How supply chains benefit from using

generative AI
Authors
Glenn Steinberg
EY Global Supply Chain and Operations Leader
Matthew Burton
EY EMEIA Consulting Center Partner and Digital Operations Leader
Contributors
Ayoub Abielmona

7 minute read9 Jan 2024

Related topics AI Consulting Supply chain

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Across the end-to-end supply chain, the buzzworthy technology adds extra

capabilities to AI tasks and promises a simplified user experience.

In brief

 Use cases exist today, and whether you win or lose in the

market may soon depend on having the best generative AI

tools and the data quality to match them.

  Organizations are identifying business needs and

emboldening them with generative technology, whether in

planning, sourcing, manufacturing or delivery.

Corporations have been increasingly deploying artificial intelligence (AI) in supply
chains for demand planning and procurement, while exploring its use in other areas,
such as standardizing processes and optimizing last-mile delivery. Even in the
relatively nascent area of sustainability tracking and measurement, AI adoption is as
high as 62%, according to an EY study.

But in the last year, another evolution of AI has seized the spotlight — generative AI

(GenAI), popularized by ChatGPT — that has upended our notions of what is

possible.

What is GenAI in supply chain?

GenAI creates new content, such as numerical data, images, text, audio or video,

based on data on which it has been trained. Recent advances make it simpler to use

and realize value from, but the technology isn’t new. Already around 40% of supply

chain organizations are investing in GenAI, focusing on knowledge management

applications.¹
The future is now
40%
of supply chain organizations are investing in GenAI

How EY can help

Supply chain and operations

Based on your overarching strategy, we’ll help redefine your end-to-end supply chain
and operations to support your enterprise objectives.
Read more
As investors pour cash into the technology, executives are racing to determine the

implications for operations and business models. For those who diligently pursue

innovation guided by strategy and an understanding of the limitations — not by an

impulse to chase after the latest shiny object — GenAI can prove to be an agile co-

advisor and multiplier in strengthening supply chains.

There are limitations and risks to using GenAI in supply chains — especially when

implementation is rushed or poorly integrated across organizations and supply chain

networks. GenAI tools are only as powerful as their input data, so they are limited by

the quality and availability of data from supply chain partners. Broadly, the risks that

come with fewer human touchpoints — like lack of transparency or ethical and legal

considerations — are best managed with strong governance and working with

experienced partners.

However, what seemed like science fiction even a year ago is now being leveraged in

real-world use cases across the end-to-end supply chain. These projects are enabled

through GenAI’s ability to:

 Classify and categorize information based on visual,

numerical or textual data.

 Quickly analyze and modify strategies, plans and resource

allocations based on real-time data.

 Automatically generate content in various forms that

enables faster response times.

 Summarize large volumes of data, extracting key insights

and trends.

 Assist in retrieving relevant information quickly and

providing instant responses by voice or text.

Leaders can integrate AI into these four building blocks of supply chain operations:

plan, source, make, move.

Plan: generating simplicity with AI

GenAI adds simplicity to interactions throughout tech-enabled planning efforts. The

“chat” function of one of these GenAI tools is helping a biotech company ask

questions that inform its demand forecasting. For example, the company can run

what-if scenarios on getting specific chemicals for its products and what might

happen if certain global shocks occur that disrupt daily operations. Today’s GenAI

tools can even suggest several courses of action if things go awry. Risk management

may be the most promising area for GenAI’s input, particularly in preparing for risks

that supply chain planners haven’t considered.

Global Fortune 500 companies and government organizations are developing GenAI

tools with partners to map and navigate complex supplier networks. These tools

make it easier to plan for alternative suppliers in the event of a disruption and offer

product tracing platforms to meet regulatory or ESG requirements.

Where GenAI drives value in planning:

 Demand forecasting

 Production planning

 Risk management
Source: automate vendor negotiation

A leading US retailer and a European container shipping company are using bots

powered by GenAI to negotiate cost and purchasing terms with vendors in a shorter

time frame. The retailer’s early efforts have already reduced costs by bringing

structure to complex tender processes. The technology presents the opportunity to

do more with less, and when vendors were asked how the bot performed, over 65%

preferred negotiating with it instead of with an employee at the company. There have

also been instances where companies are using GenAI tools to negotiate against each

other.

Beyond negotiations, GenAI presents an opportunity to improve supplier

relationships and management, with recommendations on what to do next. These

tools are useful to quickly extract information from large contracts and help you

better prepare for renewal discussions, for example.

Where AI drives value in sourcing:

 Supplier management

 Sourcing

 Contracts

Make: faster, more effective creation and maintenance

GenAI in supply chain presents the opportunity to accelerate from design to

commercialization much faster, even with new materials. Companies are training

models on their own data sets and then asking AI to find ways to improve

productivity and efficiency. Predictive maintenance is another area where GenAI can

help determine the specific machines or lines that are most likely to fail in the next

few hours or days. This can help improve overall equipment effectiveness (OEE) —

one of the most important manufacturing metrics.

For instance, one leading industrial manufacturing company in Europe partnered

with a tech leader to use GenAI for factory automation and product lifecycle

management, shortening the product development lifecycle and boosting efficiency

with automated inspection processes.

Where AI drives value in manufacturing:

 Product design

 Predictive maintenance

 Material science and engineering

Move: using GenAI to optimize logistics

One of the biggest logistics companies in the US is using a proprietary AI platform to

optimize picking routes within its warehouses, boosting workforce productivity by

about 30% while slashing operational costs through optimized space and materials

handling. While this is not a new use for AI, the generative component offers added

dimensions of customization — say, optimizing based on less fuel, or prioritizing

certain deliveries or considering many other factors in a user-friendly application.

Chatting with its customized tool helped the company understand if its trade

network was optimized, and it even offered suggestions for improvement.

Where AI drives value in logistics:

 Global trade optimization

 Logistics network design

 Last mile dynamic route optimization

Get started today

While GenAI is a powerful tool with certain limitations, it is not a strategy. Focus on

the business value and define a roadmap to shape and impact the organization,

guided by four steps:

1. Focus on domain-wide transformation: Pinpoint high-

impact use cases, envisioning a cohesive ecosystem that

synergizes with traditional business models and unlocks

possibilities.
 2. Coordinate organization collaboration: Discuss the

implications and identify the required skills across

functions, going beyond technical roles.

3. Keep an open mind and guard against risks: Implement

proof-of-concept pilot initiatives to learn more, drive quick

wins and strive for scalable adoption — while taking care on

data quality and hallucination risks.

4. Stay ahead of the curve: Explore the art of the possible. As

adoption increases, companies will test and implement

GenAI in new areas of their supply chains, like in

sustainable and responsible supply chains.

Sumit Dutta, Principal, Supply Chain and Operations at Ernst & Young LLP; and

Asaf Adler, EY Americas Supply Chain Emerging Technology Leader, both

contributed to this article.

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1. IDC’s Future Enterprise Resiliency & Spending Survey
(Wave 2, 2023)

Summary

AI in supply chain management will help enterprises become more resilient and

sustainable and will transform cost structures. While it does have limitations,

generative AI presents a multiplier in what humans and technology can achieve

together in building efficient and resilient supply chains — whether in planning,

sourcing, making or moving. Thanks to recent updates that make it simpler to use

and more effective in realizing value, organizations are now forced to determine how

these advances will impact their sector or risk disruption.