One of the most important components of the factory of the future is a connected, smart and highly efficient supply chain. Because there are so many players involved in the supply chain -- including suppliers, manufacturers, distributors, retailers and customers -- there are ample business processes that can be optimized using artificial intelligence (AI).
Insights garnered from advanced analytics can enable companies to anticipate and react to changes in demand, available inventory, environmental conditions, transportation costs, supplier capabilities and customer requirements, ensuring improved productivity and the timely delivery of products and services. In fact, IDC estimates that half of all mature supply chains will incorporate advanced analytics and AI by 2020.
Here are five potential AI capabilities that can make the supply chain more efficient:
1. Virtual Assistants
Chatbots can be used to respond to internal and external inquiries regarding invoices and payment requests. Already used by call center agents to recommend answers to clients’ questions and make upsell and cross-sell suggestions, chatbots can help your business automate the 6,500 hours per year that most businesses spend chasing invoice exceptions, discrepancies and errors.
2. Cargo Sensors
AI systems can be used to detect risks in trade shipping lanes due to weather conditions, and shock-detecting sensors can report back on the status of sensitive cargo. Algorithms are currently being used to predict the cost of oil, which can have a huge impact on shipping costs. Global supply chain managers are currently using sensors to track the exact location of ships, containers and trucks and to adjust routes if necessary. Maersk technicians are able to watch the exact location and analyze operational details of 270,000 refrigerated containers full of perishable goods.
3. Smart Warehouses
AI systems can automate the labor-intensive task of finding items to fulfill orders, including using robots armed with laser-based sensors (similar to technology used in autonomous vehicles) to find the exact location of products inside a store. AI can also be used to determine how to lay out a new warehouse, improve the design of an existing warehouse, update picking methods or optimize staffing levels for busy seasons.
4. Drone Deliveries
Drone deliveries can be faster and cheaper than existing logistics methods, making it worthwhile for delivery companies to find regulatory battles to make drones an accepted means of delivery in the U.S. Amazon launched Prime Air in December 2016 with the goal of delivering goods to customers in 30 minutes or less and has been successfully making autonomous deliveries in the UK. Ele.me, the meal delivery service owned by Alibaba, received approval from the Chinese government to use drones for food delivery along 17 predetermined routes in Shanghai suburbs.
5. Automated Purchasing Agents
AI agents can find potential deals and negotiate the best terms based on preset parameters in the market. A recent analysis by McKinsey predicts that by 2021, AI-based purchasing systems will also be able to draft and distribute an RFQ. They will also be able to receive and rank their responses, and once a contract is signed, the system will monitor to ensure terms and conditions are met. Humans will only need to get involved if a supplier fails to respond.
But there are still IT hurdles that need to be overcome to achieve the perfect orchestration of supply chain partners. ERP systems must have built-in analytics or a seamless integration with third-party systems that perform the data analysis. All the necessary data needs to be collected in a secure way from partners, suppliers and customers. With the added complexity of so many different data sources and dynamic business processes, ERP systems should be flexible to adjust to the fast pace of market change.
However, despite these challenges, given the huge potential cost advantages and improved customer service, it’s only a matter of time before AI is an expected and necessary part of optimizing the supply chain.
