The Hindu: Published on 14th August 2025.
Why in News?
Manufacturers are increasingly turning to Artificial Intelligence (AI) to manage supply chains amid global tariff volatility, especially in the wake of U.S. President Donald Trump’s new trade tariffs. The use of generative AI in supply chains is expected to grow massively — from $2.7 billion now to $55 billion by 2029.
Background:
Over the past five years, supply chains have faced severe disruptions — COVID-19 lockdowns, global trade wars, and geopolitical tensions.
U.S. manufacturers previously stockpiled goods to hedge against tariffs, but now many are returning to “just-in-time” inventory management to avoid high holding costs.
Companies like The Toro Company are using AI not just for operational tasks, but also to track tariff updates, raw material prices, and geopolitical developments in real time.
Key Details of the Current Development:
AI’s Role:
AI scans news, social media posts, commodity prices, and trade policies to help manufacturers decide what to buy, when, and from whom.
AI agents can create actionable plans, like shifting materials between plants or choosing alternative suppliers.
Industry Growth:
Spending on generative AI for supply chains projected to grow nearly 20-fold by 2029.
Major software providers: SAP (Germany), Oracle, Coupa, Microsoft, Blue Yonder (Panasonic).
Practical Uses:
Weather-based route optimisation for large shipments (example: Konecranes’ port cranes).
Inventory cost control by reducing overstocking.
Challenges:
AI is still in early stages; most companies are only in pilot testing.
Large-scale deployment can cost tens of millions due to IT upgrades.
Experts warn against AI overhype — it’s an enabler, not a “magic fix.”
Key Issues & Concerns:
Overreliance Risk: Some firms expect AI to “work miracles” without fixing deeper structural inefficiencies.
High Implementation Costs: Advanced AI requires costly infrastructure, data integration, and system upgrades.
Accuracy Limits: AI cannot predict every disruption (e.g., terrorist attacks at sea).
Hype vs. Reality: There is a risk of wasted investment if expectations are unrealistic.
Impact / Significance:
Business Resilience: AI helps companies remain lean and adaptable in uncertain trade environments.
Cost Savings: By keeping inventories low, firms free up capital and reduce storage expenses.
Technology Adoption: Tariff uncertainty accelerates the adoption of advanced supply chain technologies.
Competitive Advantage: Early AI adopters may respond faster to trade shocks and supply disruptions.
Global Context:
Similar tech adoption spikes were seen during 2008 financial crisis, Brexit, and COVID-19.
The trend reflects a broader global movement toward digitalisation of supply chains to handle unpredictable geopolitical and economic shifts.
Expert Opinions:
- Optimistic: AI boosts resilience and decision-making speed in volatile conditions (SAP, GEP, McKinsey).
- Cautionary: AI is a tool, not a universal solution; human judgment and traditional supply chain strategies still crucial (OECD business advisory board members).
