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GenAI is a necessary tool for competitive advantage, but companies will need to navigate the risks and capitalize on the opportunities—or risk being left behind. 

TAKEAWAYS:
● Most supply chain and operations executives (73 percent) are planning to deploy GenAI, yet only 62 percent have reassessed projects, and merely 7 percent have completed implementation.
● Organizations further ahead in the autonomous supply chain journey are 5.2 times more likely to see success with GenAI, further widening the digital gap.
● The greatest gains from GenAI come when projects align to a strategic vision, data are AI-ready, and value is maximized by addressing cyber and data risks.  

Since 2020, the global economy has been in a new paradigm, marked by disruptions and changes that are more forceful, appear more frequently, trigger more interconnected and widespread impacts, and often strike immediately. Chief operating officers and supply chain managers know this all too well—the supply chains they oversee exist on the frontier of this high-risk climate, bearing the brunt of its disruption.

In response, many companies refocused on boosting resilience in supply chains, which involved diversifying operations across multiple countries and suppliers. Supply chains that had once been ultra-lean gained protection against external shocks—but often at the price of reduced efficiency.

Enter generative artificial intelligence (GenAI), which can help companies leapfrog their technical maturity and accelerate their path toward an autonomous supply chain. GenAI is being used to not only analyze and interpret vast amounts of data but also to create new scenarios, generate innovative solutions, and remove frictions in real-time. As a result, managers have end-to-end visibility and more human time for higher-order work.

“Companies see GenAI as a critical capability for remaining competitive in the future and are investing in it accordingly.”

Unlike traditional AI, which primarily focuses on data-driven insights and automation, GenAI can design new processes, forecast future demands with greater accuracy, and seamlessly identify the most cost-efficient routes and carriers in the event of a disruption.

But the combination of GenAI and traditional AI is a game changer in bridging the gap to self-driving supply chains, because of GenAI’s breakthrough capabilities and the ways in which the strengths of the two technologies complement each other. It is a compelling vision, but one that has so far remained elusive.

EY global research of 460 supply chain and operations executives has found that even among organizations that have started preparing for GenAI in their supply chain, only 28 percent have achieved a low-human-touch supply chain, and only 50 percent have achieved end-to-end visibility across the supply chain.

The Great AI Reset

Companies see GenAI as a critical capability for remaining competitive in the future and are investing in it accordingly. Three-quarters (75 percent) are planning to deploy GenAI in their supply chains, and 80 percent believe it can reinvent supply chains. In addition, 69 percent believe that failing to integrate GenAI into their supply chains will put them at a competitive disadvantage.

Despite this optimism, a retrenchment is taking place. In the past 12 months, 62 percent of respondents have reassessed their GenAI supply chain initiatives, and only 7 percent have gone on to complete deployment.

Why?

Two reasons:

1. Concern and lack of understanding around the unique risks created by GenAI; and
2. Challenges of implementing this complex technology.

Our findings suggest this reset is about achieving scale and maximizing impact. In-depth interviews with seven supply chain and operations executives revealed that it was tougher than expected to make the technical leap from proof-of-concept to GenAI at scale.

Leading the Way to Autonomous Supply Chains

Organizations further ahead on the journey to autonomous supply chains (front-runners) have created strong digital foundations that enable them to adopt and take advantage of GenAI quickly. This momentum is likely to widen the digital divide, unless those who are behind (followers) take prompt action.

GenAI is giving organizations a faster pathway to the autonomous supply chain. Front-runners are more ambitious about using GenAI in the next two years, anticipating deploying GenAI in 12 use cases for the supply chain on median compared to eight for followers. Front-runners are going beyond the supply chain to align more closely with other business functions and external parties and driving end-to-end visibility across the supply chain.

Most organizations’ supply chains (82 percent) are using both AI and GenAI across a wide array of use cases to take advantage of their different, often complementary strengths. Traditional AI is rules-based, requiring prepared datasets and predefined logic to solve business problems. GenAI is great for text-rich environments and unstructured data, creating new content based on the data it has been trained on. For example, companies using traditional AI for demand forecasting and quality optimization are finding that a GenAI layer improves accuracy and democratizes adoption of the tools.

