According to a recent study by DP World, artificial intelligence (AI) has become an essential tool for 98% of executives, transforming various aspects of their supply chain operations. The Trade in Transition report reveals that in response to concerns about rising supply-chain costs, 34% of companies are utilizing AI technology to control trade expenses.
The report emphasizes that incorporating AI into supply-chain management is enabling organizations to reduce logistics costs, manage inventory more efficiently, and enhance service levels. It highlights the evolving trends in inventory management in an uncertain market, noting that just-in-time supply chains are less prevalent, and the just-in-case inventory model is being refined to strike the right balance between resilience and cost management.
Digital tools are being employed by 34% of executives to improve inventory management, which is seen as the most effective strategy for cutting supply chain costs. Furthermore, 35% of executives are using AI to optimize inventory levels, underlining the increasing reliance on technological solutions.
The report underscores the significance of efficient inventory management, stating that companies lose approximately US$1.8 trillion annually due to inventory issues. Addressing these challenges could lead to a substantial increase in sales, showcasing the direct impact of streamlined inventory on business growth. However, the report advises that this must be balanced against business resilience strategies to mitigate risks from potential unforeseen events.
In terms of wider supply chain trends, the DP World report notes that while executives still prefer supply chain diversification, a shift towards fewer supplier partnerships is underway. In 2023, 45% of executives favored diversification as the primary supply-chain strategy, but 26% of companies chose to work with fewer suppliers, representing a 16% increase from 2022.
The report acknowledges the counterintuitive nature of this trend, attributing it to businesses focused on capacity building favoring working with fewer suppliers. This streamlined approach to supplier engagement is observed consistently across regions and sectors, indicating a structural evolution in supply chain strategies.
Looking ahead to 2024, the report suggests that transport costs are likely to be the leading obstacle for firms aiming to increase exports. It concludes that navigating fluctuating costs, logistical deficits, and changing consumer behavior remains a crucial aspect of contemporary trade and commerce.
These findings align with a recent Gartner survey, which revealed that half of supply chain leaders plan to embrace Gen AI within the next 12 months, with an additional 14% already implementing such solutions.