The Impact of Supply Chain Artificial Intelligence on Profits of Manufacturing Companies

The Impact of Supply Chain Artificial Intelligence on Profits of Manufacturing Companies
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Abstract
Artificial intelligence is increasingly being used in manufacturing because of its perceived benefits. There are many ways through which artificial intelligence can enhance efficiency and increase productivity. Notably, there are prospects that firms utilizing artificial intelligence increase their profits. A survey research will be conducted targeting managers, investors, personnel, and stakeholders in manufacturing firms. The data collected aims to highlight the benefits of artificial intelligence and its implications on company profitability.
Key words: artificial intelligence, supply, technology, efficiency, profits.
Table of Contents
TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc70432296 \h 2
1.Introduction PAGEREF _Toc70432297 \h 4
1.1.Broad Issues and Current Conditions PAGEREF _Toc70432298 \h 4
1.2.Problem Definition PAGEREF _Toc70432299 \h 6
1.2.1.Formal Problem Statement PAGEREF _Toc70432300 \h 7
1.2.2.Past Research and Gaps PAGEREF _Toc70432301 \h 8
1.3.Purpose of Study PAGEREF _Toc70432302 \h 9
1.4.Research Questions PAGEREF _Toc70432303 \h 9
1.5.Hypotheses PAGEREF _Toc70432304 \h 10
1.6.Philosophical Research Paradigm PAGEREF _Toc70432305 \h 10
1.7.Theoretical Framework PAGEREF _Toc70432306 \h 12
2.Literature Review PAGEREF _Toc70432307 \h 13
2.1.Introduction PAGEREF _Toc70432308 \h 13
2.2.Artificial Intelligence and Efficiency PAGEREF _Toc70432309 \h 13
2.3.Artificial Intelligence and Costs PAGEREF _Toc70432310 \h 18
3.Research Methodology PAGEREF _Toc70432311 \h 23
3.1.Methodology PAGEREF _Toc70432312 \h 23
References PAGEREF _Toc70432313 \h 24
1 Introduction
1 Broad Issues and Current Conditions
In almost every sector, businesses are adopting artificial intelligence to enhance efficiency, automate processes, and reduce costs. There are many ways through which manufacturing companies enhance their performance and increase revenue through the use of artificial intelligence. In a report by Gartner, it was found that supply chain institutions are expecting to double their use of artificial intelligence system to double by the close of 2020 (Jacobs, 2020). There are increasing complexities in the supply chain systems that mandate the need for efficiency and lower margin for errors. Moreover, as competition continues to increase, companies are capitalizing on the power of technology to enhance profits and ensure that they remain competitive in the market (Senthiil, Sirusshti, & Sathish, 2019). People are capitalizing on speed, efficiency, and reduced costs to ensure that their needs are met faster and whenever they want. Therefore, leveraging on the power and ability of artificial intelligence will ensure that manufacturing companies remain productive even as they address the different aspects related to supply and logistics (Kersten, Blecker, & Ringle, 2019). The availability of raw materials and speed of distributing finished products from manufacturing centers can be enhanced through the power of artificial intelligence.
In the supply industry, artificial intelligence and machine learning are transforming how products are moving across the supply hierarchy. There are many aspects that determine the people who are winning and those who become losers. In a report by Material Handling and Logistics (2020), it was reported that only 20% of manufactures are using artificial intelligence in their supply chains. Through the implementation of artificial intelligence systems, companies are able to curtail inefficiencies and eliminate uncertainties in systems managed by humans. These measures assist in eliminating accidents, reducing the cost of man power, and ensuring that profits are maximized (Kantasa-ard, Bekrar, & Sallez, 2019). There are many revolutionary optimizations that have been attained through the use of artificial intelligence in supply systems. Through the use of artificial intelligence, companies are able to highlight the important aspects related to product capacity planning, enhanced productivity, lower costs, high quality, and greater output (Baryannis, Validi, Dani, & Antoniou, 2019). Moreover, the safety of people working within the manufacturing firm is also enhanced by the use of artificial intelligence. This implies that movement and supply of dangerous materials used during the manufacturing process are managed and supervised by artificial intelligence system (Jacobs, 2020). This also eliminates costs from accidents involving workers and other people within the company.
