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How Artificial Intelligence will Transform Supply Chains

With supply chains becoming increasingly global, complex, and competitive, the role of new business technology will be essential as companies attempt to drive greater efficiency, visibility, and intelligence throughout their operations.

As a result, CIOs and CTOs need more information and guidance to understand the application of transformative technologies and how they will impact the supply chain now and in the future.

Over the next 5 years, revenues generated by technology in the global supply chain will increase at a compound annual growth rate (CAGR) of 11 percent, reaching $440 billion by 2023, according to the latest worldwide market study by ABI Research.

Supply Chain Automation Market Development

Suppliers, manufacturers, retailers, and logistics service providers (LSPs) will continue to adopt increasingly sophisticated and impactful digital technology strategies to deliver value along the entire logistics value chain. Combining both technologies and services, the supply chain will generate $4.6 trillion in 2023 -- that's an increase of 29 percent from 2018.

“Supply chain operators must find innovative ways to deliver the three primary tenets of a successful strategy: visibility, intelligence, and efficiency,” said Nick Finill, senior analyst at ABI Research. “Technologies such as robotics, blockchain, IoT, augmented reality, and especially Artificial Intelligence (AI) are vital for supply chain operators wanting to remain competitive in today’s complex, global, and customer-centric market.”

AI has emerged as a major driving force behind the digital transformation of the supply chain. It offers suppliers, manufacturers, retailers, and LSPs the ability to improve the way they forecast demand, optimize planning, mitigate risks, transport goods and serve customers.

The entire value chain will benefit from AI as it facilitates greater levels of automation and smarter decision making, enabling production, distribution, and retail to become synchronized for the benefit of operating companies and customers.

According to the ABI assessment, the growth of e-commerce is driving new approaches to digital technologies in the supply chain too. Warehouse automation and the digitization of last-mile delivery operations stand out as areas targeted for technology spending.

E-commerce and omnichannel retailers such as Ocado, Wal-Mart, Kroger, and Amazon have been investing in robotics and AI, which are set to transform fulfillment operations on a major scale. Also, investments in robotics and drones for last-mile delivery are gaining momentum as pilot projects deliver results.

The 'sharing economy' is also influencing the supply chain, with transportation and storage both key sectors which face potential disruption. Companies such as Convoy, Uber Freight, and Deliv are providing digital freight matching and new crowd-sourced delivery models.

Outlook for Supply Chain Ecosystem Disruption

Supply chain operators are also able to integrate flexible storage capabilities into agile logistics strategies, thanks to on-demand warehousing service providers such as Flexe, Stowga, and Ware2Go.

“The supply chain is generally ripe for disruption, but it is also a highly intricate and crucial ecosystem. Supply chain stakeholders, therefore, face the challenge of adopting technologies in the right way and at a rapid pace, but without damaging their own supply chain operations and losing customers in the process,” Finill concluded.

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