How artificial intelligence technology will change the future of supply chains

Technology is always disrupting and improving the way we manage supply chains—from new wheeled carts strapped to camels on the ancient Silk Road, to today’s ultra-accurate retail replenishment demand forecasting powered by artificial intelligence.

But while these developments continue to push society forward, they are not always welcomed initially. Take barcodes for example.

When bar codes first came into commercial use, skeptical manufacturers had to be convinced to print them on products and hesitant supermarkets to buy scanners. But within a few years, barcoding was widely recognized as transforming the efficiency and accuracy of the entire retail lifecycle.

As business leaders, we must always overcome initial reluctance and take advantage of transformative new technologies. Supply chains that can adapt to external changes, from geopolitics to the environment, are a major competitive advantage in today's volatile economic environment. So, which new technologies can increase speed, support reliability, and increase the resiliency of businesses like yours? Let’s take a look.

IoT and 5G will change visibility

The COVID-19 pandemic has caused an economic slowdown, but now that the worst may be behind us, IoT and 5G can advance if not prioritized Consider the level they would have been at given the pandemic.

The benefits of 5G technology are obvious. It’s 1,000 times faster than 4G and can handle 10,000 times more traffic. It also reduces latency from 10 milliseconds to less than 1 millisecond and increases device connectivity from 100,000 to 1 million devices per square kilometer. Simply put, it facilitates an explosion in the number of devices and applications that can be interconnected simultaneously.

For supply chains, this enables unprecedented levels of speed and responsiveness when tracking the movement of goods around the world. Low-cost 5G chips can collect and analyze supply chain data in real time. 5G-enabled IoT sensors can then be placed at different points along the supply chain, allowing managers to remotely monitor product location, labeling and status and immediately begin planning workarounds if delays or disruptions occur.

5G will also help organizations optimize their operations and minimize inefficiencies, such as using geolocation technology to avoid traffic congestion. By combining 5G with IoT, organizations can ensure that products reach warehouses and shelves at the right time and in the perfect quantity.

Artificial Intelligence and Machine Learning Will Optimize Performance

Another area of ​​technology that promises to revolutionize supply chain management is artificial intelligence (AI) and its subset of machine learning (ML). Remember, it’s important to note the subtle difference between AI and ML: AI enables computer systems to “think” for themselves using mathematics and logic and perform tasks autonomously. At the same time, ML allows the system to “learn” and improve its output based on its experience.

Machine learning-driven supply chains allow organizations to automatically improve their forecasts of product demand over time. This not only improves the accuracy of inventory and inventory forecasts to prevent the “bullwhip effect,” but also opens up new retail opportunities, such as dynamic pricing. Additionally, data models can highlight anomalies in product demand and automatically set up control mechanisms, such as customer purchase limits and additional inventory ordering.

At the same time, with the help of artificial intelligence, menial back-end tasks such as document processing and order picking can be automated, allowing employees to take on more impactful and fulfilling work. AI can also help managers evaluate supplier performance, from pricing to reliability, to further reduce disruptions and strengthen supply chains.

These are not just speculative breakthroughs, either. Research from McKinsey shows that early adopters of AI and machine learning have seen huge success, with “an average improvement in logistics costs of 15%, inventory levels by 35%, and service levels by 65%.”

As costs rise and disruptions escalate, business leaders should strive to leverage the benefits of AI-driven supply chains to prevent faster-moving competitors from getting too far ahead.

Next-generation technologies will future-proof the industry

While supply chains need to become faster, safer, and more resilient, supply chains that are truly future-proof must also be sustainable. As we move towards a net-zero society, greener supply chains will be highly sought after – not least because they can avoid fluctuations in fossil fuel prices and availability, and attract eco-conscious customers, investors and employees.

Luckily, governments are starting to take notice and provide substantial incentives for environmentally friendly purchasing and distribution. The United States recently passed a sweeping energy bill that will invest approximately $370 billion over the next decade in a variety of low-carbon energy technologies. Research already shows the legislation could help significantly reduce U.S. emissions and achieve net-zero goals.

At the same time, the Russo-Ukrainian war and its impact on the flow of oil and gas to Europe may lead countries on the continent to follow the United States and invest heavily in sustainable energy.

Quadrupling renewable energy generation and building electricity infrastructure could save the EU more than $1 trillion by 2035, with additional benefits for climate, health and energy security, research shows. Similarly, the UK’s energy security strategy sets out how the country will use renewable energy to ensure that up to 95% of electricity is low carbon by 2030.

Currently, the cost per watt of electricity obtained from solar and wind energy is comparable to that of fossil fuels. But if green energy investments succeed, we could see independence from fossil fuels, revolutionizing sourcing, operations and excessive waste in supply chains.

Meanwhile, other emerging technologies are giving us glimpses of incredible futures. Ten years from now, will AI even be able to engineer living organisms? A research team of roboticists and scientists has shown that it's certainly possible. Innovation is always just around the corner, and it’s our responsibility to be ready for whatever technology may come next to our supply chains, businesses, and lives.

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