The Role of Artificial Intelligence in Supply Chain Risk Management

  • 13 February 2024
  • 5 Min Read

“Digitisation will have the impact on supply chains that steam and electricity had on manufacturing,” Joe Terino of Bain—Economist (July 2019).

A case study of an online grocer –“Some 3,000 boxy robots, each the size of a small refrigerator, are scurrying around a metallic chequerboard about seven times the size of a football pitch. Every second or so one halts as a crate of groceries rises up and is deposited inside it. The bot then conveys the crate to a picking station, where a human puts orders into bags. An AI-driven computer system choreographs the bots’ movements. Each travels some 60km a day, helping to bag around 1m items.” –source Economist.

Covering 60 kilometres a day is no mean feat and one of the biggest challenges of manually managed and operated supply chain. The above study proves how with an automated inventory management software, it is easy to accomplish something unimaginable and that too in the shortest possible time period. This is the power of AI-driven supply chain operations.

Digitisation helps in faster prediction, planning and delivery of goods. Till a couple of years back, the West was seen as a slow receptor of this transformation. Industry is now opening towards Artificial Intelligence, as it allows real-time comparing, studying and addressing risks of supply chain. In fact, good news is companies from various industries are ready to embrace technological innovations as they make supply chain much wiser and intelligent by bringing increased predictability, planning, transparency and the delivery speed.

What is Supply Chain Risk Management (SCRM)?

There are multiple factors responsible for risks in smooth functioning of supply chain and then leave management high and dry. Identification of risks is a smart planning as it makes easier for the management to plan ahead. In SRM, risks are both internal and external. Let’s take a closer look on what these can be and how they can paralyze a system.

Internal Factors

  • 1. Inventory Management: Post-pandemic, consumers want the comfort of both online and offline shopping experience. To remain competitive, retailers need to sync their operations and know exactly how much is required for meeting sales velocity being generated from multiple sales points.
  • 2. Supplier Performance: To meet demands, suppliers for business should be in a good condition to provide materials.
  • 3. Warehouse Management: Proper information should be available about deficit or surplus space for storing stocks.
  • 4. Human Resources: No business can achieve target without a dedicated workforce, employees attitude change and it can reflect on SCM.
  • 5. Management: Change of management can also disrupt supply chain functioning.
  • External Factors

    • 1. Demand Complexity: Unpredictable or unforeseen demand can hamper supply chain.
    • 2. Transportation and Logistics: Supply chain risk management team is most effected by transportation and logistics. It is usually handled by 3PL and without synced operations, transparency and continuous coordination, it gets difficult.
    • 3. Inflation: This can also influence supply chain as cost of operation can increase.
    • 4. Geopolitical Issues: Wars as Ukraine and Russia, global crisis as in Srilanka or other similar features can disrupt several movements and increase raw material cost if being imported or exported.
    • 5. Global Economy: Economic uncertainty related with fear of global recession, silences many opportunities. Businesses are scared of stocking inventories and miss market signals.
    • Benefits of AI-Powered Supply Chain Risk Management

      Artificial Intelligence or AI is an intelligent working module. It empowers ease of operation, it can monitor weather and climatic conditions of a region, forewarn about any potential disturbances to transportation and logistics, counsel and show retailers or 3PLs alternate shipping options, reroute and avoids delays in order fulfillment. This is but a singular instance of what AI is capable of achieving for a business. AI with Machine Learning can bring accuracy in demand predictions and influence inventory management for the benefit of the company. The automated technology takes into reference history of data, it is programmed to minutely analyze each aspect of operations before predicting future moves.

      AI-Powered algorithms process complex and numerous sets of data in real-time. It gives insights and provides information for predictive analytics as AI can monitor data coming from multiple sources as weather departments, performance of suppliers, transportation and logistics, warehouse, market trends, geopolitical conditions and economy. The integrated data explores reasons of disruptions, is helpful in accurate predictions and transforming supply chain risk management into business profit.

      1. Real-time visibility: The automated inventory management software or TMS or WMS provide real-time information for processing. This brings alacrity in the business and provides enough time and space for dynamic adjustments.

      2. Collaborative Networks: AI-powered system allows businesses to collaborate with supply chain partners for sharing real-time insights into data. The faster transmission of information through a secure network, brings efficiency in decision-making.

      3. Risk Mitigation: AI leverages proactive and timely approach to risk management. AI algorithms can follow patterns, trends and thus identify loopholes. This provides timely intervention and avoid impending risks to supply chain management.

      4. Intelligent Decision-Making: AI-powered Supply Chain Risk Management alerts management about disruptions and calamities in advance. It prompts several solutions that can be adopted as per business model with certain modifications, if required. AI shares impact of various risk mitigation and leverages management to formulate a strategy which minimizes disruptions while optimizing operational efficiency.

      5. Predicts Market Trends: AI-powered system leverages historical data to study the pattern of market and allows optimization of inventory management operations. It precisely predicts the market demand in future and guides about value addition to old stocks or warehousing stocks to avoid stock-outs or overstocking.

      Advatix Cloudsuite™ AI Algorithm Panacea to Supply Chain Management Risks

      The 3Rs- reciprocate, realign, and reinvigorate. This is Advatix Cloudsuite™ for supply chain management. In this tech-savvy economy, it is a comprehensive package, with an aim to predict, warn and suggest mitigation strategies to keep at bay any impending disruptions to supply chain.