By FIona Tan, CTO, Wayfair
The retail sector, always known for its commitment to innovation, is placing an increased focus and growing resources towards supply chains. One area in particular that’s gaining momentum is artificial intelligence (AI).
When it comes to innovation in the retail sector, the supply chain was traditionally never at the top of anyone’s list. Then along came the pandemic, which quickly uncovered the many flaws in today’s supply chains and made innovation and AI, in particular, a top priority—according to Gartner, 50% of supply chain organisations are projected to invest in AI and analytics applications through 2024.
While we’re still in the early stages of this journey, it’s already clear how big of an impact AI will have on the supply chain. In this blog, I’ll examine some of these benefits while delving into the challenges businesses will encounter over this journey and the steps they must take to succeed.
The Promise of AI
The impact that AI will have on today’s supply chain is vast and far too long to include in this blog, so instead, I will focus on a few of my favorites.
Enhanced demand forecasting: By tapping into AI, businesses can more accurately forecast demand, which in turn allows them to streamline production. That means no lost sales due to out-of-stock goods and fewer products gathering dust on warehouse shelves. It also means greater levels of efficiency in production and growing profitability.
Inventory accuracy: Supply chain teams cannot succeed with an accurate line of sight into their inventory. AI-powered inventory management systems monitor precise stock levels around the clock and not only predict upcoming demand but take pre-emptive action to ensure all orders are fulfilled. As a result, employees can focus on other critical areas while the business reduces holding costs by only storing precisely what’s needed at any given time.
Risk management: Risk Management is often referred to by another name, Supply Chain Risk Management (SSCM). When paired with AI, SSCM can scan vast amounts of data from disparate systems and provide teams with invaluable real-time insights. As we know from the pandemic, having instant access to the latest data across the entire supply chain is critical.
With SSCM, teams can track the flow of goods throughout the supply chain and instantly
identify potential threats. This can include anything from developing weather patterns,
transportation issues, or inventory shortages. But that’s not all. These systems can provide
instant, actionable insights that guide teams to take the best action. At the end of the day, this allows businesses to avoid potential downtime and delays and ensure customers receive their orders on time, as promised.
The challenges of AI
As I said at the top, infusing AI into the supply chain does present some unique challenges.
Here’s a look at a few that are top of mind.
Data security and privacy: Any time businesses turn to AI to fully maximize their data, the issue of security and privacy begins. Many companies are so focused on transforming the performance of their supply chain that they overlook potential threats such as the growing risk of cyberattacks.
Along this journey, companies must conduct regular risk assessments and establish security protocols that they and all suppliers adhere to. Next, implement an educational effort for all supply chain teams, including all partners, so they understand the latest threats, how to identify vulnerabilities and more. Each of these is vital and must be reassessed on an ongoing basis.
Cost and complexity: While we are all eager to experience the benefits, the reality is that
infusing AI into your supply chain will take time. And, if you think it can be accomplished at a low cost, you’re out of luck. But there are steps you can take to ease these burdens. The most important thing is to invest in the proper infrastructure. This includes more significant investments in hybrid cloud and digital infrastructure. These can enable greater agility, help streamline operations, and more.
Education: Naturally, AI alone cannot transform the supply chain. To achieve the desired level of success, businesses will need to upskill their employees, so they know how to leverage these new capabilities fully. This includes educating them on critical thinking and complex problem-solving so they can monitor the supply chain data and glean actionable insights from these AI- powered systems to make immediate and informed decisions. The idea of active learning will be critical to ensure employees are up-to-date with the latest innovations.
While the supply chain world has taken massive strides forward when it comes to innovation, we are just at the beginning. Especially when it comes to AI. As we look ahead into 2024 and beyond, emerging technologies such as blockchain and IoT will be deployed in conjunction with AI. Through these pairings, supply chains will scent to the next level as teams gain unprecedented levels of visibility and detail as well as entirely new levels of efficiency while ensuring they are meeting all environmental and ethical standards. Stay tuned for more updated in the year ahead.