How are Next-Gen Technologies like Artificial Intelligence Powering Logistics and Supply Chain Industry?
- Published | 20 January 2022
The attributes of the Fourth Industrial Revolution (Industry 4.0), i.e., machine learning (ML), artificial intelligence (AI), big data, and the Internet of Things (IoT), have laid the foundation for a new approach to supply chain management – Supply Chain 4.0.
A supply chain consists of various links. A company may have many logistics links such as component (raw material) suppliers, manufacturers, logistics companies, distributors, warehouses, carriers, distribution networks, etc., which may be scattered around the world. Every link in the supply chain exchanges information. The business efficiency of all participants in the supply chain depends on the speed of this exchange and the quality of the data transmitted.
The advent of the Supply Chain 4.0 revolution has increased predictability in enterprise logistics. Companies are nowadays building self-learning digital ecosystems. This has become a vital component in the development of supply chains today. Unlike traditional systems, the self-learning ecosystem analyzes the flow of raw materials and goods besides building reliable forecasts of resource consumption, final demand, pain points, and future sources of optimization.
Over the past few years, information technology (IT) has dramatically changed the way goods are distributed and the way customers are reached. When the logistics industry begins to aggressively introduce new technologies and unify national regulations, the shift would be more global and compelling.
Countries such as U.S. and China to Witness Major Investments in the Supply Chain Industry
As per experts, AI in supply chain market is poised to grow at a healthy growth rate in the coming years. For instance, according to BlueWeave Consulting, global AI in supply chain market reached USD 21.5 billion in 2021 and is expected to reach USD 48.6 billion by 2027 at an impressive 12.6% CAGR during the forecast period (2021-2027). The increasing digitalization of economies, especially emerging economies, would be the key market growth driver. The surge in demand for increased visibility and transparency of supply chain and logistics data in developing economies, such as India and China, the increasing generation of large volumes of data and information, the growing adoption of small and medium enterprises (SMEs), and the strengthening of the IT industry would further accelerate the market growth. Additionally, the rising popularity of cloud-based services and a growing set of favorable government regulations are some of the other factors supporting the market growth.
More and more companies are realizing the need to use digital technologies in their supply chains. But in general, the level of digitization in logistics is always low, and most logistic companies still use the usual communication channels, such as email, telephone, and instant messaging, as well as an outdated method of transporting goods: importer-dealer-retail network. In order to meet the needs of customers, logistics providers must have access to direct-to-consumer channels (preferably through machines) to process large amounts of data, to exchange with competitors and stakeholders, to build blockchains, and to leverage leads from these arrays to make informed decisions.
Additionally, it has been observed that in Europe customer, supplier, and contractor integration is in full swing, and the U.S. and China has already started implementing AI in the supply chain on a large scale. The U.S., for instance, has registered major FDI in logistics and supply chain industry. The US logistics and supply chain industry welcomed 3.5 billion dollars in foreign direct investment in 2019.
Top FDI Sources in the U.S. Logistics and Supply Chain Industry
Source: U.S. Bureau of Economic Analysis
Impact of COVID-19 on Supply Chain Management Industry
The automotive industry is the backbone of the global economy. Over the past 12-18 months from 2019 to 2020, the automotive industry has seen a considerable slowdown due to the COVID-19 pandemic. This can be attributed to several reasons, including factory closures, government sanctions, supply chain disruptions, and shutdowns in many countries that have caused global auto demand to plummet. In addition, the global supply of auto parts has been disrupted due to restrictions on import and export activities in several countries.
Several companies are expecting that the COVID-19 pandemic will pass quickly. However, this has not been the case thus far. As the pandemic shifts the industry, there are ways to stand out and better navigate the next inevitable storm of disruption. The initiatives include rethinking supply chain strategies to address risk and resilience, finding ways to withdraw cash quickly, and investing in digital technologies. It is also important to continually put people at the center of the work and empower them to do extraordinary things. Furthermore, innovation must be designed with circularity and environmental considerations in mind through a truly sustainable supply chain centered on the customer. As a result, businesses will be better prepared for any future crisis - turning a potential disruption into a huge opportunity.
In terms of competition, there are several well-known and start-up companies that are present in the market. Some of the key players operating artificial intelligence in the global supply chain market are Samsung Electronics, Microsoft, Xilinx, Amazon, IBM, Intel, Micron Technology, project44., Deutsche Post AG, FedEx, GENERAL ELECTRIC, Google LLC, NVIDIA Corporation, Oracle, SAP SE, Robinson Worldwide Inc., E2open LLC., and RELEX Solutions. These companies indulge in various business development strategies, such as mergers and acquisitions, launching new products, and similar other strategies to strengthen their position in the market.
The Way Forward
Decades of focus on optimizing supply chains to minimize costs, reduce inventory, and improve asset utilization have removed buffers and flexibility to absorb disruptions. The COVID-19 has shown that many companies are not fully aware of how vulnerable their supply chain relationships are to global shocks. The good news is that new supply chain technologies are emerging that greatly improve end-to-end visibility and support businesses' resilience to such shocks. The conventional linear supply chain model is being transformed into a digital supply network (DSN), where operational silos are broken down and organizations are connected to their complete supply network for end-to-end visibility, collaboration, agility, and optimization.
Additionally, the world's leading logistics companies are closely monitoring all modern IT trends and are looking for opportunities to implement them in their businesses, especially in their supply chain. For instance, NVIDIA, in 2021, introduced NVIDIA ReOpt AI software to assist leading logistics companies in their supply chain management to efficiently route goods from factories to stores and homes. Also, in the coming years, major companies would witness the implementation of digital and end-to-end supply chains in planning, procurement, manufacturing, and logistics, to increase efficiency and open up new revenue sources.
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