6 Ways Generative AI Fuels Supply Chain & Procurement

6 Ways Generative AI Fuels Supply Chain & Procurement

Supply chains around the world are slowly recovering from the pandemic, becoming more resilient, digitalized and sustainable. The progress made in Generative AI can support supply chain procurement in overcoming challenges and continuing the positive trend in 2024.

In 2023, supply chain conditions started to recover from the devastating impact of Covid-19. While 2024 will see a continuation of this trend, businesses will have to take into account new factors and challenges. Cyber vulnerability, worrying geopolitical situations and increasing labor shortages and strikes are all important factors that risk destabilizing supply chains worldwide.

So, what can executives do? The answer may come from the developments in Generative AI. The field of supply chain management and procurement can benefit enormously by leveraging the power of AI: in a historic moment in which inventory management is becoming increasingly complicated as supply chains are under enormous stress, supply chain AI can help businesses thrive and gain competitive advantage.

Topic Overview

Why should businesses implement supply chain AI?

Smart and far-sighted businesses are already experimenting with supply chain AI and catching the opportunities it offers.

Here are 6 ways Generative AI can transform your business, improving supply chain risk management:

  1. Demand forecasting
  2. Supplier selection
  3. Reduce time and costs
  4. Inventory optimization
  5. Transport optimization
  6. Digitalization

1. How to use Generative AI to forecast demand

When it comes to inventory management, scenario planning plays a crucial role. Increasing your prediction and analysis capabilities through Generative AI and Data Analytics means better-managing inventory, avoiding overstocking and understocking, improving supply chain risk management and gaining a considerable competitive advantage.

As reported by Ernst & Young, Generative AI is already widely used in many industries to analyze large historical sales data sets, market trends and other variables to create real-time demand models.

2. Generative AI boosts the search process

While advanced technology is now commonly used for forecasting, AI procurement has a lot of untapped potential. Generative AI can facilitate the suppliers’ search process by shortening times and expanding reach, proving more efficient than Google or other search engines.

How is it different from web searching keywords?

When using Google or other search engines, companies face several limitations that can impact accuracy. Results can be inaccurate, not relevant, outdated or limited because of suboptimal queries. Moreover, the search needs to be updated regularly to obtain new information; Gen AI represents a step forward thanks to its precision and ability to be customized to individual needs.

3. Reduce time and costs with supply chain AI

Here is how Generative AI can support your business in all administrative and commercial activities:

  • Save time;
  • Better identify suppliers;
  • Analyze suppliers’ contracts;
  • Ensure compliance with regulations;
  • Identify risks and opportunities;
  • Cut costs;
  • Reduce human error.

4. Maximize inventory optimization

According to a study from IHL Group, overstocking and understocking cost retailers 1.1$ trillion in lost revenue, with the former responsible for 3.2% of revenue loss and the latter for 4.1%.

Impressive numbers that executives can’t overlook if they want to increase margins and drive growth. Data analytics can benefit from the power of AI to improve companies’ demand forecasting abilities, avoiding understocking and overstocking by making data-driven decisions. Gen AI tools can be used to analyze inventory data to optimize stock levels, reduce waste and improve order fulfillment times.

If you want to learn more about how Generative AI can help companies improve inventory management, read Tredence’s successful business cases.

5. How Generative AI can improve your transportation system

Transportation is a crucial component of the supply chain, because it connects every step from the shipping of raw materials to the delivery of the finished products. While it is common to overlook its significance when analyzing supply chain to identify room for improvement, optimizing transportation can really make a difference.

An efficient transport network means significantly reducing shipping costs and time, minimizing delays and improving customer service and overall customer experience. Here is where data analysis comes into play: by powering it with Gen AI, it is possible to:

  • Identify new shipping routes;
  • Find lover prices;
  • Reducing delivery time;
  • Being up to date with restrictions;
  • Implement shipment pooling.

By maintaining an updated and efficient shipment transport process it is possible to achieve two goals at the same time: reducing costs and improving quality of service.

