New Era of Logistics
Global changes force us to build supply chain resilience to new risks.
Logistics and operations experts surveyed by EY see GenAI as a key solution to staying competitive in the future. Almost three-quarters of them (73%) plan to implement the technology in their supply chains, and 80% believe it has the potential to transform the space and therefore give it a high priority. Leaders in implementing generative AI are using it to improve demand forecasting and operational efficiency. Importantly, 69% of respondents believe that not integrating GenAI into their supply chains will expose their organization to a strong market position. “AI-powered elements have been used in the supply chain for years. But it is the combination with GenAI that is the breakthrough in building impersonal supply chains. AI is used not only to analyze and interpret huge amounts of data, but also to create new scenarios, generate innovative solutions and remove friction in real time.” In turn, GenAI can design new processes, forecast future requirements with greater accuracy to mitigate external shocks and seamlessly identify the most cost-effective routes in the event of disruptions. This is crucial for the development of supply chains that can dynamically adapt to changing market conditions and operate with limited human intervention – explains Marta Cicholska, Partner at EY Poland, Leader of the Supply Chain & Operations Team.
EY’s research indicates that a full 90% of experts have implemented GenAI in some form in their supply chains. In the past 12 months, 62% of respondents have evaluated their GenAI initiatives, but only 7% have moved on to full implementation. The two main reasons for this are concerns and lack of understanding of the risks posed by GenAI and the challenges of implementing this complex technology. In-depth interviews with supply chain and operations executives revealed that making the technical leap from proof of concept to large-scale GenAI implementation was more difficult than expected.
Achieving full logistics autonomy also remains a major challenge. Only 28% of companies that have begun preparing to implement GenAI have created supply chains with low human involvement. The success factor for organizations at a higher level of advancement is a strong digital foundation that allows them to quickly adopt and use GenAI. Leaders also show greater progress in implementing both AI and GenAI in the logistics area. They are 3,5 times more likely to have achieved significantly higher than expected success for AI, and 5,2 times more likely for GenAI. “We expect to see significant growth in the implementation of generative AI over the next two years. As a result, this will widen the digital gap between organizations that are at the forefront of using new technologies and those that are only in the early stages of adoption. However, it is worth emphasizing that access to AI is becoming increasingly democratized.
Until recently, its use required training models, and was therefore limited by the need to have highly qualified experts and appropriate infrastructure in the organization. This generated additional costs and raised the entry barrier. In the era of GenAI, when large pre-trained models become available through key technology platforms, the effort is shifted to their proper use within the organization, its data, processes and requirements. The technology itself is becoming more accessible, but the challenge remains its proper implementation, using all the elements related to regulatory requirements and cybersecurity - adds Ewa Nowakowska, Partner EY Poland, Leader of EY AI Lab.
Understanding the challenges and success factors
Data incompleteness and skills gaps were identified by respondents as the main challenges in the process of implementing AI in supply chains. The human factor will determine the speed of implementation, so organizations should develop solid plans for upskilling current employees and carefully consider future recruitment. Half of the leaders in GenAI supply chain implementation are handing over the management of this technology to their teams - 51% compared to 33% in companies at the beginning of this journey. Such internal activation is all the more important because, according to the results of the EY - Work Reimagined Survey - 49% of employees are already using or expect to use GenAI in the next 12 months.
According to operations and supply chain experts, the key to a successful GenAI implementation is executive support (67%), building third-party support (65%), and the availability of technical talent (64%). Generative AI is a new technology, and 40% of respondents believe their organization does not fully understand the risks and challenges associated with it. They believe that maintaining data quality (38%) and access to data (33%) are the most important tasks in this area. This is especially true for supply chains, where data is scattered across systems within the organization and among external entities.
About the study
The survey was conducted by EY in partnership with HFS Research in February and March 2024 among 460 supply chain and operations professionals who play a significant role in their organizations’ supply chain initiatives. Responses were collected in 19 countries spanning the Americas, Asia Pacific (APAC) and Europe, the Middle East, India and Africa (EMEIA). Companies in the consumer, health sciences and wellness, energy and resources, technology, telecommunications and manufacturing industries were included. Respondents represented organizations with annual revenues of more than $1 billion that were at least in the planning stages of implementing GenAI in their supply chain. In addition, in-depth qualitative interviews were conducted with supply chain and operations executives.
The fourth edition of EY’s global study – Work Reimagined Survey – was conducted between June and August 2023 on a group of 17 employees and 050 companies. They represented 1 market sectors and 575 geographic areas from the Americas, Asia-Pacific, Europe, the Middle East, India and Africa.