EJECE, European Journal of Electrical Engineering and Computer Science

Vol. 4, No. 6, November 2020

AI-Supply chain Risk Management during Pandemic

Dhanesh Thatikonda

Abstract — Artificial intelligence (AI) was introduced to

develop and create “thinking machines” that are capable of
mimicking, learning, and replacing human intelligence. Since
the late 1970s, AI has shown great promise in improving human
decision-making processes and the subsequent productivity in
various business endeavors due to its ability to recognize
business patterns, learn business phenomena, seek information,
and analyze data intelligently. Despite its widespread acceptance
as a decision-aid tool, AI has seen limited application in supply
chain management (SCM). To fully exploit the potential benefits
of AI for SCM, this paper explores various sub-fields of AI that
are most suitable for solving practical problems relevant to
SCM. In so doing, this paper reviews the past record of success
in AI applications to SCM and identifies the most fruitful areas
of SCM in which to apply AI.

Index Terms — Artificial Intelligence, Supply Chain

Management, Knowledge Management, Risk Management.

Fig. 1. AI Integrated Supply Chain Management.

I. INTRODUCTION1
Enterprise applications based on advanced technologies III. PREDICTIVE CAPABILITIES ARE HELPING DEMAND
such as AI and machine learning (ML), though still in the FORECASTING
nascent stages of development, are beginning to drive
When inventory lags demand, companies suffer losses. AI
innovation strategies of business. In the supply-chain and
is ramping up efficiencies in network planning and predictive
logistics industry, these technologies are proving to be a game
demand, allowing merchandisers to become more proactive.
changer. McKinsey & Company expects businesses to gain
By knowing what to expect, they can adjust the number of
between $1.3tr and $2tr a year in economic value by using AI
vehicles and direct them to locations where maximum
in their Supply Chains.
demand is expected. This leads to lower operational costs.
According to PricewaterhouseCoopers, AI could
contribute almost $15.7tr to the global economy by 2030.
IV. CHATBOTS ARE REDEFINING CUSTOMER SUPPORT
II. AI SUPPLY CHAIN MANAGEMENT AI can personalize the relationship between customers and
logistics providers. A recent example of personalized
AI adoption is taking off in the supply chain is the
customer experience is DHL’s partnership with Amazon. By
realization by companies of its potential to solve the
activating DHL Parcel “skill” via the Alexa app, DHL
complexities of running a global logistics network.
customers can ask Alexa to connect with Amazon Echo or
Implemented correctly, AI helps companies to make smarter
Echo Dot smart speakers and confirm their parcels’ status. In
and more agile decisions and anticipate problems. Proactive
the event of any issues arising during the interaction, Echo
systems enabled by AI are raising the quality of service,
users can directly contact DHL for assistance by its customer-
exceeding customer expectations for on-time and undamaged
support team.
deliveries. They’re further improving efficiency through
automated compliance processing. The result is lower costs
V. SMART WAREHOUSES ARE MORE EFFICIENT
and fewer problems across the logistics network. Fig. 1 shows
AI presence in entire supply chain. A smart warehouse is a fully automated facility wherein
most work is done through automation or software. In the
process, tedious tasks are simplified, and operations become
more cost-effective. Alibaba and Amazon have already
transformed their warehouses using automation. Amazon
recently rolled out machines that automate the job of boxing
customer orders. In Amazon warehouses, robots work
alongside humans to increase productivity and efficiency.

1
Published on November 9, 2020.
Dhanesh Thatikonda, T-Mobile USA, USA.
(corresponding e-mail: dhanesht@outlook.com)
DOI: http://dx.doi.org/10.24018/ejece.2020.4.6.252 Vol 4 | Issue 6 | November 2020 1
 EJECE, European Journal of Electrical Engineering and Computer Science
Vol. 4, No. 6, November 2020