Substantial GenAI Growth Expected

Substantial growth in GenAI is anticipated over the next two years. Given that front-runners already use traditional AI more and are more confident about future growth, the gap between them and followers is likely to widen. Looking more broadly at where front-runners are focusing the first wave of use cases, those with high GenAI deployment today and continued high anticipated use in two years will likely focus on

• Product design
• Logistic network design
• Global trade optimization
• Demand forecasting

These are areas where traditional AI has long been available but has been limited by the need for highly trained data scientists, which has made them too expensive for many. GenAI provides the benefit of a natural language, interpretive layer that can become a democratizing force that puts these tools in the hands of the workforce. These areas are also supply-chain functions with well-defined datasets, a high percentage of unstructured data and high value to be gained.

The next wave of use cases, those with lower GenAI deployment today but high anticipated use in two years, potentially includes

• Supplier management
• Production yield or quality optimization
• Risk management
• Customer service chatbots and product training

These high-growth areas also offer clear commercial returns, either by improving the speed of customer service through chatbots or reducing costs through quality optimization in manufacturing. Demand forecasting is another key area of focus for GenAI. It’s perceived to be a use case that will resolve a lot of pain points for the supply chain and offers clear metrics that can make the business case an easier sell to the CEO and the Board of Directors.

Many of these use cases suffer from back-end challenges when using traditional AI (quality optimization, predictive maintenance) and require bespoke solutions. Customer service chatbots also have a high degree of risk given the chatbots’ direct interaction with the public. Both factors may be contributing to the time horizon suggested here.

Three Actions to Overcome Implementation Challenges

Implementing GenAI in the supply chain involves a complex interplay of technical, organizational, and operational challenges. Organizations should take the following three action steps to advance their journey to the autonomous supply chain.

1. Align people and investments to strategic vision

For front-runners, the top factors for success in GenAI deployments are securing support from leadership (67 percent), building support from third parties (65 percent), and availability of technical talent (64 percent). The largest gaps between front-runners and followers are in prioritizing the strategic vision and support from third parties, which highlight the importance of a cohesive vision and external support in ensuring GenAI pilots and implementations are focused on delivering business value.

A cohesive, strategic vision can clarify investment priorities against the seemingly endless list of use cases of GenAI, minimize the risk of multiple business units duplicating investments, and improve AI outcomes by guiding the augmentation of large language models (LLMs) with reusable algorithmic patterns, such as retrieval-augmented generation.

2. Prioritize data readiness when considering use cases

The demands of GenAI are shining a spotlight on the myriad complexities of enterprise data management. Despite data availability, quality, and privacy being top of mind when prioritizing use cases, organizations are still struggling. Maintaining data quality is the number one implementation challenge cited by respondents (38 percent), with access to data (33 percent) another top challenge.

Any organization hoping to compete in GenAI needs to get its data house in order, by prioritizing data cleansing, standardization, systems, and engineering to reduce latency, and enhancing metadata so data can be consumed by retrieval augmented generation (RAG) systems to improve the accuracy of GenAI outcomes.

3. Maximize GenAI value by mitigating cyber and data risks

GenAI is a nascent technology, so it is not surprising that 40 percent of respondents say their organizations do not fully understand the new risks and challenges of GenAI in supply chain. GenAI poses new vulnerabilities—for example, through prompt injection attacks designed to provoke LLMs into leaking sensitive data or manipulate their outcomes. Front-runners are more likely than followers to focus on the new risks that GenAI poses, such as inaccuracies and hallucinations, exposure to legal liability through IP infringement, overreliance on untested technology, brand or reputation damage and job insecurity.

The need for stronger cybersecurity is paramount as organizations look to deploy GenAI. Supply chain and operations leaders need to work closely with cybersecurity teams from the beginning to help with the secure adoption of GenAI in the supply chain. This includes embedding the cyber team in use case identification and governance to ensure the value potential of GenAI in the supply chain is maximized.

