Do you know the beer game? If you're thinking of beer pong, you've taken a wrong turn - or you haven't yet learnt about this simple and efficient role-playing game. In the beer game, participants take on different positions in the supply chain. The stated aim is to keep the costs of the entire supply chain as low as possible, and the fact that, as in real day-to-day business, the individual participants in a supply chain do not exchange all of their information, but only transmit the order quantities, means that the focus is usually only on managing their own situation, their respective role. As a result, the order quantities build up very quickly, as we know from the bullwhip effect. Despite the simplest rules, even experienced logisticians find it difficult to prevent order volumes from building up. "The insight gained from this role play is that the system structure determines the system behaviour. Problems in the supply chain are therefore not primarily caused by external factors, but by the lack of information exchange," explains Eric Weisz, founder and CEO of the start-up Circly, who is currently doing his doctorate at the Institute of Transport Economics and Logistics at Vienna University of Economics and Business. He is investigating how artificial intelligence can be used to smooth out the bullwhip effect in supply chains. Weisz is focussing on the management perspective, as the technology itself has already been well researched, he says. Weisz founded the start-up Circly together with Armin Kirchknopf to make AI applications for supply chain members, from production to retail, cost-efficient and easily accessible.

Concern about the data

Almost all events on the topic of artificial intelligence talk about data as a problem. And not the lack of data, but above all the transfer of this data. "The problem with the supply chain is therefore the information situation," says Weisz. The fact that most companies lack trust and are unwilling to share information leads, among other things, to various forecasting methods within the supply chain, which can cause a bullwhip effect either through the use of incorrect data or imperfect forecasting techniques. Other consequences include an increase in storage or manufacturing costs, replenishment times or transport costs.

The bullwhip effect could be stopped if all parties involved in the supply chain adopt a cooperative mindset and exchange data voluntarily and efficiently. Eric Weisz also has a prime example to share with Dispo: "Procter & Gamble and Walmart, both major players in their industries, have found a way to utilise information technology by sharing data about their joint supply chains. As a result, activities along the supply chain are better coordinated and there is less need for stock, but a higher yield by focussing on the needs of the end customer."

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Can artificial intelligence avoid the bullwhip effect?

Artificial intelligence allows supply chain players to look into the future by recognising trends in a data-driven and unemotional way, thereby bypassing the poor or sometimes non-existent communication between the individual participants in the supply chain.

One application example is timeseries forecasting. Here, historical data is combined in the form of a timeline and the technology recognises the dependencies between the data. Because the information on various factors, such as seasonality, weather, events and the like, is known in advance, the AI-supported software recognises the combination of these factors and determines the actual demand. The quality of the AI results is determined by the input data. Around three years of historical data are required to get started.

As a result, the producer is no longer dependent on the retailer's forecast, but can plan precisely by using AI. This is not based on simple statistics and human experience, but on many different factors.

But time series predictions are not the only application example; in addition to the bullwhip effect, other supply chain problems can also be solved or contained using artificial intelligence.

For example, personnel deployment planning can be optimised using an efficiency key by calculating the effort in advance, or route planning can be made more efficient to prevent empty runs. When it comes to customs clearance, artificial intelligence is able to automatically cross-check, complete and process customs declarations. "Another field of application is stocktaking, which may require robots. One exciting example is Ubica from Germany, which uses a robot and suitable AI to take stock," explains Eric Weisz.

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Logistics industry as a pioneer in AI

The logistics industry has long recognised the importance of artificial intelligence, if a recent Bitkom study is to be believed. According to the study, one in five logistics companies in Germany uses AI - either in demand forecasting, sales planning or transport optimisation. A further 26 per cent are planning to do so or are discussing it.

The results come from a representative survey of more than 400 logistics companies with 20 or more employees in Germany. This refers exclusively to logistics service providers, i.e. transport logistics (land transport, shipping, aviation), warehousing and postal, courier and express services.

In comparison, only nine per cent of German companies use artificial intelligence as a strategic component. "The logistics industry has recognised the potential that AI offers in both warehousing and transport and is using the technology in a targeted manner to increase efficiency, quality and productivity," comments Bitkom CEO Bernhard Rohleder on the results.

More than half of logistics companies (58 per cent) believe that artificial intelligence will be widely used in the future and will take over many tasks in logistics, such as planning routes or avoiding empty runs.

In the logistics sector, the majority of companies (56 percent) consider themselves to be pioneers in the field of digitalisation - in comparison, this figure is only 32 percent in the economy as a whole.

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This article was published on 22.11.2022 under https://dispo.cc/lieferkette/wie-bier-zu-einer-resilienten-supplychain-beitragen-kann/

Credit: Michaela Holy-Zwickelstorfer