VI. GENERIC ALGORITHMS ARE IMPROVING DELIVERY VIII. COVID-19

TIMES AND REDUCING COSTS Pandemic has driven home the need to reduce global
In the logistics business, every mile and minute matters. supply chain vulnerabilities through intelligent workflows.
Companies can use a route planner based on genetic As the world works to manage the current COVID-19
algorithms to map out optimal routes for deliveries. outbreak (see Fig. 3), the focus is rightly on communities
treating those infected, companies protecting employees
worldwide, and collectively containing the virus to limit
VII. SUPPLY CHAIN RISK MANAGEMENT global health impact.
SCRM as an academic topic was identified as important in It’s clear that economic and societal costs will be huge. The
2001-2002 and has since gained extensive recognition as an pandemic has revealed the vulnerabilities and fragilities in
important topic both within academia and industry. With global supply chains across most, if not all, sectors, and
changing weather patterns, natural disasters, political turmoil, industries. Today, organizations are in reaction mode,
financial upheavals, and now a pandemic, supply chains are focused strictly on maintaining supply and meeting customer
under constant pressure to deliver. The basic challenge in the needs, often through hands-on rigor and hard work.
scenarios mentioned above is the aspect of supply disruption. However, at some point, leaders must analyze the current
In general, the focus in most cases is to strengthen the pain points to better prepare for tomorrow. To avoid
upstream supply chain to maintain continuity of supply. perpetual reaction to future “black swan” situations, leaders
However, as seen in this pandemic the cause of the risk need to evaluate how they can proactively get ready for future
upstream was the lack of human resource due to the lockdown unpredictable, yet inevitable, disruptions.
(with operations shut) and an unknown demand profile due to
stockpiling on one end coupled with reduced footfall in the
retail environment on the other. SCRM in general borrows
from risk management techniques from multidisciplinary
sources such as engineering, finance, and mathematics. There
is an increasing amount of literature on SCRM, but the basic
process is comprised of three activities: identification of the
risk, quantification of the risk, and identifying potential
solutions to mitigate the impact of the risk. Simplistically,
risk can be defined as an event that has the probability of
Fig. 3. Impact of covid-19 to business operations in Asia Pacific.
creating a negative impact for the organization or supply
chain. There are a number of papers and articles that focus on
the sources of risk (for example, whether the risks are external IX. AI AND SCRM
or internal to the firm, whether the risks are upstream or Supply chains are complex systems comprising of
downstream) the different quantification techniques (for various organizations, operations, processes, assets,
example, risk trees, FMEA), and the solutions for mitigating people, and strategic stakeholders. The complexity is also
the impact of the risks (transferring the risk, hedging, manifested through the information flowing across the
postponing the risk, avoiding the risk). chain which ensures that appropriate decisions are taken
Another aspect of SCRM is to consider both proactive for the supply chain to work both efficiently and
management - creating systems in anticipation of the risk to effectively. These decisions are taken by humans in the
mitigate; as well as reactive management - reacting quickly chain. As supply chains have gone far and wide there is
to minimize the impact of the risk. Fig. 2 describes the even more complexity due to unpredictable weather
reactive risk management steps. patterns and external sources of risks.
However, software systems have grown in capability and
with big data systems there is a lot of data available for both
pattern analysis and decision making. To add to the big data
available from supply chain software systems, there is a
plethora of dynamic fast data from social media streams
that provides valuable information about ground reality of
locations, assets, sentiments, and weather which has the
potential to be tapped for better decision making.
The use of AI and specifically machine learning techniques
could be used to harness both big data and fast data from the
supply chain systems to predict supply chain risks and
prescribe mitigating strategies. The future may be a situation
where the system takes over the mitigation process after the
decision is made, without human intervention. The research
Fig. 2. Reactive Risk Management Response. is moving in that direction, but from a SCRM perspective the
ability of the humans to control and mitigate the risks will be
more important.

DOI: http://dx.doi.org/10.24018/ejece.2020.4.6.252 Vol 4 | Issue 6 | November 2020 2

 EJECE, European Journal of Electrical Engineering and Computer Science
Vol. 4, No. 6, November 2020

AI systems will be able to identify the source of risk X. CONCLUSION

(ideally predict it from big data analytics), quantify the risk Companies like Amazon, Walmart, Alibaba, and Zara
based on past impact data, and suggest the best possible are leading the path in the use of technology and advanced
mitigation strategies for that scenario (See Fig. 4) . As analytics in managing supply chains. Artificial
discussed above, this method is a regular process, however Intelligence (AI) and Machine Learning (ML) are of the
AI, and data analytics will help provide a faster analysis hot topics being discussed in the retail world. Across the
process, a faster quantification process, and perhaps better globe, whether they are grocery, mass merchant, or
suggestions for mitigation based on a wide ranging analysis fashion, retailers are looking for ways to make faster and
of past scenarios. For example, if we consider a scenario of smarter decisions using this technology. Among the
sourcing grain from farms, the system could analyze weather leading applications of AI & ML in planning are
patterns, predict which farms could be affected in the future forecasting and replenishment processes.
(or near future) and do a portfolio analysis to redesign
upstream sourcing to minimize supply chain disruption by
identifying the appropriate suppliers from the portfolio. This REFERENCES
could also work based on analyzing supplier quality data. In [1] Thatikonda, Dhanesh. “Recent Information Technology Trend of
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or regional upheaval, the system could analyze big data and International Journal of Science and Research (IJSR) 9, no. 7
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is required for business continuity.
Dhanesh Thatikonda is a Senior Product Manager at T-
Mobile USA, having 16+ years of design, development
experience in Supply Chain Management Applications.
He has vast domain experience in Retail and
Manufacturing Organizations. He has conducted several
trainings and published several articles in International
Journals.

Fig. 4. AI and Machine learning influencing peak expectations.

In the future, sustainability non-conformance will be a

major supply chain risk and AI systems will need to be taught
about sustainability parameters and its importance within
supply chains.
It is clear from the discussion that the capability of the
system will depend upon the AI algorithms and the available
data. Data availability and appropriate data is critical for the
system to manage supply chain risks effectively. There is
debate within the community about whether the AI systems
should be like humans or should be designed to naturally
remove all bias as ingrained in humans. Since the discussion
will continue until the capability is fully formed, it is
important that the AI (Machine Learning) system provides
the following characteristics at the present:
Explainability – the ability to explain how the AI system is
working.
Interpretability – the extent to which one can predict
what will happen if there is a change in the input to the
system or parameters in the algorithm, the ability to
interpret how the system is working.
Auditability – the ability to audit the system, the data
and how this data is used.
Transparency – the characteristics that provides full
access to how the system works and provides trust to all
stakeholders.

DOI: http://dx.doi.org/10.24018/ejece.2020.4.6.252 Vol 4 | Issue 6 | November 2020 3