AI in Supply Chain: Unlocking the Value of AI

The modern supply chain is a huge and complex web that interconnects every process from production to consumption. Artificial intelligence (AI) is a transformative technology, reshaping the world of supply chain and how companies handle logistics, inventory, and distribution.

AI in Supply Chain Management (SCM)

AI's progression affects SCM in each process.


1. AI-powered tools are able to study past data, market patterns, and how people behave to aid in planning. They can produce what-if situations, letting managers simulate different situations and plan based on those inputs.

2. Using predictive analytics, AI can predict demand accurately. This helps companies match their production timing to the expected needs of consumers and lower expenses on storing extra goods or throwing away unused items.

3. AI integration with enterprise resource planning (ERP) systems allows for real-time data analysis, providing actionable insights that can lead to more informed strategic planning and better resource allocation.


The use of AI is also assisting in the area of sourcing. It aids in mapping and managing provider networks.

1. With the ability to map complex supplier networks and show them visually, AI can detect possible risks and interconnection.

2. AI systems can improve interaction and organization between suppliers and vendors. By predicting material requirements and placing orders automatically, AI can ensure a steady flow of materials during manufacturing processes.


In the manufacturing process, AI can anticipate when maintenance is required and plan for it at times that least interfere with work. Also, it helps to streamline production lines by directing resources to areas where they are most needed, ensuring that operations run smoothly.


1. AI in logistics can enhance shipping routes and predict when deliveries will arrive. It is also beneficial in managing fleets more efficiently. Additionally, they are helpful to estimate the future demand for shipping which assists in planning and arranging resources better.

2. Additionally, AI is able to evaluate a wide range of things like weather, traffic, and cost of fuel for offering recommendations on which transport methods are most efficient. It can also assist with inventory control in different distribution centers.

AI in logistics


AI makes returns simpler for customers by automating the process. It can understand and classify returned items, helping to speed up refunds or exchanges. Moreover, AI algorithms can predict possible returns based on factors like product features or customer behavior patterns. This helps companies solve problems before they turn into actual returns.

The Widely Used AI in SCM

Toorajipour et al. (2021) reported several subfields of supply chain management that have been improved by using AI. These include distribution and transportation, logistics hub management, sales, marketing, planning, production, and forecasting of supply chain demand.

Applied in these subfields, generative AI (GenAI) shows promise to change the game by providing new answers.

Classifying Information & Generating Content

Handling monotonous tasks like inputting data is easy for GenAI. It has the ability to make detailed reports and summaries, giving a full view of what is happening in the supply chain. Also, GenAI can create marketing content, product descriptions, and other types of materials. This improves the customer's experience as well as operational effectiveness.

Data Analysis & Strategy Modification

GenAI is swift in assessing alterations to the supply chain scenario, like changes in demand or disturbances within the supply. It can provide suggestions for modifications to strategies. Hence, supply chain managers can quickly alter strategies and plans with the help of GenAI.

It also assists managers in conducting simulations utilizing live information to examine different situations and get ready for diverse results.

By using predictive understanding, GenAI can enhance resource allocation, including raw materials, labor, and capital.

Insights & Decision-Making

The strength of GenAI in condensing lots of information and getting main points is good for making decisions about supply chain operations.

It can examine large amounts of information to find trends and patterns, and early risk identification can aid in creating proactive risk management plans. GenAI has the ability to study customer information, offering knowledge about consumer actions, likes, and requirements that can assist in tailoring marketing and product creation tactics for better outcomes.

Supply chain management

Benefits of AI in SCM

Proactive Identification

When AI is used to look at big amounts of data, it can find irregular data and quality problems in the supply chain before they become visible. AI can promptly find and fix quality problems, making sure that customers get top-notch products. This helps companies fix these issues before things get bigger.

Companies can save money by detecting quality problems early. This helps in avoiding the expenses linked with product recalls, returns, and harm to their brand image.

Additionally, AI can assist firms to better manage their resource distribution by foretelling demand and automated ordering or restocking of supplies.

Enhancing Safety

AI is capable of monitoring the manufacturing area instantly. It can notify workers about possible dangers and assist them to avoid accidents.

From the perspective of training workers, it can consider their duties and obligations to provide safety training programs.

Also, AI-supported platforms can offer full visibility throughout the supply chain process, allowing for real-time tracking of goods and faster responses to problems.

Maintenance & Capacity Optimization

AI can foresee the times when equipment is probable to collapse or need upkeep, helping companies plan maintenance during convenient periods and reduce unproductive periods.

AI could aid companies in optimizing their capacity by studying demand patterns and production limits. This would guarantee that firms can satisfy customer needs without spending extra money on unused capacity.

Predictive maintenance and capacity optimization have the potential to enhance efficiency within the supply chain, lessening waste and elevating total system performance.

Risk Management & Strategic Planning

AI can analyze large amounts of data to foresee market trends, how customers will act, and potential disturbances. This helps companies to adjust their plans ahead of time and decrease dangers.

With various sources of data, AI can examine them to identify risks in the supply chain. AI's ability to comprehend large quantities of data and predict outcomes makes it useful for identifying possible risks. Meanwhile, it can also propose solutions for minimizing these risks, assisting in the protection of business from future disruptions, and maintaining continuity.

AI provides insights into market patterns and consumer behavior that can aid in strategic planning. It can help companies discover brand-new opportunities and decide where to invest wisely through its capacity for perceiving data on market movements or buyer preferences.

Furthermore, AI is useful in sustainability efforts by improving logistics to lessen carbon emissions, predicting machine maintenance requirements for waste reduction, and aiding the shift towards greener supply chain methods.

