Value Creation Drives AI Supply Chain Success

We might not be asking the right questions when it comes to bringing AI into supply chain operations. Whenever a new technology emerges, companies filter its benefit through the rate of return (ROI) lens.

While this is sound reasoning for most technologies, it misses the larger advantage that AI can bring. AI offers a platform that serves the macroeconomic goal of creating value for the company. It widens the view through which a company views itself, its workforce, and the competitive landscape of its market.

“The fundamental issue that needs to be prioritized is to have a value-centric mindset,” says Avik Ghosh, managing director, head of AI and production Innovation at Maine Pointe. He observes that often companies lose sight of the value of their processes. “You might have a certain process, a sales process, or an inventory process and you have to ask yourself what is the fundamental value of this process. Why does this process exist?” 

Using AI to simply reduce the number of steps misses the more expansive capability of AI. When these processes were originally designed, they were a means to an end, explains Ghosh. “But now that AI is here, if a company reanchors itself on the value-- what is it we're trying to do? AI can reimagine the whole thing.”

Joseph Esteves embraces this holistic view of this technology. “Everyone's looking at AI to replace tasks to free up time. Well, once you come to terms with what the technology can do, it's like the next level of Maslow's hierarchy, which is, it can actually help me think about the strategy better than I could alone.”

Building ROI

Once a company has a clear understanding of the overarching goal of AI and its fundamental value, it can delve into the tactical applications that determine its early ROI.

While Esteves says AI can solve many of the current problems companies are facing, it’s how they are applying the technology that will determine how soon they see an ROI.

“At first, we, like everyone, treated Gen AI as a tool layered into our existing workflows, which were designed for a world where knowledge and analytical horsepower were scarce. So, we put AI into an inefficient system, and we got inefficiency out of it. We found we were just automating constraints rather than removing them.”

Once constraints are removed, Esteves says ROI will appear in the form of enhanced enterprise performance. “Speed to decisions is going to be lightning fast,” he said. “Companies will experience cycle time compressions. You're going to see risks that you didn't see before. People are going to be able to scale these improvements very quickly.”

The larger ROI will be that all of these improvements become strategic advantages in a very volatile market. “And those will lead to better financial outcomes, higher service levels, lower cost to serve, and improved working capital.”

However, these benefits must be supported by the proper investment in assets, which include machines and people. “If you are not investing in a capability that is foundational to your competitiveness, that is a real concern.”

New Paradigm of How Work Gets Done

Investment in the workforce is vital. Esteves says his company, and what he advises clients to do, is redesign how work gets done. This involves both retraining and creating jobs that have never existed.

"Gen. AI’s ROI is not capped by technology's potential," says Esteves. “Now we have an abundance of intelligence. It's capped by how quickly organizations can evolve the way their people work.”

Changing and expanding how everyone at the company achieves goals creates a new mindset. “Everyone is going to think differently, believe differently. We're going to have a sense of urgency about this. Imagine if you had all that time to  be more strategic and innovative, how would your company benefit?”

This new paradigm shift goes beyond individual companies. Just as manufacturing workers were all trained in the lean process many years ago, which created a set of workers that brought high-level skills to any employer, the same will be true of those training in AI.

Democritization of Leadership

It's not just the job descriptions that are evolving; leadership must do the same. The older style of leadership from the top down is not the ideal method to implement the capabilities of AI.  

"We have to democratize innovation," says Esteves. "Get it in everyone's hands. Give everyone the chance to solve problems, because when you are able to scale that way, you can have hundreds, thousands solving problems. And sometimes people are solving problems that the top of the organization didn't even know existed." 

And that call for a new organizational structure explains Ghosh. "I have seen this idea of democratization work when the organization chart is turned upside down. Instead of the CEO at the top, that position was now at the bottom, with those direct reports above. And so, the philosophy moved from who reports to you, to who do you support. 

"We can take that analogy further, understanding that the root of the tree now supplies nutrients and water to the leaves (the employees) who can now grow in their own different ways."

The Way Forward

These foundational shifts are coming at an ideal time in supply chain organizations, says Ghosh. "To deal with uncertainty, which is the case currently, you need to be agile. And one of the things that allows you to be agile is how quickly you can adjust processes.

"For example, maybe you would have spent a year doing some strategic sourcing event and negotiating contracts and cutting deals. Well, because you invested so much time securing these terms, you might not want to change the terms and so end up sticking with these contracts for two to three years. But now, with all of this uncertainty, you don't have that luxury. What AI is now enabling you to be more agile to deal with these changing macroeconomic and geopolitical issues."

"Our whole ecosystem shifted," says Esteves. "So now we have the conversation within our companies and ask what the art of the possible is. What's been our dream that we never thought we would be able to do? "

Esteves sees AI as a fundamental shift in how companies will survive. "We owe it to the people we employ, our friends and family, to be ready and to survive and thrive in this new era."