Artifical Intelligence in Supply Chain Management

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Introduction How Supply Chain Management Works?

inventory. These strategies boost profit margins, crucial for global businesses.

Supply chain management (SCM) is the process of managing the flow of goods and services to and from a business

What is Artificial Intelligence (AI)?

SCM can help companies manage their waste,

Artificial intelligence (AI) embodies the emulation of human intelligence through software-encoded algorithms. Its pervasive presence extends across diverse platforms, encompassing cloud-based enterprise solutions, consumer applications, and embedded firmware systems.

maximize customer value, and gain competitive advantages

What is Generative AI?

How Supply Chain Management Works?

Unlike traditional AI which analyses data,

It also includes every step in turning raw materials and components into final products and delivering them to the final consumer.

•SCM is based on the idea that every product that comes to market results from efforts by multiple organizations that make up a supply chain.

generative AI uses it to become a creative machine and can create content. It learns from massive amounts of existing content like text, images, or code, then uses that knowledge to generate fresh, original content in the same style.

•SCM attempts to centrally control product production, shipment, and distribution.

How AI, particularly generative

•Companies major aim is to remove excess costs, removing excess steps to deliver commodities to the end consumers' reach.

AI started off tackling basic tasks, but it's gotten

AI, is

growing rapidly?

way smarter. Now, companies use it to supercharge their efficiency and growth. From

management

important?

voice assistants helping your day to self-driving cars changing the roads, AI is making a realworld impact with intelligent machines.

Effective supply chain management enhances

AI fuels revenue growth in sales, after-sales,

product quality, reduces recall risks, and bolsters consumer trust.

product innovation, and service optimization.

Industries like finance, manufacturing, and supply

Why

is

Supply

Chain

It also optimizes shipping to improve customer service, minimizing shortages and excess

1 Source: MC Kinsey

chain benefit significantly from AI, enjoying strong cost advantages and efficiency gains.

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AI and Generative AI in Supply Chain AI-driven solutions offer accessible avenues for companies to elevate their supply chain management performance. These solutions encompass features such as dynamic optimization, and physical flow automation.

Generative AI-

Phases of Supply Chain Management

3. Manufacturing

1. Planning

Manufacturing is the process where raw materials are transformed into final products efficiently, with attention to minimizing waste & deviations from planned processes.

Planning involves forecasting future demands and orchestrating resources using ERP software to synchronize supply with customer and manufacturing requirements.

Use of AI•Full transparency across operations via an endto-end digital control tower

A consumer-packaged goods firm using generative AI for enhancing risk sensing techniques to identify emerging risks to its operations.

Use of AI• dispatches and intra - warehouse logistics •leveraging historical data for improved efficiency in inventory management Generative AI-

• Risk-adjusted end-to-end margin optimization for enhanced profitability

Generative AI-

An automobile manufacturer announces the use of generative AI in intelligent vehicle production to improve quality management.

A retail chain adopts LLMs to swiftly summarize, categorize, and analyze customer feedback, slashing execution time from days to minutes.

4. Delivery

2. Sourcing

Delivery encompasses implementing resilient logistics strategies to ensure timely and costeffective product distribution to customers.

Sourcing entails cultivating reliable supplier partnerships to secure quality materials meeting specifications at competitive prices, ensuring flexibility for emergency supplies.

Use of AI• Enhancing last mile delivery

Use of AI-

•Optimize the no. of dispatched vehicles to warehouses & reduce operational costs

•anomaly detection and text AI for entity extraction

Generative AI-

• Sourcing real-time inventory levels

1 Source: WTO

A global transport & coordination company using generative AI to provide automated shipment tracking to increase transparency and speed.

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Applications AI is and will be revolutionizing SCM by enhancing efficiency, visibility. The below research will focus on exploring the various applications of AI in SCM. The study aims to shed light on how AI methods can support Operations and Supply Chain Management (OSCM) processes, ultimately improving competitiveness by reducing costs, lead times, enhancing quality, safety, and sustainability.