Limitations of AI in Supply Chain

AI, with its power to change supply chain and logistics, also has some limits and difficulties.

Data Quality in AI

Data is the primary fuel for AI. The usefulness of AI applications greatly depends on data quality and availability.

The truth is AI systems can be good or bad depending on the data they learn from. If the information used for training is not accurate, it might lead to wrong predictions and less-than-ideal decisions. Getting correct and dependable data is a big challenge we must meet.

AI algorithms usually need a lot of data and multimodal datasets to train well. However, it may be difficult to get enough data in some industries or for specific kinds of analyses. This could restrict how much AI can be used in particular situations.

Many times, data in an organization is spread across various systems and sections, forming what we call data silos. The task of defeating these silos and establishing a single data environment can be a major obstacle for AI applications.

Ethical and Legal Considerations

Just like every technology, applying AI in SCM brings up ethical and legal issues. AI systems frequently depend on the analysis of personal or sensitive information. So, keeping this data private and secure is a big issue.

AI algorithms may unintentionally intensify biases found in the data they were trained on, causing unfairness or discrimination in results. These potential dangers must be eliminated in an early stage.

The laws and rules for AI are not yet fully formed. Organizations must keep up with changes and make sure to follow the necessary laws and regulations.

Governance and Partnerships

Effective governance is crucial for managing and controlling the use of AI in supply chains. It helps in making sure that algorithms make decisions aligned with business goals and values. Additionally, creating strategic partnerships can help organizations build the necessary capabilities and resources for incorporating AI into their supply chain operations.

Organizations require robust governance systems to implement AI successfully, which must supervise its deployment, guarantee ethical usage, and manage risks. This incorporates the creation of clear policies, methods, and rules for employing AI.

Working together with experienced AI vendors, consulting companies, or research institutions in this field can be beneficial. Such partnerships can bring knowledge and guidance to build the necessary capabilities and resources for incorporating AI into their supply chain operations.

Real-World Applications

1. Amazon uses AI-powered services like Amazon Forecast to manage inventory levels effectively. A kind of AI is used by a big retail chain to study past sales data, patterns of seasons, and how customers act. This helped in accurately estimating the demand for products which then improved the handling of inventory, and lowered stockouts as well as markdowns.

AI-powered logistics

2. Logistics companies apply AI to make better delivery routes, considering traffic, weather, and time slots for deliveries. This led to less use of fuel, shorter delivery times, and happier customers.

3. AI algorithms can spot suspicious activities or patterns indicating potential fraud in the supply chain, such as false invoices or non-authentic products. For instance, Visa uses AI trained by computer vision datasets to prevent billions of dollars in fraudulent transactions annually.

4. Working with Internet-of-Things (IoT) sensor inputs, AI systems provide visibility into supply chains. Many companies use AI-powered platforms combining real-time IoT sensor data with data streams from carriers, ports, rail lines, and weather forecasts.

5. With the help of chatbots and virtual assistants, logistics companies can manage customer questions, follow shipments, and offer instant information. This makes service to customers better while also cutting down on costs for operations.

6. AI-powered supply management platforms help companies make data-based decisions about their direct materials sourcing. By using such a platform, companies can source parts faster at a competitive price.

7. The introduction of AI to supply chain operations needs organized change management. Companies that achieve success have made investments in communication, training, and support for managing this change well.


Potential AI Techniques in SCM

1. Machine Learning (ML): ML algorithms can find patterns in big sets of data that allow for things like predicting demand, spotting fraud, and foreseeing maintenance needs.

2. Natural Language Processing (NLP): NLP is capable of studying text data that includes customer feedback, social media content, and market reports to obtain valuable information for making decisions.

3. Computer Vision: This has the ability to do automated quality control, find defects in products, and watch over safety within warehouses.

4. Blockchain & AI: AI could help make blockchain more powerful for keeping records in supply chains that are secure, clear, and difficult to tamper with.

5. Voice-activated Systems: Being trained by speech recognition datasets, AI-driven voice recognition systems can streamline order processing and improve warehouse operations.

Potential Subfields to be Enhanced by AI

1. Logistics and Distribution: AI can enhance the effectiveness of supply chains by optimizing delivery routes, reducing transportation expenses, and increasing rates for on-time deliveries.

A woman is using computer to manage the products in a warehouse

2. Procurement: By automating the selection and bargaining with suppliers, as well as predicting ideal moments for purchasing materials, AI can help in making the procurement process more efficient.

3. Manufacturing: Using predictive maintenance for machines and optimizing production plans, AI can improve production efficiency

4. Sales and Operations Planning (S&OP): AI has the capability to combine sales predictions with operational strategies for better synchronization of supply and demand.

5. Planning for Demand: AI can improve the accuracy of planning for demand by studying different data sources and forecasting market tendencies.

6. Inventory Control: AI can manage stock levels in real-time, lessening instances of items running out or excessive stocking and enhancing cash flow.

7. Supplier Management: AI can assess supplier performance, identify possible dangers, and propose tactics for maintaining positive relationships with them.

8. Customer Relationship Management: AI can provide personalized customer experiences, foresee what customers may require, and carry out customer assistance automatically.

9. Network Design: AI can aid in developing cost-effective supply chain networks that reduce expenses and increase service levels.

10. Sustainability and Compliance: AI helps in monitoring and guaranteeing adherence to environmental rules, as well as assist in businesses to meet sustainability objectives.

11. Finance and Accounting: AI has the ability to automate financial transactions, enhance budgeting procedures, and offer insights for improved financial planning.

12. After-sales Service: AI can predict maintenance needs, automate service requests and personalize customer support to improve post-sales service.