SCM Optimization Using AI

Dr. Suresh Babu D.

Associate Professor,
Department of CSE – AIML,
sureshbd@[Link]
SCM Optimization Using AI

 Course Objectives:
The objectives of this course are :
1. Understand the key components and challenges of modern supply chains.
2. Learn about the various AI technologies applicable to SCM optimization.
3. Explore case studies of AI applications in forecasting, logistics, inventory management,
and procurement.
4. Develop and implement AI models to solve real-world SCM problems..

 Course Outcomes:
At the end of the course, the student will be able to:
1. Identify areas within SCM that can be optimized using AI.
2. Apply AI and machine learning techniques to predict trends, optimize inventory, and
improve logistics.
3. Evaluate the impact of AI-driven solutions on supply chain performance.
4. Design a project that implements an AI solution for a specific aspect of SCM.
SCM Optimization Using AI

Course Overview
Unit 1: Introduction to SCM and AI
Overview of supply chain management, Basics of AI and its relevance to SCM, Review of AI technologies:
Machine Learning, Neural Networks, Natural Language Processing, History and evolution of AI in SCM, Role of
big data in SCM, Introduction to AI tools and platforms for SCM optimization. Case Studies
Unit 2: AI in Supply Chain Forecasting and Planning
Demand forecasting models, Predictive analytics for supply chain planning, Case studies on AI-driven
forecasting, Techniques for improving demand accuracy, AI in production planning and scheduling, Scenario
analysis and simulation using AI, Case studies on AI applications in supply chain planning. Case Studies
Unit 3: AI in Inventory and Logistics Management
Inventory optimization techniques, AI for warehouse management and automation, Enhancing transportation and
logistics with AI, Real-time tracking and monitoring with AI, AI-driven route optimization, Role of AI in last-mile
delivery, Case studies on AI applications in logistics. Case Studies
Unit 4: AI in Procurement and Supplier Relationship Management
AI applications in procurement processes, Supplier selection and performance assessment with AI, Risk
management and compliance using AI, AI in contract management, AI-driven negotiation strategies, Block-chain
and AI for supply chain transparency, Case studies on AI applications in procurement. Case Studies
SCM OPTIMIZATION USING AI
Evaluation Scheme
Marks to be conducted for Marks to be scaled to
ISA 1 (Units 1 and 2) 40 20
ISA 2 (Units 3 and 4) 40 20
Experiential Learning  10 marks(Mini Project)
 10 marks(Case Study) 10

ESA 100 50
Total 100

Dr. Suresh Babu D

Associate Professor, Department of CSE - AIML
SCM Optimization Using AI

Text Book

Artificial Intelligence for Supply Chain Management: Techniques and Applications

for Improved Efficiency and Effectiveness" by N. Viswanadham
SCM OPTIMIZATION USING AI

Unit 1: Introduction to SCM and AI

Dr. Suresh Babu D

Associate Professor, Department of CSE - AIML
SCM Optimization Using AI
Introduction to SCM and AI

Unit 1: Objectives:
1) Overview of supply chain management.
2) Basics of AI and its relevance to SCM.
3) Review of AI technologies: Machine Learning, Neural Networks,
Natural Language Processing.
4) History and evolution of AI in SCM, Role of big data in SCM.
5) Introduction to AI tools and platforms for SCM optimization.
SCM Optimization Using AI
Introduction to SCM and AI

Overview of supply chain management

SCM Optimization Using AI
Introduction to SCM and AI

Supply chain management definition

Supply chain management includes all activities that turn raw materials
into finished goods and put them into customers’ hands. This can
include sourcing, design, production, warehousing, shipping, and
distribution. The goal of SCM is to improve efficiency, quality, productivity,
and customer satisfaction.
SCM Optimization Using AI
Introduction to SCM and AI

The benefits of supply chain management

Increased productivity: EAM systems and predictive
maintenance help machines and systems run more
efficiently. This can fix bottlenecks, improve workflows, and
boost productivity. Automated processes and responsive
data analysis also mean faster shipping and delivery times.

Reduced supply chain costs: The use of

predictive analytics helps eliminate costly “guesstimating,”
which reduces wasteful stockpiles and risky shortages. IoT
lets existing assets become more responsive and deliver the
most efficient and useful workflows possible for every
situation. This also delivers more accurate forecasting to
help reduce half-full delivery trucks, uncoordinated delivery
routes, and inefficient fleet management.
SCM Optimization Using AI
Introduction to SCM and AI

Greater supply chain agility and resiliency: Trends and

market shifts can happen suddenly. Resilient SCM systems
have the agility to adapt to any situation. Real-time data and
smart insights can help supply chain managers re-allocate
machines and staff into better workflows. Customer feedback
can be heard and acted upon right away. Virtual inventories
and smart warehouse processes keep supply and demand
aligned.

