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Published on 14 Mar 2024

Leveraging AI in Supply Chain Management: A Comprehensive Guide

TABLE OF CONTENTS

updated

Updated: 2 Jul 2024

The promising news is that AI-powered solutions are readily available and accessible for companies to achieve unprecedented levels of performance in supply chain management. According to McKinsey, companies adopting AI in supply chain planning have already seen remarkable improvements in logistics costs by 15%, inventory levels by 35%, and service levels by 65%. AI tackles complex supply chain challenges with intelligent robotics. This comprehensive guide will explore the potential of AI, real-world applications across the supply chain industry and the future of intelligent supply chain operations. 

Understanding AI in Supply Chain

As we all know AI is amazingly capable of performing tasks that require human intelligence, such as reasoning, learning, problem-solving and decision-making.  This versatility makes AI an invaluable asset across various industries, including supply chain management. AI in the Supply Chain helps streamline operations and optimise processes. The integration of AI technologies like machine learning, predictive analytics and robotics has already changed the way supply chains are managed.

Machine Learning and Predictive Analytics

Machine learning algorithms can analyse vast amounts of data and identify patterns, trends, and insights that would be difficult or impossible for humans to discern. In supply chain management, these techniques are used for demand forecasting, inventory optimisation, route planning, and predictive maintenance.

Demand forecasting is a critical aspect of AI powered supply chain management, as it helps companies anticipate future demand and plan production and inventory levels accordingly. Machine learning models can process historical sales data, market trends, seasonality, and other relevant factors to generate highly accurate demand forecasts, enabling companies to avoid stockouts or excessive inventory.

Predictive analytics techniques are employed to optimise inventory levels and minimise excess or shortage situations. By analysing historical data, current stock levels, lead times, and other variables, these models can predict the optimal inventory levels for each product, ensuring efficient use of resources and minimising carrying costs.

Robotics and Automation

Automated guided vehicles (AGVs) and robotic arms are used for tasks such as material handling, picking, packing, and sorting. These technologies not only improve efficiency and accuracy but also enhance worker safety by reducing the need for manual labour in repetitive or hazardous tasks.

Collaborative robots (cobots) are increasingly being deployed in supply chain operations, working alongside human workers to augment their capabilities and productivity. These robots can be easily programmed to perform various tasks, such as assembly, packaging, and quality inspection, reducing the risk of errors and increasing throughput.

AI-powered robotics systems can also optimise warehouse layout and workflow, maximising space utilisation and minimising travel distances for workers and AGVs. This optimisation leads to significant time and cost savings, ultimately enhancing the overall efficiency of supply chain operations.

Intelligent Logistics

AI-powered systems can track and monitor shipments, inventory levels, and operational processes in real time, providing end-to-end visibility and enabling proactive decision-making. This level of transparency improves supply chain agility and responsiveness and facilitates collaboration among stakeholders, such as suppliers, manufacturers, logistics providers, and customers. By integrating data from various sources and leveraging AI-driven analytics, companies can gain a comprehensive understanding of their supply chain operations, identify bottlenecks, and implement targeted improvements. 

Real-World Examples of AI in Supply Chain

Here are some examples that illustrate the importance of AI in supply chain management, demonstrating how AI technologies are driving significant improvements in operational efficiency, cost savings and overall supply chain responsiveness.

Unilever

Unilever utilises an AI application and service provided by the German startup Scoutbee to rapidly identify alternative supply sources. The software scans websites for data on suppliers' financials, customer ratings, sustainability scores, diversity metrics, intellectual property information like patents and design awards, U.S. Customs data to validate international trade experience, and real-time alerts from social media and news feeds based on user-specified criteria like financial reports and major staffing changes. After generating a list of potential new suppliers, the process transitions to manual evaluation where corporate buyers instruct Scoutbee's staff to request additional information from specific suppliers on the list.

Koch Industries

Koch Industries employs an AI tool developed by Arkestro to optimise its supplier base. Unlike traditional procurement approaches that manage suppliers based on high-level purchasing categories and aggregate spending, this AI tool delves into granular data at the stock-keeping unit (SKU) level. It generates supply options, often within the existing supplier network, reducing the need for lengthy requests for quotes (RFQs).

The tool achieves this level of detail by ingesting comprehensive datasets, including existing supplier information, purchase orders, invoices, and even unsuccessful quotes from previous procurement cycles. This provides a nuanced view of qualified suppliers, enabling companies to identify backup suppliers across various categories.

