and compliance factors to choose the right suppliers.
AI is taking a big role in production planning as well, synchronizing procuring, manufacturing, and production schedules to maintain optimum efficiency. In fact, many large supply chain companies have already started using AI-powered robots to enhance warehouse throughput. It improves the accuracy in operation, picking, and packing of products.
Beyond Implementation: Managing Challenges of AI Supply Chain
It’s true that AI plays a important role in optimizing supply chains, sourcing, manufacturing, and delivery. However, companies implementing predictive analytics supply chain, or AI-powered tools, must consider a few areas:
Data Quality & Integration
AI output will be as good as the data supply chain operators train it with. AI models trained using siloed and poor-quality data will have difficulty providing accurate and helpful predictive results. Here, success depends on accurate data governance and the quality of the data that trains the model to maintain quality and integrity of the supply chain.
Ethical Concerns
AI holding immense power and capabilities of predictive analysis must be used responsibly. Supply chain operators must learn to responsibly use AI tools to rely on transparent algorithms and handle sensitive data with care when training their AI models.
Workforce Adaptation and Training
Analytics insights also suggest that close to 70% of manufacturers are planning to train their employees with AI tools to embrace change in the industry. Large manufacturers and supply chain companies must balance the human-AI collaboration and the size of their workforce to support logistics.
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From Disruption to Prediction
There’s a new standard in the supply chain industry, thanks to AI supply chains solving many existing problems. AI-powered manufacturing and supply chain optimization are setting new standards for resilience, foresight, and efficiency in overall management.
Thanks to this transformative power of AI, uncertain reactions to supply chain disruptions have turned into precalculated prevention techniques. AI is future-proofing the supply chain industry and helping organizations move from struggling with disruptions to predicting dangers beforehand. With AI at the tip of our fingers, now is the time for manufacturers and logistics leaders to invest, adapt, and lead.