Tariffs creating a challenge for manufacturers? Smart AI solutions come into play to navigate through the obstacles
In an era of rising trade tariffs, export bans, and global uncertainties, businesses are turning to artificial intelligence (AI) to bolster their supply chain resilience. AI systems are proving instrumental in enhancing operational efficiency, risk management, and decision-making agility, allowing companies to respond swiftly and adapt their supply chain operations in the face of uncertainty.
One company leading the charge is The Toro Company, a U.S. lawnmower maker. Toro's supply-chain manager, Kevin Carpenter, uses AI to digest news into a custom-made podcast, helping him stay abreast of the latest tariff changes and market trends. Toro is not alarmed by U.S. President Donald Trump's global trade tariffs, as they have managed to maintain pre-pandemic inventory levels.
AI's key contributions to supply chain management include improved risk identification and contingency planning, enhanced demand forecasting and inventory management, dynamic decision support in supply allocation, operational optimization, and maintaining supply chain resilience.
For instance, AI predicts potential disruptions from tariffs, export bans, or global events by analysing various data sources, enabling businesses to proactively develop alternative sourcing and routing strategies to maintain continuity and reduce impacts of trade restrictions. Furthermore, AI incorporates diverse, real-time inputs beyond historical sales, such as social media sentiment and economic indicators, to produce more accurate demand forecasts, allowing firms to keep inventory lean yet sufficient.
AI tools also generate actionable recommendations for inventory purchasing and product transfers between plants, helping companies optimize resources under fluctuating trade policies. In addition, AI optimizes logistics, warehouse operations, and maintenance schedules, cutting costs and improving service levels even when supply chains face external shocks like trade disputes or export controls.
Moreover, by increasing visibility and traceability, AI fosters transparency and reduces errors, which is critical during crises induced by tariff changes or export bans. Companies can adapt more quickly with the situational awareness AI provides.
GEP, a U.S. supply chain consultancy, sells AI tools and sees demand driven by Trump's tariffs. Konecranes, a Finnish crane-maker, is also leveraging AI, with their logistics partners deploying AI on mundane data like weather forecasts to optimize shipping routes for port cranes.
It's important to note that AI agents won't put supply chain managers out of work, as humans still need to make strategic and big tactical decisions. AI agents are designed to handle more routine tasks like ordering and scheduling production maintenance.
According to Gartner supply chain analyst Noha Tohamy, without AI, companies would be slower to react and more likely to build up inventories. Spending on software that includes generative AI for supply chains could reach $55 billion by 2029, up from $2.7 billion now.
While there are warnings about AI hype, with supply chain experts stating that a lot of money may be wasted on the expectation that AI can work miracles, the benefits are clear. AI is a strategic tool to mitigate the complexities and uncertainties posed by trade tariffs and export restrictions, enabling supply chains to adapt rapidly while maintaining efficiency and customer service.
[1] Supply Chain Dive (2021). AI's role in supply chain management: A Q&A with SAP's Richard Howells
[2] McKinsey & Company (2021). Supply chain resilience: Building a more agile and responsive supply chain
[3] Forbes (2021). How AI Is Transforming The Supply Chain In 2021
[4] The Economist (2021). The supply-chain revolution
[5] The Wall Street Journal (2021). How Artificial Intelligence Is Transforming Supply Chains
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