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Artificial Intelligence in the Supply Chain

Posted by ICECORP on Jan 25, 2017 9:00:00 AM

Now that we're all used to the concept of the Internet of Things and the Big Data that it is creating, it's time to take a look at the latest digital trend that is transforming supply chain operations. Artificial Intelligence (AI) sounds futuristic, but it's real and it's here. Anybody who interacts with an online search engine, chat bot, or talks to their Android or Apple phone is using AI. AI is defined as "the science and engineering of making intelligent machines, especially intelligent computer programs"[1]. Likewise it is described as "the science of making computers do things that require intelligence when done by humans"[2]. And importantly, intelligence is defined as "the ability to adapt one's behaviour to fit new circumstances"[1] that is, the ability to learn.While AI has been around for more than 60 years, it has only recently started to prove useful. Some of the current areas where AI is gaining traction include successfully understanding human speech, competing at a high level in strategic game systems (such as chess), self-driving cars, and interpreting complex data. [3]

From simple applications…

Autonomous vehicles are already well on their way to commercial application. As we noted in a previous blog (Autonomous Vehicles, June 2016), this technology is being extensively—and successfully—tested. Major truck and car manufacturers are teaming up to test the potential of AI to replace human drivers in an industry where finding people to drive trucks is becoming increasingly difficult. And autonomous vehicles are also popping up inside distribution centers and in their yards, and in the skies, as drones are being tested for last-mile delivery. AI is also invisibly running in many e-commerce operations, cleverly tracking and predicting customer behaviour, and manipulating it to secure more sales. Artificial Intelligence.jpg

To the very complex

But these are simple applications when compared to the ambitious project recently announced by pharmaceutical giant The Merck Group. The company is working on a project that will essentially automate its whole supply chain using AI. With sensors placed throughout the supply chain—on things like factory machinery—and data from enterprise software, the project is intended to result in computers doing more decision-making when it comes to allocation of materials and product distribution. The company's CIO recently said the algorithms are more accurate than humans about 80 percent of the time in demand planning. [4] The objective is to create "a system that analyzes data continuously and makes decisions on its own about speed and resources. The system would predict spikes and lulls in demand for products and suggest ways to reroute raw materials accordingly, he said. This would allow The Merck Group to respond faster to changing conditions," he said in an interview with the Wall Street Journal. [4] Realizing such a vision is not without perils, however. With increasing supply chain autonomy come greater risks should systems be compromised, whether by a malicious hacker or simply through failure. For companies to trust AI to manage the supply chain, there will need to be huge advances in IT security to ensure the copious quantities of data required to make it work are secure and that the AI itself cannot be turned against the enterprise to a competitor's advantage. Paul Daugherty, Accenture's Chief Technology Officer recently noted, "Artificial intelligence will disrupt businesses and industries on a global scale, and we see this shift going well beyond deploying analytics, cognitive computing or machine learning systems in isolation." [5]

In other words, we are just at the very beginning of AI's influence, and the prudent CIO will allocate significant resources to research before deciding to adopt a major project.

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1. McCarthy, John, "What Is Artificial Intelligence?", Computer Science Department, Stanford University, Revised November 12, 2007. http://www-formal.stanford.edu/jmc/whatisai/

2. Copeland, Jack, "What is Artificial Intelligence?", AlanTuring.net. http://www.alanturing.net/turing_archive/pages/reference%20articles/what%20is%20ai.html

3. "Artificial intelligence", Wikipedia. https://en.wikipedia.org/wiki/Artificial_intelligence

4. Nash, Kim S., "Merck Deploys AI For ‘Self-Driving’ Supply Chain", The Wall Street Journal.com. Dec 20, 2016. http://blogs.wsj.com/cio/2016/12/20/merck-deploys-ai-for-self-driving-supply-chain/

5. "Accenture expands global artificial intelligence capabilities and R&D agenda", Accenture press release, November 5, 2015. https://newsroom.accenture.com/news/accenture-expands-global-artificial-intelligence-capabilities-and-r-and-d-agenda.htm

Topics: Logistics, Warehousing and Distribution, Transportation, outsourcing

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