The Next Evolution in Supply Chain Safety: The 5 Ways AI Eliminates Risk & Promotes Resilience

March is Asset Management Awareness Month. For many organizations, their supply chain is their greatest asset, and AI is the next evolution in supply chain management.

Let’s imagine you’re a teacher, and today you’re administering a test. You close the doors. You keep noise to an absolute minimum. You turn the lights up for maximum visibility. And you make sure everyone has a sharpened pencil.

Then, someone knocks at the door. One of your students needs to check out. The phone rings. Another student must report to the gym for school pictures. The intercom clicks on. It’s time for a mid-day announcement about tomorrow’s fire drill. And so on. And so on.

Your testing environment has been ruined. These constant disruptions almost guarantee your students won’t perform their best, and there’s nothing you can do to avoid the consequences. In this way, your supply chain is like a testing environment. It needs to be protected from external forces if it’s going to serve its purpose and avoid the $82 million per day price tag that comes with supply chain disruptions.

Unfortunately, almost every industry is failing to keep the peace. Nine out of 10 respondents say they faced serious supply chain problems in 2024, and 93% of executives have been looking to reevaluate their supply chain management since everything collapsed during the COVID pandemic. Simply put, industry professionals need to add another tool to their toolbox, and artificial intelligence (AI) is the next step in supply chain management.

How? My organization has been promoting AI integration with supply chain logistics since the very beginning. These are the five ways AI can eliminate risk and promote resilience.

1. It continuously evaluates every type of risk.
   Experts have known for quite some time that supply chain resilience is an important part of a comprehensive management strategy. Of course, a big part of building greater resilience is achieving supply chain visibility, which is a feat only accomplished by approximately 6% of all companies. Visibility allows you to take an honest look at your supply chain logistics with complete confidence that you’re getting an accurate picture of the situation.

   So why is it so rare? Because end-to-end visibility is extremely difficult to accomplish, especially for those companies not utilizing the latest tools in supply chain management. That’s why 86% of executives believe their organizations should invest more into technology with the express purpose of enhancing their monitoring for supply chain risks. Not surprisingly, one of the primary technologies experts are encouraging executives to embrace is AI integration.

   AI tools can constantly scrutinize every area of risk, including cyber, sanctions, modern slavery, and payment times reporting systems (PTRS). These ever-watchful eyes are tireless and aligned precisely with your targeted standards, which means supply chain resilience — and the requisite visibility — is a much more attainable goal.

2. It tightens the reins on tail spending.
   Tail spend. Maverick spend. Rogue spend. The names we assign to off-contract spending might vary from company to company, but its negative impacts are practically universal. It’s estimated that tail spending can result in up to a 16% loss in negotiated savings for many companies, and losses of that size are unfortunately fairly common.

   As expected, the top reasons behind these losses are predominantly confined to “user error,” such as a lack of guided buying tools or a non-compliant mentality. This means two things: (1) tail spending is a substantial drain on the bottom line, and (2) it is largely outside of your control inside a traditional supply chain management system. In fact, the only technology with a consistent track record in curbing tail spending is AI integration.

   With the help of advanced AI tools and years of expertise, my organization put a stop to over $80 million in rogue spending for a major corporation in the Fast-Moving Consumer Goods (FMCG) industry. FMCGs are characterized by extremely high demand, complex distribution networks, and a short product shelf life . This makes it the perfect test case for AI integration, and the proof is in the results.

3. It identifies optimal areas for diversification.
   The COVID pandemic already proved the inherent benefits of supply chain diversification. Whether it’s reshoring, near-shoring, or an evolving combination of both, organizations with more diverse supply chains are almost always in a better position than those with significant dependencies. What’s more, when supply chain disruptions do occur, a lack of diversification creates a landscape of “winners and losers” — of haves and have-nots.

   AI can effortlessly pinpoint perfect opportunities for diversification, either within your current supply chain network or as part of a comprehensive reevaluation. My organization partnered with a global beverage company to bring more diversity to their supply chain. After leveraging AI against the problem, the company achieved greater supply chain stability with an 8% increase in overall ROI.

4. It future-proofs your network for heightened regulatory reporting.   
   Regulatory standards in high-income countries are increasingly stringent, most especially when it comes to matters of sustainability and diversity, equity, and inclusion (DEI). On top of that, middle-income countries are following suit, meaning the vast majority of markets and connected supply chains will be highly regulated in the not-too-distant future. Does any part of this projection fill you with fear?

   AI tools can improve your data quality and reporting procedures, both of which will naturally prepare your organization for any imminent increases in regulatory expectations. AI can also be trained to target specific objectives, such as greater sustainability or a more equitable distribution of vendors. No matter how the regulatory landscape evolves, AI tools can keep your supply chain network in line with every single standard.

5. It expertly rationalizes vendors to capture cost savings.
   Procter & Gamble made headlines in the last few years for several initiatives intended on streamlining their system of commerce and consolidating their brand. P&G initially cut its agency roster by 50%, then eliminated the bottom 25% of its stock keeping units (SKUs). When the dust settled, the organization was left with only 30 agency partnerships as part of its new approach to supplier management. Ultimately, a corporate trend toward vendor consolidation was born, and it’s saving organizations a lot of money.

If you and a team had to pass a basketball from point A to point B, you would want as few passes as possible for maximum efficiency. No unnecessary passes. No unnecessary catches. AI tools can figure out exactly how to reduce your vendor base down to its most essential elements. It isn’t influenced by bias, and it always finds the most efficient solution. That’s how my organization saved an oil and gas company $68 million purely through vendor consolidation and payment optimization.

Written by Dave Curtis.
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