1. Planning and Manufacturing Optimization Artificial intelligence revolutionizes supply chain planning using real-time data analysis and predictive algorithms. This transformation enhances demand forecasting, inventory. management, and route optimization, ensuring efficiency and adaptability. AI-driven insights facilitate proactive decision-making, risk management, and sustainable practices, ultimately driving competitive advantage and business growth in an increasingly complex market landscape.

A) Production Forecasting Precision AI leverages vast datasets and advanced algorithms to predict raw material shortages and potential disruptions years in advance. By analyzing historical trends, supply chain data, and external factors such as geopolitical events and environmental changes, AI provides manufacturers with proactive insights. This enables effective production planning, risk mitigation strategies, and contingency plans, ensuring operational resilience. Companies can thus maintain a competitive edge by adapting to changes swiftly.

B) Inbound Logistics Optimization AI-driven solutions like nuVizz's Robo Dispatch automate and optimize inbound logistics ensuring efficient asset utilization and timely deliveries from suppliers to manufacturing facilities.

The below given graph depicts how important and rapid is the penetration and adoption of AI. Now, according to the research and articles, the top use cases of AI with alignment to SCM can be classified under Four Heads: -

Exhibit 1 The growing adoption rate of AI in supply Chain Management

Adoption Rate of AI in the Supply Chain is Projected to grow by 2025

Share of respondents (%)

34

35

32

30

18

16

12

Adoption in 2022 AI is Critical 1 Source: WTO

8

6

Widescale Adoption 2

4

Expected Adoption in 2025 Limited Adoption

Piloting Use Cases

Not Using

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2) Logistics Automation Synergy

C) Prevention of The Bullwhip effect

Contemporary supply chain automation relies heavily on AI, enabling technologies like digital workers, warehouse robots, and autonomous vehicles to autonomously execute repetitive and error-prone tasks, fostering efficiency and reliability.

Small fluctuations at one end of the supply chain are amplified as they move upstream/downstream. The global furniture brand Ikea has also developed a demand forecasting tool based on AI, which uses historic and new data to provide accurate demand forecasts.

3) Refined Eco-Efficiency

Forecasting tool based on AI, which uses historic and new data to provide accurate demand forecasts.

AI can help improve supply reduce their emission to make them greener A)Greener transport logistics AI tools are helping optimize transportation routes to reduce the number of kilometers travelled. For instance, DHL uses AI to optimize vehicle routes and reduce fuel consumption, resulting in lower emissions and improved sustainability.

B)Greener warehousing utilizes AI forecasting to map carbon emissions related to storage. This allows for the reduction of excess inventory movement, minimizing carbon emissions.

Additionally, smart energy solutions can further cut carbon emissions by optimizing energy usage in warehouses. These advancements enable more efficient and sustainable warehousing operations, contributing to broader environmental sustainability goals.

Global supply chain challenges often stem from inadequate supplier relationship management, evident during the 2020 pandemic. AI offers solutions by enhancing consistency and efficiency in SRM, mitigating disruptions across sectors like food.

4) Efficient Supplier Relationship A) Enhanced supplier communications Utilizing AI in supplier management streamlines selection processes based on various criteria and automates communications, preventing disruptions and fostering smoother supply chain operations.

B) AI-Enhanced Supplier Selection Utilizing AI, SRM software enhances supplier selection based on pricing, historical data, sustainability, and tracks supplier performance, optimizing supply chain efficiency.

Exhibit 2 The applications of AI in Supply Chain Management at a glimpse Planning and Manufacturing Optimization

Refined Eco-Efficiency

Logistics Automation Synergy 1 Source: WTO

Efficient Supplier Relationship

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Key Trends 1. Advanced AI Integration in Operations: The integration of Generative AI (Gen AI) promises to revolutionize supply chain management, logistics, and procurement. By analyzing extensive datasets and intricate variables, Gen AI offers opportunities for enhancing procurement compliance, refining manufacturing workflows, and facilitating virtual logistics communication.

2. Driven Streamlined Planning: AI-driven Sales and Operational Planning (S&OP) and Integrated Business Planning (IBP) applications are closing the gap between planning and execution. These technologies streamline processes, leverage advanced analytics, and provide deeper insights with minimal human intervention, ultimately enhancing predictability and resource allocation.

