Will AI Change The Supply Chain In 2021?

 

In the business world, especially in this day and age, there is no doubt that supply chain management softwares are at the top of the priority list for any large or small business, owing to its ability to streamline processes and enable higher levels of efficiency. Over a year ago, the World Health Organization categorized COVID-19 as a pandemic. Needless to say, the isolation of workers, shutdown of several industries and the shortage of resources have caused supply chains and even businesses as a whole to plummet to never-seen-before lows. While artificial intelligence and machine learning have slowly been penetrating supply chains and enabling staggering business advances for years, their role in supply chain management has never been more crucial than it is in 2021.

While companies are gradually making their way back into their respective businesses, it has not been without their share of obstacles. In a study conducted by Capgemini Research Institute on the impacts on businesses brought about by COVID-19, about 80% reported that their supply chains have been severely negatively affected by the pandemic, with a mere 14% expecting their business to return to normal. While the use of AI in supply chains was already underway with a majority of industries pre-pandemic, AI-based supply chain management is now of utmost importance with regards to streamlining, simplifying and enhancing business operations in the post-pandemic world where consumer demands are constantly on the rise, despite a noticeable hit in personal finance as well.

Impact of AI-based supply chain management softwares on businesses

•  Data Extraction

A very essential branch of artificial intelligence is NLP or Natural Language Processing, a supply chain optimization software that is concerned with interactions between humans and computers and the extraction of actionable insights from large volumes of consumer data. Whether to reach optimal levels of supply chain management or simply for continued improvement, NLP can extract useful information from various channels such as purchase orders, customer chat logs, etc. The pandemic has birthed new, unforeseen patterns in consumer behaviour and NLP is a highly efficient method to analyse, interpret and understand this data for improved demand forecasting and eventually, higher business gains.

 

• Demand Forecasting

 Artificial intelligence has helped drive huge enhancements in the demand forecasting aspect of a business. According to McKinsey Digital, AI-based supply chain management helps reduce up to 30% to 50% in the supply chain. By combining the learnings of historical data with real-time data derived from factors such as demographics, psychographics, buying behaviour, etc., demand forecasting can reach new levels of accuracy and efficacy. In a world hit by the pandemic, with customers having gained a new level of importance in the chain of business and new buying behaviours emerging on a daily basis, demand forecasting on the basis of big data analysis has become the foremost solution to building a sustainable business.

•  Reduced Costs & Pricing

Operational costs can be effectively reduced by applying artificial intelligence and machine learning to supply chains. Unmitigated costs can occur at any point in a supply chain, be it warehouse costs, maintenance and reparation fees, rent, or unused stock. By implementing AI in supply chain management, wastage of resources and operational costs can be brought down to a minimum at various stages in the supply chain, thus allowing businesses to be able to offer attractive prices to a customer that has a wide variety of options to choose from, especially in the digitally-driven world of shopping. Additionally, AI in supply chain optimization softwares can also help prepare business owners for unforeseen situations such as market ups and downs, weather fluctuations, etc.

• Inventory Management

The pandemic has left little scope for errors or mismanagement for businesses now that survival in a highly competitive and digital world has become a priority. AI-based supply chain optimization softwares can enable high levels of efficient inventory management. This softwares make use of advanced algorithms to systematically read and interpret large volumes of customer and market data which can help in accurately predicting inventory requirements. With the use of this data, wastage of inventory can be brought down, demand for various products can be correctly identified, and thus, costs can be reduced at various ends.

AI-led Supply Chain Trends To Look For In 2021

• Stronger Automation

The past decade has witnessed a tremendous increase in AI-based supply chain management and it is only expected to rise further in the post-pandemic business world. AI helps reduce the scope for human errors as well as saves time, thus leading to higher levels of efficiency. However, the use of AI for predicting trends and patterns in the supply chain has increased now more than ever. A Gartner poll has revealed that even during an ongoing pandemic, 30% of organizations planned to increase investments in artificial intelligence.

• Eliminating Information Gap

A survey by McKinsey revealed that businesses that engage in regular collaboration with all entities in the supply chain experienced greater profits and reduced costs as compared to businesses with little or no collaboration. Using supply chain management softwares and real-time systems allows for reduced scope for error, helps bridge information gaps at various levels and speeds up processes.

• Automated Warehouse Technology

AI in supply chain and warehouse management has gained a lot of impetus in the past decade, and with lockdowns taking place all over the globe, reduced manpower has strongly pushed businesses towards automating warehouse management at various levels. These types of supply chain management softwares and tools such as Automated Guiding Vehicles (AGV), drones, blockchain, and other advanced technologies help steer supply chain visibility, cheaper and seamless delivery and reduced wastage, thus leading to higher profits for the business.