GenAI’s Potential and Pitfalls

GenAI is emerging as a transformative tool, enabling more autonomous supply chains with end-to-end visibility and real-time problem-solving capabilities. EY research suggests that GenAI adoption is crucial for competitiveness, but challenges in understanding risks and implementation complexities have led to a strategic reassessment. Front-runners in GenAI adoption are leveraging it for improved demand forecasting and operational efficiency. To overcome these challenges, companies must align strategic visions, prioritize data readiness, and mitigate cyber risks. For more information, visit Will GenAI accelerate autonomous supply chains? | EY – US.  M

Authors:

Ayoub Abielmona is an EY Global GenAI Supply Chain Leader.

Matthew Burton is an EY EMEIA Supply Chain and Operations Leader.

Sumit Dutta is Principal, Supply Chain & Operations, Ernst & Young LLP.

David Guarrera is Principal with EY Americas Technology Consulting, leading Generative AI initiatives.

Jocelyn Hallum is EY Global Supply Chain Transformation, Planning and PLM Transformation Solution Leader.

Glenn Steinberg is EY Global Supply Chain and Operations Leader.

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The fact that supply chain disruption made major news at the onset of the pandemic crisis in the United States shows the depth of its severity. “When the president or any global leader talks about the supply chain, that is not a good thing!” said Simon Ellis, VP of Supply Chain Strategies at IDC.
Ellis and Bart Talloen, VP of Supply Chain Innovation and Insights at Johnson & Johnson, took part as panelists on “The Implications”, an edition of the Manufacturing Leadership Council’s What’s Next for Manufacturing? virtual meeting series, which took place July 21. Based on the theme of the June Manufacturing Leadership Journal, this meeting was focused on supply chain impacts and future implications.
While today’s supply chains have better visibility and resilience than ever before, Ellis says they still aren’t resilient enough. Understanding the multidimensional nature of risk and creating a resilient supply chain is essential to minimizing risk, especially when disruptions seem poised to occur more frequently and with greater severity.
Looking into the future, Ellis says that while some elements of the supply chain will resolve themselves over the summer, it’s probable that demand shocks will persist. While it’s unlikely that most companies will undertake massive reshoring of their operations, it is likely they will re-examine where their goods and materials are produced and make changes that strategically prioritize resilience over cost savings.
Ellis identified five technologies that can help enable a more resilient supply chain:

• Cloud delivery/SAAS applications
• Control tower/digital twin
• Scalable data and analytics capabilities that inform real-time decision making
• Artificial intelligence and machine learning
• Multi-enterprise networks

For Johnson & Johnson, the top priority as the pandemic grew was to ramp up holistic multi-faceted risk management and supporting business continuity plans. From an end-to-end supply chain orchestration perspective, improving demand sensing and agile response to it and building supply chain resilience was key. With four facilities achieving the status of World Economic Forum Lighthouse Factories, the new demands brought about by COVID-19 were met by the company’s ongoing digital journey to bring together its existing innovation solutions into one integrated platform that could allow for end-to-end visibility throughout a digital ecosystem.
To meet intense changes in demand, J&J relied on a suite advanced M4.0 technologies to enable agility and flexibility. That included increasing the visibility of real-time data to make quick decisions. The company deployed AR on the factory floor and in warehouse and distribution centers for remote maintenance and engineering support as well as instructions and training. Other factory technologies were accelerated, such as advanced automation and robotics to help frontline workers and address staffing constraints. Also, 3D printing technology has been applied within J&J operations and outside in hospital systems, in support of the broader COVID response efforts (ventilators, masks etc.).
Talloen also shared an advanced example from J&J’s manufacturing operations called the MoBot, or Mobile Robot. These MoBots are standardized, stand-alone independent units (modules) that execute a single manufacturing or warehouse activity. They can be configured into integrated flexible, modular, and mobile manufacturing or supply systems. The MoBots use AI technology and have the ability to be reprogramed based on need in an easily reconfigurable production or warehouse line. J&J is deploying this approach in its pharmaceutical, consumer healthcare, medical devices, and over-the-counter drug manufacturing.
Asked for his feeling on whether complex global supply chains will give way to shorter regional ones, Talloen believes those changes will happen on a case-by-case basis. At J&J, the company is continuing to pursue its journey toward greater agility and customization, but it’s not one-size-fits-all. He believes that many companies may well now re-evaluate their suppliers and supply chain footprint as they identify specific areas of vulnerabilities and risk. The future will be about agility, adaptability and resiliency.
Supply chain risk is likely to remain a hot topic for at least the rest of the year as manufacturers reassess their operations, vendors, suppliers, logistics networks, and more. With no vaccine imminent and many parts of the United States currently affected by their own outbreaks, it’s likely that supply chain stability will be elusive for some time to come.
Recordings of all four What’s Next for Manufacturing? virtual meetings are now available on demand at: www.manufacturingleadershipcouncil.com/kbtopic/covid-19-resources/

