Supply Ch(AI)n Strategy Session - AI Bootcamp FROM INC STUDIO AND SAP

This episode explores how AI is transforming supply chain and procurement strategies, focusing on resilience and sustainability.

1. AI significantly enhances the resilience of supply chains by predicting and mitigating disruptions.
2. Generative AI can automate complex processes such as customer communication and decision-making.
3. AI technologies like predictive analytics are crucial for efficient inventory management and demand forecasting.
4. Integrating AI requires alignment with business goals and ensuring the IT infrastructure supports AI capabilities.
5. Education and upskilling are essential for maximizing the benefits of AI in supply chain management.

1: Introduction to AI in Supply Chains

Overview of AI’s impact on supply chain resilience and efficiency. Discussion on embedding AI into supply chain strategies for sustainability.

• Julianne Pepitone: "AI is completely revamping supply chain and procurement strategies."

2: Deep Dive into AI Applications

Exploration of specific AI applications in inventory management, demand forecasting, and procurement.

• Ava Ponce: "AI analyzes historical data and external factors to predict future product demand."

3: Strategic Implementation of AI

Guidance on strategic considerations for integrating AI into business practices, focusing on data management and alignment with business objectives.

• Walter Sun: "AI can model what-ifs, preparing businesses for potential disruptions."

4: Q&A with AI Experts

Insights from experts on practical implementations of AI and future trends in technology.

• Walter Sun: "Generative models that take images can find issues quickly in a supply chain context."

1. Evaluate AI readiness within your organization's IT infrastructure.
2. Align AI strategies with business objectives to drive value.
3. Invest in data quality and security to support effective AI applications.
4. Upskill employees to handle AI technologies and processes.
5. Implement predictive analytics to improve inventory and demand forecasting.

How artificial intelligence is shaping the product journeys from procurement to end customers.

People

Julianne Pepitone, Dr. Walter Sun, Dr. Ava Ponce

Companies

SAP, MIT

Content Warnings:

None

Chase

Today's show is brought to you by Chase. Explore some of the perks your business could get with Chase. Ultimate rewards@chase.com Slash ultimate rewards.

Julianne Pepitone

Welcome and thanks for tuning in to this session about how AI is completely revamping supply chain and procurement strategies. I'm Julianne Pepitone and I'm happy to be your moderator for this event. AI Bootcamp, a fast company in Inc. Series in partnership with SAP. As any procurement leader knows, when it comes to the supply chain, the old adage is true.

The only constant is change. Climate events, geopolitical, technological changes, global pandemic. As we've seen recently, things that the supply chain can change in an instant and that requires resilience. And that's where AI comes in to embed that resilience into your strategy to automatically identify and address supply chain issues and to find sustainability opportunities that reduce carbon footprint and lower costs. Today we'll talk key tactics and takeaways for integrating AI into your supply chains.

Joining me today are Dr. Walter Sun, SVP and global head of AI at SAP, and Dr. Ava Ponce, director of omnichannel supply chain Lab at MIT. Thanks to you both for being here. As you both know, for many companies, procurement really is the lifeblood.

So I'd love to start here. How can AI modernize procurement and help mitigate supply chain risks while informing procurement strategy for the long haul? Walter, we'll start with you. I think the idea of disruption mitigation is a big key technology that AI can enable. And the idea is, know if you're a supply chain planner, you have so many different variables to deal with every day and you can't really keep up with everything.

Walter Sun

So if there's an algorithm that can track news events, different of things happening around the world, and alerting you with issues, that's going to make your life a lot easier. On top of that, with generative AI, you can actually marry the idea of alerts with the idea of finding mitigations. And the mitigations could be if you see something, let's say a disruption in a Suez canal, you can have the machine algorithm look at your deliveries and say, how many of your deliveries are rotting through my ship, for instance, through the Suez Canal? And notify you as well. So that's the next level.

