Supply chain management (SCM) KPIs are essential metrics that businesses use to gauge the effectiveness and efficiency of their supply chain operations. These KPIs offer insights into how well an organization is performing concerning inventory management, order fulfillment, transportation, and other key aspects of the supply chain. As supply chains become increasingly complex, it is becoming more challenging to measure and monitor SCM KPIs accurately. However, generative AI is a powerful tool that can be used to analyze large datasets and generate insights based on the patterns it observes, providing a data-driven approach to monitoring and measuring SCM KPIs.
An Approach to Use Generative AI for Measuring and Monitoring SCM KPIs
Step 1: Define the SCM KPIs: The first step is to define the specific SCM KPIs that the organization wishes to measure and monitor. These KPIs should be specific, measurable, relevant, and time bound. Common SCM KPIs include inventory turnover, order cycle time, on-time delivery, and transportation cost per unit.
Step 2: Collect the data: The next step is to collect the data required to measure and monitor the SCM KPIs. This data can come from various sources such as ERP systems, transportation management systems, and warehouse management systems. The data should be in a format that can be easily analyzed by the generative AI model.
Step 3: Train the generative AI model: The generative AI model should be trained on the data collected in step 2. [NPP1] The model should be capable of identifying patterns in the data and generating insights that can be used to measure and monitor the SCM KPIs. The generative AI model can be trained using various algorithms, such as deep learning, decision trees, and clustering.
Step 4: Analyze the results: Once the generative AI model has been trained, it can be used to analyze the data and generate insights. The results should be reviewed and analyzed to identify trends and patterns that can help measure and monitor the SCM KPIs. For example, if the generative AI model identifies that the order cycle time has increased over time, the organization can investigate the root cause of the issue and take corrective action.
Step 5: Take corrective action: If the generative AI model identifies any issues or problems with the SCM KPIs, corrective action should be taken to address them. This can help improve the overall performance of the supply chain. For example, if the generative AI model identifies that the transportation cost per unit is higher than the industry benchmark, the organization can negotiate with its transportation providers to reduce costs.
Step 6: Monitor the SCM KPIs: The generative AI model should be used to continuously monitor the SCM KPIs and generate insights. This can help identify trends and patterns over time and provide insights into the effectiveness of the corrective actions taken in step 5.
With the above approach organizations can gain deeper insights into their SCM KPIs, make data-driven decisions to optimize their supply chain performance, and reduce costs while improving customer satisfaction.
Measuring the Uncomplicated and Challenging KPIs Using Generative AI
Generative AI is a type of AI that can create new data based on patterns it identifies in existing data. It can analyze large amounts of data and identify patterns and trends that would be difficult to spot manually. This makes it an ideal tool for measuring and monitoring SCM KPIs, which can be challenging to measure using traditional methods.
Here are some SCM KPIs that are easier to measure using generative AI:
- Inventory turnover: Generative AI can analyze historical sales data and identify patterns in the demand for products. Based on this analysis, it can provide insights into how quickly inventory is moving and suggest optimal inventory levels.
- Order cycle time: Generative AI can analyze order data and identify the time it takes to process an order from start to finish. This analysis can help identify bottlenecks in the order processing system and suggest ways to reduce order cycle time.
- On-time delivery: Generative AI can analyze transportation data and identify the percentage of deliveries that are on-time. This analysis can help identify trends and patterns that effect on-time delivery and suggest ways to improve delivery performance.
- Transportation cost per unit: Generative AI can analyze transportation data and identify the cost.
While generative AI is an effective tool for measuring some SCM KPIs, there are some KPIs that are challenging to measure using this technology.
Here are some SCM KPIs that are challenging to measure using generative AI:
- Customer satisfaction: Measuring customer satisfaction is crucial for businesses, but it is subjective and difficult to measure using data alone. While generative AI can analyze customer feedback and identify common themes, it cannot fully capture the nuances of customer satisfaction.
- Employee satisfaction: Measuring employee satisfaction is equally challenging as it is a subjective metric that is influenced by factors outside of work. While generative AI can analyze employee feedback, it cannot fully capture the complexities of employee satisfaction.
- Supplier performance: Measuring supplier performance requires more than just analyzing data. It often involves qualitative assessments and human intervention to evaluate factors such as supplier responsiveness, quality, and delivery times.
- Sustainability metrics: Sustainability is becoming an increasingly important metric for businesses. However, measuring sustainability requires a combination of qualitative and quantitative data that cannot be fully captured by generative AI.
- Lead time variability: Lead time variability is a measure of the consistency of the time it takes for goods to move through the supply chain. While generative AI can analyze historical data to identify patterns, it cannot account for external factors such as weather, traffic, or political events that can affect lead time variability.
Navigating the Metrics of Supply Chain Management with Generative AI
While generative AI is an effective tool for measuring some SCM KPIs, it is important to recognize its limitations. To measure and monitor SCM KPIs effectively, businesses must use a combination of quantitative and qualitative data, as well as human intervention to interpret the results.
Generative AI is a valuable tool for measuring and monitoring SCM KPIs. However, there are some KPIs that require more than just data analysis, such as customer satisfaction, employee satisfaction, supplier performance, sustainability metrics, and lead time variability. Businesses must use a combination of quantitative and qualitative data and human intervention to measure and monitor these KPIs effective.
About the Author
VISHWAS BUNYAN,
Group Manager, Digital Transformation Office (DTO)
VISHWAS BUNYAN is an SCM expert at the Digital Transformation Office (DTO) at Tech Mahindra. Vishwas has 22 years of Professional experience in the IT Industry. He has done MBA from the Indian Institute of Management (IIM), Trichy, and holds a Bachelor of Engineering Degree.
