Supply Chain Management
Leveraging Artificial Intelligence can significantly enhance supply chain management through improving forecasting accuracy. Machine learning models today analyze historical data and real-time information to predict demand, allowing companies to optimize the flow of goods and services, avoiding stockouts, and/or minimizing the costs of unneeded inventory.
Moreover, AI-powered predictive maintenance can help minimize equipment breakdowns and improve overall operational efficiency, reducing downtime and maintenance costs.
AI can also fuel dynamic routing and logistics optimization, helping companies streamline transportation, reduce fuel consumption, and lower shipping costs. The benefits of AI investments here include demonstrable cost savings, a more agile approach to global and local networking, and improved customer satisfaction.
This said, there remain notable challenges to successfully integrating AI in logistics and inventory management. Because many companies struggle to collect, clean, and harmonize data from disparate sources, data quality and accessibility constitute significant obstacles. When dealing with sensitive supply chain information, privacy, accountability, and security concerns are also prevalent.
A third challenge is the need for personnel who can design, implement, and manage AI solutions effectively in real-world situations.
Finally, AI algorithms are rarely transparent, making it difficult to explain the significance of the model’s predictions to management. Striking the proper balance between automation and keeping the human in the loop once again proves critical to the future value of AI in supply chain management.
To make the following articles easier to understand for newcomers, here's a quick overview of what the supply chain is all about.
When we talk about the supply chain, we're not just talking about logistics. Logistics is only one link in the supply chain.
The key players in the supply chain are raw material suppliers, transporters, wholesalers, retailers, and end users.
1.Processes
According to Douglas M. Lambert (Supply Chain Management: Processes, Partnerships, Performance, 3rd Edition, 2008), the supply chain includes 8 processes:
Customer Relationship Management;
Customer Service Management;
Demand Management Style;
Order Fulfillment;
Manufacturing flow management;
Supplier Relationship Management;
Product Development and Marketing;
Returns management.
Figure 1 - Material Flows in a Supply Chain.
Source: Small Business Management, ch.11 – Supply Chain Management, Jason Anderson
2.Flows
There are 3 types of flows in the supply chain:
Product flows;
Information flows;
Financial flows.
Financial flows relate to payment schedules, credit terms, and title management.
Product flows refer to the movement of goods. This begins with the transportation of raw materials and ends with delivery to the customer. Product flows also include the return of defective products.
Information flows relate to order management and delivery status.
Figure 2 - Additional Flows in a Supply Chain
Source: Small Business Management, ch.11 – Supply Chain Management, Jason Anderson
All of these processes and flows can be managed and optimized through supply chain management.