Can You Afford To Avoid AI Integration In Supply Chains?

In an attempt to become more efficient and to gain an edge over others, the global economy today is burgeoning with innovations. The rate of technological advancement is multifold. And those that don’t adapt to this innovation get sacked off in the fight for survival and growth. One such innovation, rather revolution, I would say, is Artificial Intelligence. Here we discuss how we can leverage AI to add value to the long and complex Supply Chain.

The Saga of Supply Chain

If there is one thing that perfectly knits together all the industries into an economy, it is the Supply Chain. An efficient supply chain is the backbone of prosperity in every country. Its impact on national economies is so significant that it becomes an essential determinant of a coherent global economy. All the value chains across the globe are connected so profusely that it becomes practically impossible to terminate any individual supply chain altogether. These value chains exist in almost every aspect of the economy in some way or the other. Keeping that in mind, let’s now talk about supply chains specific to the business domain.

Every business has to manage multiple aspects of the supply chain for the smooth functioning of different business processes. Let’s take the case of a chocolate factory. What decisions have to be made related to the supply chain in this company? Innumerous! Firstly, they have to decide the companies which will source their milk, their cocoa, their wrapping materials, the nuts and dry fruits, and so on. After that, they have to decide who will help them fetch the supplies to their factory along the best-suited route. The critical question here is what quantity has to be ordered and that on what date should it reach the site? This quantity depends on the availability and production targets. So the following question, How much to produce? Which variety to have? In how much time to make? How to get it on the racks of supermarkets and retail shops? What time and what quantity? Also, an essential factor to keep in mind is that all of this must be done by optimizing the cost and revenue, which means choosing a supplier with the least cost. A transport plan with optimized charge. They can not overstock or understock the materials. Both ways, it will increase losses. Also, making quality checks at both ends, i.e., supply-side and sale side, is an important task. The most important question is yet to be asked. When to make payments and nudge for receipts such the working capital is maintained along with the reputation.

AI, The Saviour

The good news is, AI is here to solve this problem. With all its tools like NLP, RPA, IoT, NLG, etc. AI has a tremendous capacity to predict a lot of decisions based on data. In fact,

‘’AI is becoming essential to innovative supply chain transformation. Forty-six percent of supply chain executives anticipate that AI/cognitive computing and cloud applications will be their greatest areas of investment in digital operations over the next three years.’’

(IBM Institute of Business Value)

Getting back to the chocolate factory, let’s see how AI can help us in making decisions.

Demand Prediction:

The demand forecast for chocolates depends on multiple factors. The past sales, dates, weather, economic conditions, supply availability, trends of the market, price of the product, etc. Can a person calculate the demand, correlating so many factors even by using calculators? No. The calculation can become even more complicated when disasters or natural calamities, or health crises like covid hit the world. He will not be able to set up a demand forecast model. But with the use of AI, it’s an easy task. There the NLP technology can understand the data, and the NLG technology can generate reports. The AI engine will then make predictions based on the above findings. And you, the chocolate firm, can precisely predict the number of chocolates they have to produce to meet the demand.

Inventory Decisions:

Keeping inventory has a cost. If overstocking is done, it may lead to loss of supplies due to damage or spoilage. For example, if too much milk is stored, it may get spoiled if not used. If huge quantities of chocolates are stored in warehouses, and they are not moving, it will have unnecessary costs. If understocking takes place, supplies might not be available when production is needed to be ramped up. But, AI will help avoid all such situations. Based on the production data and the demand forecasts, it will tell exactly how much quantity of supplies to buy on which day.


Money is the center of all business activities. A firm might have huge profits on paper but might still be cash strapped if the working capital is not appropriately managed. The AI tool will run algorithms and find correlations and patterns in dates of receipts of payments. The amount of capital required between that time. And consequently, help in accurately determining the dates for payments so that the firm is not cash strapped.

These are just three instances where AI aids the supply chain, but it shows how phenomenally it can reduce human interference in decisions. This reduction is essential because humans don’t have the capacity to process humongous data. And humans can’t be unbiased to factors like the machine can be.

What is your decision?

This is just a snapshot of the embarkment of the AI revolution in the Supply Chain. There is much more magic to come through innovations happening each day. So, AI is here, and it is here to stay. It’s your call now! Do you embrace it now and be an early mover or regret it later when everyone has embraced it, and you have to embrace it for survival. But remember what Gartner has to say before making a call.

“Through 2024, 50% of supply chain organizations will invest in applications that support artificial intelligence and advanced analytics capabilities.”


Implementing AI to your business

When you decide to adopt it, follow the below-mentioned four steps of AI implementation for a smooth transition.

  1. Value Creation Identification and Strategizing a Road Map
  2. Selecting Vendor for the target solution
  3. Implementation and integration with existing systems
  4. Change management, i.e., training of employees to the new environment

Fatal Mistakes to Avoid

People make mistakes with machines and say machines made mistakes. There are chances that errors can occur while using the AI in Supply Chain. One must be super alert for that. The most primary mistake is the incompatibility of systems to integrate with AI technology. If that happens, the AI will become more of a headache for the management than a relief. The second mistake is not having the latest data. AI helps in deciding on the trade-offs based on the data it is fed with. So, if the data provided is not the latest one, then the results should also not be expected to be accurate.

Let your AI journey begin in your Supply Chain

If you decide upon having AI integrated into your Supply Chain system and follow the steps and avoid the mistakes, you can see your efficiencies increase by multi-folds. And your profits soar higher than ever because of optimization of the supply chain.

Wish you good luck on your journey of AI integration to the Supply Chain.

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