Chris Clowes Senior consultant, SCALA
In navigating the ever-growing complexities of global supply chains, AI and machine learning can offer some welcome support. In a survey of supply chain and manufacturing executives, 38% said they expect that AI will be business-critical by 2025. This is compared to just 11% of executives who thought the technology was critical to operations in 2022.
The capabilities of AI are becoming increasingly visible. The ability it has to process vast amounts of data in real time can enable predictive analytics, which can empower supply chain leaders to make informed decisions and mitigate risks proactively. It can also help businesses on their road to net zero. The integration of AI in logistics and transportation can facilitate better route management to reduce costs and environmental impact.
Yet, while AI is a powerful tool, human intuition and oversight remain essential if supply chain efficiencies are to be maximised.
The potential benefits of AI
One of the most impactful features of AI-technology is its ability to improve business forecasting. Traditional forecasting methods often fall short in capturing the complexities of consumers, which tends to lead to over or understocking. However, by using advanced algorithms and data analytics, AI tools can analyse data sets including market trends, consumer behaviour and any external factors that may impact forecasting. This sophisticated system allows businesses to optimise their inventory levels, minimise storage costs and meet customer demands effectively.
A recent example of this is P&G Japan adopting an AI demand forecasting system to better predict product demand in order to boost logistics efficiency. With the supplier aiming to start using the system as early as late 2024, it has goals to cover around 70% of deliveries by 2025. Japan is bracing for an acute driver shortage starting in April as new restrictions will cap overtime work for delivery drivers at 960 hours a year.
Warehouse automation is another area where AI is having a real impact. A recent example of a successful warehouse automation project is The Hut Group achieving an impressive 12-month return on investment (ROI). This automation project has set a new benchmark for the industry. Hopefully as AI technology continues to develop, there will be an increasing number of businesses seeing quick ROI.
AI could also support businesses to reach their net-zero targets. AI can reduce the carbon footprint of companies by optimising supply chain processes. It can identify opportunities for greater energy efficiency in warehouses and optimise transport routes to avoid unnecessary carbon emissions. Machine learning systems can analyse the data being produced across the business to identify any areas that could be streamlined for greater energy efficiency.
In time, the technology may also make autonomous vehicles a reality. Its capacity to make real-time decisions could turn the concept into a viable solution. The Canadian firm Waabi appears to be one of the businesses leading on the development of autonomous trucks. Its simulator ‘Waabi World’ replicates real world conditions to develop the technology. As AI algorithms improve hazard perception and decision-making skills, we may see more businesses successfully trailing the vehicles.
Recognising AI’s limitations
While AI does present some great potential benefits, the technology is not without its challenges. There will inevitably be instances where the technology fails. This is relatively unproblematic when it comes to basic tasks, but customers and suppliers may not be as forgiving when it comes to delayed or missed deliveries at the hands of the technology.
Another challenge is the volume of data required to maximise the capabilities of AI tools. By nature, supply chains rely on various software systems to run operations. However, the consistency of data management and classification between these systems is often lacking. This makes it difficult to develop effective AI models as they require a rich source of data to work. Promisingly, there are AI systems being developed to overcome this challenge, but they aren’t ready for use just yet.
Moreover, there are ethical considerations involved with AI, particularly surrounding bias and transparency. There have been examples of AI solutions presenting biases due to the data it is fed and a lack of transparency in the decision-making process. For businesses considering introducing an AI-system, these limitations must be acknowledged and considered when reviewing its outputs.
Maintaining the human touch
Relationships and connections play a key role in supply chains. This can simply not be replicated by AI technology. Therefore, a balance between technology and the human touch is required.
Global supply chains have faced unprecedented levels of disruption in recent years. This has culminated in labour shortages, fluctuating consumer demand, and supply restrictions. To combat these issues, AI and machine learning systems should be introduced alongside the existing team of industry professionals. People remain fundamental to the success of supply chains due to their ability to problem-solve and make strategic decisions during periods of disruption.
At our annual supply chain debate with industry professionals last year, an impressive 45% of delegates came to the consensus that people will remain key to supply chain success in the future. This might be surprising considering the level of investment and interest in assistive technologies within the supply chain sector. However, considering the disruption that companies have faced in recent years, the strategic decisions made by professionals has allowed some businesses to become more flexible and agile despite pressures.
It is clear that AI has a vital role in improving efficiencies and reducing costs going forward, but the power of blending this with the insight of professionals should not be underestimated.
SCALA’s 21st Annual Supply Chain Debate is taking place on 6 June at the Advanced Manufacturing Technology Centre in Coventry.
For more information, visit: https://www.scalagroup.co.uk/