How Generative AI is Redefining Supply Chains

for Sustained Competitiveness

Explore Gen AI's role in transforming supply chains for enhanced resilience and agility. Talk to
Tredence Gen AI experts to future-proof your operations.

Modern supply chains sit at a unique confluence of factors. Their mastery of optimization and
reliability at scale is being tested by the rapidly rising expectations of the digital-first customer.
And if this wasn’t enough, the vagaries of the weather and geopolitical instability, which were
thought to be challenges of the past, have re-emerged with considerable force.

It is almost as if, in response to these daunting difficulties, a new technology has arrived.

What is Gen AI, and how does it differ from traditional AI in supply chain management?
Supply chains have long used traditional AI as a part of their automation to improve employee
productivity and the efficiency and accuracy of critical processes such as demand forecasting and
inventory optimization. Tools like decision trees and statistical models perform pre-set tasks that
comprise these processes very reliably based on learnings from historic data sets.

However, navigating current supply chain volatility requires more than automation and fixed
learnings. Next-generation generative AI (Gen AI) with its ability to support innovative, live
strategizing based upon near-real-time insights, can provide the responsiveness supply chain
teams today need and is rapidly emerging as the cutting-edge problem-solving tool of the hour.

Gen AI stands tall over traditional AI

Generative AI models like natural language processing (NLP) and graph analysis learn on the fly
from live data streams and create new content in formats that are easy for teams to understand
and apply. Generative AI has one more key advantage over traditional AI. From numbers to
reams of text and images, it is not limited by data types and sources and can effortlessly scan
massive volumes of diverse structured and unstructured data fast for inputs. These powerful
abilities that distinguish Gen AI from other analytics engines can help supply chain teams shatter
data and communication barriers throughout their ecosystem.
Half of supply chain leaders planning to implement Gen AI within a year
Chief supply chain officers (CSCOs) are dedicating 5.8% of their function’s budget, on average, to
Gen AI.

Source: Gartner

Real-world applications of Gen AI in supply chain management Improving stakeholder

relationships:
The effectiveness of a supply chain depends on the quality of its relationships with diverse
stakeholders across numerous ecosystems. Financial service organizations, regulatory bodies,
multinational retailers, and small and medium-scale suppliers are all equally important partners.
Supply chain leaders and their teams have to work with FSIs for trade finance, cooperate with
regulatory bodies for reporting and compliance, and identify suppliers, retailers, and logistics
partners who comply with local, cross-border, and internal regulations that span business and
ESG dimensions, and build strong relationships with them.

While large organizations have automation and traditional supply chain AI in place to help teams
with these activities, generative AI applications can significantly enhance these efforts.
Gen AI tools such as LLMs and Reinforcement Learning (RL) agents can scan the latest updates
on a range of influencing variables, such as business and ESG regulations, legal frameworks, and
the reputational history of a partner, and create new approaches on the go. This capability can
empower both supply chain teams and their ecosystem partners during key negotiations and
conversations and also help in the accurate drawing up of contracts and reports. Graph Neural
Networks (GNNs) can help supply chain teams proactively identify potential areas of non-
compliance so they can rapidly alter internal mechanisms or alert external partners and avoid
serious regulatory and reporting concerns.

In this way, Gen AI can support every single process that drives relationships between the supply
chain team and external stakeholders with accurate, well-researched, and contextual information
and recommendations, leading to frictionless, long-standing trust-based equations.

In a recent successful application, a US retailer built a generative AI-led bot to conduct

negotiations with its vendors, and over 65% of vendors found that they preferred dealing with the
bot over humans. The technology’s ability to rapidly grasp complex discussion points and marry
them with facts and processes to propose several alternative scenarios is likely to have led to this
preference.

Boosting resilience
Supply chains in large companies are vast, complicated international networks spanning
thousands of suppliers, distributors, retailers, and numerous owned and contractor manufacturing
plants. Since the multidimensionality of the challenges to the reliability of this interconnected
network is growing in tandem with its complexity, the abilities of existing decision-making
engines, such as traditional AI, are proving inadequate for proactive risk mitigation.