Buchmeister, Palcic, and Ojstersek (2019) argued that the invention of artificial intelligence is an important event in the history of humans. This is because of the transformative power it brings in activities that were previously reserved for humans. Through these technologies, there are improvements in human conditions. This includes the elimination of the need for physical presence during the manufacturing processes in industries (Buchmeister, Palcic, & Ojstersek, 2019). It is evident that the use artificial intelligence enhances business profits in several ways. Dash, McMurtrey, Rebman, and Kar (2019) argued that through the use of artificial intelligence, companies can increase productivity and expand global prosperity in ways never experienced before. This shows that technologies such as artificial intelligence are powerful tools that can transform supply chain management and enhance productivity for manufacturing firms. There are numerous abilities that makes supply chain an effective tool for enhancing performance and warranting effectiveness in supply chain management. These abilities include the ability to learn and adapt to certain systems in order to optimize strengths and eliminate disadvantages.
Therefore, the study is significant because it assists in highlighting how artificial intelligence can assist manufacturing companies to manage their supply chains and enhance profits. There are many benefits that result from the use of technology within manufacturing firms. The automation of processes enhances speed and efficiency, and eliminates errors. All these are enhancing company effectiveness in meeting its objectives. However, manufacturing companies that never leverage on the power of artificial intelligence are prone to make losses or achieve less compared to those using artificial intelligence.
2 Problem Definition
Before making any investment, every business would want to understand the profitability and effectiveness of the proposals. With the emergence of coronavirus, many manufacturing firms are considering automating their supply systems because of the need to social distance, as well as meet the demand of customers. Therefore, the study is important at this moment because it assist in highlighting the advantages associated with artificial intelligence in managing supply in manufacturing companies (Savaskan, Bhattacharya, & Van Wassenhove, 2004). Without a proper understanding of the benefits associated with artificial intelligence, firms will never be able to make proper decision during automation of supply procedures. Therefore, it is important to consider how artificial intelligence can be leveraged to reduce costs and maximize profits. When the systems are managed by artificial intelligence, many unnecessary costs, such as the need to have human managers and supervisors (Min, 2010). In turn, this increases profits within a manufacturing firm compared to those who have never implemented artificial intelligence. The abilities of this new technology to communicate with people and other machines enables it to transform the supply chain in manufacturing firms, as well as enhance the profitability.
While there are many firms adopting the use of artificial intelligence, many do not understand the associated risks or measures that must be taken to enhance effectiveness. Therefore, another challenge that will be addressed in th study is how to identify loopholes in supply chain systems and leverage the power of artificial intelligence to address these challenges. The goal is to maximize or optimize the system for effectiveness and ensuring that every aspect of the technology is exploited for revenue generation and cost reduction. With minimal studies highlighting how artificial intelligence enhances profitability, this is a timely study at a time when business have been forced to automate and develop comprehensive systems.
1 Formal Problem Statement
The use of artificial intelligence in managing supply has been adopted in almost every sector. However, while the adoption has been increasing over the years, there are minimal studies that address whether they enhance profits, and to what extent. In manufacturing, there are many costs incurred by the parties involved in the process. Therefore, there is a need to establish whether the use of artificial intelligence in manufacturing companies to manage supply increases profits compared to the firms that never utilize the technology. MHL (2020) reported that only 25% of manufacturers utilize artificial intelligence in managing their supply chain. This was reported after an investigation done in 2020 aimed to understand how companies were coping with the new measures established to curb the spread of coronavirus. Therefore, it is essential to understand how companies leveraging on artificial intelligence are enhancing their profits. As we have highlighted earlier, artificial intelligence influences the operational efficiencies, optimize procedures, and warrants competitive advantage (Baryannis, Dani, Validi, & Antoniou, 2019). The technology is already projected to have a greater impact on manufacturing, epically the management of supplies. Therefore, the study aims to understand how artificial intelligence application in managing supply enhances profits for manufacturing companies. This is an issue that must be addressed with urgency because of ravaging pandemic, and how it has affected the way people do business. Therefore, understanding the profitability of using artificial intelligence can lead to better decision-making in manufacturing companies.
2 Past Research and Gaps
There are several studies that have been conducted to establish the benefits of using artificial intelligence in manufacturing. Most of the studies focus on how artificial intelligence enhances operational performance, efficiency, and reduce costs. Artificial intelligence is an important implement in the manufacturing environment, especially for enhancing operations and supply chain management. There are reports that affirm the benefits associated with using artificial intelligence. On of the outstanding studies was done by Dubey et al. (2020), and found that artificial intelligence is effective in enhancing performance, productivity, and capabilities within the manufacturing environment. However, the study failed to determine how artificial intelligence is associated with profitability of the organization. Therefore, there is an existing gap on how artificial intelligence can enhance profitability of an organization. Therefore, current research does not determine whether organizations using artificial intelligence are more profitable compared to those not using artificial intelligence. The study will add to the literature by addressing the identified gap and explain how artificial intelligence impacts profits in manufacturing. This is an essential aspect that will benefits scholars and stakeholders in the manufacturing sector.