4. Enhanced Transparency Across Supply Chain Tiers: Addressing the challenge of limited visibility across supply chain tiers is crucial for regulatory compliance and risk management. Solutions like control towers and digital twins offer insights into sub-tier relationships, factory locations, overall supply chain depth, thereby bolstering resilience, supporting ESG goals.

5. Adoption of Low Code Platforms: Low-code platforms are facilitating automation and integration across various supply chain functions. These platforms empower nontechnical users to swiftly adapt applications to changing market conditions, fostering agility and responsiveness.

3. Focus on ESG and Scope 3 Emissions:

6. Transformation in Electric Vehicles and Logistics:

Increasing emphasis is placed on Scope 3 emissions across the value chain. Efforts to establish emissions baselines and leverage digital platforms for centralized emissions data management are key to advancing sustainability goals.

The logistics sector is undergoing significant transformation with the adoption of electric vehicles and smart logistics technologies.

Integration of AI, IoT, and data analytics is driving efficiency, improving customer experience, and advancing sustainability objectives.

Exhibit 3 The key supply chain trends Enhanced Transparency Across Supply Chain Tiers

Advanced AI integration in Operations

Driven Streamlined Planning

Focus on ESG and Scope 3 Emissions 1 Source: WTO

Top 6 supply chain trends

Adoption of Low Code Platforms

Transformation in Electric Vehicles and Logistics

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Amazon: Case Study AI is being used to optimize inventory levels in a variety of industries, including retail, manufacturing, and healthcare. Retail giants like Amazon deploy AI to optimize inventory levels, ensuring products are available when needed, ultimately enhancing customer satisfaction and operational efficiency.

What challenges did Amazon face in inventory management?

Amazon encountered issues with overstocking and understocking products, leading to increased inventory costs and potential customer dissatisfaction due to product unavailability or delayed deliveries.

Amazon's inventory management challenges resulted in financial strain and customer dissatisfaction, highlighting the need for efficient supply chain strategies.

Hence, supply chain strategies are vital for mitigating inventory issues.

How did Amazon utilize AI to address these challenges?

Amazon deployed AI, including machine learning, natural language processing, and computer vision, to optimize inventory levels. Machine learning analyzed historical data to predict demand, while natural language processing extracted insights from customer reviews and social media.

Computer vision tracked product movement in warehouses to identify bottlenecks and optimize inventory.

What benefits did Amazon derive from implementing AI in inventory management?

Reduced inventory costs: AI prevented overstocking and understocking, leading to cost savings. Improved customer satisfaction: AI ensured timely delivery of products, enhancing customer experience. Increased sales: AI-driven insights enabled Amazon to identify trends and launch new products, driving sales growth.

Exhibit 4 A comprehensive breakdown of Amazon’s supply chain

1 Source: WTO

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Walmart: Case Study AI is being used to forecast demand for products and services. This information can be used to optimize inventory levels, production schedules, and pricing.

What challenges does Walmart address through AI-powered demand forecasting?

Walmart tackles challenges related to inventory management, production scheduling, and pricing by accurately predicting product demand. This prevents issues such as overstocking and understocking, ensuring optimal stock quantities aligned with market needs and minimizing inventory shrinkage. By leveraging advanced data analytics and machine learning algorithms, Walmart optimizes inventory levels, production schedules, and pricing strategies. This proactive approach enables the retail giant to maintain optimal stock quantities, reduce inventory shrinkage, and enhance customer satisfaction through timely product availability and competitive pricing.

How does Walmart utilize AI to forecast demand for products?

Walmart leverages AI technologies such as machine learning, natural language processing, computer vision to forecast product demand.

Machine learning analyzes historical sales data to generate precise predictions, natural language processing mines customer reviews and social media discussions to identify emerging trends.

What benefits has Walmart derived from implementing AI in demand forecasting?

Reduced inventory costs: By avoiding excessive stock or inventory shortages, it achieved significant financial savings. Improved customer satisfaction: AI enables Walmart to fulfill customer demands promptly, enhancing overall customer satisfaction. Increased sales: With AI-driven insights, Walmart can capitalize on emerging trends and meet customer demand promptly, leading to increased sale

Exhibit 5 A comprehensive breakdown of Walmart’s supply chain

1 Source: WTO

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Disadvantages The dawn of the 21st century brought with it technological advancements that have reshaped the very fabric of our societies. Among these advancements, Artificial Intelligence (AI) stands out as a transformational force, affecting industries ranging from healthcare to entertainment. However, there is one domain where AI's impact is particularly crucial: the supply chain.

