Introducing innovations such as artificial intelligence
into your supply chain takes time and effort but it can help you
leapfrog the competition.
The scope and ingenuity of artificial intelligence (AI) was
demonstrated earlier this year when a computer won against a human
opponent at Go – a traditional Chinese board game in which
the aim is to surround more territory than your opponent. This was
a breakthrough – revealing how machines have developed new
levels of human-like intuitive capability and processing, much
faster than anticipated.
AI is already having a beneficial influence on business and, in
particular, on the supply chain – a part of business
operations all too often overlooked as a source of competitive
Mitchell Osak, managing director, strategic advisory services at
Grant Thornton in Canada, says "the application of AI or
cognitive computing to make decisions that humans would otherwise
take, or that humans are unable to take, based on data and
analytics collected on the supply chain" is already happening.
"It's the next step in the development of supply chain
management techniques, building on the current trend of using
analytics and data as a tool to improve supply chain
performance," he explains.
Innovation in action
Let's backtrack a little. Osak says: "Location-based
data is an example of how analytics can be applied across the
supply chain." This shows where your raw materials are in the
global supply chain and "effectively provides visibility and
makes your shipment trackable and adjustable. This means you have
the ability to co-ordinate with other suppliers in real time to
make sure everything culminates at the right place, at the right
AI applications can add a whole new dimension to that capability
by shifting some of the data-based decision-making to a machine.
"AI creates self-learning systems where, for instance, a
computer can automatically notify a production manager that a
shipment of materials is at the nearby airport and will reach the
manufacturing plant in an hour, so alerting them to be ready for
intake," says Osak.
"The computer will have processed the location-based data
as well as previous data on journey times so notification becomes
totally autonomous. There are still people involved at each end of
the cycle, of course, but in between those points machines can make
the decisions. Those decisions will be made faster and more
reliably, and a machine can work overnight, with no coffee breaks
or sleep needed.
"And the real beauty of the system is it learns from its
successes and mistakes, so the level of accuracy continually
Improving on good
This is about making already good supply chains even better.
Firms that are investing in such forward-thinking technologies
recognize that their supply chains are not simply a mechanism to
drive down costs but a source of innovation and new ideas; a means
to gaining a competitive edge.
It's a growing but not quite yet mainstream concept.
"Japanese automotive manufacturers saw the light decades
ago," says Osak, but more recent converts have included
retailers from the fashion world such as Zara, whose innovative
supply chain management model has become iconic – and the
result has been soaring profit and global growth. Hokey Min's
The essentials of supply chain management: New business
concepts and applications chronicles this link in the case
study, 'Zara's rapid rise as a cool supply chain
An approach that looks to compete through its supply chain
brings a number of benefits, says Osak. "It can lead to better
aligned strategies and a faster time to market with new products,
improved manufacturing processes that bring efficiencies as well as
better quality, improved customization, greater knowledge sharing
and expertise, and a generation of new ideas and innovative
Tactical to strategic
How can it be achieved? Through adoption of a new mindset that
shifts the focus of attention from tactical supply chain management
to strategic. In other words, the single-minded goal of making
savings gives way to one of joint value creation.
"Vital to this is collaborative working, being willing and
able to share comprehensive quality data with suppliers, having
common goals and aligned strategies, regular and effective
communication, and offering the right incentives," says
At its heart is establishing trust. Boardroom commitment from
both organizations is required to ensure the relationship is
nurtured from a strategic point of view. Meanwhile, dedicated teams
or managers can get on with the day-to-day job of managing the
partnership at operational level, and its objectives and
Developing this partnership mentality is a journey and takes
time though, warns Osak. "It's a long-term view and there
are no shortcuts or silver bullets." We are still only human,
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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