Henry Stueber, Senior VP at Greene Tweed, believes today’s opportunities for manufacturing transformation represent one of the most energizing times in industrial history.

Q: What is your role and focus?
A: I am responsible for a variety of functions, including manufacturing, platform management, business development, advanced technology (R&D), projects, supply chain, marketing, quality, and process engineering. My focus is maneuvering the organization through transformation and unprecedented growth.

Q: What is the most pressing issue facing the manufacturing industry today?
A: Blending the knowledge from current successful leaders with the new skills emerging from talent that will take companies into Industry 4.0. Many senior leaders have been successful utilizing skills that fit the situation at the time. A new set of employees are entering the workforce that dissect data and disseminate information much faster. Blending the skills of the past with the speed of now, a new style work-force will emerge.

Q: What is the most important corporate initiative?
A: Factory Innovation and Technology Transformation – an initiative we call The Right FITT™. This new initiative is a five-year manufacturing strategy in line with Industry 4.0 technology and best practices. Our goal is to refocus and retool operations to better support a growing customer base and our employees as we look forward to the future.

Q: What will be the most important leadership qualities to possess in the future?
A: Urgency, accountability, and simplification, all driven by a never ending desire to learn and improve the world around you; this includes developing the next generation of leaders.

Q: What will be the greatest opportunities for manufacturers over the next five years?
A: The opportunity to transform the way we work is exciting and energizing. Major manufacturing changes are underway for only the fourth time in history. We are all fortunate to be part of this current transformation where we have the opportunity to reinvent ourselves, and our work. This transformation should energize us all.

Q: What is your favorite activity outside of work or the last book you read?
A: As a retired U.S. Naval officer, I enjoy taking time at the beach being with my family looking over the ocean. I have also enjoyed playing golf since an early age. Most recent impactful books are New Product Blueprinting by Dan Adams, Not Impossible by Mick Ebeling, and Turn the Ship Around by L. David Marquet.

Henry Stueber

Company: Greene Tweed
Location: Kulpsville, PA
Industry: Perfluoroelastomers, Thermoplastics, and Thermoplastic Composites
Website: http:// www.gtweed.com
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Winnebago VP Chris West believes manufacturing leaders must close the gaps that prevent their teams from being engaged and empowered.

Q: What is your role and focus at your company?
A: I am Vice President of Operations for Winnebago Industries. Winnebago Industries has multiple facilities in Iowa, Indiana, Oregon, Minnesota and Florida and is a leading U.S. manufacturer of outdoor lifestyle products under the Winnebago, Grand Design and Chris-Craft brands. We build the highest quality motorhomes, travel trailers, fifth wheel products and boats, which are used primarily in leisure travel and outdoor recreation activities.

Q: What is the most pressing issue facing the manufacturing industry today?
A: Obviously, there are always issues to face. Our current priority is addressing the shrinking amount of talent and skills available for our operations. We see this as a key issue we must address now, and in the future, so we’re actively working on strategies and partnerships to address this in our local communities.
Q: What is the most important corporate initiative?
A: We are a growing business that has doubled in 24 months and there are many challenges an organization faces with that type of growth. In order to grow, our business has to be scalable and we are in the process of implementing a new ERP system which is being strategically configured to not only support who we are today, but also to position us for who we aspire to be in the future.