Data Principle and Quality AI blueprints significantly rely on high-quality and accurate data from multiple primary and secondary sources.

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•

The caliber of data that AI-driven applications supply has a direct impact on their efficiency and accuracy. This can be a problem because supply chains often involve multiple sources with varying data formats.

Cleaning and integrating this data can be complex and time-consuming. It becomes crucial to establish data integrity, particularly in large and intricate networks.

Cost of Implementation Adopting AI technology necessitates investments in infrastructure, software, and qualified personnel.

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•

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The initial expenses and labor associated with deploying and integrating AI systems may be exorbitant for some organizations, particularly those with restricted resources.

Integrating AI-driven technologies such as predictive analytics, machine learning, and robotics often involves substantial costs for purchasing, customization, and training.

Small and medium-sized enterprises (SMEs) may find it particularly challenging to afford these investments, leading to a widening gap between large corporations and smaller businesses.

Data Privacy and Security Risks AI-powered SCM systems may be vulnerable to data breaches, cyber attempts, jeopardizing crucial supply chain information and operations.

While processing sensitive data, AI systems may unintentionally perpetuate prejudices or divulge private insights, raising legal and ethical concerns.

Exhibit 6 The disadvantages of integrating AI into the supply chain

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Algo went wrong. Microsoft had launched Tay.ai, which was introduced on Twitter in 2016, which was a chatbot for assisting and being friends with teenagers.

Tay’s launch led to it becoming the target of frantic attention from the media and the Twitter community, and within twenty-four hours it had around 100,000 interactions with users all around the world. However, what

suboptimal or erroneous decisions. Limited adaptability can constrain the flexibility and responsiveness of AI-driven decision-making, particularly in dynamic or unpredictable environments such as supply chain management.

Human Workforce Displacement •

began as an inviting first tweet declaring "Hello world" quickly turned into horribly racist, fascist, and sexist tweets, ranging from "Hitler was right..." to "feminists should... burn in hell."

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Limited Decision-Making AI excels at data analysis, but it can lack the human touch when it comes to complex situations. Intuition and unquantifiable factors are important for strategic supply chain decisions, and AI may struggle with these areas.

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Lack of Transparency and Interpretability AI decision-making processes are often perceived as "black boxes" due to the complexity of underlying algorithms and data processing techniques. This lack of transparency can hinder stakeholders' ability to understand how decisions are made, evaluate their reliability, and identify potential biases or errors. Limited transparency and interpretability can erode trust in AI systems and impede their acceptance and adoption in decision-making contexts.

Inability to Adapt to Novel Situations AI systems excel at performing tasks within predefined parameters but may struggle to adapt to novel or unforeseen situations.

When faced with scenarios outside their training data or programming, AI algorithms may produce

1 Source: WTO

Job Displacement and Restructuring The introduction of AI technologies in SCM raises concerns about the potential displacement of human workers and the need for restructuring within organizations.

Employee Resistance and Labor Disputes The possibility of job losses or changes in job roles due to automation can lead to resistance from employees and even labor disputes, impacting organizational harmony and productivity. Major issues faced under this head would be:

1. Loss of Human Oversight: A 2021 BCG study highlights that 70% of executives believe human-AI collaboration is essential for effective decision-making, particularly in navigating unforeseen disruptions. Source: Boston Consulting Group, "Why Human-AI Collaboration Is Key to Supply Chain Resilience," 2. Employee Resistance and Morale: Data on this specific concern in the context of AI in supply chain management is limited, but a 2022 study by Gartner found that 70% of employees reported feeling anxious about AI replacing their jobs. This anxiety can lead to resistance to AI adoption. Companies must address these concerns through transparent communication and emphasizing the role of AI in augmenting rather than replacing human labor.