6. Digitalize and automate your supply chain

Digitalization is one of the keys to success in the future. A recent research from Accenture shows that leading companies in enterprise technology were growing two times faster than most companies, indicating how advanced technology has the power to transform your business.

With the deployment of supply chain and procurement AI, processes become more automated, integrated and smart, increasing efficiency in every area, from transportation to inventory management, from forecasting to supply chain risk management.

Boost business performance by investing in Generative AI in the supply chain

Generative AI and advanced data analytics have the potential to improve supply chain efficiency, and companies are quickly realizing it. In fact, AI integration in the supply chain market is expected to be worth $6.5 billion by 2023. Businesses that don’t want to be left behind need to act quickly to bring digitalization into their supply chain. Learn 5 Critical Hurdles with Innovative Technology Architectures- Download GenAI POV.

FAQS on Generative AI

What is generative AI, and how does it relate to supply chain and procurement?

Generative AI is a type of Artificial Intelligence able to create new and original content without human intervention. Among its fields of application there are supply chain and procurement, due to this particular technology’s ability to reduce costs and analyze supply chain data.

How can Generative AI improve demand forecasting in the supply chain?

AI-powered demand forecasting provides accurate and high-quality insights into consumers’ demands and preferences, market patterns and future trends. Having access to these insights allows companies to make accurate predictions about demand and predict big market changes.

How can Generative AI optimize inventory management and reduce costs?

In this article, we have illustrated the many uses of Generative AI in supply chain management. In particular, Gen AI can:
 
Facilitate suppliers’ search process;
Cut administrative and commercial costs;
Maximize inventory optimization through demand forecasting;
Improve transportation system;
Fuel digital transformation.

Can you provide examples of how generative AI enhances supplier selection and relationship management?

Supplier relationship management (SRM) can be improved and innovated by leveraging the power of AI. Generative AI tools can help with supplier selections, it keeps supplier performance monitored and rate them, and supports consistency and effective comunication between parts. Find out more about Tredence’s SRM solutions here.

How does Generative AI support cost optimization and cost reduction strategies in procurement?

One of the main factors of cost inefficiencies in the supply chain is bad demand forecasting, resulting in overstocking or understocking. Adopting Generative AI services with AI-powered data analysis allows you for a better predictions, improvements in orders fulfilling time and waste reductions.

What are the benefits of using Generative AI for supply chain risk management and mitigation?

Some benefits of using Generative AI for risk supply chain risk management are:
Advanced data analysis capabilities, which allow risk managers to make data-driven decisions;
Detection of fraudulent contracts and documents when selecting and onboarding suppliers;
Mitigation of human error;
Out-of-stock chances reduction and inventory optimization to avoid waste or order unfulfillment.

How can Generative AI help in automating routine procurement tasks and improving efficiency?

Generative AI can automate several tasks saving time and money. With procurement AI, companies can automate:
Data-entry
Data analysis and demand forecasting
Real-time monitoring of suppliers’ performance
Contract management
Invoice processing

Are there any ethical or security concerns associated with using Generative AI in supply chain and procurement?

Yes, like all technologies, Generative AI presents some challenges and ethical concerns. Generative AI is trained on massive amounts of data, which accuracy isn’t always guaranteed. This poses a misinformation issue because if data is biased, Generative AI outputs could be biased as well. Companies should also avoid becoming over-reliant on AI since regulations or system errors could cause serious disruptions. Unlock the power of Generative AI Consulting for transformative insights and innovation.

What types of data are necessary for generative AI to be effective in these areas?

One of the challenges of Generative AI is the need to obtain vast amounts of high-quality data. These data can be collected from different sources:
 
Historical procurement data;
Inventory data;
Suppliers data;
Contracts;
Market data;
Customer demand;
Transportation data;
Financial data.

Can you share real-world examples where Generative AI improved supply chain and procurement processes?

Tredence has a vast portfolio of successful use cases of Generative AI in supply chain management. For example, you can learn more about how supply chain AI completely modernized the supply chain of a leading 15$ billion company.

Amelia S

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