And then the final level of that is on top of that, you can actually even have generative AI create content, send emails, pair emails to send to the individuals that your vendors, the people you're supplying with, and say, hey, do you want to send these emails to them and ask them if your delays are happening due to this issue. And so that way all this becomes like, almost like you have a human assistant sitting next to you who can alert you of things that you otherwise wouldn't have known about. Right. Wonderful, Ava. Yes.

Ava Ponce

So as Walter mentioned, AI and generative AI tools are disrupting the landscape. And I think this is true in education and the industry. Companies are exploring how to use AI to offer more customized products to their customers, but also to use AI to improve their operations. And artificial intelligence has the potential to enable significant efficiencies across the entire supply chain and the logistics industry. And more specifically, I think, has the transformative potential to enhance procurement strategies and supply chain resilience, specifically in the face of dynamic and global changes.

Some examples of how to do that. Predictive analytics is a big area that is impacting many areas in the supply chain, and more specifically procurement, supplier risk management, I would say another big area. And supply chain visibility, because this end to end visibility is something that the supply chains require. Currently, AI can help with this supply chain visibility and specifically if we look upstream the supply chain to their suppliers. Yes, I mean, you each mentioned several interesting examples there, and I'd love to dig in a little bit more on some of these use cases and just talk to people what that really looks like on a practical level, either at your own companies or ones that you've encountered in your work for AI in the supply chain and procurement space.

Julianne Pepitone

So, ava, if you could pick one or two of what you just talked about, or maybe a new one, if you could walk us through a use case, an example of what this really looks like in an organization. Indeed, I'm going to pick some of the top number ones. I currently rang a survey as part of my omnichannel lab to better understand the impact of AI, specifically because of the growth of ecommerce and omnichannel. And we asked more than 100 retailers and manufacturers, where do they see AI having the greatest impact on supply chains? So I would say that demand forecasting is the top number one.

Ava Ponce

And the reason is that AI analyzes historical data, but also external factors like market trends and weather, for example, to predict future product demand. And this allow, at the end of the day, for a more accurate stock levels, allow to reduce waste, to reduce shortages. So an accurate forecast is something that has been an obsession for supply chain professionals. So definitely machine learning techniques have been used extensively in order to bring more data to help and improve this forecast. But there is much more than we can do here.

And AI, I think can also start bringing kind of judgment components into this forecasting. And I think this is kind of the more, I would say revolutionary part of using AI specifically in demand forecasting. As part of that survey, I also identified customer experience. And specifically, if we look at the customer, what happened with AI, they can bring also more personalization. And this topic recently appears in news headlines.

For example, Walmart is launching a new generative AI search feature that will allow customers to search for products by use cases instead of by the specific product. So it's another way to use AI. Also related to customer service are also the chatbots and this AI shopping assistant that are also helping a lot customers when they are shopping and personalize some of the products. And of course inventory management. I think this is another area in supply chain that AI is bringing new insights and new additions.

And here, same theme machine learning has been using so far and has been helping to simplify the process, but AI will transform the function. Again. Companies are trying to introduce AI just to incorporating the replenishment solutions, just trying to automatize that based on the customer needs. Yeah, I'm struck by so many of those trends that you mentioned. I guess it's a bit of a chicken or egg, but there are trends we hear in the retail space too, right?

Julianne Pepitone

That people consistently want more of a personalized experience or a personalized product know, and that's something that AI is able to give us. So do we want it because AI is able to give it, or is AI kind of evolving to give us what we wanted? Exactly, yes. And it's more kind of based on your previous orders, what you just purchased previously, historical data, what is happening currently. So it's a mix of combination of historical data and current events that are happening that is personalizing this offer just for customers.

And Walter, I'd love to hear some use cases or examples from you, either at SAP or some of your clients as it relates to AI in the supply chain space. If you could walk us through an example of what that looks like on a process and practical level, I can. Think of three examples. One, starting with the demand forecasting that AVA is talking about, is like AI, you can actually just not using time series, which historically you just say, look, what's the pattern historically? Maybe there's seasonality on us.