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Benefits 1. Enhanced Demand Forecasting:

2. Optimized Inventory Management:

Traditionally, demand forecasting relied on historical data and statistical models, often leading to inaccuracies and missed opportunities.

AI, with its ability to analyze vast amounts of real- time data, including social media trends, weather patterns, and competitor activity, can provide much more precise forecasts. This allows companies to optimize inventory levels, preventing stockouts and minimizing the risk of holding excess stock.

Managing inventory levels is a delicate balancing act. Too little stock can lead to lost sales, while too much ties up valuable capital and increases storage costs.

For instance, Amazon leverages AI to analyze customer behavior, purchase history, and external data points to predict demand with incredible accuracy. This allows them to stock their warehouses with the right products at the right time, reducing storage costs and ensuring customer satisfaction.

Exhibit 7 The benefits of AI integration in the supply chain

AI algorithms can analyze historical sales data, seasonality trends, and supplier lead times to determine optimal stock levels for each product.

This not only reduces storage costs but also frees up cash flow that can be reinvested in other areas of the business. Walmart, a retail giant, utilizes AI to automate inventory management across its vast network of stores. By analyzing sales data and predicting future demand, they can ensure shelves are always stocked with the right products, minimizing stockouts and maximizing sales opportunities.

3. Predictive Maintenance for Supply Chain Assets: Equipment breakdowns can disrupt the entire supply chain, leading to delays and significant costs. AI-powered predictive maintenance can analyze sensor data from equipment to identify potential failures before they occur. This allows for proactive maintenance, minimizing downtime and ensuring smooth operation of the supply chain.

For example, Rolls-Royce employs AI to analyze data from aircraft engines in real-time. This allows them to predict potential component failures and schedule maintenance well in advance, preventing costly in-flight breakdowns and ensuring the safety and reliability of their aircraft. Additionally, AI-driven insights help optimize inventory management and streamline maintenance operations, further reducing costs and enhancing operational efficiency. This proactive approach not only safeguards passenger safety but also strengthens customer trust and satisfaction.

1 Source: WTO

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4. Improved Transportation and Logistics: AI is optimizing transportation and logistics operations in several ways. AI-powered route optimization software can analyze traffic patterns, weather conditions, and driver availability to determine the most efficient delivery routes.

Additionally, AI can automate tasks like scheduling deliveries and managing warehouse operations, saving time and reducing human error.

UPS, a leading logistics provider, utilizes AI to optimize delivery routes for their vast network of trucks. By analyzing factors like traffic patterns and package sizes, they can ensure faster deliveries and reduce fuel costs, making their operations more efficient and sustainable.

5. Product Quality Maintenance :

Improvement

and

AI technologies can improve product quality and maintenance processes within the supply chain by identifying defects early, optimizing production processes, and predicting equipment failures before they occur.

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This ensures that products meet quality standards and reduces the likelihood of recalls or disruptions in the supply chain due to faulty products. This can be illustrated by General Electric (GE) that utilizes AI-powered predictive maintenance systems in its manufacturing facilities.

These systems analyze data from sensors embedded in equipment to monitor performance metrics such as temperature, pressure, and vibration. By detecting anomalies and patterns indicative of potential equipment failures, GE can schedule maintenance proactively.

6. Increased Visibility and Risk Mitigation : AI provides real-time insights into your entire supply chain, offering a clear view of what's happening at every stage. Imagine having a realtime dashboard that pinpoints potential disruptions, like a delayed shipment or a raw material shortage. This enhanced visibility allows businesses to take proactive measures to mitigate risks before they snowball into major problems.

AI can even analyze historical data to predict potential bottlenecks and suggest preventative actions, ensuring a smooth-running supply chain with a better equipped risk mitigation system.

Exhibit 8 The benefits of AI integration in the supply chain

3 2 1

Predictive Maintenance for Supply Chain Assets

Optimized Inventory Management

Enhanced Demand Forecasting

1 Source: WTO

Improved Transportation and Logistics Product Quality Improvement

4

5

Increased Visibility and Risk Mitigation

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Challenges 1. Data Management

Partnerships: Partner with AI service providers to leverage the experience of external specialists who can guide the implementation process.