The AI algorithm uses historical data to automatically populate new RFQs with essential parameters like lead times, geographic locations, quantities, service-level agreements, and material costs. It then emails the RFQ to the respective supplier for review. If the supplier agrees with the AI-generated quote, a one-click submission is all it takes. If the supplier modifies the quote, the algorithm learns from these changes, continually refining its predictive capabilities. This mutually beneficial approach saves suppliers between 60% and 90% of the time typically spent on completing an RFQ.

Walmart

Walmart employs a software product called Pactum AI to conduct negotiations with equipment vendors, according to a recent report from Bloomberg. Pactum AI's chatbot can negotiate discounts, payment terms, and prices for individual products, as well as compare current vendor deal offers to historical ones and what other companies are paying

Challenges in Implementing AI in Supply Chain

Implementing Artificial Intelligence in Supply Chain Management comes with its own set of challenges that organisations must address to fully realise its benefits. Some of them include:

  • Data Quality and Integration: AI systems rely heavily on data to train models and make accurate predictions. However, supply chain data often comes from multiple sources, formats and systems, leading to data quality issues such as inconsistencies, missing values, or errors. So integrating and cleansing data from various sources can be a complex and time-consuming task, hindering the effectiveness of AI solutions.
  • Skill Gap and Talent Shortage: Developing and deploying AI solutions in supply chain management requires specialised skills and expertise in areas such as data science, machine learning and AI engineering. However, there is a global shortage of professionals with these skills, making it challenging for organisations to build and maintain AI teams or attract the necessary talent.
  • Regulatory and Ethical Considerations: As AI systems become more prevalent in decision-making processes, organisations must address regulatory and ethical concerns related to data privacy, transparency and algorithmic bias. Supply chains often involve sensitive data and critical operations requiring robust governance frameworks and adherence to legal and ethical guidelines such as the GDPR.
  • Cost of Implementing AI Solutions: Deploying AI solutions can be capital-intensive, particularly for organisations with limited resources. The costs associated with data infrastructure, hardware and software can be substantial. Opting for a cloud-based GPU solution can help mitigate these costs. 

Future Trends of AI in Supply Chain

The future of AI in supply chain management is expected to integrate with emerging technologies like the Internet of Things (IoT) and edge computing to improve operations further. IoT sensors and devices can generate an unprecedented amount of real-time data from various touchpoints along the supply chain, enabling AI algorithms to analyse and act upon this data with greater speed and accuracy.

Edge computing, which processes data closer to the source, will complement IoT by reducing latency and enabling faster decision-making, particularly in time-sensitive scenarios like real-time inventory management or predictive maintenance. The combination of IoT, edge computing and AI will create intelligent, self-optimising supply chains capable of adapting to changing conditions dynamically.

AI is also expected to play a pivotal role in promoting sustainability and ethical supply chain practices. AI-powered supply chain optimisation can help reduce carbon footprints by optimising transportation routes, minimising waste, and improving energy efficiency. AI can even help assist in monitoring and ensuring compliance with environmental regulations, labour laws, and ethical sourcing practices across the entire supply chain network.

Conclusion

At Hypertsack, we offer access to powerful NVIDIA A100 and H100 GPUs as a cost-effective and scalable solution for implementing AI in supply chain operations. These high-performance GPUs are designed to accelerate AI workloads. You can leverage powerful computing resources without the need for significant upfront investments. This approach eliminates the need for costly on-premises infrastructure and maintenance, allowing you to scale their AI capabilities up or down based on your needs.

We provide pre-configured AI environments, tools and frameworks, reducing the complexity and time required for setting up and managing AI infrastructure. This can accelerate the development and deployment of AI solutions for you to quickly pilot and iterate on AI-driven supply chain initiatives for your business.

FAQs

What is AI in Supply Chain?

AI in the supply chain refers to the application of artificial intelligence technologies like machine learning, predictive analytics, and robotics to optimise and automate various supply chain processes. It involves leveraging data and algorithms to enhance decision-making, improve efficiency, reduce costs, and increase visibility across the entire supply chain network, from demand forecasting and inventory management to transportation logistics and predictive maintenance.

Why use AI in Supply Chain?

Companies leverage AI in the supply chain to gain a competitive edge by improving operational efficiency, reducing costs and improving customer service.

What are the examples of AI in Supply Chain?

Key examples include demand forecasting using machine learning models, predictive analytics for inventory optimisation, real-time supply chain monitoring and tracking, intelligent robotics for warehousing/logistics automation, predictive maintenance of assets/equipment, and risk assessment for supplier selection and management.

What is the best GPU for AI in Supply Chain?

Our budget-friendly cloud GPUs for AI/ML workloads like the NVIDIA H100 80 GB PCIe, specialised for most demanding AI workloads are available for $ 3.44 per hour. You can check our gpu pricing here. 

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