Walter Sun

Thanksgiving if you're shopping in America, but the history is a good predictor of the future. But now there's exogenous factors, right? Of course, with the pandemic, of course with shortages in delivery, the Suez canal blockage, these different things that can happen. So the idea of having exogenous signals being added to the model. So AI can actually model what ifs, right?

You can have a what if model saying, what if these eight things happen? And you can model each of them happening, and as soon as one of them does happen, you can actually have a mitigation plan ready immediately. So I think that's one area that we're building up thing that Ava is talking about, recommendations. I think you were also talking about it as well, Julian, that in Ariba, which is our procurement tool, we can actually do recommendations for businesses. And what recommendations is, isn't know, consumers purchasing.

It's actually saying, hey, if I buy a certain laptop, what do other people normally buy with that? And maybe there are certain docking stations or products that fit automatically, and it saves users a lot of time and saying, hey, look, people who typically buy this laptop buy these three other components. So that's a use case that we're actually offering our customers as well. And then finally, there's a car company which has a pain point. They told us about manually documenting data.

So we have this transportation management use case where we expedite freight verification and documentation. And so in the manufacturing industry, a single manufacturer can have hundreds of trucks that arrive every day at production facilities, and there's nothing digital in their manufacturing system. They give you a receipt saying, hey, I dropped this bag of widgets. Here's a piece of paper. And so now you can digitize that.

You can actually process it and create a record keeping of it. And that information to this company who worked it said it saves them close to a million a year just for one pilot facility. So you can see there's a lot of value add and savings, time and money for these type of technologies and supply chain. Today's show is brought to you by Chase. Explore some of the perks your business could get with Chase.

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Ultimate rewards@chase.com. Slash ultimate rewards. Great examples. Yeah, and in each of those use cases and examples, you both mentioned some technologies that are used. I'm curious, are there additional AI technologies, either specific types of products or perhaps just categories that you think are having the greatest impact on the supply chain and procurement spaces right now?

Julianne Pepitone

And do you see that evolving? Can you kind of predict a little bit where this technology is going? I think optical character recognition is a big area where you take an analog piece of paper, OCI and get images. But I think the next level is what we call multimodal large models. So generative models, which not just take text as input takes images.

Walter Sun

And this can be useful in supply chain space of detecting issues with the processing. If you have a camera in, let's say a warehouse, you can actually find issues. If there's a water leak, the camera can quickly detect, oh, the images see something here, and the models can detect aberration, detect, alert the manager quickly and find issues. So take unstructured information and images and create structure out of it and alerts as well. And I think that's kind of the next thing where you say, look, we've done tech generative models, now we have this multimodal images and videos as well.

Julianne Pepitone

Ava, same question for you. Are there certain types of technologies or categories that you think are having the greatest impact in your field right now? And do you see that evolving in the near term? Yes. The example that Walter brought about identifying kind of disruptions in warehouses is one of the top ones.

Ava Ponce

And we are using a lot of applications specifically for warehouses. More specifically for procurement, I would say natural language processing is something that in procurement is also helping to automate and streamline the processing, for example, of unstructured text data such as invoices or purchase orders and emails. So are helping to streamline operations. Another area that is not kind of such as impactful as the other. For example, predictive analytics is the top one.

But robotic process automation are also being used to automate kind of a basic procurement tasks such as order processing and payments is again helping to streamline operations. It's helping to free up human workers and having them more time for strategic works instead of just for more operational tasks. So all of these things are helping, and of course Internet of things, these devices in the supply chain that are providing real time possibility to track in their goods, offer transparency and visibility across the end to end supply chain are really powerful. And bringing this end to end visibility that you need, for example, in ecommerce and omnichannel, if you need to provide a seamless customer experience, you need to have inventory visibility. So there are many tools, AI tools, that can help to gain this end to end visibility that I would say the growth of ecommerce is bringing, and the need of omnichannel and integration of different channels.