Challenge: The effectiveness of AI models hinges on the quality and accessibility of data. Fragmented data residing in isolated pockets across departments, partners, and legacy systems creates significant hurdles. Furthermore, inconsistent, inaccurate, or incomplete data leads to unreliable AI outputs.

Upskilling: Provide training programs to bridge the knowledge gap within the current workforce. This empowers existing employees to understand, work with, and contribute to AI-driven initiatives.

3. Legacy Systems Challenge: Outdated legacy systems may struggle to handle the volume, variety, and velocity of data required by AI applications. This incompatibility can create significant roadblocks to integration.

Solution: Establish data sharing mechanisms to break down data silos and create a unified data source. Invest in data cleansing efforts to standardize data formats, identify and rectify errors, and ensure data integrity throughout the supply chain.

Solution: Three approaches can address legacy system compatibility issues: Connectors: Build custom connectors to bridge the gap between disparate systems and facilitate seamless data exchange.

2. Technical Expertise Challenge: Many companies lack the inhouse expertise required to implement and maintain AI solutions. This skill gap can hinder successful AI adoption.

Middleware: Utilize middleware solutions to act as a translator between legacy systems and AI applications, enabling them to communicate effectively.

Solution: There are three main approaches to address this challenge Talent Acquisition: Hire AI specialists to build an in-house team with the necessary expertise in data science, machine learning, and AI engineering.

Upgrades: In cases where feasible, upgrade legacy systems to improve their compatibility with the data demands of AI applications.

Exhibit 9 The top 5 issues rated very or extremely challenging by supply chain professionals

57%

56%

54%

52%

52%

hiring or retaining qualified workers

talent shortage

supply chain disruptions or shortages

out of stock situations

customer demands for customization

1 Source: WTO

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4. Cost Challenge: The financial investment required for AI adoption can be a significant hurdle for businesses. Significant upfront costs are associated with hardware infrastructure, software licenses, talent acquisition, data preparation, model development, and pilot testing. Additionally, ongoing costs for maintenance, scaling, and personnel salaries need to be factored in.

Solution: Careful cost evaluation is crucial. Businesses should prioritize highimpact applications that deliver the most significant return on investment. Cloud- based AI can be a cost effective option, as they offer flexible scaling and potentially lower upfront hardware costs.

5. Organizational Resistance Challenge: Introducing AI into the workplace can create resistance from employee concerned about job displacement or disruptions to established workflows. These concerns can hinder the successful integration of AI solutions.

Solution: Implementing transparent communication strategies is key. Employees need to be kept informed about the purpose and

impact of AI implementation. Stakeholder engagement through involvement in the planning and decision-making processes fosters a sense of ownership and reduces anxieties.

6. Security Considerations It is crucial to acknowledge additional security considerations associated with AI in supply chain and logistics. Supply chain data often contains sensitive information such as customer orders, inventory levels, and shipment details Here are some key security best practices: 1. Implement data encryption to safeguard sensitive information.

2. Enforce access controls to restrict unauthorized access to data.

3. Utilize intrusion detection systems to identify and prevent cyberattacks.

4. Conduct regular security audits to ensure compliance with data privacy regulations.

5. Adopt security best practices for AI models such as model encryption and anomaly detection.

6. Implement input validation to prevent malicious data injection.

7. Utilize adversarial robustness techniques to make models resistant to manipulation

Exhibit 10 Projected impact of AI integration in supply chain

1 Source: WTO

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Importance of Human Intervention 1. Relationship Management: Effective supply chain management relies heavily on developing and maintaining relationships with suppliers, partners, and customers. While AI can automate certain aspects, human involvement is crucial for:

• Trust-Building: Regular human interaction fosters trust and trust-based relationships enable better collaboration, open communication, and joint problem-solving.

• Cultural Sensitivity: In a globalized business environment, human intervention helps navigate cultural differences, respecting local customs and building relationships based on mutual respect and understanding.

2. Enhancing Innovation through Human-AI Collaboration: AI automates tasks efficiently, but strategic direction requires human input. The synergy between human creativity and AI's analytical power drives innovation: • Strategic Insights: Executives use AI's datadriven insights to identify growth opportunities and set strategic goals, aligning with market trends.

