Artificial intelligence’s role in supply chain risk management

by Everstream Team

The goal of supply chain risk management (SCRM) is to minimize any disruption and keep the flow of goods moving. But with the increasing complexity of global supply chains – including multiple tiers and shared industry suppliers among competitors – human-based risk management methods can no longer do the job on their own. That’s where artificial intelligence comes in.  

AI can identify patterns and correlations in data, then get smarter via personalized input. Supply chain managers and executives can get a real-time view of risks across the entire supply network and make more informed decisions about how to mitigate them.  

Here, we explore how AI is the keystone of today’s supply chain risk management, where human input is critical, and the cost benefits it can offer. If you’re responsible for managing a supply chain, you’ll learn how AI can help you reduce risk and keep your operation running smoothly. 

How artificial intelligence is used in supply chain risk management 

Artificial intelligence is the ability of a computer to learn and make increasingly more appropriate decisions without the direct intervention or programming of a human each time. When applied to supply chain risk management, artificial intelligence algorithms can identify patterns and trends that are otherwise difficult to spot, then incorporate personalized guidelines and feedback, and immediately adjust plans to mitigate any potential risks identified.  

This ongoing process provides insights that help human users monitor their entire supply chain, from top to bottom, with accuracy and precision. Artificial intelligence can provide end-to-end visibility from procurement to logistics, alerting supply chain managers to potential proactive actions before there’s a disruption. It can even rank and score each risk according to a company’s standards.  

patterns and predictions recognized by artificial intelligence in risk management

Automated AI monitoring reduces costs throughout the entire supply network by identifying inefficiencies and continually improving them based on what it has learned. 

For example, AI can help businesses make more informed decisions about their inventory levels and pricing strategies. AI analysis can identify potential threats within the supply chain by analyzing data from suppliers or customers to detect any irregularities or changes – like noting anomalies in supplier payments or delivery times.  

Track supplier performance over time by monitoring production capabilities, service quality, and cost effectiveness. These insights can help businesses identify new potential suppliers or renegotiate existing contracts with current suppliers. In addition, businesses can use AI tools to analyze customer feedback from previous orders to predict future customer demand or suggest improvements that could help increase sales.  

But the biggest advantage of AI monitoring is the computer’s ability to map and monitor an entire supply network, down to the last tier. Instead of waiting for disruption to filter its way up to your operation, AI alerts supply chain managers to risk far down the supply chain, providing valuable days and weeks to shift plans before resources become more expensive or unavailable.  

The value of human oversight in artificial intelligence monitoring 

By combining human oversight with advanced AI technology, companies can gain insight into potential risks within their supply chains while also gaining greater control over their operations. Human oversight and verification ensure accuracy, precision, and personalization in AI operations.  

Human researchers and fact-checkers review and validate the datasets that AI systems use, ensuring that all data points are accurate, relevant, and up to date. Additionally, human review of AI-generated outputs can help to eliminate errors due to misinterpretation or illogical assumptions made by the system. Human experts monitor a system’s performance over time to ensure its accuracy remains consistent as changes occur within the business environment.  

chart showing the roles of both human and artificial intelligence in risk management

Humans are also able to detect patterns or anomalies that may not be immediately apparent to an AI system, allowing for a more comprehensive analysis of potential risks. AI systems may struggle with nuanced, complex scenarios that require a deeper contextual understanding, and human analysts are better suited for detecting subtle relationships between different pieces of information.  

On the other hand, human bias must also be taken into consideration when it comes to data review and interpretation. Human reviewers may come from different backgrounds with varying levels of experience. The best supply chain risk monitoring platforms minimize human bias by using protocols and training which promote impartial decision-making, and develop technical safeguards against biased outcomes based on gender, race, or ethnicity.  

How artificial intelligence reduces supply chain disruption costs

At Everstream Analytics, we apply our AI algorithms and expert analyst oversight to support the world’s largest supply chains. Our clients have seen significant savings after deploying our risk management platform: 

  • 5% reduction in expedited freight costs 
  • 10% improvements in on-time performance 
  • 30% reduction in revenue losses from disruption 
  • 50-70% reduction in time to identify and assess disruption impact 
  • $2+ million annual savings in temperature-sensitive freight costs 

AI-supported risk management helps reduce costs primarily by scoring risk by how likely it is to happen, and buying companies more time to adjust operations before disruption hits. For example, organizations can notably reduce unexpected delays and reduce costs while also improving customer service. The use of AI also minimizes manual labor efforts, reduces errors, minimizes data inconsistency, and accelerates communication within the organization making it easier to reduce lead time and delivery costs. 

chart showing Everstream client cost savings of using artificial intelligence in risk management

Essentially, AI-driven solutions enable organizations to shorten their supply chain risk management cycle times and increase their ROI via improved process visibility, real-time decision making, automated approval controls and much more. Companies can recognize risks faster and are able to take preventive action earlier than ever before. They can also scenario-plan to anticipate likely outcomes.  

For today’s supply chains, artificial intelligence is a powerful risk management tool. If you’re ready to learn more, download our special report with a cost-benefit analysis and real-life case studies.  

Download our report to see a sample cost-benefit analysis and case studies. 

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