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According to a McKinsey study, using AI in demand forecasting can reduce losses due to product unavailability by up to 65%. You too can improve your supply chain with the right tools. Learn how to leverage artificial intelligence to stay ahead of the competition.
How is AI changing the face of supply chain management?
Supply chain management is a complex puzzle. It involves planning, sourcing materials, overseeing production, and coordinating distribution simultaneously. Add to this the increasing complexity of supply chains, demand unpredictability, and constant pressure to reduce costs.
Fortunately, technological advances also offer us tools to tame this process. This is where artificial intelligence comes into play. With AI, you can:
- automate many tedious processes;
- analyze large data sets in the blink of an eye;
- use new information to make better business decisions.
AI also improves other supply chain areas. It plans optimal routes, alerts about possible failures, enhances customer service, and helps make better use of available resources.
In which areas can AI help you?
Do you really need artificial intelligence in your supply chain? Check out the areas where it can make your life easier.
Demand forecasting
Available tools on the market allow you to predict how many products you'll need in stores in each region accurately.
Take Nike, for example. This well-known footwear brand analyzes sales data, market trends, and external factors to more accurately forecast demand for its products. AI-based forecasting solutions helped Nike reduce inventory costs by up to 15%. The giant even acquired several companies and startups like Celect, which specialize in data analysis and AI.
But that's not all. AI can also analyze historical data, account for seasonality, and even predict the impact of sports or cultural events on demand.
Inventory optimization - no more overfilled warehouses
Maintaining the right level of inventory often resembles walking a tightrope. Too much - you lose on storage costs. Too little - you risk shortages. How to find the golden mean?
Walmart uses AI capabilities to analyze sales data, weather forecasts, and local event information. The system predicts the demand for specific products in individual stores. As a result, the chain effectively avoids both shortages and excess inventory.
Logistics and transportation - find the shortest route to your goal
Planning routes and schedules keeps many logisticians up at night, but artificial intelligence can simplify them.
The largest players in the courier market have long been using such solutions. DHL has special tools to analyze traffic, weather, and package specifics. Based on this, it plans the most efficient routes and optimizes vehicle loading. As a result, deliveries arrive faster, and the company incurs lower costs.
AI helps predict potential delays and respond to them. The system suggests alternative routes or modes of transport - ensuring you don't miss the delivery deadline due to unforeseen events.
Warehouse automation
An anecdote circulating on the internet says that in some Amazon warehouses, only one person works, and all the work is done by robots. This is not entirely true, but machines are indeed an important element of logistics in this company.
Intelligent robots in Amazon warehouses move goods, complete orders, and manage inventory. These mechanical helpers work with human employees, significantly speeding up warehouse processes and reducing the number of errors.
AI also optimizes the placement of goods in the warehouse, for example, by placing the most frequently ordered products in easily accessible locations. This further streamlines the order fulfillment process.
Increase your knowledge about warehouse process automation and robotics.
What will you gain by entrusting AI with some repetitive tasks and relieving your employees of them?
- Your operational efficiency will improve - process automation will translate into higher productivity and lower costs.
- You'll better predict what will sell - precise demand forecasts will help you better plan and manage inventory.
- You'll respond faster to market changes - with real-time data analysis, you'll quickly adapt to new conditions.
- Your customers will be more satisfied - products will be more available, and delivery itself will be smoother.
- You'll pay less - significantly reducing operational costs associated with logistics.
- You'll be more competitive - using AI, you can gain an edge over the competition that has not yet implemented these solutions.
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Challenges of implementing AI
Implementing artificial intelligence in a company is an ambitious endeavor that carries a series of complex challenges. One of the more difficult tasks is integrating modern AI systems with the company's existing IT infrastructure, including ERP and SCM platforms. This complex process requires hiring specialists and significant financial outlays.
Investments in innovative AI solutions and thorough staff training are just the beginning. To fully exploit the potential of artificial intelligence, careful data quality and security management is required. Digital transformation also involves profound changes in the way the organization operates and its work culture. Some employees may naturally resist - after all, the risk of being replaced by an algorithm is always a cause for concern. How to overcome it? The only way is transparent communication and training programs.
Also, don't forget about ethical issues and privacy protection, which gain particular importance in the era of Big Data and machine learning. Responsible AI implementation requires clear rules and procedures that ensure respect for fundamental values and human rights in the era of intelligent machines.
How to prepare for AI implementation?
Preparing for AI implementation requires careful planning and a thoughtful strategy. First, you should identify areas where new solutions will bring benefits to your company. The next step is to collect and prepare high-quality data, which fuels AI systems.
If your employees are to efficiently use AI's potential, you should invest in their thorough training. It's good to start with small pilot projects in carefully selected departments. This way, the team will gain experience and confidence in working with new technologies. Then, you can boldly expand and implement AI on an increasingly larger scale.
However, remember that this cannot be a one-time action but rather a continuous process. Be vigilant, constantly monitor the effects, and don't be afraid to optimize processes. Only then will you be able to extract the best from AI.
Do you feel you lack know-how? Then it's worth seeking the support of experts. Partnering with AI implementation specialists in the supply chain is often a bull's eye. Their experience and fresh external perspective can be invaluable.
Examples of AI applications in supply chain management
The company Procter & Gamble uses AI algorithms to analyze historical sales data, current market trends, and external factors. This allows it to accurately predict future demand for its products, enabling better production planning and inventory management.
P&G also uses machine learning to optimize transport schedules. Such dynamic route planning reduces driver downtime.
Another example is the courier company UPS, which implemented the AI-based ORION (On-Road Integrated Optimization and Navigation) system to optimize routes. Analyzing data on traffic, weather conditions, and other factors, ORION daily sets efficient routes for 66,000 UPS vehicles. This way, the company saves millions of dollars on fuel annually.
Artificial intelligence also improves demand forecasting, inventory management, production planning, warehouse automation, and customer service. AI algorithms analyze data from various sources, detecting trends and relationships invisible to the naked eye. This allows for good decision-making in a dynamically changing supply chain environment. Companies that have early implemented AI achieve significant benefits - McKinsey research shows that they have improved inventory levels by 35%, reduced logistics costs by 15%, and increased service levels by 65%.
Start using AI solutions
Efficiently implementing AI-based solutions allows you to gain a solid advantage over the competition. Yes, preparing your company for such a change is a significant challenge, but the potential benefits are truly impressive.
Start with small steps, but don't put it off. Use AI to build an efficient, flexible, and innovative supply chain, and your company will have the chance to become a leader in the industry.
