Creating Value in Supply Chain Management (SCM) using Artificial Intelligence (AI)
Artificial intelligence (AI) has the potential to create value in various sectors by enabling automation, optimization, and insights that were not possible before. Supply chain management (SCM) might benefit from artificial intelligence (AI) in a number of ways that could save costs.
These are a few instances:
Demand forecasting: A crucial component of SCM is accurate demand forecasting. Companies may better estimate demand by employing AI algorithms to assess previous sales data, economic factors, and consumer behavior. By doing this, the possibility of overstocking or understocking, which can lead to increased prices, is diminished.
Inventory optimization: By examining sales trends, lead times, and other parameters, AI may be utilized to optimize inventory levels. By reducing surplus inventory, which uses up capital and raises holding costs, businesses may save money.
Transportation optimization: AI algorithms may be used to optimize the modes, timetables, and routes of transportation. This can speed up deliveries, cut down on transportation expenses, and reduce carbon emissions.
Supplier selection: AI may be used to assess supplier data, including parameters for quality, turnaround times, and cost. This can assist businesses in finding the vendors that provide the most value for their money.
Predictive maintenance: AI algorithms are able to examine sensor data from manufacturing equipment to forecast when maintenance is required. This may save downtime, avert expensive malfunctions, and increase equipment longevity.
Overall, by increasing the effectiveness and precision of SCM operations, AI may assist businesses in cutting costs. Companies may make data-driven choices that optimize their supply chain operations, decrease waste, and increase profitability by utilizing AI-powered tools and analytics.
Major Challenges and Concerns of CEO adopting technologies in Supply Chain Management
Industry 4.0 technologies are already being used in supply chain management by several CEOs. The phrase “industry 4.0,” frequently referred to as the “fourth industrial revolution,” refers to the incorporation of cutting-edge digital technology into supply chain and production procedures. The Internet of Things (IoT), artificial intelligence (AI), machine learning, and robotic automation are a few examples of Industry 4.0 technology.
Industry 4.0 technologies provide several advantages for supply chain management, including enhanced productivity, cost savings, higher quality, and better customer service. IoT sensors, for instance, may be used to track shipments, keep an eye on inventory levels, and improve logistical procedures. Demand forecasting, manufacturing schedule optimization, and product quality enhancement may all be done using AI and machine learning algorithms. Automation by robots may be utilized to speed up and accurately improve assembly and packaging procedures while lowering labour expenses.
Several CEOs are investing in Industry 4.0 technology to stay competitive because they see the potential benefits of these innovations. In their supply chain management, 72% of industrial organizations have already started using Industry 4.0 technologies, and 33% plan to invest in them in the next 3 to 5 years, according to a PwC poll.
Implementing Industry 4.0 technology, however, is not without its difficulties. Businesses must make investments in emerging technologies, modernize their IT systems, and educate their staff on how to utilize them. They must also make sure that the data they are gathering and analyzing is valuable and useful. They must also address issues with cybersecurity and data privacy.
In conclusion, many CEOs have already begun to invest in these technologies to obtain a competitive edge in their respective sectors, even if the adoption of Industry 4.0 technologies in supply chain management is still in its early stages.
How AI is changing Supply Chain Management in ASEAN countries
Artificial intelligence (AI) creates new opportunities and challenges in supply chain management (SCM). In ASEAN countries, AI is used to streamline processes, reduce costs and improve decision-making. However, there are also concerns about data security and the impact of AI on jobs. Therefore, let’s look at some of the opportunities and challenges of using AI in SCM in ASEAN countries.
Opportunities
One of the biggest opportunities that AI brings to SCM is the ability to automate tasks. For example, automated machine learning can identify patterns in data sets. This can predict demand, plan production schedules, and optimise routes. Automation can also improve communication between different parts of the supply chain. For example, AI-embedded Robotic Process Automation (RPA) streamline and automate documents and related processes, and chatbots can provide customer service or track shipments.
Another opportunity that AI brings to SCM is the ability to make better decisions. AI can quickly analyse large amounts of data and identify trends humans might miss. So, for example, AI can be used to predict consumer behaviour, assess supplier risk or forecast demand. This information can then be used to decide pricing, inventory levels or which suppliers to use that transit from “Push” to “Pull” supply chain strategy; this leads to cost savings and real-time strategic reactions.
Challenges
One of the challenges of using AI in SCM is data security. SCM relies on sharing data between different parts of the supply chain. If this data falls into the wrong hands, it could be used for malicious purposes such as fraud or theft. Another challenge is that AI is still a relatively new technology, and skilled workers need help to develop and maintain AI systems. This shortage could lead to higher costs as businesses compete for scarce resources.
Another challenge related to using AI in SCM is its impact on jobs. This is because AI can automate tasks that human beings have traditionally done. This could lead to job losses in the short term as businesses seek to cut costs by using more machines instead of human workers. However, new jobs will likely be created as companies adopt more AI that replaces repetitive work with higher cognitive activities.
For Small & Medium Size Enterprises (SMEs) to adopt AI, which can be daunting but not impossible.
Conclusion
The application of artificial intelligence (AI) is creating new opportunities as well as challenges in supply chain management (SCM). In ASEAN countries, AI is used to streamline processes, reduce costs and improve decision-making. However, there are also concerns about data security and the impact of AI on jobs. Overall, the benefits of using AI in SCM outweigh the challenges. Still, businesses must carefully consider how they implement AI into their operations to reap all the rewards by considering the benefits versus the return on investment in the long run. Doing it right will allow ASEAN to level its capability and move up the Global Value Chain (GVC) in the coming decades.
Watch Colin Koh at the AI Asia Expo as he talks about the opportunities and challenges of using Artificial Intelligence in Supply Chain Management, some of the technologies that will be deployed and different ways of managing them.
Written by Colin Koh, Senior Business Development Manager, Industry 4.0 Consultant. He is a technology evangelist, digital transformation specialist, and highly-respected figure in the ASEAN business community. Colin previously served as the President of the Singapore Industrial Automation Association (SIAA), is a certified IoT specialist and an MIT Sloan School of Management Executive program in Artificial Intelligence and Iot. Colin currently provides mentorship and advisory to companies implementing digital transformation towards Industry 4.0.
This Industry 4.0 Article Series is aimed to empower readers on everything they need to know about Industry 4.0 and its application to the technologies and benefits it can bring to companies and consumers.
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