AI– Artificial Intelligence is transforming the world. It’s truly unimaginable what AI is doing across different fields and industries today. Through AI, you can design a painting with a click. You can edit an image with a click and even convert this blog to your native language within a click. The possibilities are endless.
AI has been the talk of the town since the launch of ChatGPT, but it existed way before that. Many businesses utilise machine learning (a subset of AI) to streamline their operations. It has been used to solve the complexity of supply chain management and bring resiliency.
How? In this blog, you’ll learn exactly how machine learning applications improve supply chain resilience.
Let’s begin by understanding the relationship between ML and supply chain resilience.
Machine Learning and Supply Chain Resilience
Supply chain resilience is the capability of a supply chain to prepare for unexpected disruptions, adapt to the situation, and recover quickly by restoring operations to their original or better state. Resilient supply chains can predict potential disruptions, adapt to any changes, and swiftly bounce back to normal, ensuring a continuous flow of products and services to the customers.
However, in an era of growing uncertainties, achieving such resilience can be a Herculean task. This is where Machine Learning enters the scene, offering businesses the resilience they need to effectively navigate through the turbulent waters of the modern supply chain ecosystem.
Here are 7 machine learning applications in supply chain resilience
Demand Prediction and Optimisation
By leveraging historical data and employing sophisticated ML algorithms, organisations can garner a deep understanding of their demand dynamics, make informed decisions, and optimise their operations accordingly.
For instance, an algorithm might identify that the demand for a particular product tends to spike in the summer months or that sales of a certain item increase whenever a related item is on sale. These are insights that might have gone unnoticed without the help of machine learning.
Supply Chain Risk Management
The essence of supply chain risk management lies in understanding potential vulnerabilities and disruptions that could affect the smooth functioning of the supply chain. These could range from vendor disruptions and logistics failures to market fluctuations and unforeseen global events.
Traditional risk management approaches might not capture the full spectrum of these risks, given their dynamic and complex nature. That’s why businesses leverage machine learning, bringing a new dimension to supply chain risk management.
Machine learning algorithms can model multiple scenarios, assess potential impacts, and calculate the probability of different types of risks. This predictive capability of machine learning allows businesses to anticipate risks before they manifest and prepare for them proactively.
Cost Reduction and Improved Response Times
Time is as valuable as money, and in supply chain management, the two are intrinsically linked. Any opportunity to reduce costs and improve response times is an invaluable asset for businesses. By leveraging machine learning, companies can achieve these objectives and thereby enhance their supply chain resilience significantly.
In the traditional supply chain, substantial time and resources are spent managing demand-to-supply imbalances. With machine learning, companies can automate many of these processes as well as help them by optimising the routes for the delivery fleet.
In supply chain operations, warehouses function as crucial nodes, facilitating the smooth flow of goods from manufacturers to consumers. Effective warehouse management is, therefore, paramount for maintaining supply chain resilience.
Machine learning is instrumental in transforming the age-old practices of warehouse management. By analyzing patterns, ML algorithms can generate invaluable insights for inventory management and warehouse operations, bolstering the overall resilience of the supply chain.
Reduction in Forecast Errors
Predicting outcomes has always been challenging because it involves multiple variables and their dependencies. However, machine learning (ML) can analyze large data sets and provide a revolutionary solution to this problem. By reducing forecast errors, ML can help improve the resilience of supply chains.
Supply chains generate huge amounts of data from multiple sources, including inventory records, sales history, market trends, customer behaviour, and even external factors like weather or economic indicators. This data is rich and highly complex, but machine learning excels in taming this complexity. ML can analyze and identify hidden patterns and trends using sophisticated algorithms, leading to more accurate forecasts.
Advanced Last-Mile Tracking
Last-mile delivery is one segment that stands as both a challenge and an opportunity. It’s a critical component that directly affects customer satisfaction and a company’s reputation. With the advent of machine learning, we’re witnessing a revolutionary transformation in last-mile tracking, making it more efficient, transparent, and resilient than ever before.