Improved product quality: Linking customer feedback

directly to R&D teams means that product design and
development are fully informed by customer needs. R&D and
manufacturing teams can use the insights from machine
learning and analytics to respond to customer trends and
wishes with meaningful product design improvements.
SCM Optimization Using AI
Introduction to SCM and AI

Better customer service: The best SCM practices are

customer-centric and designed to be responsive and
adaptive. With the competition only a click away, modern
SCM allows companies to implement customer feedback and
trends, enabling both micro-fulfilment and personalisation at
scale.

Greater transparency and sustainability: SCM allows full

transparency, from the design and manufacturing stage
through to last-mile logistics, delivery, and returns. With the
ability to see all inputs and outputs throughout the supply
chain, organisations can greatly improve their environmental
footprint, often working directly with suppliers and other
vendors to do so.
SCM Optimization Using AI
Introduction to SCM and AI

Benefits of AI in supply chains

• Lower operating costs
• Advanced real-time decisions
• Cut down on errors and waste
• More tailored inventory management
• Improved warehouse efficiency
• Better supply chain sustainability
• Optimized operations through simulation
SCM Optimization Using AI
Introduction to SCM and AI

Challenges of AI in supply chain

• Downtime for training
• Startup costs
• Complex systems

AI risks
• Inaccuracy of data
• Overreliance on AI – Augment it
• Security and privacy vulnerabilities
SCM Optimization Using AI
Introduction to SCM and AI

Steps to prepare a supply chain for AI

• Take stock of current logistics network
What you can do:
Identify main points within the supply chain from end to end.
Clean data to determine how structured and unstructured data should
be used.

• Make a roadmap: Decide which issues your business wants to address first
and which ones are less of a necessity. It’s likely there are going to be
multiple issues for a supply chain so prioritization is key.
What you can do:
Prioritize issues based on what your supply chain needs.
Take on the more difficult, pressing issues first and then delineate
between the medium to lower importance.
SCM Optimization Using AI
Introduction to SCM and AI

Steps to prepare a supply chain for AI

• Design and select a solution: There are several types of systems to
choose from, and which one a business selects will depend on its needs and
the roadmap it has developed. At this point, a business might bring in a
consultant or industry expert for guidance.
What you can do:
Go through each system option to see which best fits the company’s
supply chain management goals.
Consider gaining professional insight from an industry expert.
SCM Optimization Using AI
Introduction to SCM and AI

Steps to prepare a supply chain for AI

• Begin to implement: The business needs to begin implementation of the AI
technology at this point. The system integrator is likely going to be working
with the internal IT team and the AI solution vendor to get things up and
running.
What you can do:
Prepare and educate a team on the AI technology.
Be ready for setbacks or errors to occur in the process.
SCM Optimization Using AI
Introduction to SCM and AI

Steps to prepare a supply chain for AI

• Prepare employees: AI technology can be a major change that requires
training, patience and a plan. Employees need to learn how to do their
jobs, and open communication is key to successful AI technology
implementation.
What you can do:
Make a plan for communication to all employees before
implementation begins.
Consider the downtime that it takes to train employees and create a
schedule.
SCM Optimization Using AI
Introduction to SCM and AI

Steps to prepare a supply chain for AI

• Continue to monitor: AI technology is always changing, improving and
adjusting. The teams who must manage the technology need to test and
track what happens when adjustments occur, so that periodic refinements
can be made.
What you can do:
Regularly test the AI solution and troubleshoot its capabilities.
Ensure that there is an organized tracking method for when testing
occurs.
SCM Optimization Using AI
Introduction to SCM and AI

History and evolution of AI in SCM

1950s-1970s: The seeds of AI in SCM were sown in the 1950s, when

researchers delved into using computers to tackle intricate challenges in
logistics and inventory management. During this period, techniques like
linear programming and optimization algorithms were harnessed to refine
supply chain processes.

1980s-1990s: This period saw the emergence of expert systems as a pivotal

AI application in SCM. These rule-based systems aimed to emulate human
expertise in specialized domains. A notable example was the Inventory
Management Assistant (IMA), crafted in 1986 to enhance spare parts
replenishment for the US Air Force. Expert systems laid the groundwork for
the integration of more sophisticated AI technologies into supply chain
operations.
SCM Optimization Using AI
Introduction to SCM and AI

History and evolution of AI in SCM

2000s: With the advent of enhanced computing power and reduced hardware
costs in the 2000s, data-driven AI and machine learning took center stage in
SCM. The abundance of data facilitated the development of predictive
analytics, data mining, and machine learning algorithms. These innovations
revolutionized demand forecasting, inventory optimization, and risk
management within supply chains.

