The Most Promising Application of AI in Supply Chains

The Most Promising Application of AI in Supply Chains

AUTHOR

Vivek Sood

TIME TO READ

minutes 

UPDATED ON

April 24, 2021

The World Of Supply Chain Is Experiencing Its Own Digital Divide

On one hand we have several large global corporations shipping hundreds of thousands of containers a year who can take great pride in their trade volumes and impact on vendors' businesses and global shipping freight rates. Experiencing severe disruptions in their freight movements in the post pandemic and post Suez fiasco era, they  are happy to open up the supply lines again. Their  most important priority seems to be to get their containers on board, and keep the overall freight spend within limits.

Of course, every other company is also affected by the same global events. 

Yet, on the other side of the digital divide are the strategic supply chains players. To be sure, they are experiencing the same supply chain disruptions as everyone else, but the impact is less severe on them for two reasons:

  1. They always had a lot better control over their supply chains because they knew how to
  2. They were better prepared for supply chain disruptions because of their continuing investment in staying at the global frontier of supply chain practice

Those two are also the reasons why they continue to push the thought leadership on where is the next frontier of global supply chain advantage.

Artificial Intelligence comes before supply chain automation

If you have already read our quick notes on supply chain automation, you would naturally ask this question - what comes first - automation or AI?

As we have explained in a lot more detail elsewhere in these articles - between the two AI is the first priority. Supply Chain automation tends to be incomplete and less effective in the absence of artificial intelligence.

There are many questions we get asked about deployment of AI in supply chains. That is natural - with our track record of more than three decades at the global frontiers of supply chain we get asked all sorts of questions about supply chain.

I write this article to answer one of the most important questions on this topic. 

What are the most promising deployment of AI in supply chains?

To answer this question properly we must look at all the possible deployment applications of AI and rate them for the promise they bring to the future of supply chain.

copyright GLOBAL SUPPLY CHAIN GROUP

Take a look at the above holistic picture of the supply chain activity inside any company. It also shows the job titles of the people carrying these activities inside the company. Of course it only covers the business as usual activities, not the business transformation activities related to SCM. We have written an entire article to cover the differences between the business as usual activities in SCM and the business transformation activities in SCM. Be sure to search and read it, if you want clarity on that matter.

I am sure you are already starting to see the potential for application of AI in many of these area. But before we get into the nitty gritty details of supply chain activities I want to show you another view of the same activity pyramid.

No matter what activity we are planning, scheduling or executing, there are a number of time horizons and details that are needed in planning prior to the executing and control after the execution. AI has scope in almost all of these. They key question is where are the most promising applications of of AI ?

To help you work out the answer to this critical question there would be a number of criteria you will have to take into account. What are these criteria for your company? Most companies have some of the following criteria:

  1. Ability to discern the heuristics and algorithms in the decision making
  2. Possibility of turning algorithms into AI
  3. Cost of implementing AI
  4. Potential business impact - timeframe, benefits, synergies
  5. Sources of benefits and their longitivity
  6. Competitive advantage gained from AI, and its durability

There can be many more such factors but in the end we will summarise all of them into three critical and easy to discern criteria - Cost of AI, Benefit, Room for AI. 

And these are the factors that can be used to rate the attractiveness of AI for SCM. If you are conducting such an exercise in your business use the following table:

Every business is different so the ratings in the orange section will differ for your business. The results will also depend on the knowledge base of the people who attend your workshop. However, when we carried out this exercise in a few business we noticed that CONTROL was an area with a big room for AI and high amount of benefits at the present time. 

Be sure to note down your views and results in the comments below.


Copyright - These concepts, frameworks and ideas are copyright of GLOBAL SUPPLY CHAIN GROUP from the time of their creation. Do NOT copy these without permission and proper attribution.

Notes:

  1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, webinars, videos and training. You may have heard us say the same thing before.
  2. The date shown above the article refers to the day when this article was updated. This blog post or article may have been written anytime prior to that date. 
  3. All anecdotes are based on true stories to highlight the key points of the article - some details are changed to protect identification of the parties involved. 
  4. You are encouraged to comment below - your real identity and email will not be revealed when your comment is displayed.  Insightful comments will be  featured, and will win a copy of one of our books. Please keep the comments relevant, decorous and respectful of everyone. All comments represent opinions of the commentators.

Vivek Sood

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