With vast data sets, including traffic conditions, weather patterns, and historical delivery data, ML algorithms can identify the fastest and most efficient delivery routes. This not only ensures on-time deliveries but also reduces fuel consumption and vehicle wear and tear, leading to cost savings and sustainability.
Improving Reverse Logistics
The process of managing returns and exchanges has become a pivotal element in a company’s supply chain. Many firms perceive it as a burden, mainly due to the cost and complexity associated with processing returns. However, with machine learning, businesses now have a unique opportunity to transform this challenge into a competitive advantage.
Moreover, machine learning can dramatically streamline the reverse logistics in the supply chain itself, which is often fraught with inefficiencies. By utilising predictive analytics, machine learning has the ability to accurately predict return volumes and pinpoint any potential bottlenecks in the process. In essence, it turns the return process into a well-oiled machine that offers both economic and operational benefits.
Examples of Companies Using Machine Learning to Enhance Their Supply Chains
Amazon, a global retail giant, has embedded machine learning at the core of its supply chain. The company employs machine learning in several facets of its operations, such as:
Demand Forecasting: Amazon uses machine learning algorithms to accurately predict product demand. These algorithms analyze historical sales data, search queries, and other relevant factors like seasonal trends to make precise predictions.
Warehouse Management: Machine learning also plays a pivotal role in Amazon’s state-of-the-art warehouse operations. Amazon deploys intelligent robots, guided by machine learning algorithms, to automate its warehouse operations, including sorting, packing, and moving items.
Delivery Optimisation: The company uses complex machine-learning algorithms for route optimization. These algorithms consider variables like traffic patterns, weather conditions, and delivery locations to determine the most efficient delivery routes. This helps Amazon ensure timely last-mile delivery.
Microsoft, one of the world’s leading technology companies, also leverages machine learning to improve its supply chain operations:
Microsoft employed machine learning to create ‘digital twins’ of its supply chain. Digital twins are virtual representations of physical systems that enable real-time monitoring and what-if analysis. This allows Microsoft to optimise its supply chain operations, improving efficiency and mitigating potential issues before they arise.
With the world becoming increasingly interconnected, it’s paramount for businesses to adapt, innovate, and fortify their supply chains. As we have seen, machine learning offers an exciting path to tread on this journey, promising improved resilience, efficiency, and sustainability in logistics and supply chain management. Therefore, it’s not just about surviving in the competitive market landscape; it’s about thriving and staying ahead of the curve, for which machine learning provides the necessary thrust. Let’s embrace it and witness the transformation it brings to supply chains across industries.
Why is machine learning important in the supply chain?
Machine learning is important in the supply chain for several reasons.
- Machine learning can optimise inventory management by analyzing various factors such as customer demand, lead time, supplier performance, and production capacity.
- Machine learning can be used to monitor and analyze sensor data from equipment and machinery in the supply chain.
- Machine learning can optimise the design and configuration of supply chain networks.
- Machine learning can improve the efficiency of logistics and routing processes.
How machine learning can be used in logistics?
Machine learning can be used in various ways to enhance and optimise logistics operations. Here are some use cases of how machine learning is utilised in the logistics industry:
- Machine learning algorithms can analyze patterns and anomalies in data to detect fraudulent activities in logistics operations, such as unauthorized access, tampering, or theft.
- Machine learning can assist in evaluating and managing supplier and vendor performance by analyzing data on criteria like quality, delivery time, and pricing.
- Machine learning can optimise warehouse operations by analyzing data on factors like inventory levels, order patterns, and resource allocation.
- Machine learning models can analyze data to provide insights for optimizing pricing strategies and improving profit margins.
How is machine learning used in procurement?
Machine learning is widely used in procurement to optimise and streamline various processes. Here’s how machine learning is used in procurement:
- Machine learning algorithms can analyze vast amounts of supplier data, including performance metrics, prices, delivery times, and quality.
- Machine learning can analyze market data, supplier quotes, and historical pricing trends to optimise pricing in procurement.
- Machine learning can be utilised to assess and mitigate risks in procurement processes.
- Machine learning can automate contract management processes by extracting key information from contracts, such as terms, conditions, and pricing details.