The Role of AI in Supply Chain and Logistics

Ten years ago, AI development was just a work of fantasy, there were just a few apps and robots. However, today, AI is changing the world. Recently, the supply chain discovered the value of AI. Artificial intelligence is not magic for all supply chain problems, but it has the power to solve many problems in the SCM industry. Therefore, companies that can invest and set up their businesses to take advantage of the potential of AI in the supply chain can get a clear head start. 

At this point, every business must act quickly. They need to evolve with time, Luis Gonzales, the head of Becel's global supply chain, tells CGT "The supply chain is getting more complicated day by day. The only way for companies to stay in business and quickly adapt to these changes is to perform tasks and change physical tasks where people make decisions.” 

But how does this happen? 

In this way, does AI help to move things in the real world? Well, that's what we are looking for today. Let’s explore how companies implement AI in today's supply chain.    

AI in supply chain management

In simple words, the supply chain sources, produces, and delivers products. It depends on the type of industry. For example, in the pharmaceutical industry, the supply chain focuses on sourcing the raw materials to deliver the final product. Logistics, also called shipping, are the activities in the supply chain that focus on delivery and transport. 

For example, how do raw materials reach from one point to another and finished products reach the customer most efficiently? This is just because of logistics. But how does AI find its way in all this? 

Intelligence that does not belong to humans is called artificial intelligence. This makes it different from normal computer programs. AI collects a large amount of data and uses it accordingly to determine what will happen next. In a world with more data, this is now possible in many fields. Such as logistics and supply chain management. 

Many companies use AI for supply chain in different ways. For example:

• Demand Projections and Plans:

Companies can plan and determine what kind of goods they need by combining different historical data.  

• Risk Management:

AI can use a large amount of data to help people make plans and avoid risks like bad weather, repair downtime, and problems with quality control. 

• Supplier Selection:

AI can look at the past performance of the supplier and analyze how reliable they are. And give recommendations to find out the specific supplier. 

How AI will change the supply chain

Larry Sherrod, senior manager at Peloton Consulting Group, says that “AI will change everything about how we manage the supply chains.”

Although the mobile App development of AI in the supply chain needs money, it can also change the supply chain by making it stronger, more trackable, and more collaborative. Peters says that: 

“Not just technical users understand the AI development services, but anyone can understand it because it can make technology that is used to solve the problems of the supply chain.” 

As a result, people who work in the supply chain will be able to make decisions based on data that is understandable and easily accessible. It will also change the jobs of suppliers because they want to work very smartly, not barely.

Benefits of AI in Supply Chain 

Here are some benefits of using AI in logistics and the supply chain.

Increased Efficiency and Cost Savings:

AI-based supply chain management and logistics can help companies do their work in the lowest cost and fastest possible way. For example, inventory management and transportation are tasks that are repetitive. On these tasks, people spent hours. On the other hand, AI does these tasks rapidly. So that humans are free to focus on more cognitive work. This improves the efficiency of workers. 

Increased Transparency and Visibility:

When supply chains go around the world, there is a chance to lose things. Deliveries are lost and misplaced. The wrong shipping label is put on the wrong container. Eventually, it slows down logistics. AI can solve this by accumulating enormous logistical data in a way that people can easily understand. Shipping link to includes the process of sending things, where they are stored, expected delays and shortages, and much more. 

Improved Customer Satisfaction:

As we know, today’s customers want things delivered instantly. It is the same for a B2B client as it is for an individual. AI ML in supply chain provides the solution to this problem for logistics companies. That is not even talking about chatbot custom services that can answer questions very quickly instead of waiting for hours on hold to talk to a busy person.   

Disadvantages of AI in the Supply Chain

Everything in life has bad points, and AI is no different from these things.

• Data Privacy and Security

One of the biggest challenges of using AI in any industry is data handling. AI uses massive data for accurate results. It is essential to think carefully about where the data for AI solutions comes from; only humans can do this. 

We should take extra care of your data. There is also an issue of security. It is possible for AI to accidentally share private information if it processes that data. The hacking of AI systems is also possible. Some of these are adversarial machine learning attacks, in which the system is given information about changing incomes and the AI gives the wrong results. 

