A look at how AI can be used to take on—and improve—the optimization of a supply chain.

According to a report by McKinsey, artificial intelligence (AI) could help companies optimize their supply chains and reduce costs by up to 20%. The technology has the potential to transform supply chain management by providing real-time data and insights to decision-makers.

AI can be used to automate and optimize various aspects of the supply chain, from demand forecasting and inventory management to logistics and transportation. By analyzing data from multiple sources, including sensors and RFID tags, AI algorithms can identify patterns and make predictions that help companies make more informed decisions.

One area where AI can have a significant impact is in demand forecasting. By analyzing historical data and current trends, AI algorithms can accurately predict future demand for products and services, enabling companies to adjust their production and inventory levels accordingly. This helps reduce waste and ensures that products are available when customers need them.

AI can also help companies optimize their logistics and transportation operations. By analyzing data on routes, traffic, and weather conditions, AI algorithms can identify the most efficient routes for delivering products, reducing delivery times and costs. AI can also be used to optimize warehouse layouts and inventory placement, reducing the time and effort required to move products around.

One example of a company using AI to optimize its supply chain is Walmart. The retail giant is using AI algorithms to predict demand for products and optimize its inventory levels. By doing so, Walmart has been able to reduce its inventory levels by 7.5% while maintaining a 98% in-stock rate.

However, there are also challenges to implementing AI in supply chain management. One major challenge is data quality, as AI algorithms require large amounts of high-quality data to function effectively. Companies also need to ensure that their employees are trained to work with AI systems and can interpret the data and insights generated by the technology.

Despite these challenges, the potential benefits of AI in supply chain management are significant. By automating and optimizing various aspects of the supply chain, companies can reduce costs, improve efficiency, and provide better service to their customers. As such, it is likely that we will see more companies adopting AI in their supply chain operations in the years to come.

By The Impactlab