2010s: The 2010s ushered in a new era in SCM with the widespread adoption of
the Industrial Internet of Things (IIoT). IoT devices interconnected various
facets of the supply chain, generating copious real-time data. AI, complemented
by big data analytics, empowered businesses to derive valuable insights, refine
supply chain processes, and enhance overall efficiency.
SCM Optimization Using AI
Introduction to SCM and AI

History and evolution of AI in SCM

Present and Future: Presently, AI in SCM is evolving towards cognitive and

autonomous supply chains. Self-learning algorithms, coupled with advanced AI
technologies such as natural language processing and machine vision, enable
supply chains to adapt, learn, and make decisions autonomously. These
autonomous supply chains possess the capability to respond to dynamic
conditions, anticipate disruptions, and optimize operations in real-time.
SCM Optimization Using AI
Introduction to SCM and AI

Role of big data in SCM

Sales, inventory, and operations planning

• Planning often benefits from analyzing big data more than other areas of the
supply chain. Large data sets containing current and historical information on
production levels, sales numbers, inventory volumes, and customer
purchase histories are all critical to determining whether supply and demand
are properly aligned.

• If demand outweighs supply, the organization can raise prices, especially if

demand is high enough and competition isn't robust enough. Or it can ramp up
production, believing that greater availability will drive sales enough to offset
increased manufacturing costs.
SCM Optimization Using AI
Introduction to SCM and AI

Role of big data in SCM

• When supply exceeds demand, organizations have very different choices to

make. They can perhaps discontinue poorly selling products, retool products'
designs or features, or sell off inventory at bargain-basement rates.

• Big data doesn't just tell organizations about the state of these market forces
now and in the past. It enables enterprises to project how these forces may
rise, fall, or plateau through the use of predictive analytics. Such projections
will help companies budget for production, inventory management, logistics,
and other costs.
SCM Optimization Using AI
Introduction to SCM and AI

• Review of AI technologies: Machine Learning, Neural Networks, Natural

Language Processing
SCM Optimization Using AI
Introduction to SCM and AI

• Review of AI technologies: Machine Learning, Neural Networks, Natural

Language Processing
SCM Optimization Using AI
Introduction to SCM and AI

• Introduction to AI tools and platforms for SCM optimization.

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SCM Optimization Using AI
Introduction to SCM and AI

• Introduction to AI tools and platforms for SCM optimization.

• 1. IBM Watson Supply Chain : optimize inventory management, demand
forecasting, and supplier relationships by analyzing data from various sources,
including IoT devices, social media, and weather data.

• 2. Blue Yonder : demand planning, inventory optimization, and transportation

management, optimize production planning, reduce stockouts, and minimize
costs.

• 3. SAP Ariba : cloud-based procurement and supply chain management

platform to streamline sourcing, supplier management, and contract
negotiation.
SCM Optimization Using AI
Introduction to SCM and AI

• Introduction to AI tools and platforms for SCM optimization.

• 4. Kinaxis RapidResponse : demand, supply, and inventory. optimize
production schedules, minimize inventory costs, and improve customer
satisfaction

• 5. Llamasoft Supply Chain Guru : identify potential bottlenecks, optimize

transportation routes, and assess the impact of different supply chain
strategies.

• 6. ClearMetal : logistics and transportation management platform provides

shipment status, carrier performance, and transportation costs.
SCM Optimization Using AI
Introduction to SCM and AI

• Introduction to AI tools and platforms for SCM optimization.

• 7. O9 Solutions : Integrated Business Planning (IBP) platform that helps
organizations align their supply chain, sales, and finance processes. demand
forecasting, optimize inventory levels, reduce lead times, and improve
customer satisfaction.

• 8. E2open : cloud-based supply chain management platform demand

forecasting, optimize inventory levels, and reduce stockouts.

• 9. FourKites : shipment arrival times and optimize transportation routes.

reduce transportation costs, improve customer satisfaction, and minimize the
environmental impact of logistics operations.
SCM Optimization Using AI
Introduction to SCM and AI

• Introduction to AI tools and platforms for SCM optimization.

• 10. Vuealta : demand forecasting, inventory optimization, and scenario
planning capabilities.

• 11. Oracle Intelligent Track and Trace - track products, assets, and shipments
in real-time, Oracle Demand Management, Oracle Supply Chain Planning,
Oracle Transportation Management, Oracle Warehouse Management, Oracle
Supplier Collaboration and Innovation, Oracle Maintenance Cloud - integrates
AI and IoT technologies to enable predictive maintenance.
THANK YOU

Dr. Suresh babu D

Associate Professor,
Department of CSE – AI & ML