• Job Losses

A lot of people are afraid that AI will take their jobs. No doubt, this fear is real. McKinsey says that at the end of the era, AI could take between 400 billion and 800 billion jobs. As more jobs are automated and fewer people are needed to do them, companies in need of more money will reduce their staff. But keep in mind that this is not a new thing. Between the 18th and 19th centuries, we saw a huge number of workers being replaced by machines. We can expect the same thing with the AI revolution. 

• High Costs

Although AI is an amazing tool, it costs something. In fact, according to Analytics Insights, a custom AI alone could cost anywhere from $20,000 to $1,000,000. AI for supply chain solutions is a bit expensive for many companies.

Uses of Artificial Intelligence in supply chain management 

• Many supply chain AI companies have been researching solutions to improve workflow efficiency and the challenges involved in managing the movement of goods and transferring them from companies to the end customer.  

• According to Gartner, a research and data insight company, 50% of supply chain companies are expected to invest in AI and analyze the solution by 2024. 

• Looking back at how the trend began, the role of AI in supply chain management was sharply shaped in 2020 due to COVID-19. Global health crises disrupted economies, slowed industries, and caused irregular consumer behavior. The outbreak of the virus posed new problems for supply chain organizations. 

• The rapidly changing situation has left many supply chain operators facing a new level of uncertainty since the supply chain management has proven insufficient to deal with such crises. 

• This situation forced supply chain organizations from different industries to look for innovative tools and technologies. As a result, many companies are starting to use AI for supply chain optimization because it can change things completely. 

Challenges of AI in The Supply Chain and Logistics

Data Access and Quality 

As we know, AI is only beneficial with data. This information could be the hardest part of using AI in the supply chain. We already know that old methods were not made to work with AI. For that reason,  a lot of businesses will need unique ways to make their recent information available to AI solutions. Furthermore, this information must be in a format that AI can understand and use efficiently. 

Resistance to change

Some people believe that AI is scary and, consequently, are against using it. To be precise, two types of people are against supply chain AI use cases, Philosophical and Practical. 

Practical people are afraid that AI will take their jobs. These individuals are those who work in creative industries and perform paper-based tasks, which AI can do automatically.  

Philosophical people are against AI for moral and basic reasons. These people think that AI is a mindless copy of human skills. Some people think that AI hurts people more than it helps them. No matter what their reasons are, these people will speak against using AI on a large scale. 

Integrate With Previous Systems

A new problem, not just with AI but with all new technologies, is that old systems were made to work with technologies available at the time. Because of this, AI will have trouble merging with hardware and software already existing. Most of the companies have a hard time because they can't tear down their systems and build new ones. 

Too much data is stored in their current systems, and it would be expensive to move it all to a new one. So many companies will have to work together, making unique software and fixing a lot of problems, before AI can be merged. On the other hand, this will give a chance to new companies and start them up to build systems from scratch with AI. 

The Future of AI in the Supply Chain

AI is still a new tool, and it is the beginning of many things that will happen as it grows up. At the end of the year, big changes are expected.

AI could completely change logistics and supply chains by making them more efficient and reducing costs. By using artificial intelligence in the supply chain, we can completely change how things move, handle, and distribute in the future. Automation, predictive analytics, and other AI-based technologies can improve a lot of supply chain tasks. 

These changes may make it easier to predict demand, track shipments in real-time, and find the best route for transportation. AI can lower costs, find inefficiencies, and make companies more responsive to customers. The fusion of  AI and supply chain makes them more efficient and better able to adapt to the changing needs of the modern market as it grows. 

Conclusion 

AI is revolutionizing supply chain management across the world because of its cost-saving ability. Artificial intelligence in logistics and the supply chain has several benefits. It can enhance efficiency, optimize routes, predict demand, and improve inventory management. Overall, AI helps streamline operations and drive cost savings in the supply chain and logistics industries.

Do you want to know more about AI in supply chains and logistics? Let's share your ideas here.