Optimizing AI to Revolutionize Supply Chain

India has made significant strides in the technology and automation space since the past over two decades. The manufacturing sector has witnessed a massive growth in automation and use of advanced technologies such as Artificial Intelligence, Machine Learning, Internet of Things, robotics, etc. AI-powered tools and applications have helped companies optimise their operations, reduce costs, and improve customer satisfaction.

However, one of the most critical aspects of the manufacturing sector – supply chain and logistics – is still lagging behind in terms of adoption of advanced technologies. In India, the use of AI in supply chain and logistics is still in its early stages, but the country is making steady progress towards incorporating these technologies.

AI in supply chain and logistics: An overview

The supply chain and logistics industry is a complex and constantly evolving system, with numerous stakeholders involved in the movement of goods from one point to another. Artificial Intelligence can be used to improve various aspects of the supply chain and logistics, including demand forecasting, inventory management, route optimisation, and last-mile delivery.

One of the most significant advantages of AI in the supply chain and logistics industry is its ability to analyse vast amounts of data and identify patterns and insights that can be used to optimise operations. For example, AI can be used to forecast demand accurately, allowing companies to adjust their inventory levels and production schedules accordingly. AI can also help companies optimise their logistics operations by identifying the most efficient routes, modes of transportation, and delivery schedules.

In addition to optimising operations, AI can also improve customer satisfaction by providing real-time tracking information and predictive delivery times. By using AI-powered chatbots and virtual assistants, companies can also provide customers with personalized support and faster resolution of issues.

What has triggered AI adoption?

Supply chain disruptions are not new to the industry as it is impacted by marco-economic and geopolitical environment. And, it has been largely region and time specific. However, the disruptions witnessed with the onset of the Covid-19 pandemic, have been severe and had impacted almost all the economies at the same time and that too for a prolonged duration.

Many shippers and players in the transport and logistics business are still under great pressure. Apart from the pandemic related issues, huge increases in energy prices; large fluctuations in the supply and demand for transport capacities; delays in port trans-shipment; and bottlenecks in hinterland transport have also impacted supply chain. Furthermore, numerous countries are experiencing double-digit inflation. Also, Russia’s war on Ukraine and the over dependence of the western countries on China had severely impacted the supply and flow of goods.

“Supply chain, in general, has completely transformed post the Covid-19 pandemic. Technology adoption, which was happening at a snail’s pace, picked up speed during the pandemic period. The adoption was slower largely because there was, as such, not much need felt by the businesses. However, the pandemic and the supply chain shortages in general, has catapult the adaptation of advanced technologies with the supply chain,” Aswini Thota, Analytics and AI Leader, Bose Corporation, said.

He noted that business leaders are changing their priorities and there is a shift in approach from planning for short-term needs, to being able to anticipate long term demand. “In the pre-Covid era, typically, businesses used to plan for 3-6 months into the future. However, after the Covid pandemic and also the geopolitical disruptions, businesses are planning for 18-24 months in advance. They have, today, realised the advantage of procuring raw materials on time,” Thota said.

He further said that in the post Covid era, investments have increased in newer technologies such as Artificial Intelligence and advanced analytics. “Leaders were interested in adoption of such technologies, but it was never the primary decision-making capability. But today these companies are using these technologies for strategic planning purposes,” Thota added.

How is AI assisting in supply chain & logistics?
By leveraging AI-powered tools and applications, companies can enable demand and supply planning and forecasting, track shipments in real-time, optimise routes, predict delays, and improve customer satisfaction.

Demand planning and forecasting

Demand planning and forecasting are critical functions for businesses to ensure that they can meet customer needs while keeping costs under control. However, in the backdrop of uncertainties, such as changes in consumer behaviour, supply chain disruptions, and global economic conditions, accurate demand planning and forecasting can be a challenging task. This is where AI can play a crucial role.

AI-powered demand planning and forecasting systems can analyse large volumes of data, including historical sales data, social media activity, and weather patterns, to identify trends and patterns that can be used to make predictions about future demand. These systems use machine learning algorithms to continuously learn from new data and improve their accuracy over time.

