Leveraging AI to Improve SCM

Amin Mevawala, Regional Director of Supply Chain, APAC, NCR CorporationInvestment in AI will soon be a necessity for all businesses aiming to be customer centric. Consumer behavior is changing, and they demand product and services to be available 24x7 across mobile, internet, self-service device or a store. Gone are those days when the buyer had to physically visit the store and that to only during business hours. Thanks to smart devices that allow us to shop while on the couch.

Changing consumer dynamics have made it imperative for organizations to investing in technology and services to give their customers the power to seamlessly shop across channels at their convenience.India with its 3rd largest Purchase Power Parity (PPP) rating only behind China and the US and the largest youth population in the world with a burgeoning middle-class population with constant growing income throws a unique opportunity for organizations here.

Strategic investments in automation, restructuring infrastructure for better efficiency and higher focus on supply chain is becoming a norm for Indian organizations today.

Focus on Supply Chain Management (SCM) is at its peak with major boom seen in the e-commerce space. Consumers are now expecting to utilize ordered product (or services) within hours instead of days. With competition increasing, consumers are spoilt for choice and remain less loyal. Thus, services providers need to better understand that it’s not only about the cost of the product but after sale services and on-time delivery is becoming ever more critical.

You may see a lot of investments raking in autonomous vehicles, however, fully autonomous vehicles being utilized in supply chain are still some years away due to various challenges like weather and visibility condition, road infrastructure, challenges around navigating streets / pedestrians and the ability to communicate with traffic signals. We see that a lot of inefficiencies are caused due to roads planning and intersecting highways, that results in less distance covered by trucks. This significantly impacts efficiency of trucks which currently stands less than 50 percent compared to developed world.

McKinsey Global Institute estimates that the transportation and warehousing industry has the third highest automation potential amongst various sectors. The value of the Indian logistics market is expected to increase by 35 percent in the next two years. In India, numerous start-ups have emerged to drive technology in supply chain space and have attracted investments worth $1.89 billion in 2018.

To continue being relevant to existing customers and attract prospective buyers, there’s an urgent need to reduce in efficiencies prevailing in the system. It’s time that companies start cumulatively investing in Hardware, Software and Services to improve operational efficiency,increase up time and reduce cost and this is possible by
introducing more autonomous technology with thinking and-self-learning machines in their operations.You guessed it right, it’s indeed ‘Artificial Intelligent’ (AI), the word that was coined in 1955 but has recently started showing its true potential.

Lot of businesses around the world is optimistic about the future of AI and ML (machine learning) and is in active testing and implementing phase to improve their operations.Companies which have taken the lead and implemented AI in transportation and logistics are already enjoying profit margins greater than 5 percent compared to non-adopters, as per McKinsey report.

As a consumer, you are already interacting with robots. Lot of supply chains have already implemented Robotic Process Automation (RPA) in customer touch points like contact centers, company portals, mobile apps, which essentially automates repetitive tasks traditionally done by humans.

World Economic Forum report predicted that by 2025, 10 percent of GDP will be stored on Blockchain or Blockchain-related technologies.

Implementation of RFID in warehouse and distribution centers can lead to better inventory management and will help further reduce labor cost, improve spares availability resulting in improved efficiencies. Further, the benefits of having AI based technologies like RPA, RFID, Internet of Things (IOT) gives organizations access to structured data which supply chain should be able to utilize in making strategic decisions to ensure continuous process improvements, improve demand forecasting that results in lower inventory investment, improve operations and optimizing routes.

Going forward, businesses will need technologies like Predictive which will assist supply chain to plan their operations resourcefully. In this era, it’s of utmost importance for organizations to be proactive than reactive, making them more reliable.

VR and AR:
There are a host of AI technologies making valuable impact in supply chain globally like virtual reality (VR) and augmented reality (AR) which is helping supply chain executivesmake informed decisions that are assisting them to see the future automation processes before they’re implemented.

It will be unfair if Blockchain isn’t mentioned here, which is already making waves. World Economic Forum report predicted that by 2025, 10 percent of GDP will be stored on Blockchain or Blockchain-related technologies. Globally big businesses are already conducting trial of these technologies in supply chain.

While, options are plenty in AI, it is important to understand how we implement the right technology based on its ability to solve existing business problems and predict future challenges. Supply chain companies including 3PL need to evaluate best fit technology considering ROI and problems on hand. Consumers should be updated real-time from the starting process till completion of transaction including reverse logistics, if applicable.

To ensure transformation in supply chain we will need the right talent to assess, test and implement AI successfully. There’s immediate need to relook at the existing curriculums to ensure that they are relevant to this fast-changing environment and educational institutes havededicated curriculum with experienced faculty that will leadtoincrease employable talent base.

As automation absorption increases, logistics costs are expected to fall by 30 percent.With keenness from businesses and commitment from the Government of India (National Logistics Policy), our supply chain operation is about to reach standards that haven’t been witnessed yet- and it’ll be here sooner than you think.

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.