With Congress having to step in at the tracks and the mayhem at ports, it seems that the business world still has to panic. The great supply chain disruption is still a real concern for customers and manufacturers, and we continue to feel its effects. The supply chain chaos is impacting manufacturers regardless of industry. Companies often face problems like spoilage of perishable products, long wait times on raw materials, decline in demand, and loss of customers.
However, the supply chain can be disrupted for more reasons than just the pandemic. Natural disasters, global events, supplier issues, or unexpected changes in demand can all cause sudden problems.
Fortunately, artificial intelligence (AI) and Enterprise Resource Planning (ERP) systems can work to resolve some of these supply chain issues.
Causes for Supply Chain Disruption
When the Covid pandemic began, it was easy to point to problem areas on the supply chain and understand why they were happening. Now, however, these pain points have spread and aren’t necessarily COVID-related. We can try to blame a lack of truck drivers, but what about the issues of the tanker ships being too large to navigate around certain areas and needing to take longer routes? Then we need to factor in the railway strike, too. Perhaps next we could add in that demand has been greater than ever before, and the impact that would have on the materials themselves. And then we need to look at ourselves – is our technology advanced enough, or the data accurate enough to get ahead of these problems?
There isn’t an isolated problem to blame the disruption on.
There’s just a disconnect between current inventory and planning systems that run on fixed lead times and demand forecasting and the real world’s dynamic lead times. This disconnect results in poor decision-making and improper planning by leaders and executives, and it ultimately causes port congestion and other delays.
AI with Supply Chain: Planning Shipments
Real-time inventory visibility helps retailers, manufacturers, and customers to plan accurately. Generally, terminal and third-party logistics companies are given stowage plan information. This is intended to help the first-in, first-out process, making sure that goods life cycle is taken into consideration. AI can support these and other supply chain processes by determining changes in transportation or routes early to ensure on-time and seamless delivery of critical items. Think of it like when your Maps app redirects you while you’re driving down the road. It finds a new route that will shave minutes off your arrival time, and it can even tell you where an accident or traffic issue will cause bottlenecks in the route.
As AI technology grows, more companies will embrace its potential. Between 2017-2023, AI in the logistics and supply chain markets expanded at a compound annual growth rate of around 42.9 percent. When more companies adopt the use of AI, the supply chain disruption will perhaps see its way out.
4 Benefits of AI in Supply Chain
AI is incredibly helpful when it comes to the supply chain. Here are a few of the benefits.
1. Shipment Prediction
The delivery window to customers is expected to be within a few days. However, data shows us that, that window will continue to widen. Even when dealing with unforeseen circumstances like natural disasters, customers expect that companies have contingency plans in order to make delivery dates on time.
To meet these expectations, companies can use AI to examine historical data from vendors and in turn predict on-time, in-full drops early. AI can also analyze and establish deadlines to switch modes of transportation for customers who generate significant profit margins. Overall, AI offers companies full visibility of materials both in-house and from suppliers, allowing your warehouse to be aware and ahead, and making it easy to avoid or eliminate bottlenecks promptly.
2. Quicker Shipping
Thanks to heavy hitters like Walmart and Amazon, customers have gotten used to a speedy delivery time. Most customers expect to see their order delivered within a week from ordering, and considering the amount of customization coupled with shipping delays, that just might not be feasible for some companies. Faster shipping is necessary if companies want to keep and attract customers.
To help with this, AI detects shippers who slow down the supply chain. Companies can remove those slower shippers and replace them with efficient ones who can keep the timeline. AI can also be used to simulate bottlenecks and disruptions. This simulation allows AI to predict shortages based on inventory stock levels or extending lead times. AI allows problems to be solved before they even occur, making sure your customers are never waiting empty-handed.
3. Forecasting That Lets You Break Up With High-Cost Customers
You may be thinking, break up with customers? We need our customers. Of course, businesses do need customers, but Gartner forecasts that 75 percent of enterprises will cut ties with poor-fit customers by 2025. This is due to things like over-customization, custom-made solutions, and the excessive time spent on servicing. Gartner suggests that while these customers may help business in the short term, there are long-term financial consequences to keeping them around.
There are some companies who may not be able to break up with costly clients, but it’s advised that these customers no longer be part of the priority list. To help find these troublesome customers, AI uses sorting algorithms to detect customers who negatively impact the bottom line. AI can then find other opportunities for improvement to that bottom line.
In addition to letting you know which customers aren’t really helping your enterprise, AI can also help you avoid losing millions of dollars by continuing to sell products that aren’t in demand. AI-driven forecasting can alert companies to needed changes early in order to help optimize products and profit margins.
4. Increase Profit Margins
AI can help to increase profit margins in a number of ways that deal with your inventory. For instance, AI-powered supply chain management delivers a 65 percent reduction in lost sales due to out-of-stock products. To help keep inventory moving, AI can support the sales team by studying customer habits and identifying upsell and cross-sell opportunities.
How to Use AI to Manage the Supply Chain
Enterprise Resource Planning (ERP) software can help you navigate the disruption effectively. Supply chain disruptions can occur at a moment’s notice. Here’s how you can use your ERP system to manage the supply chain:
- Real-time visibility: With a central database that connects procurement, production, inventory, and distribution, you get instant insights into changes and delays as they occur.
- Inventory management: ERP systems allow your business to determine optimal safety stock levels. If disruptions are anticipated, your team can adjust safety stock quantities to ensure you have enough buffer inventory to meet demand.
- Supplier collaboration: Pull your suppliers into the loop with supplier portals. Portals allow you and your supply to collaborate and communicate and explore alternative sourcing options.
- Altnerative sourcing: Diversify your suppliers via your ERP system to ensure you have a backup in case your primary supplier runs out of materials.
- Post-disruption analysis: Business intelligence software can integrate with your ERP system, or come as an ERP module, to analysis the causes and effects of the period of disruption.
AI with Supply Chain: Is The End In Sight?
Unfortunately, the Great Supply Chain Disruption may continue to wreak havoc for years. Therefore, it’s up to you to protect your enterprise from customer loss due to the supply chain. Using AI technology can give your company the knowledge and visibility it needs to stay ahead of the competition and keep your customers satisfied. For more information about how AI can benefit your current system, reach out to the experts at Godlan. The consultants have years of experience partnering with businesses to enhance their processes and systems via ERP and other technologies. Call 586.464.4400 or contact Godlan today for more information.