One of the key advantages of AI-powered demand planning and forecasting systems is their ability to handle uncertainties. Traditional forecasting models rely on assumptions that may not hold true in a rapidly changing environment. AI-powered systems, on the other hand, can adjust their predictions in real-time based on new data, enabling businesses to respond quickly to changes in demand.

Supply planning and forecasting

Supply planning and forecasting is a critical component of supply chain management as it involves predicting future demand and planning the necessary supply chain operations to meet that demand. Accurate supply planning and forecasting can help companies optimise their production, procurement, and distribution operations, reducing costs and improving patient care.

“The role of AI and data analytics in supply planning and forecasting is becoming increasingly important. These technologies can process vast amounts of data from various sources, such as supplier performance, weather patterns, and geopolitical factors, to provide more accurate and real-time forecasts. Additionally, AI algorithms can learn from past supply chain performance and automatically adjust forecasts based on changing market trends and supply chain disruptions,” Anubha Dixit, Founder and CEO, Tongadive, said.

In case of pharmaceutical industry, he said, the benefits of using AI and data analytics in supply planning and forecasting are numerous. “Firstly, it can help pharmaceutical companies reduce costs associated with overproduction, underproduction, and inventory management. Secondly, it can help companies respond more quickly to supply chain disruptions, such as delays in raw material delivery or transportation issues, ensuring that drugs are delivered on time and to the right location. Finally, it can improve the overall efficiency and resilience of the supply chain, ensuring that patients receive the right drugs at the right time,” Dixit added.

AI-Powered Tracking Systems

One of the most significant applications of AI in the tracking of cargo and shipments is the use of AI-powered tracking systems. These systems use a combination of sensors, machine learning algorithms, and predictive analytics to track the movement of cargo and shipments in real-time. By monitoring the location, temperature, humidity, and other parameters of cargo, AI-powered tracking systems can provide real-time insights into the status of shipments.

AI-powered tracking systems can also predict delays and alert logistics companies and customers in advance, allowing them to take necessary action to mitigate the impact of the delay. For example, if a shipment is delayed due to weather conditions, an AI-powered tracking system can predict the delay and alert the customer, allowing them to adjust their production schedule or order additional inventory to compensate for the delay.

“Efficient distribution is an inseparable part of the cold supply chain infrastructure and effective and tech enabled reefer vehicles go a long way in facilitating smooth transportation and distribution of frozen foods. Specialized distribution centers dedicated to supporting the effective storage of frozen foods play a critical role in the effective distribution, especially for products being shipped internationally. With dedicated micro-warehouses and a robust fleet of reefer vehicles with live tracking and tracing, allow end-to-end visibility helping businesses verify if the products are being transported at the right temperatures and making it to the destination on time, without damages to the products,” Swarup Bose, Founder & CEO of Celcius Logistics, said.

Route Optimization

Another important application of AI in the tracking of cargo and shipments is route optimization. AI-powered tools can analyse vast amounts of data, including traffic patterns, weather conditions, and historical delivery data to identify the most efficient route for a shipment. By optimizing the route, logistics companies can reduce transportation costs, improve delivery times, and minimize the environmental impact of shipping.

AI-powered tools can also adjust the route in real-time, based on changing conditions such as traffic congestion, accidents, or weather conditions. This allows logistics companies to respond quickly to unexpected events and optimize delivery schedules to ensure on-time delivery.

“Reducing cost and keeping customer experience intact have been the key focus areas for businesses, especially in the retail and e-commerce industry. In order to reduce cost and to keep customer experience intact, retailers are working with multiple carriers to bring in more efficiency, specifically in the last mile segment,” Soham Chokshi, CEO and Co-founder, Shipsy, said.

He further said that in the last 6 months, there has been a drastic change in the logistics sector with the increase in usage of Artificial Intelligence. “The concept of optimisation has become very crucial in supply chain. Today, businesses are using technologies like AI for route optimization, route planning. While manufacturing companies are also using AI to control the logistics cost as a percentage of their invoice value that goes on the vehicles while transporting the goods, logistics companies are using technology to optimise the vehicles that they have,” Chokshi added.