However, generative AI models, which can ingest the varied causative data and provide multiple,
granular strategies on the go, can help effectively address current, real-time supply chain
visibility challenges.

For instance, NLP techniques can use social media sentiment analysis to predict customer
demand or weather forecasting alerts to spot likely logistical disruptions. Simulation models can
mimic the impact of real-world disruptions (e.g., delayed shipment, sudden demand surge) and
provide live recommendations for mitigation. Outlier detection can identify anomalies and
potential disruptions in real-time data streams, like unexpected traffic congestion or social media
buzz around product safety concerns. Additionally, Gen AI can work synergistically with the
digital twins of the supply chain to test and optimize responses to potential disruptions.

Currently, a global CPG leader uses NLP models to draw data from social media, news
publications, and information bureaus and determine the real-time impact of extreme weather,
port congestion, traffic, and socio-political happenings on its supply chain. This has delivered
78% stock-out prediction accuracy and saved the company nearly $90 million in losses.
Enhancing Employee Satisfaction and Collaborative Innovation
Employee satisfaction leads to customer satisfaction. And with seamless digital experiences in
their personal lives, employee expectations are now rising. It is no different with Gen AI, which
is already present on every personal device. Empowering supply chain teams with the technology
will boost morale, unlocking far more than efficiency and cost savings.

Since Generative AI’s advanced capabilities can support the existing automation of daily
activities like invoicing, drawing up contracts, credit notes, estimates, and order placement with
real-time updates to function more accurately and speedily, this will free up employees for
strategic work and innovation. Since Gen AI learns dynamically, it will also spot new and
dangerous fraudulent activity faster than current technologies and practices, saving time and
money and significantly reducing worry for supply chain teams.

Crucially, when employees utilize the time freed up by generative AI for upskilling or
innovation, the technology can be a very helpful co-pilot, thanks to its growing accessibility.
Supply chain teams can leverage the user-friendly interfaces of Gen AI tools, creative content
generation and data analysis to:

 Upskill themselves continuously, learning new skills and adapting to evolving trends in supply
chain management and data analysis.
 Create collaborative lab and CoE scenarios to rapidly and continuously build value-added
innovation that will improve processes and profitability.

Top multinationals have recognized that generative AI applications will motivate supply chain
teams to transform the supply network into an innovation engine with a competitive edge and are
setting up labs to explore the powerful combination of Gen AI and human ingenuity.

Current adoption trends of Gen AI in supply chains and who's leading the way?
Currently, Gartner has found that the most impactful supply chain use cases for Gen AI include
code augmentation, providing more insights into supply chain KPIs, and staff assistance
chatbots. In addition to materials and goods-intensive sectors like retail, e-commerce,
manufacturing, and logistics, knowledge-focused sectors like healthcare are also leveraging the
technology for their critical supply chains.

Since the supply chain lags other business functions in Gen AI adoption, it can convert this into
an opportunity by capitalizing on the early learnings and technology investments of other teams
like marketing and sales, Gartner advises.

Potential obstacles in implementing Gen AI in supply chain?

A few critical points need to be kept in mind during generative AI adoption for supply chains.
Since these generative AI models run on data within and outside the organization, and
reformulate learnings on the go, a thorough understanding of the models used, any potential bias
and ethics concerns, and the local, global, and organizational security and privacy norms is non-
negotiable. Since models are only as good as what goes into them, data quality cannot be
ignored.

Preferably, these models should not be 100% off-the-shelf but built or customized in partnership
with consultants with a nuanced understanding of Gen AI, the supply chain domain, and
expertise in change management during the adoption phase, and monitoring the models as they
evolve. Finally, supply chain teams and their IT partners must avoid reinventing the wheel in
their enthusiasm to leverage Gen AI for efficiency and innovation. Gen AI will be much faster in
creating impact and positive RoI when it starts off as an additional layer to augment the existing
rules-based AI and automation and as a collaborator for innovation.