Darcy MacClaren

Unexpected supply chain disruptions can cost organizations 45% of an entire year’s profits over the course of a decade. These unforeseen circumstances highlight not only the challenge of adapting to solve the issue in the moment, but also reveal a company’s  willingness to prepare ahead of time to prevent these scenarios.

Valerie Blatt

With the growth of generative AI, machine learning and predictive analytics, industry leaders can now equip their teams with the tools to look ahead and prepare for what’s next. It’s no longer about whether they should adopt these tools, it’s about figuring out how quickly companies can deploy them and realize the benefits.

Here are three ways we see AI helping companies manage supply chain disruptions in the moment — and prevent them before they even happen.

Forecast Disruptions — and Respond in Real-Time

For global companies managing hundreds of partners and suppliers, supply chain disruptions can occur almost anywhere throughout the network. Deloitte’s 2023 Global Chief Procurement Officer Survey found that just 2% of firms said they had “high visibility” beyond tier one of their supplier networks, despite most issues arising further down the supply chain.

Should a situation occur, AI allows supply chain managers to move quickly. In the event of crowded shipping routes or weather-related delays, for example, AI can proactively recognize the problem and suggest products be transported via another method. Procurement teams can also see the cost or time implications that come with those suggestions as conditions evolve, predicting arrival times to help partners plan their inventories and keep costs down. If a key material is in low supply from one partner, AI can help companies identify other suppliers on short notice to help keep operations on track.

By recommending alternative courses of action and factoring in the repercussions, AI can help supply chain leaders react to issues more quickly — optimizing their decision-making, improving the efficiency of their operations, and creating more resilient supply chains.

Streamline Supplier Relationships

The faster companies adopt AI, the more of an advantage they stand to gain. That starts with identifying and onboarding suppliers. Not only can AI help source alternative suppliers in a pinch as previously mentioned, but it can also scrape key supplier information to help companies make more informed decisions from the beginning.

By processing information from existing supplier profiles, previous purchase orders, and data from prior procurement cycles, companies can build a more nuanced view into their suppliers. They can also consider factors like customer ratings, sustainability, diversity, intellectual property and more that can allow them to strengthen their value chain. Some AI platforms also allow users to set alerts for stories or announcements like major hires and financial reports so companies can stay in the loop on updates throughout their network.

Managing these steps through traditional practices would be lengthy and tedious. But AI provides granular, comprehensive data quickly to speed up previously drawn-out processes.

Once suppliers are identified, AI can even assist in the onboarding and negotiation processes. Walmart, with its more than 100,000 suppliers, has used the Pactum AI to automate negotiations with “tail-end” suppliers that make up approximately 20% of their expenditures on low-value items. The tool has helped the company reach suppliers that it previously wouldn’t have the bandwidth for. Altogether, these capabilities ensure that suppliers are no longer just a name in a database, but a close partner throughout every phase of operation.

Manage Ongoing Maintenance and Operations

As weeks-long queues at the Port of Los Angeles and an ongoing shortage of truck drivers have become real-life illustrations of supply chain struggles, resiliency should be on the mind of every business leader and procurement and supply chain manager.

The key to unlocking resilience hinges on ensuring that AI is used in a relevant and responsible way, so that anyone in the enterprise can tap into its benefits. Predictive capabilities fueled by AI will be transformative for the logistics industry and the benefits will extend far beyond date and times, helping companies maintain their transportation fleets and even speed up warehouse operations. For example, when companies have a yard full of containers but don’t know which to unload first, a generative AI assistant can read the manifest, understand it, and tell them which truck to start with. This simple piece task offers faster delivery times and reduced costs that cascade across the entire supply chain.

Those trucks waiting to unload also play a crucial role in the supply chain. But as the saying goes, “If the wheels aren’t turning, you aren’t earning.” As trucks move goods thousands of miles from point A to point B, they’re racking up wear and tear that, on average, causes roadside breakdowns every 10,000 miles. With the cost of repairs continuing to rise, AI can help prevent unforeseen breakdowns. By using sensors to assess vehicle components like battery health, brakes, fuel systems, tires, and more, AI can predict when a vehicle needs service or repairs before the issues occur, avoiding costly downtime and keeping trucks on the road longer.

AI offers companies key advantages across their entire supply chain — from catching disruptions before they occur to keeping trucks reliable on the road to help prevent those disruptions. With smart implementation of AI across their enterprise, supply chain and procurement leaders can build the resilient supply chain they need to be successful in 2024 and beyond.

About the authors:

Darcy MacClaren is the chief revenue officer of SAP Digital Supply Chain. Valerie Blatt is the global head of SAP Business Network Customer Success & Go-to-Market.

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