How AI could help enhance your supply chain

Artificial Intelligence (AI) has proven to be nothing short of revolutionary, and as generative AI continues to drive the technology forward its impact is being felt in many areas of life – including business.

The growth is set to continue. The overall market size for AI is tipped to reach $826.73 billion by 2030, a huge leap on the expected $243.72 billion for 2025.¹

It’s important to realise that AI is not just for big companies. Of course, the amount you can afford to invest depends greatly on the size of your business, but the truth is that AI technology is readily available to smaller businesses too.

Yet figures show that there’s still plenty of scope for SMBs to adopt AI on a greater scale. In 2024, only 11% of small enterprises (10-49 employees) in the EU were using it anywhere in their business, as were just 21% of medium enterprises (50-249 employees).² Those figures compare to over 40% of large enterprises (250 or more employees).

For those that are integrating AI, it can make a big difference – and supply chains are a key area where businesses can benefit from a host of improvements, including more accurate forecasting, lower costs, more efficient logistics, better supplier management and greater sustainability.

With the market for AI in the supply chain due to grow from $9.15 billion in 2024 to $40.53 billion by 2030, it’s clear that a lot of businesses are expected to take advantage.³ If you want yours to be one of them, here are some essential ways in which AI could help:

AI can help to change this, and at the heart of it is that it can lead to people making better decisions. One area where this is apparent is in demand forecasting. AI can analyse historical data and market trends to provide more accurate forecasts, helping businesses to reduce costly inventory missteps. Similar processes can be used to optimise warehouse stock levels and restocking processes, helping to avoid being under or over-stocked. Research shows that AI can reduce forecasting errors by up to 50%, and cut the number of sales lost due to inventory shortages by 65%.⁴

AI tools can aid the way you work with suppliers in several ways, from streamlining communications to helping choose the best businesses to work with. For the latter, it is able to analyse huge volumes of data to help identify the most suitable suppliers, cutting down often lengthy timeframes.⁵ But it goes beyond just finding partners that can meet your needs.

AI can also assess the reliability and quality of suppliers, which can help you to make better decisions on who to contract with – reducing risk and boosting confidence.⁶ And in addition, AI is able to improve working relationships with suppliers, enhancing speed and clarity of communications by doing everything from submitting purchase orders to answering queries and negotiating price discounts.⁷

So, many businesses are turning to AI to find solutions, with the technology able to deliver supply chain efficiencies in a variety of areas to reduce disruption and lower costs. Automation of routine tasks, for instance invoice processing and label generation, is one way it can this, with the technology rapidly accelerating the processes and cutting down on both the time taken and any manual errors that can occur.

Another way is when AI is used to enable predictive maintenance. By utilising data from sensors and other sources, AI technology can build effective maintenance schedules for equipment and spot potential problems in real time, addressing needs proactively while reducing downtime and lost revenue.⁸

AI can help and do so in a variety of ways. One of which is in playing a key role in plotting the best shipping routes for supplies. By more effectively evaluating historical and real-time data, it’s able to identify potential disruptions and suggest alternate routes.⁹ It can also factor in trade agreements, tariffs, customs barriers and shipping costs to formulate optimum strategies, while last-mile deliveries can be enhanced with real-time adjustments that take into account factors such as traffic conditions, weather and delivery priorities.¹⁰

And it’s not just transportation. Warehouses can also be made more efficient through AI. By arranging the most effective layouts and plotting optimal routes for workers, businesses can cut the time it takes to move goods around the facility while also accelerating fulfilment rates.¹¹

AI can be used in several ways to help make supply chains more sustainable. For instance, the technology can help businesses to evaluate the carbon footprint of the chain and analyse whether potential partners have the ethical credentials they are looking for.¹² Research shows that companies have seen a 20% increase in sustainable vendor partnerships after using AI to analyse supplier data, while predictive analytics can reportedly cut overproduction by 35% – saving on energy use and reducing waste.¹³

Optimised transport routes also help increase sustainability within the supply chain through reductions in fuel usage and emissions, while AI can be used to monitor energy usage within production facilities and elsewhere, spotting inefficiencies and recommending solutions.¹⁴

Before starting with AI or adapting your system, it’s a good idea to analyse your supply chain to find out if any bottlenecks are occurring or where any problematic issues keep arising. This will help you to see where AI could add the most value and could be a better option than trying to integrate AI into everything at once. Depending on your business, likely functions to consider could include those critical to success such as business planning, production scheduling and inventory management – high-value areas where AI can improve the speed and accuracy of decision-making and generate a strong return on investment.¹⁵

Once you’ve reviewed your current situation, and discovered the areas where AI could bring the most benefit, it’s important to plan out how you’re going to address it. Prioritising what to do first is a good first step, then build a roadmap outlining how you’ll do it. It’s worth considering the ease of implementation of potential solutions, and where you may be able to gain some quick wins.¹⁶ Then, outline a realistic timeline with clear goals to hit along the way.

When building AI into your operations, there’s often a choice between developing a bespoke system or buying a third-party off-the-shelf solution. The correct path will depend on the size of your business, its requirements, and the amount of resources available. Custom-made AI solutions offer greater flexibility and are tailored to your business’s needs but are generally more expensive to implement and can require greater technical expertise. Off-the-shelf products can be more cost-effective and deployed more quickly, but can lack flexibility and may not be able to cater to very specific business needs.¹⁷

Whatever you decide, it’s important to remember that the quality of the data used in the system is imperative. The outputs an AI system delivers are only as good as the information it is trained on, so make sure yours is high quality and available to whatever AI tools you are working with.

What does high quality data mean in practice? Well there are several components but four good things to focus on are: accuracy – data that is correct and error-free; complete – data that contains all the necessary information; consistent – data that doesn’t contradict itself; and timely – data that is up-to-date.¹⁸ It’s also worth ensuring that data isn’t duplicated in the system and that the information confirms to the required format for it.

Change can be hard. A new AI system could mean some of your employees needing to do their jobs in a different way, and some will also need to be trained how to use the new technology. It’s important to factor these things into your process.

Communication is key, so set out a clear plan to tell your employees what’s happening. It’s also worth considering how much downtime will be required while they acquire their new skills.¹⁹

AI relies on accurate, up-to-date information, so it’s essential to make sure you monitor your system to ensure it continues to deliver what you need it to. Make adjustments where necessary, using real-time insights to optimise the systems and maximise performance against your key metrics.²⁰

Adding AI to the supply chain can bring many benefits in terms of costs, efficiency and overall performance, and can help to provide resilience too. But there are other things you can do as well to strengthen the supply chain. For more details, you can watch our animation on mitigating supply chain risk. And remember, whether or not you are implementing AI, it’s important to consider how any technology you introduce will work alongside other aspects of your business. For examples of software that can integrate easily with your shipping services, check out the range of FedEx Compatible solutions.