Unlocking the Game-Changing Capabilities of Machine Learning in Supply Chain

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Unlocking the Game-Changing Capabilities of Machine Learning in Supply Chain

Jan 23, 2024 | 5 min read

Within the ever-changing supply chain management environment, decision-makers grapple with certain existing challenges. One of the biggest challenges they face is the unpredictability of product demand, aka the demand volatility. This particular supply chain-related discrepancy has several origins, ranging from weather condition-related delays to economic fluctuations.
Demand volatility refers to the fluctuations in customer demand for a service or a product over a specific period. It is a major concept in supply chain management , inventory management, and production planning. Learning and tackling demand volatility is vital for all businesses to efficiently manage their resources, reduce costs, optimize inventory, and ensure customer satisfaction.
One solution to tackling demand volatility is utilizing machine learning. This post will dive into the advanced world of machine learning in the supply chain and provide you with some challenges and benefits of applying it to your supply chain management.

How does machine learning work for supply chain forecasting?

Machine learning is a highly efficient application that utilizes advanced algorithms to understand the data. It also uses this data to predict customer behavior, improve online, and prevent unwanted fraud.

Machine learning algorithms can evaluate historical sales patterns and predict future trends in demand planning. The first step is collecting data about past sales, like product category, purchase frequency, quantities sold, seasonality, discount, and more. This essential data is then churned into an algorithm to develop models to identify sales patterns over time. Once these patterns are successfully identified, they can be utilized to create precise forecasts for future trends.

Using machine learning techniques in supply chain management

Machine learning algorithms use data to understand how trends and patterns work for the datasets. The algorithms will generate a practical model based on this relevant data. The more data injected into the datasets over time, the more precise the forecasting model becomes. Advanced deep AI and ML in the supply chain may require up to four times as much data as conventional forecasting methods.

Machine learning in supply chain forecasting is used along with traditional demand forecasting methods such as exponential smoothing, naïve forecasting, and moving average approximation to enhance accuracy and reliability when forecasting future trends. It can also provide effective pricing and inventory management insights by analyzing customer behavior across various locations and channels. By leveraging these valuable insights, organizations can make informed decisions regarding inventory movements or handling promotions and discounts.

Using machine learning techniques in supply chain management

With some of the largest organizations starting to pay attention to what machine learning can do to enhance the efficiency of their supply chain, let’s explore how machine learning in the supply chain resolves problems and what are the existing approaches of this powerful technology in the supply chain ecosystem.

There are various benefits that machine learning provides to your business, including:

  • Cost savings through machine learning, which systematically enables you to improve waste reduction and quality enhancement.
  • Product flow optimization in the supply chain without businesses needing to hold too much inventory.
  • Streamlined supplier relationship management due to faster, simpler, and proven administrative practices.
  • Machine learning delivers actionable insights, enabling efficient problem-solving and continuous improvement.

Key use cases of machine learning in supply chain forecasting

  • Predictive analytics

    By applying machine learning models, businesses can enjoy the perks of predictive analytics for demand forecasting. These models are capable of identifying hidden patterns in historical data. This technology can also be used to locate issues in the supply chain at the prevention stage. Having robust supply chain management systems means the business is armed with resources and intelligence to respond to escalating issues and threats.
  • Automated quality inspection

    Businesses usually conduct manual quality inspections to locate package or container errors for any damage during transit. The emergence of machine learning technology has improved the scope of the automation of these kinds of inspections in the supply chain lifestyle. This technology enables automated analysis of defects and errors in your supply chain via methods like image recognition. The benefit of these error-detecting inspections is reflected in reduced chances of providing defective products to customers.
  • Streamlined production planning

    This advanced technology can play a pivotal role in optimizing the complexity of manufacturing and production plans. These models and techniques can be utilized to train sophisticated algorithms on existing production data to help identify possible areas of waste and overall inefficiency. Furthermore, the use of machine learning in the supply chain in crafting a more adaptable environment to deal with any kind of discrepancies efficiently is significant.

Streamline your supply chain management with Avercast

Avercast, a division of TransImpact, provides state-of-the-art supply chain optimization solutions for end-to-end visibility and high performance. Our demand planning and inventory planning software empowers you to streamline your supply chain. To explore more about our solutions, schedule a demo or talk to our experts.