In recent years, supply chains have become substantially more challenging to manage. Longer and increasingly interlinked physical flows reflect the rising complexity of product portfolios. Market volatility, which has been exacerbated by the pandemic, has increased the need for flexibility and agility. And elevated attention on the environmental impact of supply chains is triggering regionalization and the optimization of flows. As a result, companies and stakeholders have become more focused on supply-chain resilience.
Supply-chain management solutions based on artificial intelligence (AI) are expected to be strong instruments to help organizations tackle these challenges. An integrated end-to-end approach can address the opportunities and constraints of all business functions, from procurement to sales. AI’s ability to analyze huge volumes of data, understand relationships, provide visibility into operations, and support better decision making makes it a potential game changer. However, getting the most out of these solutions is not simply a matter of technology, companies must take organizational steps to capture the full value from AI.
The changing face of supply-chain management
Several approaches have stretched supply-chain functions, which must now operate as a “central cross-functional brain” within large corporations. In many organizations, supply-chain management has shifted to concentrate on optimizing the company’s global value rather than simply improving the performance of isolated functions. The recent supply-chain disruptions and demand triggered by the COVID-19 pandemic have further amplified the need for companies to develop their central-planning muscles.
To achieve better performance, companies must tackle several additional challenges:
- Predicting demand across multiple product segments and geographies.
- Identifying trade-offs with hundreds or thousands of interlinked variables and innumerable technical constraints.
- Integrating AI solutions to manage the wider value chain.
- Ensuring that plans get executed and can adapt to variability effects in a timely manner.
Embarking on an AI-driven transformation
Transforming a supply chain is an ambitious undertaking, and companies should be fully aware of the challenges. However, the potential benefits are significant. Companies that can manage four specific areas will be positioned to achieve far greater visibility and better decision making.
1. Value-creation identification, strategy, and road map.
As a first step, companies need to identify and prioritize all sources of value creation across all functions, from procurement and manufacturing to logistics. Clearly defining a digital supply-chain strategy helps support the company’s business strategy and ensures better alignment with its digital program. In addition, it enables companies to identify the process redesign, organizational changes, and capabilities required to boost performance as well as create a strategic road map.
2. Design of target solution and vendor selection
The complexity of supply chains means that finding one provider that can meet all needs is increasingly unlikely. Solution design and vendor selection can help support the digital supply-chain strategy. Often, the best approach is a combination of different solutions from different providers, implemented by different systems.
3. Implementation and systems integration
Once companies select solutions, the risks are falling behind the implementation schedule and coming in over budget while losing focus on the primary objective: to properly address value-creation levers. By optimizing the end-to-end value, companies can implement solutions that deliver value in the short term and are more sustainable over the long term.
4. Change management, capability building, and full value capture
To ensure adoption of new solutions, companies must invest in change management and capability building. Employees will need to embrace new ways of working, and a coordinated effort is required to educate the workforce on why changes are necessary, as are incentives to reinforce the desired behaviors.
Supply-chain management has never been more formidable, but solutions are on their way. AI will be able to provide teams with deeper insights at a much higher frequency than ever. However, this visibility alone will not be enough to capture more value from AI-based supply-chain solutions. Any sizable technology investment must be matched by organizational changes, business process updates, and upskilling efforts. Only then will companies capture the expected ROI.