Using AI to Overcome the Great Supply Chain Disruption

Ritesh Sutaria
Using AI to Overcome the Great Supply Chain Disruption
Illustration: © IoT For All

The increasing mayhem at ports with no end in sight has caused panic in the business world. It has become a big issue, and the world faces a great supply chain disruption. The inability to supply products on time creates chaos for both customers and manufacturers. Due to supply chain disruption, companies often face spoilage of perishable products, reduction in demand, and non-returning customers. The supply chain issue is not limited to a single sector but is blanketing almost every industry. Let’s look at how artificial intelligence can be used to start tackling these supply chain issues.

Behind the Disruption

Could it be the lack of truck drivers? No, we cannot blame one single thing for the disruption. Issues like lack of advanced technology, real-time data availability, and hesitation toward adopting new technologies contribute to this issue.

The reason behind the emerging challenges in the supply chain is that current inventory and planning systems run on fixed lead times and demand forecasting, whereas the real world functions on dynamic lead times. It results in poor decision-making and bad planning by the procurement leaders and financial executives, ultimately causing port congestion. Leaders must withhold planning initiatives and vigorously manage their shipments to correct this.

Whenever there is a change in transportation medium while shipping goods, long queues emerge, adding to the problem. While it might appear that a new means of transportation can relieve congestion, this is not a real and practical solution. Therefore, choke points cannot flourish without a substantial investment so the port infrastructure limitations are repaired.

Planning Shipments Accurately

Retailers require real-time inventory visibility across their enterprises to plan more precisely. Generally, stowage plan information is shared with terminal and third-party logistics companies exiting the gate as one value chain. It enhances the efficiency of the first-in, first-out process. Artificial Intelligence can support the supply chain in determining changes in transportation or routes early to ensure on-time and seamless delivery of critical items.

Despite AI implementation being new to supply chain management, early adopters are already leveraging this technology. As per McKinsey & Co., companies embracing AI-enabled supply chain management saw improved logistics costs by 15 percent and inventory levels by 35 percent. As AI technology grows, more companies are attracted to it to churn immense benefits from its potential. Therefore, AI in the logistics and supply chain markets is predicted to expand at a compound annual growth rate of around 42.9 percent between 2017-2023.

Use Cases for AI in the Supply Chain

With the increasing popularity of AI, there is a great chance that it can enhance and make the supply chain process seamless. Let’s take a look at some critical use cases:

#1: Shipment Prediction

Customers expect to receive their ordered goods in a few days. Nevertheless, World Economic Forum data reveals that delivery times within the U.S. and Europe will continue to rise. Moreover, the current environment shows us that increased time frames will remain part of the future. In fact, amid unforeseen circumstances like a natural disaster or poor weather, customers expect that companies have a backup for these situations and deliver their orders on time. AI can assist companies in predicting on-time, in-full drops early using past data to know the way vendors fulfill orders. It permits companies to establish deadlines to switch modes of transportation for customers who create the most significant profit margins. In addition, AI also offers full visibility of materials across the entire value chain, making it easy to find and eliminate bottlenecks promptly.

#2: Deprioritize High-Cost Customers

Garner forecasts that 75 percent of enterprises will drop poor-fit customers by 2025. However, some companies might be unable to discontinue the relationship with costly clients. These loss leaders should not be part of their priority lists. It can appear as a big challenge for businesses to detect these customers. With sorting algorithms, artificial intelligence can automatically identify customers at scale who are not good enough for market-share gains and drain prized capacity. Further, AI can find new opportunities for improvement and discover how these opportunities will influence the bottom line.

Without knowing consumer demand, companies often risk selling products that do not show much demand, costing millions of dollars in loss. AI-driven forecasting can support companies in detecting demand changes as soon as possible, permitting them to optimize products for the best profit margins.

#3: Increase Profit Margins

AI-powered supply chain management offers a 65 percent reduction in lost sales caused by out-of-stock products. On the sales side, AI can support the sales team in identifying upsell and cross-sell opportunities for key accounts. Often, companies have very less knowledge of whom they should be upselling. Nevertheless, the sales team continuously gathers data because most sales tasks occur digitally. AI can use this information to support teams selling more efficiently.

#4: Faster Shipping

In a survey conducted by Convey, 28.6 percent of consumers shared that they like to place an order with companies that can deliver products as soon as possible or within a week of the order. This is a really small window of time, which means faster shipping is important if companies want to attract customers. In this instance, AI can also find shippers who slow down the supply chain. Once detected, companies can remove the players who cannot keep pace and replace them with others who are more efficient. Similarly, suppliers can also use AI to create simulations based on bottlenecks and disruptions.  Once the AI identifies that the specific portion of the supply chain is bottlenecked, it can predict when companies can expect a shortage based on inventory stock levels or extending lead times.

When Will We Resolve the Disruption?

It might take years to resolve the Great Supply Chain Disruption. If businesses wish to deliver products seamlessly, they must change their plan. Adopting artificial intelligence technology will equip companies with the important information required to ease today’s supply chain challenges.

Ritesh Sutaria
Ritesh Sutaria - Director, Prompt Softech
Over 20 years of experience in Product Engineering and Leading an Organization. Demonstrable organizational skills in putting together customer-focused teams of high calibre achievers who have delivered remarkable performances.
Over 20 years of experience in Product Engineering and Leading an Organization. Demonstrable organizational skills in putting together customer-focused teams of high calibre achievers who have delivered remarkable performances.