Q: What will be the most important leadership qualities to possess in the future?
A: It is difficult to pinpoint a single most important leadership quality anyone must have, but we know that people often leave bosses not companies. I believe it is most important for leaders to recognize this and be people leaders who positively influence the lives of their teams and communities. By understanding the gaps preventing your teams from being engaged and empowered, you can evolve as a leader to close those gaps and unleash untapped potential. We believe you win with talent, and we must attract and retain that talent to win in the long run.

Q: What will be the greatest opportunities for manufacturers over the next five years?
A: I believe the greatest opportunity is being able to develop, implement, and leverage Industry 4.0. These trends in manufacturing technology are moving fast and manufacturers who are not taking the time to understand them and strategize on how they can, and will, create value for their businesses will be left behind.

Q: What is your favorite activity outside of work or the last book you read?
A: I’m an avid runner. I enjoy the peacefulness and solitude of running. It clears my mind and allows me opportunities to focus on specific problems I may be dealing with.

Chris West

Company: Winnebago Industries
Location: Forest City, Iowa
Size: $2 Billion Revenues (2018); 2,850 Employees
Industry: Recreational Vehicles, Marine
Website: http:// www.winnebagoind.com

Whirlpool VP Dale Laws feels clarity of purpose is essential for M4.0 leaders.

Q: What is your role and focus at your company?
A: I am Vice President of Manufacturing Operations for Whirlpool Corporation’s North American Laundry and Dishwasher facilities. We’re the world’s leading major home appliance company with 14 manufacturing operations in the North American Region (NAR). My focus is delivering our goals and objectives at four of our manufacturing operations and actively supporting the execution of our broader strategy across the NAR manufacturing enterprise.

Q: What is the most pressing issue facing the manufacturing industry today?
A: It’s an exciting time in manufacturing. We’re seeing advances in automation and robotics that are making these technologies more cost effective. Sensors, computing power and software advances are making true connectivity possible. All of these are coming together to allow us to produce and operate in new and creative ways. The issue is that the talent and skills to integrate these and other technologies into our operations, maintain them, and use the data to best advantage, is in very limited supply. I believe this will be a challenge for many years to come.

Q: What is the most important corporate initiative?
A: From a manufacturing perspective, our primary objective is to deliver our Manufacturing 2020 Strategy. This is globally aligned and the focus of all of our manufacturing operations around the world. It consists of six focused work streams ranging from infrastructure changes, to leveraging technology, i.e., Industry 4.0.

Q: What will be the most important leadership qualities to possess in the future?
A: Clarity of purpose. I may be a little old school with this one, but I consider some leadership traits to be fundamental and timeless. The pace of change continues to accelerate and does play a role in how I think about leadership. However, to me, this acceleration of change means that clarity of purpose is more important than ever. True alignment means questions can be answered faster at all levels of the organization. It can also be very engaging, motivating, and freeing for your team. They don’t have to wonder where we are going, or what success looks like, if you’ve clearly defined it for them.

Q: What will be the greatest opportunities for manufacturers over the next five years?
A: It’s Industry 4.0 and the connected factory. Most manufacturers are working diligently to understand how to leverage technology to drive additional value. However, we are still just scratching the surface. We are still early in our journey. What happens next? Perhaps, it’s the connected value stream. I believe the closer we get these connections to the customer, the more opportunity and value there will be.

Q: What is your favorite activity outside of work or the last book you read?
A: I tend to gravitate to those that involve things that are motorized, such as dirt bikes, cars, and flying powered paragliders.

Dale Laws

Company: Whirlpool Corporation
Location: Benton Harbor, MI
Size: $21 Billion annual revenues; 92,000 employees
Industry: Home appliances
Website: http:// www.whirlpoolcorp.com
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