According to a recent McKinsey survey, 50% of respondents had implemented AI in at least one business area in 2022, up from 20% reported in 2017. In the coming three years, 63% of respondents expect their organizations’ investments in AI to increase. Artificial intelligence (AI), machine learning (ML), and the Internet of Things (IoT) are no longer buzzwords in the world of digitization. Businesses profit in various ways when the three technologies are properly integrated and implemented. For the purpose of this blog, we’re assessing the value this integration accrues for smart supply chains. Here are some crucial advantages in that light:
Decision Making and Strategic Optimization
AI and ML can generate significant insights from enormous amounts of data collected from IoT devices, historical records, and other sources across the supply chain management function. The analyzed data is converted into actionable insights that provide a complete picture of the supply chain. They enable stakeholders to monitor crucial parameters such as inventory levels, order status, delivery progress, and logistics partner performance.
Consider this; logistics teams frequently manage a wide range of complex yet repeatable operations that necessitate vast quantities of data input in order to make the best decisions. In practice, workers frequently need a significant amount of time to obtain the necessary information. However, using AI-powered tools, supply chain specialists can automate the data analysis and get their hands on invaluable operational insights in a matter of seconds. The deal is then sealed by human intuition.
AI and ML increase supply chain visibility by delivering real-time insights into demand and supply levels, supplier performance, equipment throughput, shipment tracking, delivery schedules, and other critical performance metrics. IoT serves to complement this by ensuring that the analytics systems have a steady stream of data to work with.
Warehouse Efficiency
Warehouse management is significant to the efficiency of a supply chain. As it stands, AI can help recognize inventory and order patterns to determine which items are selling and should be refilled first. Besides, with IoT devices, every component of a specific product can be traced from the time it is created until the time it is assembled and transported to an end client.
This way, businesses may foresee requirements for maintenance, manage repairs in advance, as well as prevent unexpected breakdowns, resulting in better equipment uptime and lower downtime costs. Intelligent voice recognition can also be used to improve product-picking efficiency and accuracy, as it can guide workers to the correct items and better coordinate workflow across a warehouse.
Supplier Risk Management
AI and ML can assist in identifying possible risks and weaknesses in the supply chain. The data gathered by tracking the supply chain functions is significant since it allows organizations to customize their own production schedules as well as identify suppliers who may be wasting resources.
ML algorithms can also be implemented to track supplier performance to detect potential risks such as late delivery and product and service quality issues. Through this combined use, enterprises can prevent the risk of disruptions to the supply chain and poor service quality from suppliers. This also helps with decision-making and better negotiating for lower prices.
Predictive Analytics
As outlined above, through the application of AI and ML, businesses can spot bottlenecks, follow the movement of items, and make data-driven choices quickly with real-time insight.
Apart from this, organizations can use AI and ML to analyze historical and real-time data to provide accurate demand projections and anticipate maintenance needs. The resultant insights can be utilized to optimize inventory levels, eliminate waste, and boost customer satisfaction.
More profoundly, by using a combination of AI, ML, and sensor-equipped infrastructure, organizations can:
- Monitor the operating conditions.
- Warn the technicians ahead of potential equipment faults.
- Suggest machine servicing based on wear rather than scheduled service visits based on general manufacturer’s recommendations.
Challenges in Implementing Smart Supply Chains
While the aforementioned benefits are tangible, there are still obstacles in the way of smart supply chains.
Scalability
Supply chain specialists must consider the increasing number of data points and sources as the business grows. These raise concerns such as integrating new hardware, expanding analytics capabilities, and managing an ever-growing data set. Consider the case for computer vision, where an establishment will have to tread carefully after the proof-of-concept (POC) has succeeded to realize the same benefits as were afforded during the POC. If it is not handled properly, the scaling of technology might not prove viable.
So, while AI and cloud-based solutions may be scalable and lower the entry barrier to high-performing supply chains, the entire smart system must be capable of handling substantial data volumes and processing.
Cost Implications
Smart supply chain implementation can incur large upfront expenses, including investments in technological infrastructure, hardware, software, and personnel acquisition. Due to the potential cost and energy required, the operating investment might be rather substantial. Besides, when it comes to updating some of these smart systems components, utility rates may skyrocket, directly impacting overhead costs.
To justify the investments, a thorough cost-benefit analysis and evaluation of the predicted ROI are required. While smart supply chains provide long-term benefits such as greater efficiency and decision-making, organizations must carefully consider the financial implications.
Data Privacy Breach
Because IoT devices collect a large amount of data from a variety of sources, this data can be exposed to privacy violations, unauthorized access, or misuse if not handled properly. Furthermore, there is a risk that AI or ML algorithms will divulge personally identifiable information or make judgments based on sensitive data without sufficient safeguards.
What Should Businesses Do?
Competitive pressures compel enterprises to extract every ounce of opportunity from the expanding market. And that bodes well when we consider that we are on the verge of an evolutionary shift away from simple reactive intelligence towards predictive, adaptive, and continuous learning systems that drive smarter decisions for continuous improvement—all thanks to the integration of AI, ML, and IoT.
However, smart supply chains should be approached on a case-by-case basis, where the organizations evaluate their supply chain priorities, assess their willingness to take risks, conduct a thorough cost-benefit analysis, and carefully consider the financial implications. A viable approach is to partner with an experienced supply chain technology expert like Ascentt to ensure that the organizations can benefit from the digital transformation in a cost-effective way. Contact us to learn more.