• Example: Walmart uses AI for demand prediction and inventory optimization, but human experts tailor product assortments for specific zones, ensuring customer satisfaction.

3. Complexity and Multifaceted Nature of Supply Chains: Supply chains involve various functions and subfunctions Human intervention is essential to manage this complexity: • Multifunctional Coordination: Human expertise integrates the goals of different functions, often with competing requirements.

• Validation and Feedback: Practitioners validate AI recommendations and provide feedback, refining AI models.

1 Source: WTO

4. Addressing Data Challenges: High-quality data is essential for AI systems, and human intervention plays a vital role in managing and interpreting this data. Ensuring data accuracy, quality, and governance is critical for reliable AI outcomes. Humans contextualize data, providing insights and understanding, especially in new or unforeseen scenarios.

Data Management: Ensuring data accuracy, quality, and governance involves continuous monitoring and validation processes. Human oversight is crucial in maintaining data integrity.

Implementing effective data management practices ensures that AI systems have access to reliable and relevant information.

Data Interpretation: Humans contextualize data, especially in new or unforeseen scenarios, bringing essential domain knowledge and critical thinking. This human insight is vital for making sense of complex data patterns. Effective data interpretation bridges the gap between raw data and actionable insights.

5. Organizational Dynamics: AI implementation significantly impacts organizational structures and workflows, necessitating active human involvement to ensure smooth transitions and optimized performance.

• Change Management: Human-led initiatives are essential to manage changes in processes and roles with AI adoption, addressing employee concerns and facilitating cultural adaptation.

• New Roles and Responsibilities: AI introduces roles like data scientists and AI system architects, requiring human expertise to design, implement, and maintain AI systems effectively and responsibly.

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6. Handling Uncertainty and Exceptions: AI systems can struggle with novel situations, where human intervention is critical:

8. Continuous Improvement: AI systems benefit from continuous learning and improvement, driven by human intervention:

• Crisis Management: Human judgment is indispensable during crises or significant disruptions.

• Iterative Feedback: Practitioners provide feedback to help AI systems learn and adapt.

• Complex Problem Solving: Humans excel at creative and complex problem-solving, especially in scenarios lacking historical data for AI models.

7. Ethical and Strategic Considerations: AI systems need to align with ethical standards and long-term strategic goals, requiring human oversight: • Ethical Oversight: It is quite essential to ensure that AI decisions comply with ethical guidelines and legal considerations.

• Innovation: Human creativity drives innovation, finding new ways to enhance supply chain efficiency.

9. Tactical Decision Making: Human intuition and judgment are essential for making strategic choices aligned with broader business objectives in the following ways: • Contextual Understanding: Humans possess the ability to understand complex business contexts, industry dynamics, and market trends that AI may struggle to fully grasp.

• Strategic Alignment: Humans ensure AI applications align with organizational objectives, making necessary adjustments.

• Creative Problem Solving: AI excels at data analysis, but humans are better at generating innovative ideas and solutions to complex supply chain challenges.

• Accountability and Transparency: Humans are responsible for the actions of AI systems.

Understanding how AI reaches decisions is vital for accountability.

• Trust Building: Employees need to trust AI systems, which requires human efforts to explain AI decisions and illustrate their benefits.

Exhibit 11 The importance of human intervention even after the AI integration

1 Source: WTO

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Summary AI is revolutionizing supply chain management (SCM) by enhancing efficiency, visibility, and competitiveness through automation and datadriven insights. Applications like logistics automation, and inventory optimization significantly improve operational efficiency.

However, challenges such as data quality, implementation costs, and human workforce displacement must be addressed to leverage AI's full potential in SCM. AI enhances efficiency in SCM by automating repetitive tasks and streamlining processes.

Machine learning algorithms and robotic process automation (RPA) can handle routine tasks such as order processing, invoicing, and shipment tracking, freeing up human resources for more strategic activities. By automating these tasks, companies can reduce errors, speed up operations, and lower operational costs.

Visibility is another critical area where AI makes a significant impact. With AI-powered analytics, companies can gain real-time insights into their supply chains, from production and inventory levels to transportation and delivery statuses.

This transparency enables better decisionmaking and allows companies to respond swiftly to disruptions.