Inventory management

Another critical component of supply chain is inventory management. On one hand, having excess inventory can result into an additional cost burden which can impact profitability, while on the other hand, lack of sufficient inventory can lead to losing opportunities.

“I think the global uncertainties will continue. Companies have also realised that they have to be prepared for such situations. Also, there are talks about a possible recession or slowdown in the US and other economies. So, in a situation where there is slowdown, purse strings are not going to be opened. And therefore people are going to be extremely cautious when it comes to building up their inventories. Also, the old ERP systems are not delivering today. So, there is a need to have something which is bespoke is the need of the hour. I believe, a lot of emphasis will be placed on inventory management by the companies and through AI-backed predictive analysis, this can be easily managed,” Deepak Narayanan, Founder & CEO, Practus, said.

Customer Service

AI-powered tools can also improve customer service by providing real-time tracking information and personalized support. By using AI-powered chatbots and virtual assistants, logistics companies can provide customers with real-time updates on the status of their shipments, answer their queries, and resolve issues quickly.

AI-powered tools can also provide personalised support to customers by analysing their past purchase history, preferences, and behaviour. This allows companies to provide personalized recommendations, promotions, and other offers, improving customer satisfaction and loyalty.

Improving revenues

Besides, implementation of AI in supply chain also improves revenues. According to Cleo’s 2023 Global Supply Chain Executive Report, half (49%) of senior executives surveyed say that making proactive investments in integration technology has increased their company’s agility, which enabled them to gain USD 1 million or more in additional revenue in 2022. About one-fifth (18%) said the additional revenue provided by increased agility equated to USD 3 million or more.

The findings of the survey indicate that improved supply chain and organisational agility results from investment in ecosystem integration technologies, which executives confirm benefit revenue growth, but also impact their companies in myriad positive ways.

India’s progress in incorporating AI in supply chain and logistics

In recent years, India has made significant progress in incorporating AI in the supply chain and logistics industry. The Indian government has launched several initiatives to promote the use of AI in various sectors, including the supply chain and logistics industry. For example, the National Institution for Transforming India (NITI Aayog) has launched the AI for All initiative, which aims to promote the use of AI in various sectors and provide training and support to businesses and individuals.

Several Indian startups are also working on developing AI-powered solutions for the supply chain and logistics industry. For example, Locus, a Bangalore-based startup, has developed an AI-powered logistics platform that helps companies optimize their delivery routes and schedules. Another startup, FarEye, provides AI-powered last-mile delivery solutions to companies across various industries.

Large Indian companies are also investing in AI-powered solutions for the supply chain and logistics industry. For example, Reliance Industries, one of India’s largest conglomerates, has partnered with Jio Haptik, an AI-powered chatbot platform, to provide personalized customer support for its e-commerce platform JioMart. Tata Consultancy Services (TCS), one of India’s largest IT services companies, has developed an AI-powered supply chain solution called Optumera, which helps companies optimize their inventory levels and production schedules.

Challenges

Despite the progress made in incorporating AI in the supply chain and logistics industry, there are still several challenges that need to be addressed. One of the biggest challenges is the lack of skilled AI professionals in the industry. Many companies are struggling to find qualified professionals who can develop and implement AI-powered solutions.

Another challenge is the high cost of implementing AI-powered solutions. While AI can provide significant benefits, the initial investment required to develop and implement these solutions can be substantial. Smaller companies may struggle to justify the cost of implementing AI-powered solutions.

Future Outlook

Despite these challenges, the future outlook for AI in the supply chain and logistics industry in India is promising. With the government’s support and the growing number of startups and companies developing AI-powered solutions, the industry is likely to see significant growth in the coming years. As more companies adopt AI-powered solutions, the industry is expected to become more efficient, cost-effective, and customer-focused, driving growth and innovation across the entire supply chain and logistics ecosystem.