Impact of Using Artificial Intelligence on Profitability of Manufacturing Companies

The Impact of Artificial Intelligence on Profitability of Manufacturing Companies: Special Focus on Supply Chain Management
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The Impact of Artificial Intelligence on Profitability of Manufacturing Companies: Special Focus on Supply Chain Management
Broad Issues and Current Conditions
The buzz around AI continues to influence the decisions of many companies around the world. Some big companies have invested billions of dollars in AI as they seek to tap into AI's supposed or projected benefits. However, even as many companies as buying into the buzz, there is a need to establish the legitimacy of these claims and determine the value that AI brings to supply chain management. The rhetoric behind AI investment in supply chain management is that it helps enhance productivity, lower operational costs, ensure quality in the process, and enhance planning processes. The above statement is echoed by many researchers who believe that AI does indeed enhance efficiency and improves supply chain management. Companies are currently working diligently as they seek to tap into the highlighted benefits of AI in the the supply chain. Billions of dollars are spent every year as more companies are trying to align themselves with the changes taking place in supply chain management. Projections regarding the supply chain market and AI are that investment is expected to reach $21.8 billion by 2027 (Meticulous Research, 2020). The above growth will translate to 45.3%, and considering the number of companies looking to enter the field, it is highly unlikely that such numbers will go down. Researchers such as Chui, Henke, and Miremadi (2019) seem to believe that supply chain management is one of the areas that AI will have the most impact. The researchers continue to indicate further that the value created by AI in supply-chain management and manufacturing will range between $1.2 trillion and $2 trillion. These are staggering numbers that should have any CEO of a manufacturing company considering an immediate switch or adoption of AI in supply chain. The claims made above, considering the value created by AI, are further enhanced by Insider Intelligence (2018), who indicate that companies that have adopted AI in transportation and logistics are reaping more benefits. The article claims that these companies are enjoying higher profit margins compared to their counterparts. Such claims are worth investigating, especially for manufacturing companies that are yet to adopt AI.
It is also crucial to consider the cost of integrating AI in supply chain management. AI technology is indeed expensive. Therefore, investment needs to be done with moderation. A company looking to invest in AI to enhance supply chain management needs to factor in the integrating cost. This cost is mainly brought about by the fact that AI is a combination of independent elements. Additionally, the scalability factor could end up increasing the total cost incurred as well. While AI systems are considered highly scalable, the initial setup could be a discouraging factor, considering the costs involved. However, while the above factors are crucial in assessing the need for AI in supply chain, companies need to focus on the profitability that comes with these investments.
Problem Definition
Investment in AI is becoming more alluring every year. More companies are looking to tap into the power of AI to enhance their production and supply chain processes. Meticulous Research (2020) conducted a study in which they established that investment of AI in manufacturing is expected to grow "at a CAGR of 39.7% from 2019 to 2027 to reach $27 billion." The above is a significant projection, but if current reports by companies are anything to go by, this number could be eclipsed way before 2027. Other reports have put special focus on how AI could automate the processes involved in supply chain management. Th...