The supply chain has always mattered, but now there is a greater understanding of the nuanced arguments that explain how an effectively managed supply chain can transform an organization. AI is now an important part of the story.
Let’s recap. 2022 saw a cost of living crisis that was either partially or wholly caused by supply chain bottlenecks, which were partly the result of a mismanaged supply chain. The tail end of 2022 also saw the release of ChatGPT from Open AI, and suddenly, the world felt different.
There is much that ChatGPT can do, and much it can’t. It has limitations. It has mind-blowing features. But AI technologies that are likely to see the light of day this year and next will be equally mind-blowing but suffer from fewer limitations. What is clear is that ChatGPT-like tools will be able to produce reports and make recommendations. They will provide timely information and flag problems that may emerge. Information and warnings of impending problems are precisely what an effectively managed supply chain needs.
The supply chain audit
One lesson from the supply chain crisis of 2022 is clear; organizations need to know their supply chain inside out. Not only do they need to know about their suppliers, their strengths, weaknesses, vulnerabilities, ESG credentials, and financial frailties, they need this information right the way down the supply chain, for suppliers, for suppliers to those suppliers, and further on.
In this holistic view of their supply chain, they need to know its strengths, weaknesses, areas in which it is robust, and areas in which it is fragile as a whole. They need to understand if they are too reliant on any one region (increasing risk) and whether distances involved in shipping goods have hidden costs — this is a key and not a well-understood point. A company may ship goods from one side of the world to the other and calculate that the benefits of doing this outweigh the costs but may miss a more subtle point. Goods tied up at sea for an extended period impose cash flow constraints. Poor terms negotiated with customers and suppliers can add to the cash flow challenge. Better terms and shorter shipping transit times can reduce the product cycle from source materials to manufactured goods right the way through to customer sale, from months to weeks, transforming cash flow and enabling much faster ramp-up in developing a business line.
The information about the supply chain that is so important can be gathered via supply chain audits. This was always the case, but now this is more obvious.
AI tools, not necessarily ChatGPT itself, can dynamically update the supply chain audit from information and data available in the public domain or submitted by suppliers. The AI tools will be able to warn of potential issues and highlight recommended actions that can be taken to reduce risk as well as highlight opportunities— such as how a few changes could transform the product cycle.
ChatGPT and AI and the supply chain
ChatGPT is a remarkable tool but is not updated in real-time and is not designed to work with propriety data sets.
However, we see it as a taster — a sign of future things.
It will be possible for an organization to feed data about their supply chain into AI tools, under development now, which will be able to prepare pertinent reports on the supply chain, update these reports as circumstances change, and alert organizations to possible problems in the making.
These reports will also highlight ways that tweaks to the supply chain could transform a product cycle.
AI in the supply chain enables parties to be more reactive to events that occur worldwide, such as strikes, adverse weather conditions, or a factory fire.
The AI can be trained to report on a series of scenarios and respond dynamically accordingly.
Today, as the world grapples with supply chain challenges caused by the Ukraine war and, before that, Covid-related lockdowns, it has become clear that knowledge of the supply chain is vital. AI will become an increasingly more important tool in the collection and reporting of that knowledge.