ML in supply chain optimization
How ML in supply chain optimization is improving management and efficiency
Machine learning is one technology that has revolutionizing industries by helping optimize their day to day processes. One such segment where the technology has made its mark is supply chain optimization and management. ML in supply chain has made it possible for businesses to discover patterns and identify variables that impact the networks’ success.
Supply chain optimization or even management requires a business to continually look into data and discover the changing patterns. What has been a manual or a semi-automated process, now doesn’t need manual intervention thanks to ML in supply chain. Machine learning algorithms continually analyze supply chain data to find new patterns. It helps businesses identify opportunities that have the potential to optimize their supply chain processes. The algorithms process data using constraint-based modeling to identify a set of factors impacting the supply chain with predictive accuracy.
Some of the key factors that artificial intelligence in supply chain planning and machine learning can help identify include inventory levels, supplier quality, demand forecasting, product planning, procure-to-pay, transportation management and more. Research says that 79% of companies with high-performing and well-optimized supply chains achieve greater revenue growth. This only goes to support why industry leaders are increasingly adopting ML in supply chain In this article, we’re sharing ten ways in which ML in supply chain is helping businesses optimize and manage their processes better.
Improving management and optimization with ML in supply chain
The modern-day supply chains generate vast amounts of complex data. This data is hard to derive actionables from when worked on manually and usually tends to go waste. But with machine learning, companies can put all the data to use to enhance their supply chain management and optimization capabilities
1. Improves demand forecasting accuracy
One of the biggest challenges in supply chain management and optimization is analyzing data and using it to predict future demands. The existing techniques like baseline statistical analysis and advanced simulation modeling require human intervention and have no way of tracking or quantifying certain data over time, slowing down the process Machine learning offers a supply chain optimization solution that can analyze large, diverse data sets fast, improving the accuracy of demand forecasting.
2. Provides collaborative supply chain networks
AI in retail supply chain can be used to identify collaborative factors between multiple shipper networks. By continually analyzing data across different networks, ML in supply chain helps businesses reduce freight costs, improve supplier delivery performance and minimize supplier risk Identifying key factors that impact the efficiency of different supply chains, the supply chain optimization solution ensures better collaboration.
3. Offers insights into supply chain management performance
ML in supply chain combines unsupervised learning, supervised learning and reinforced learning to offer a robust supply optimization solution. Artificial intelligence in supply chain planning continually analyzes data and identifies key factors that affect supply chain performance. The continual analysis and comparison of data help businesses get insights into their supply chain management performance, enabling timely optimization for higher efficiency.
4. Visual pattern recognition for supply chain maintenance
ML in supply chain uses algorithms that continually analyze data and seek out comparable patterns across multiple data sets. The algorithms automate the quality inspection throughout a business’s logistics hub, isolation product shipments that have been damaged in the process. Artificial intelligence in supply chain planning excels at visual pattern recognition, enabling businesses to inspect and maintain physical assets across the entire supply chain network.
5. Provides greater contextual intelligence
ML in supply chain combines technologies across supply chain operations to offer greater contextual intelligence to the business. The supply chain optimization solution provides in-depth insights into how each aspect of the supply chain collaboration, logistics, warehouse management, and overall process management, can be improved. The actionable data provided by AI in retail supply chain helps businesses lower their inventory and operations costs. Additionally, it also helps them quicken response times to customers with better collaboration across the supply chain network.
6. Accurate demand forecasting for new products
ML in supply chain takes into account causal factors that influence demand for a new product. The algorithms used by AI in retail supply chain uses algorithms that combine the pragmatic approach of asking channel partners and direct and indirect sales teams and advanced statistical models. This enables businesses to make an accurate forecast about demand, ensuring data-driven inventory decisions
McKinsey also shared a study that predicted a reduction in forecasting errors by 20-50% for companies using ML in supply chain. It states industries such as retail and healthcare already benefiting from supply chain optimization solutions running on artificial intelligence and machine learning.
7. Analysis of machinery performance
The manufacturing industry produces large volumes of data on a yearly basis, making it difficult for businesses to analyze it for machinery performance. It makes it challenging for companies to identify factors that influence (hinder or improve) the machinery performance, eventually leading to seeing for wear and tear. Using ML in supply chain, companies are able to extend the lifecycle of their key supply chain assets by closely measuring the overall equipment effectiveness (OEE). This includes machinery, engines, warehouse equipment, and even transportation. With a robust supply chain optimization solution that gives insights into machinery performance, companies are able to ensure a high-performing supply chain process.
8. Creates track-and-trace data hierarchies for suppliers
Most companies work with external suppliers to assemble a product that they offer. This calls for being able to analyze the supplier quality and their industry compliance in a continual manner. But doing so manually can be time-consuming and is at the risk of human error, missing out on smaller details that may lead to causing inefficiencies in supply chain management.
ML in supply chain helps businesses create a track-and-trace data hierarchy for each supplier. The algorithms continually work at finding patterns in the suppliers’ data to analyze quality levels without human intervention. This improves supplier quality management for the company.
9. Improves production planning and factory scheduling
A lot of manufacturing companies rely on build-to-order production workflows. Most supply chain delays are caused by latency for components and parts that need to be used to assemble customized products. ML in supply chain helps companies balance the multiple constraints for optimizing each of them. With a supply chain optimization solution driven by machine learning, companies are able to improve production planning and factory scheduling accuracy and reduce latency by manifolds.
10. Offers end-to-end visibility on the supply chain
Most companies lack an end-to-end visibility on their supply chain process. But for effective supply chain optimization management and optimization, they need to be able to analyze data in real-time, identify changing patterns and derive actionable insights across the funnel to make timely and accurate predictions. By using artificial intelligence in supply chain planning, you combine machine learning with advanced analytics, IoT sensors, and real-time monitoring. This enables the company to look into its supply chain data in an end-to-end manner.
Why does ML in supply chain matter?
Artificial intelligence in supply chain planning is changing the way businesses work on a day to day basis. But the supply chain optimization solution running on machine learning delivers the following benefits:
- AI in retail supply chain and machine learning optimizes the flow of products from one place to another, helping companies optimize the inventory they need to hold at any given point of time.
- ML in supply chain reduces the costs of operation by enabling waste reduction and quality improvement across all the components forming the process.
- The upstream optimization enables companies to take their products to the marketplace in a timely manner and drive more sales for their business.
- ML in supply chain improves supplier relationship management with data-driven administrative practices.
- With a supply chain optimization solution, stakeholders get more insight into their supply chain management performance. It allows them to nudge continual improvement to keep it optimized for high performance.