India is navigating an evolving, opportunity-rich landscape as it becomes an increasingly attractive destination for global manufacturing and supply chain diversification. This shift is driven by a large labour and consumer markets, competitive operating costs, and strategic connections to key global markets.
In the wake of global disruptions, shifts in consumer behaviour, a surge in ecommerce, and rising geopolitical risks are pressing the need for more agile and efficient supply chains. For businesses looking to manage disruption risks and ensure supply chain agility in an ever more complex environment, artificial intelligence (AI) can be a game-changer. AI can improve demand forecasting, optimise inventory management, and bolster risk management through predictive analytics.
The adoption of AI in India is surging, with AI spending projected to reach USD 6 billion by 2027. This rapid growth is reflected in the supply chain sector, where 76 per cent of Indian enterprises are already engaged in Generative AI proofs of concept or have established investment plans.
This growth, combined with AI's transformative power in supply chains, presents a compelling case for investment in India's AI sector. Among the ways AI is changing the way companies manage supply chains are:
1. Demand forecasting: One of the most critical applications of AI in supply chain management is demand forecasting. AI significantly improves the accuracy of demand predictions by analysing vast datasets and identifying patterns that traditional methods often miss. For instance, AI-driven predictive analytics can consider numerous variables—seasonal trends, market dynamics, and external factors—to forecast demand accurately. This precision allows companies to align production more closely with consumer needs, reducing instances of stockouts, minimising excess inventory, and ultimately enhancing customer satisfaction.
2. Inventory management: AI-driven systems are revolutionising inventory management by dynamically adjusting stock levels based on real-time data. These systems help businesses minimise excess stock and avoid shortages, leading to significant cost efficiencies and improved delivery times. For example, many global ecommerce giants employ sophisticated AI algorithms to manage inventory across their vast network of fulfilment centres. These algorithms optimise storage costs and accelerate delivery processes, setting a benchmark for efficient inventory management in the digital age.
3. Supply chain visibility: Real-time supply chain visibility is crucial for proactive risk management and operational efficiency. AI enhances transparency within supply chains by providing real-time insights into the status and location of goods. This capability is vital for businesses to manage risks effectively and respond swiftly to disruptions. Platforms which utilise AI and blockchain technology offer end-to-end visibility, enabling businesses to track shipments more accurately and reduce administrative processing times.
4. Predictive maintenance: AI is also transforming the maintenance of logistics equipment by enabling predictive maintenance. AI models monitor the health of equipment and predict potential failures before they occur, significantly reducing downtime and maintenance costs.
5. Logistics optimisation: AI-driven logistics optimisation is another area where Indian businesses are seeing substantial benefits. AI enhances route planning and resource allocation, reducing costs and faster delivery. Further, AI-driven logistics can identify the most efficient transportation routes and modes, cutting down on fuel consumption and greenhouse gas emissions. This intelligent orchestration of supply chain activities not only boosts efficiency but also significantly lessens the environmental footprint, paving the way for more sustainable business practices.
6. Risk management: In a world of increasing uncertainties, AI is crucial in identifying potential risks within the supply chain and suggesting effective mitigation strategies. AI could help companies adapt their supply chains to sudden demand and supply constraints changes, ensuring continuity and minimising disruptions. By providing actionable insights into potential risks, AI enables businesses to plan more effectively and maintain stability in their operations. In today's digital age, supply chain cybersecurity is also of paramount importance. AI can enhance cybersecurity by identifying vulnerabilities and potential threats in real-time. Machine learning algorithms can detect unusual patterns of behaviour that may indicate a cyberattack, allowing companies to respond swiftly and effectively.
The supply chain industry has undergone a remarkable transformation in the past few years, demonstrating an unparalleled capacity for adaptation and agility. As AI continues to evolve, its role in building more resilient, efficient, and sustainable supply chains will be crucial for India's economic future.
India's economy is projected to expand by approximately 8 per cent over the next five years, fuelled by robust public investment in infrastructure and a resurgence in private sector investments. The future of India's supply chains lies in the successful integration of AI, which promises to address current challenges and unlock new opportunities for growth and innovation.