The highlights of the report are: 1. Revolutionizing SCM: AI enhances efficiency and visibility in supply chains.

2. Demand Forecasting: AI analyzes realtime data for accurate predictions.

3. Data Quality Challenge: High-quality data is essential yet hard to maintain.

4. Human Intervention: Human oversight is crucial for ethical and strategic decisions.

The key insights obtained are: 1. Efficiency Gains: AI automates repetitive tasks, significantly boosting supply chain efficiency. This leads to reduced operational costs and improved service levels, making companies more competitive in the market.

2. Importance of Data: The success of AI applications in SCM hinges on high-quality data.

Poor data management can lead to erroneous AI outputs, emphasizing the need for robust data governance practices.

3. Investment Barriers: The high costs associated with implementing AI technologies can deter smaller organizations. Businesses must evaluate potential returns to justify these investments, especially in a competitive landscape.

4. Human-AI Collaboration: Effective decisionmaking in SCM requires a blend of AI's analytical capabilities and human intuition, especially in complex situations where emotional intelligence and cultural sensitivity are critical.

5. Ethical Concerns: AI's integration into SCM raises ethical issues, including privacy risks and biased decision-making. Organizations must establish frameworks to ensure compliance with ethical standards.

6. Workforce Implications: The shift to AI-driven processes may lead to workforce displacement.

Companies must manage this transition carefully to maintain employee morale and organizational harmony.

7. Adaptability Challenges: While AI excels at data-driven decision-making, it struggles with unforeseen situations, highlighting the need for human oversight to navigate crises and complex problem-solving scenarios.

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Bibliography Ramanathan, Kavya. Generative AI in Supply Chain_Report_2b https://www.alvarezandmarsal.com/sites/default/files/article/pdf/Generative%20AI%20in%20Supply%20C hain%20Report%20-%20Compressed%20version.pdf Agrawal, Narendra. Cohen, Morris. Deshpande, Rohan. Deshpande, Vinayak. (2024) How Machine Learning Will Transform Supply Chain Management https://hbr.org/2024/03/how-machine-learning-will-transform-supply-chain-management Ransbotham, Sam. Kiron, David. Gerbert, Philipp. Reeves, Martin. (2017) Reshaping Business with Artificial Intelligence_tcm9-177882.pdf https://web-assets.bcg.com/img-src/Reshaping%20Business%20with%20Artificial%20Intelligence_tcm9177882.pdf

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(2021) succeeding-in-the-ai-supply-chain-revolution.pdf https://www.mckinsey.com/~/media/mckinsey/industries/metals%20and%20mining/our%20insights/succee ding%20in%20the%20ai%20supply%20chain%20revolution/succeeding-in-the-ai-supply-chain-revolution.pdf Lavanchy, Maude. (2018) Amazon's sexist hiring algorithm could still be better than a human https://www.imd.org/research-knowledge/digital/articles/amazons-sexist-hiring-algorithm-could-still-bebetter-than-a-human/ Liddell, Peter. (2024) Supply chain trends 2024: The digital shake-up https://kpmg.com/xx/en/home/insights/2023/12/supply-chain-trends-2024.html Swart, William. Hall, Cathy. Chen, Haozhe. (2012) Human Performance in Supply Chain Management https://www.researchgate.net/publication/263191373_Human_Performance_in_Supply_Chain_Management Javaid, Shehmir. (2024) Top 12 Supply Chain AI Use Cases in 2024 https://research.aimultiple.com/supply-chain-ai/#enhanced-supplier-relationship-management

Champion, Allison. (2023) AI in Supply Chain Management: Use Cases, Impact, & More https://flow.space/blog/ai-in-supplychain/#%3A~%3Atext%3DFor%20example%2C%20Amazon%20uses%20AI%2Con%20hand%20to%20meet% 20demand

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Authors Krish Gupta Associate krish.22122@sscbs.du.ac.in

Shitiz Dhar Coordinator shitiz.22227@sscbs.du.ac.in

Diksha Garg Coordinator diksha.22068@sscbs.du.ac.in

Ishatv Sharma Associate ishatv.23331@sscbs.du.ac.in

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