Julianne Pepitone

So as you both enumerated, there are plenty of technologies, plenty of opportunities, a lot to consider for executives in this space who are developing their AI strategy. I'd love to bring the office of the CIO and CTO into this. For those executives thinking about AI, how to incorporate it into their strategy, what are some of the key questions that they should be asking of their CIO and CTO offices. Ava, we'll stick with you. Okay, so for executives developing AI strategies, I'm focusing more on chief information officers or chief technology officers.

Ava Ponce

The first thing will be understand the asset situation. I mean, what are the current state of their AI capabilities and how ready is the IT infrastructure in order to support this AI deployment that they want to implement? The key thing is data, data and data. How will they manage and govern the data required for AI? Because we need to ensure the quality of this data.

Security aspects are also key here, compliance with regulations. So data plays a key role, not only the quality of the data, but how we are going to manage this data. Another thing I will bring here is the strategic alignment, because we need to align any AI implementation, any new strategy like AI, that is going to be a disruptive technology with the business goals. Questions kind of how will AI implementation drive business value and competitive advantage in this specific industry? For their specific operation, I think will be key.

And one of the most common reasons I have seen to fail when implementing disruptive technologies like AI is when they are rushing in that implementation with a lack of clear vision. So I think this alignment will be clear. And finally, as an educator, I need to finish with the skills and talent, but at the end of the day, they need to incorporate the necessary talent in order to develop, deploy and maintain AI solutions. Sometimes they need to maybe think about hiring new talent or just upskilling their employees in this area. So I would say just to be ready and have the right skills for this journey is something key and can be through upskilling or through hiring new technicians, but definitely something that might need to be in consideration.

Julianne Pepitone

Thanks, Ava. Yeah, Walter, same question for you. For those executives thinking about how to develop their AI strategy, how should they think about the tech offices? What are some of the key questions they should ask of the C suite tech leaders? I think the main question is, are field workers, the ones in the supply chain, ready to handle the technology?

Walter Sun

I think the answer is, if the answer is know, as Ava was saying, the upskilling. Right. How do we educate users for the technology? I think also the people who are building from the CTO's office people are building technology should also think about how we can make it easy to use. Meaning that instead of opening an application on a laptop to find out alerts or mitigations, you can actually hopefully get text alerts.

Right. Because everyone has a phone. Most people have phones. They know how to operate them. So if a supply chain warehouse worker gets a text message saying there's an issue here, then he or she can quickly address that without needing to have to learn too many applications or products to make it work.

So I think that it's a combination of upskilling, educating the field workers, but at the same time, building technology that's easy for field workers to use. So it's kind of both the CIO kind of educating and the CTO finding technology would maybe be easy to use to kind of bring those two together. And finally, for the senior leaders who are joining us today, if you could have them take away one truism or perhaps implement one tactic as they think about integrating AI into their own supply chains or procurement strategy, what would that be? One takeaway or one tactic you like to see them implement? Ava.

Ava Ponce

So AI is complex. So I think they need to bring the right talent to help them in the journey, and also they need to put a lot of attention to the data, the quality collection, processing capabilities, because these are key for effective AI applications. Wonderful. And Walter, we'll give you the last words. Disruptions are always happening, right?

Walter Sun

And we can never help. I think you said at the beginning, know, change is the only constant. I think, Julian, you said something to that extent. And I think that in supply chain you can predict everything, you know, doing what, if analysis or whatever, but disruptions will happen. So I think the main thing is that there are many points of failure.

So if you leverage technology, as we talked about, like corruption, mitigation, AI technologies, notifications, these things will be necessary, I think, to make your life easier. I think there's no harm in getting that information. A false positive, overeager text alert, so long as it catches the real failures. Right. And so helping you, leveraging technology to make your life and job easier, thank you.

Julianne Pepitone

And that is the end of our time for this session. Walter. Ava, thank you so much for joining me and for sharing your insights today and to our audience. Thank you for joining this session and for being part of this AI bootcamp series. On behalf of SAP, Fast Company and Inc.

I'm Julianne Pepitone. Thanks for being here.