In an era where speed, efficiency, and innovation are key competitive differentiators, businesses are increasingly turning to artificial intelligence (AI) to support their operations. While previous iterations of AI have been present in the supply chain for many years, the newest advancement in this technology is rapidly gaining steam. Generative artificial intelligence is a class of AI that’s capable of creating entirely new content, such as text, images, and simulations. While the full potential of generative AI is still developing, it’s poised to transform the way inventory-based businesses function.
In this article, we’ll explore the implications of generative AI in supply chain businesses, as well as the benefits of adopting this new technology.
What is Generative AI?
To understand the role of generative AI in supply chain management, it’s important to first dive into what generative AI is in general. Generative AI is a subset of artificial intelligence focused on creating new data and content based on patterns and structures it has “learned” from pre-existing information. Unlike traditional AI, which primarily analyzes data, generative AI has the unique capability of generating entirely new outputs that were not part of its original training data, thanks to machine learning technology. Generative AI can produce everything from creative works to in-depth assessments of massive datasets.
AI is already making a significant impact on the way we work. Research shows that 40% of global companies currently use AI and that in the next five years, 23% of global jobs will change in part due to the impacts of artificial intelligence. And now, generative AI is shaking things up even more.
How is Generative AI Used in the Workforce?
Generative AI is increasingly being integrated into the workforce across nearly all industries, revolutionizing everything from the way tasks are performed to how teams collaborate.
Here are some of the key ways that generative AI is being used in the workplace today:
1. Automating routine tasks
Generative AI is being used to automate repetitive or time-consuming tasks, allowing employees to focus their efforts on more complex or strategic activities. For example, AI models can draft reports, contracts, and other documents by pulling info from various data sources, significantly reducing the time spent on manual writing and editing.
2. Enhancing decision-making and problem-solving
Generative AI’s ability to simulate outcomes and generate optimized solutions makes it a powerful tool for decision-making. For example, it can process large datasets to identify patterns and trends and offer predictive insights that help leaders make informed decisions.
3. Inspire creativity and innovation
With the help of AI, employees can unlock new levels of creativity and innovation by producing ideas, content, or prototypes. For example, generative AI models can assist in brainstorming ideas, generating drafts or samples, and creating different variations of ideas.
As generative AI becomes more sophisticated and specific, its role in different industries will only continue to expand.
Key Applications of Generative AI in Supply Chains
While still new, generative AI in supply chain management is proving to be incredibly useful. It’s already addressing complex challenges and optimizing processes, and data shows us that more than 60% of professionals in supply chain organizations are already using generative AI with a very high degree of expertise.
Here are some of the key applications of generative AI in this field.
1. Demand forecasting and inventory optimization
AI-powered demand forecasts can be used to avoid stockouts and overstocking, thanks to their high degrees of accuracy. That’s because generative AI can generate predictions based on comprehensive data, such as historical sales data, market trends, and external factors (like seasonality), which can lead to more accurate forecasts. Plus, AI-powered tools can even suggest recommendations for inventory optimization (such as ordering more of something or moving stock between locations).
2. Route and logistics improvements
Logistics, particularly in transportation and delivery, are often costly and can account for up to 45% of a business’ total expenditures. Generative AI can significantly improve efficiency in this area in a few different ways. Mainly, AI can generate optimal delivery routes, thanks to its ability to analyze factors like traffic patterns, fuel costs, and delivery schedules, to create more efficient routes that are faster and cheaper. Generative AI can also continuously analyze real-time data (such as weather conditions and road closures) to dynamically adjust routes.
3. Supplier decision-making
Generative AI can also support smart decision-making when it comes to a business network of suppliers and partners. For example, it can analyze data on supplier performance (like costs, lead time, and on-time delivery rate) to come up with recommendations for the best supplier partners. It can also help identify alternative suppliers and even simulate potential outcomes of different sourcing strategies.
4. Supply chain resilience support
Risk is inherent in supply chains, which are vulnerable to things like natural disasters, geopolitical events, and supplier failures. However, generative AI can help support supply chain resilience. For example, it can create advanced scenario models, easily generating multiple “what if” situations,” to simulate the impacts of potential disruptions. This allows businesses to plan for contingencies and come up with proactive measures. Also, generative AI is incredibly useful for real-time risk detection. By analyzing large amounts of data in real-time (such as weather reports and customer ordering habits) generative AI can detect early signs of disruptions, alert decision-makers, and even suggest plans to help mitigate risks.
5. Production and process improvement
Generative AI can also help improve efficiency by optimizing processes and production schedules. For example, AI can generate optimal production schedules by analyzing data from demand forecasts, equipment, and labor, ensuring factories operate at peak efficiency. This technology can also help design and optimize workflows, to create processes that minimize bottlenecks and waste while maximizing output.
6. Sustainability and waste reduction
As inventory-based businesses prioritize sustainability, generative AI can play a role in creating greener, more sustainable supply chains. For example, AI models can generate plans that minimize resource usage across the supply chain, helping to reduce the environmental impact. Also, by optimizing processes and improving demand forecasts, generative AI contributes to more sustainable operations, which reduce waste.
Benefits of Adopting Generative AI in Supply Chain Management
The adoption of generative AI in supply chain management is transforming the way businesses operate, and it also has many powerful, tangible benefits. Here are just a few of the key upsides of incorporating generative AI into supply chain management,
- Cost reduction: One of the most significant benefits of generative AI is its ability to reduce costs across several areas. For example, accurate demand forecasts can reduce costly overstocking, and AI-generated delivery routes can reduce transportation expenses. Research has found that generative AI has the potential to deliver hundreds of billions of dollars of value across all industry sectors.
- Improved efficiency and productivity: Generative AI enhances the overall productivity of supply chain operations by streamlining processes and eliminating inefficiencies. Remember, generative AI can analyze vast amounts of data in real time, enabling rapid responses to changes in demand or disruptions. It can also automate routine processes and optimize workflows.
- Enhanced flexibility and adaptability: Generative AI provides businesses with the ability to adapt to ever-changing conditions, and to be flexible and resilient. For example, AI-powered forecasts enable agile inventory management, where companies can adjust inventory levels based on real-time market demand.
The benefits of adopting generative AI in supply chain management are far-reaching. From cost savings and improved efficiency to enhanced sustainability, companies that embrace the potential of this technology will be best poised for long-term success.
StockIQ: Your Partner in AI-Driven Supply Chains
AI is revolutionizing the way inventory-based businesses function. If your business is ready to embrace AI-driven emerging technologies, then StockIQ is here to help. StockIQ is supply chain management software that’s both advanced and user-friendly. It incorporates AI and other next-generation technologies to allow you to control inventory, simplify ordering, and improve forecasting.
Find out how StockIQ’s AI-driven tools can enhance your supply chain management practices by contacting us today or requesting a StockIQ demo.
