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March 19, 2023

AI for Supply Chain: How Artificial Intelligence is Disrupting Operations and Transforming Business

March 19, 2023

AI for Supply Chain: How Artificial Intelligence is Disrupting Operations and Transforming Business

Mitali Gandhi
Research Executive
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AI for Supply Chain: How Artificial Intelligence is Disrupting Operations and Transforming Business

As the world continues to embrace intelligent automation, the supply chain industry is not left behind. The use of Artificial Intelligence (AI) in supply chain management is fast becoming a necessity for businesses that want to remain competitive in the market. The traditional supply chain management approach is no longer enough to keep up with the increasing demand and supply chain complexity. Supply-chain management solutions based on AI are expected to be potent instruments to help organizations tackle challenges, and an integrated end-to-end approach can address the opportunities and constraints of all business functions, AI can deliver powerful optimization capabilities for more accurate capacity planning, improved demand forecasting, enhanced productivity, lower supply chain costs, and greater output, all while fostering safer working conditions.

The Rise of AI in Supply Chain Management

The use of AI in supply chain management is not new; it has been around for some time. According to a report by IBM, by 2023, the global market for AI in supply chain management is expected to reach $6.5 billion.

However, recent advancements in AI technology, such as Machine Learning and Natural Language Processing, have made it more accessible and easier to use. AI is now being used to improve various aspects of the supply chain, including demand forecasting, inventory management, and logistics and transportation management.

According to a report by Gartner, by 2025, 50% of supply chain organizations will use AI and advanced analytics in their operations and Early adopters of AI in supply chain management saw a decrease in logistics costs of 15%, an increase in inventory levels of 35%, and a boost in service levels of 65%.

Which tells that growth of AI in supply chain management is driven by the need for companies to reduce costs, increase efficiency, and improve customer satisfaction.

Impact of Artificial Intelligence in the Supply Chain

Demand Forecasting

One of the most significant benefits of AI in supply chain management is its ability to forecast demand accurately. AI algorithms can analyze historical data, market trends, and consumer behavior to predict future demand accurately. This allows companies to optimize their inventory levels, reducing the risk of stock-outs and overstocking.

According to a report by McKinsey, using AI to forecast demand can reduce forecasting errors by up to 50%, resulting in a 5-10% reduction in inventory costs.

Supply Chain Optimization

AI can also optimize the supply chain by identifying the most efficient routes for transportation and the best suppliers to work with. By analyzing data from various sources, AI-powered systems can identify bottlenecks in the supply chain and suggest ways to overcome them.

This can result in faster delivery times, reduced transportation costs, and improved customer satisfaction. According to a report by DHL, using AI to optimize supply chain operations can reduce logistics costs by up to 30%.

Warehouse Management

AI-powered warehouse management systems can improve inventory accuracy, reduce errors, and optimize storage space. By using sensors and IoT devices, these systems can track inventory in real-time, allowing companies to respond quickly to changes in demand.

The Benefits of AI for Supply Chain

The benefits of AI for supply chain management are numerous. One of the key benefits is increased efficiency. By automating repetitive tasks and improving accuracy, businesses can reduce the time and resources required to complete tasks, increasing efficiency in the supply chain.

Another benefit of AI for supply chain management is improved decision-making. AI can provide real-time insights that can help businesses make better decisions that are based on data-driven insights. This can help improve the overall performance of the supply chain and reduce the risk of costly mistakes.

AI can also help businesses reduce costs by optimizing operations. By analyzing data and identifying inefficiencies, businesses can make changes that can help reduce costs and improve profitability.

Stats of AI for Supply Chain

- According to a study by McKinsey & Company, AI could potentially generate $3.5 trillion to $5.8 trillion in value annually across nine business functions, including supply chain management.

Another report by Grand View Research estimates that the global market for AI in supply chain management will reach $10.1 billion by 2025, growing at a CAGR of 45.3% from 2019 to 2025.

AI is disrupting supply chain operations and transforming the business landscape. By leveraging AI-powered systems, companies can improve their efficiency, reduce costs, and improve customer satisfaction. As the technology continues to evolve, we can expect to see even more significant disruptions in the industry. Companies that invest in AI for supply chain management now will be better positioned to compete in the future.


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