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5 Use Cases for Generative AI in Supply Chains

Updated: May 16

GenAI is undeniably the hot topic in tech right now.  Universities debate whether they should prohibit its use, or if ChatGPT is part of the next educational frontier.  Stock prices fluctuate based on how effectively companies utilize the new technology.  And people create images, videos or even music by only describing their ideas.  No matter your business sphere, it seems like GenAI is suddenly on everyone’s mind!

Generative AI, often referred to as GenAI, is a subset of machine learning. While all machine learning algorithms incorporate and interpret wide swaths of data, GenAI is characterized by its ability to generate new content from that data.  This generative content can be in the form of text, images, music, or video. While we have seen all the cool stuff it can do, what has most piqued our interest is how GenAI can enhance business operations.


Here at Ventagium we are particularly drawn in the potential applications of GenAI in supply chains. We have identified 5 key operational areas, which, when enhanced by this innovative tool, can take your supply chain operations to the next level. 

1.        Demand Forecasting

2.        Market Dynamics

3.        Supplier Interaction

4.        Route Planning

5.        Redefining Work

Let’s jump right in!


1.        Demand Forecasting

Forecasting is indispensable for efficient supply chain operations; despite this, the 1st law of forecasts dictates that “Forecasts are always wrong”. For years, the goal has been to find the least incorrect prediction, and companies have dedicated numerous resources to this objective. Traditional approaches, such as moving averages and exponential smoothing, have long been utilized to predict future sales, with machine learning algorithms have recently been adopted to supplement conventional methods.

GenAI has now focused the spotlight on the short- to mid-term forecast horizon. Capable of managing vast amounts of real-time data, analyzing numerous exogeneous factors, and generating realistic future scenarios, GenAI holds the promise of significantly improving forecast accuracy. A reliably precise forecast will translate into cost-effective inventory planning across even complex operations with numerous products, locations, and sourcing strategies.


2.        Market Dynamics


AI is already utilized in text, image, and video content analysis, enabling continuous collection and interpretation of data from sources such as social media, customer reviews, and blog posts. By integrating this data with information from internal systems, such as ERPs, organizations can gain deeper insight into market patterns and customer behaviors.


GenAI is emerging as a key tool in this landscape, offering valuable insight into understanding and predicting market dynamics. GenAI is able to simulate various market conditions, conduct what-if-analyses, and generate personalized content tailored to distinct customer segments. These capabilities are particularly beneficial for supply chain managers, allowing them to explore scenarios and proactively prepare for challenges such as panic buying, port congestion, or key hub (DC, warehouse, factory) shutdowns.


3.        Suppliers Interaction

For material and product sourcing, GenAI presents promising use cases in contract management and negotiation. GenAI-powered software can assist in analyzing existing supplier contracts to provide plain language insights to supplier managers. While GenAI may not be ready to independently negotiate contract terms (yet!), it can offer recommendations based on data analysis, leading to better agreements, mutually beneficial to vendor and customer.

GenAI can also facilitate enhanced visibility beyond tier 2 suppliers. In today's global market, upholding ethical standards and ensuring environmental sustainability throughout supply chains is essential for companies. GenAI can support this crucial effort by analyzing suppliers’ data to identify any non-compliance with environmental and human rights objectives.  Organizations can be alerted of potential environmental, ethical and branding risks before the impacts are felt. 


4.        Route Recommendations

One of the most common problems that supply chain managers face is the optimization of transportation routes. Almost always a significant business expense, efficient transportation can significantly reduce operational cost and risk. Traditional route optimization methods do consider current constraints and conditions but are limited in flexibility and reaction speed. GenAI can consider a much broader and unpredictable set of variables, such as weather and environmental concerns, and allows operators more flexibility to pivot quickly when unforeseen circumstances arise. Through this adaptability, GenAI can develop even more efficient and sustainable transportation routes.


Additionally, by leveraging its communication capabilities, GenAI can explain these decisions to managers, shedding light on why one route was chosen over another. This opens a new level of transparency, enabling better decision-making aligned with broader business objectives.


5.        Redefining Work


Perhaps the most important takeaway from today’s post: GenAI’s true potential lies in its ability to redefine work processes and methodologies. Rather than viewing GenAI solely as a tool for replacing human roles, business leaders should consider how to leverage its capabilities to enhance overall business productivity.


Taking this concept a step further, implementing GenAI should be part of a well-defined digital transformation strategy. At the core of this strategy must be a clear value proposition outlining what you aim to achieve with your supply chain. Additionally, you must identify specific supply chain capabilities that align with this value proposition. Only once these foundational steps are established should you explore how GenAI can contribute to the development of your business operations. If a GenAI solution doesn’t align with your stated strategic objectives, perhaps now is not the right time to implement it. 


We hope this sparked some ideas for how your supply chain can benefit from Gen AI!

Be sure to keep an eye out for future blog posts as this technology continues to develop and impact the marvelous world of supply chain operations.


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