The impact of innovations coming from generative AI on the ERP industry is significant and this article covers how it enhances the Supply chains of a business.
Introduction:
We live in a global village where all of our businesses rely on a complex network of resources invested in a series of production processes. Such networks are managed through controlled and monitored transportation to provide goods and services to the end customers. This management of all this is termed supply chain management (SCM) and holds a pivotal role in the success of a business dealing with the delivery of a physical product.
The goal of SCM is to maximize efficiency while avoiding shortages in daily business processes by continuously monitoring inventory, manufacturing, sales, and vendor/customer interactions, all this in an ideal case results in a significant increase in operational revenue. However certain market dynamics are extremely challenging for supply chain managers due to high uncertainty, complexities in transportation processes, and ever-changing customer demands.
To overcome these problems, the latest generation of SAP’s ERP products comes with advanced SCM tools (SAP SCM) and SAP Business AI for the supply chain. These software are designed to help businesses stay competitive by responding early to market dynamics and optimizing supply chains thanks to AI-powered algorithms. If you are doubting the role of artificial intelligence in supply chains then here are some stats; estimated numbers as of 2024 are a 15 percent improvement in logistics costs of businesses and more than 30 percent improvements in inventory levels as compared to demands.
AI-powered techniques and machine learning algorithms in SAP’s tools for supply chain can significantly improve the efficiency of the entire supply chain and all the processes attached to it. Here are five direct applications of AI and the latest technologies used in SAP SCM that directly affect the supply chain of a running business:
1. Better Forecasting:
An efficient supply chain always works with an inventory that is maintained according to the specific demand at that time and efficiently avoids stockouts or overstock scenarios. Accomplishing this is rather quite a difficult task that requires continuous monitoring and accurate future prediction.
For this, AI-powered algorithms help businesses to analyze their previously collected data and compare them with market trends, and external factors to provide more accurate demand forecasts. Such deep processing of historical data and smart predictive analysis enables businesses to optimize their inventory and consequently the entire supply chain.
2. Quality Control:
Anomalies in products coming out from the origin sites can result in a significant waste of resources and if gone unnoticed can damage the firm’s business reputation. SAP’s tools working along SAP S/4HANA use AI to optimize the entire design-to-operation process which involves improved product design, prototyping, identification, acquisition, and decommissioning.
Advanced AI-powered quality control processes by identifying defects or anomalies in products during production. This enables businesses to remove such faulty products from even entering the transportation process and saves significant form resources.
3. Logistics Optimization:
SAP SCM uses AI to optimize warehouse layouts and distribution networks to reduce operating costs and save time. Such enhanced algorithms (featured in SAP Transportation Management) are used for route optimization and better methods of allocating goods to vehicles considering their weight and volume. SAP’s systems are also fully integrated with IoT (Internet of Things) devices and sensors which real-time monitoring of the entire supply chain through the ERP platform and supply chain products of SAP.
Moreover, it features the industry’s leading practices and specific criteria for fleet management and carrier selection. On top of this, the in-memory computing of the company’s flagship ERP system, the SAP S/4HANA enables the real-time processing of vast data sources of the company’s operation. This results in faster and more informed logistics decisions.
4. Supplier Management:
With the above-mentioned product combined with SAP’s ERP platform, firms can quickly check supplier performance data in real-time which helps them to filter out the suppliers that are not keeping up with the scheduled delivery times according to their contracts.
Such features also enable them to identify any potential risks with the schedules of the deliveries of the products coming out from a production process. In case of any delay, SAP TM enables supply chain managers to follow up on any disruptions and recover any failures in the supply chain as soon as possible.
5. Data Integration and Analysis:
Powered with AI, these systems can integrate data from different sources of a supply chain (production schedules, inventory levels, equipment sensors, maintenance logs, etc). This integrated data is processed in real time with the help of AI algorithms which can quickly identify patterns in these processes, and build any correlations, and potential anomalies.
Wrapping Up:
Despite the potential benefits of AI in supply chain modernization, many firms lack the necessary knowledge to expand initiatives throughout their business activities. To help such firms, SAP SCM and SAP Transportation Management systems provide real-time monitoring of supply chain processes which are linked with SAP’s flagship ERP platform. Firms can use such systems to stay competitive and respond quickly in case of any disruptions in the supply and production streams.