It is estimated that the AI for supply chains market will be worth over $10 billion USD by 2025, as leading retailers look for ways to increase the accuracy, resilience, and predictability of their supply chains.
But what is AI for supply chains, how does it work, what benefits does it offer, and how can it be used by retailers?
Let’s take a look at artificial intelligence in supply chains.
What is artificial intelligence in supply chains?
Artificial intelligence (AI) in supply chains refers to the application of advanced algorithms (like machine learning) to automate, improve, and optimize various aspects of the supply chain management process.
At a high level, supply chain AI is any such algorithm that can read a retailer’s supply chain data (inventory, purchase orders, cost, price, vendors, routes, etc.) and automatically output suggestions to improve the retailer’s supply chain operations.
Today, AI is used to significantly improve the retail supply chain through:
- Enhanced efficiency
- Reduced costs
- Increased overall performance
Let’s peel this back a little more by looking at it in context to what is taking place in supply chains.
Why is supply chain artificial intelligence important?
Supply chain artificial intelligence is important because modern supply chains–global, regional, and local–are complex and under great pressure to perform. As a result, applying AI to various supply chain operations has become an effective solution to today’s supply chain challenges.
Let’s look at what some of those challenges are.
Supply chain challenges: external and internal
Forces from outside supply chains that are problematic include:
- Disruptions (pandemic, natural disasters)
- Trade barriers (tariffs, quotas)
- Infrastructure weakness (port availability, road quality)
- Regulatory differences
- Demand fluctuations
These external issues cause delays, increase costs, and make it difficult for retailers to meet customer needs effectively.
Then there are the internal struggles to:
- Analyze huge volumes of data
- Connect all stages of the supply chain
- Visibility into how the supply chain is performing
- Miscommunication due to complex networks
With these external and internal challenges combined, retailers are now putting supply chain concerns front and center.
The chart below indicates areas where more investment in retail supply chains could be made.
This being the situation, supply chain artificial intelligence is fast being recognized as an aid to revolutionize bogged-down supply chains, transforming the way they operate and making them more resilient.
Let’s take a look at what AI in supply chains looks like.
Applying supply chain artificial intelligence: Seeing the benefits
Six prominent areas where AI-based solutions are being applied in modern supply chains include the following.
1. Demand forecasting
The use of AI-driven analytics can quickly analyze:
- Large volumes of sales data
- Market trends
- Seasonal trends (such as holidays)
- Consumer buying behaviour
The result is a highly accurate demand forecast that allows you to make better business decisions, as the forecast predicts what may happen in the future.
Simulation with supply chain artificial intelligence also works in your favour. When you simulate different demand forecasts, production schedules, or transportation routes you will see the impact on your supply chain performance–helping you identify potential inventory problems before they happen and make adjustments.
Benefits: Confidence in your supply chain decisions; better inventory levels; and increased flexibility.
2. Inventory management
Supply chains, especially lengthy ones, are unpredictable. There are a lot of opportunities for things to go wrong. The ability to quickly adjust when things do go awry will save you time, money, and frustrated customers.
Because AI-driven analytics quickly assesses fluctuations in data and takes lead times into account, you can respond to factors like inventory delays efficiently.
For instance, if supply chain AI analytics indicates there will be a delay in inventory arrival, you may decide to re-allocate inventory via inter-store balancing (buying you more time when you have to wait on suppliers.)
Benefits: Increased visibility into your supply chain; improved cash flow.
3. Warehouse management
Retailers, especially omnichannel retailers, typically have multiple warehouses with millions of dollars of inventory that need to be organized and easily accessed.
AI is being used to identify the best locations within warehouses for various products. It can streamline picking and packing processes, automate routine tasks with robotics., and plan and schedule inventory moves.
Benefits: Highly accurate records that help you find, access, and distribute inventory easily; improved efficiency.
4. Transportation and logistics
AI is impacting supply chain transportation and logistics as it optimizes routing, scheduling, and fleet management.
Benefits: Lower transportation costs, reduced fuel consumption, and decreased carbon emissions.
5. Supplier relationship management
If you’ve wondered about how your suppliers are performing or want to compare, advanced analytics can analyze supplier performance, identify potential risks, and recommend actions.
Benefits: Improves supplier collaboration and performance.
The way in which AI for supply chains is applied is completely altering the way the supply chain performs for the better.
AI revolutionizing the supply chain
When supply chains are functioning at their optimum the whole industry benefits; and artificial intelligence for supply chains is positioned as an agent to transform the retail industry because it optimizes key supply chain areas of:
- Data analysis
- Customer demand
- Supplier relations
Enhancement in these core functions leads to increased profits, greater efficiency, better decision-making, and higher consumer satisfaction.
If you want to learn more about how you can use artificial intelligence to optimize your entire supply chain–from the factory to the consumer–contact our team and ask for a Demo.