Spring 2023 Extensiv Supply Chain Scholarship runner up, Noah Walker, is a bright student with a promising future career in supply chain management. Inspired by the supply chain disruptions during the pandemic, he wrote a thoughtful essay on how artificial intelligence can help prevent future supply chain failures.
For those not aware, the Extensiv Supply Chain Scholarship was created to not only inspire fresh and new ideas within the industry, but to find talent as well. In conversations with our warehouse management system (WMS) customers, they shared the difficulty in seeking suitable employees with talented minds. These minds would inspire, create, and lead the future of the supply chain industry. To help the development of our industry, Extensiv created the Supply Chain Scholarship. Our hope is that we can benefit the supply chain industry by finding and aiding like-minded individuals that will lead the future of supply chain and warehousing technology.
Without further ado, here is a future visionary in logistics and runner up for the Spring 2023 Extensiv Supply Chain Scholarship, Noah Walker, and his essay on artificial intelligence and its many possibilities for increasing supply chain efficiency.
Artificial Intelligence Pushing Supply Chain to New Heights
Supply Chain Management has been one of the most talked about topics in the world since the pandemic caused various issues regarding supply, demand, and transportation. With issues arriving during the heat of the pandemic, supply chain leaders looked for solutions that would advance the industry for future generations. One of these solutions is artificial intelligence. Artificial intelligence (AI), “leverages computers and machines to mimic the problem-solving and decision-making capabilities of the human mind” . Yes, the human mind will always be what makes this world go round, but artificial intelligence can help boost humans' skills, making us much more efficient and accurate and creating better ways to solve problems.
Forecasting plays a large role in logistics as people must plan for spikes in demand, scarcity in supply, and unexpected events like the pandemic. With artificial intelligence, predictions can be done much easier, more efficiently, and statistically have a higher accuracy rate. Planning considers massive amounts of data. Data at such a large rate is almost impossible to sort through and makes it very difficult to make strong inferences for the future. With AI, data can be generated at much higher speeds that will help predict various unexpected events and allow companies to be better prepared. As we saw with the COVID-19 outbreak, planning for unforeseen circumstances can seriously impact a company’s bottom line. Predicting demand ahead of time is crucial for inventory management. If inventory runs out before it is sold, this negatively impacts customer satisfaction and company revenue. Companies that can accurately forecast demand with the help of artificial intelligence can adjust their production schedules and minimize the amount of remaining product at the end of each day . This can potentially save massive amounts of revenue and thus becomes a strong risk management tool for inventory management. The prediction becomes possible with the ML model training and activation functions working post the training.
Another form of AI is customer interaction automation. In 2022, roughly 40% of customer interactions were performed without a human agent and instead handled through chatbots . I believe this is only the beginning, as we will see this percentage continually expand year after year. Many large retailers are already using AI to help customers buy their products. Amazon and Alibaba are two examples of companies that are using AI to improve customer experience. For example, shoppers can use voice assistants to order products from Amazon, and they can get recommendations about products to buy from Alibaba from their previous purchases. These examples illustrate the importance of AI for companies that want to create a superior customer experience. AI is an extremely innovative tool that will push companies far beyond human brain capabilities. AI can create an automated reorder system for the warehouses when products are bought directly from voice assistants or chatbots. The data collected from the system increases inventory management and prevents stock-outs from occurring. This aids the supply chain managers to keep efficiencies strong within the warehousing and have inventory supply at an appropriate level.
AI can change the way inventory management is done, where algorithms help companies optimize their inventory levels to avoid wasting money on excess inventory. It can also be used to help with shipping and logistics. Logistics is a complicated process that involves managing the transportation and delivery of goods from manufacturers to distributors and then to retailers and consumers. Most large companies have separate departments responsible for each of these steps in the supply chain which can lead to unnecessary complexity in the process. This can also lead to higher labor costs and inefficiencies in the process . Some companies are using AI to help them streamline their logistics processes and improve the efficiency of their operations. For example, UPS is using AI technologies to improve its distribution operations. Its cognitive load platform predicts and optimizes the company’s delivery routes and schedules to improve efficiency and accuracy. The company is also leveraging technologies such as predictive maintenance to predict and identify potential equipment breakdowns before they occur. This prevents costly downtime and ensures continuous operations of its fleet of vehicles . This type of technology can help predict equipment breakdowns in manufacturing plants and proactively address the bottlenecks. This drives efficiencies and allows employees to address ongoing continuous improvement.
The future has only just begun in the supply chain management field. Artificial intelligence is constantly improving and expanding. Accuracy, efficiency, and speed will be positively impacted, with remarkable benefits to both the company and the consumer. AI is a significant novelty in the supply chain management process and has the potential to provide future impactful benefits across the entire supply chain spectrum. AI is continuing to improve every day and humans are adapting quite well to working with this new technology. As artificial intelligence enhances the future of the supply chain field, it will create better opportunities for innovation and improve the learning of humans to help solve problems more efficiently.
- Santagate, J. (2018, January 25). NextGen Supply Chain: The robots are here. Recently Filed RSS. Retrieved November 22, 2022, from https://www.scmr.com/article/nextgen_supply_chain_the_robots_are_here
- IBM Cloud Education. (n.d.). What is Artificial Intelligence (AI)? IBM. Retrieved November 22, 2022, from https://www.ibm.com/cloud/learn/what-is-artificial-intelligence
- Brady, G. (2017, October 19). 8 fundamentals for achieving AI success in the supply chain. Recently Filed RSS. Retrieved November 22, 2022, from https://www.scmr.com/article/8_fundamentals_for_achieving_ai_success_in_the_supply_chain
- *, N. (2022, April 14). Managing logistics chaos with the next wave of Artificial Intelligence. Inbound Logistics. Retrieved November 22, 2022, from https://www.inboundlogistics.com/articles/managing-logistics-chaos-with-the-next-wave-of-ai/
- Marr, B. (2018, June 15). The brilliant ways UPS uses artificial intelligence, Machine Learning and big data. Forbes. Retrieved November 22, 2022, from https://www.forbes.com/sites/bernardmarr/2018/06/15/the-brilliant-ways-ups-uses-artificial-intelligence-machine-learning-and-big-data/
- Markoff, R., & Seifert, R. W. (2020, May 4). Is demand planning ready for ai? CSCMPs Supply Chain Quarterly RSS. Retrieved November 22, 2022, from https://www.supplychainquarterly.com/articles/1928-is-demand-planning-ready-for-ai