Supply chains, our topic in Chapter 11, are the backbone of successful business operations, but their complex nature comes with inherent challenges. And then there’s Artificial Intelligence. AI has emerged as an important player for supply chain management, offering predictive analytics, real-time data insights and automation capabilities that drive efficiency and resilience, writes Supply & Demand Chain Executive (Aug. 17, 2023).
AI acts to mitigate risks for the supply chain by forecasting potential issues, identifying existing threats and helping decrease response time when confronted with supply chain disruptions. When there is a significant delay in response to a disruption, such as in the case of extreme weather, security events or major accidents, the result can cascade throughout the entire supply chain. Implementing AI throughout the supply chain helps firms to more quickly enact immediate and proactive responses to disruptions.
AI is also making strides in streamlining business processes in supply chains to optimally allocate resources and improve effectiveness. AI’s technology can analyze data to understand business patterns and objectives. Using AI, managers can gain a deeper understanding of business operations, and how operations at each step of the supply chain can directly affect the rest of the supply chain.
Theoretically, advancements in AI will mean less human error, quicker production processes and faster responses to supply chain disruptions. And Generative AI, a new generation of applications and natural language interfaces, will deliver additional context and allow less technical personnel across the supply chain to ask questions that will better inform decision makers.
But Supply Chain Dive (Aug. 15, 2023) takes a cautionary view with these three points:
1. SCM involves strategic decision-making, supplier relationship management and negotiation skills, all which require judgment and expertise. While AI can provide data-driven insights and recommendations, final decision-making requires human involvement.
2. SCM professionals engage in complex negotiations with suppliers, considering factors beyond price, such as quality, delivery terms and contractual obligations. Building relationships, understanding market dynamics and finding mutually beneficial agreements are areas where human skills are crucial.
3. Developing and managing supplier relationships involves trust-building, collaboration, communication and understanding the supplier’s capabilities. Humans are essential in evaluating and ensuring supplier integrity, advocating for social responsibility and strong ethical standards.
Classroom discussion questions:
- What are the advantages of using AI in supply chain decisions?
- Does the article in Supply Chain Dive contradict the one in Supply & Demand Chain Executive?