3 Purpose of Study
The purpose or objective of this study is to explore or examine the whether managing supply using artificial intelligence in supply chain increases profits in companies. This is important because it assists managers, investors, and stakeholders understand how artificial intelligence can be used to enhance productivity and address inefficiencies within manufacturing firms. Moreover, the study will highlight how these different benefits translate into profits for the company in question. This is an essential aspect that will enable managers and investors to see how artificial intelligence is beneficial to the business environment. The manufacturing sector is leading in the adoption of artificial intelligence, and the trend is projected to increase in the coming years (Buchmeister, Palcic, & Ojstersek, 2019). Therefore, the study is appropriate because it will highlight the most important aspect related to artificial intelligence and profitability.
4 Research Questions
The main research question for this is as follows:
Do manufacturing companies that use artificial intelligence to manage supply make more profit than manufacturing companies that do not?
In order to address answer, the question, the study will seek to respond to the following questions.
* What are the benefits associated with artificial intelligence use in managing supply?
* How do these benefits increase revenue for the company?
Understanding the impact of artificial intelligence of managing supply is important for stakeholders, policymakers, innovators, investors, and the general public. This is because as technology continues to evolve, there are many ways it has transformed how people work and live. Therefore, there are many benefits that can be gained from effective use and implementation of technology. The knowledge is beneficial in policy formulation, especially on how technology should be used in manufacturing. Managers, investors, and business leaders will also benefit from the knowledge gained from this study. This will lead to better decision-making regarding the use of artificial intelligence and its impact on company profits. Therefore, the research question is important because it assists individuals to understand whether using artificial intelligence in supply chain can enhance profits or not for manufacturing firms.
5 Hypotheses
In order to respond to the question, we hypothesize that manufacturing companies using artificial intelligence to manage supply make more profits than those who do not. Moreover, there are many benefits associated with artificial intelligence use in supply management, such as efficiency, cost reduction, productivity, and quality improvement. These benefits are important for enhancing revenue for the company by optimizing sales, quality, and reduce operational costs for the firm.
H0: Manufacturing companies using artificial intelligence to manage supply make more profits than those who do not.
H1: Manufacturing companies using artificial intelligence to manage supply make less profits than those who do not.
6 Philosophical Research Paradigm
The worldview or framework used for th study is interpretivist. The study is focused on interpreting previous studies, highlighting the benefits associated with artificial intelligence, and how they assist in enhancing revenue or reducing costs for companies. This approach will be exploratory in nature, highlighting the diverse aspects associated with application of artificial intelligence in manufacturing as well as the core benefits to companies. There are unique advantages associated with interpretive paradigm in undertaking this research. The approach is effective is exploring and highlighting several hidden reasons behind certain “complex, interrelated, or multifaceted social processes” (Chapter 12 Interpretive Research, n.d.). Therefore, the approach is effective in establishing how the benefits associated using of artificial intelligence in managing supply enhances the profits of a company. Moreover, is easier to construct theoretical framework is areas that have no existing theories to explain certain issues. This makes it effective for analyzing and understanding certain traits within particular contexts. Through an interpretive analysis of past studies, the study will be able to relate the insights about artificial intelligence to the specific context. The interpretation will be based on the perspective of the participants or people who are affected by existence of artificial intelligence.
The interpretive approach is also effective because it aims to focus on different elements in order to establish detail and contextualized inferences. Through this approach, the processes can be utilized to build theoretical frameworks that can be used to understand how artificial intelligence and profitability are related in manufacturing firms. Interpretive research is more dependable and authentic compared to other research paradigms. However, reliability and dependability of the results depends on the researcher’s approach to details. Therefore, it is important to highlight the phenomena of interest as well as the social context where the outcome is embedded. Therefore, the audience for the research will be able to authenticate the outcomes or inferences made from the study.
In the study, the dependent variable is profit while independent variables are the benefits associated with the use of artificial intelligence in manufacturing. These two variables will provide a basis of how artificial intelligence influence profits within manufacturing companies. Therefore, it will assist in determining whether using artificial intelligence in managing supply. The benefits associated with artificial intelligence, such as efficiency, elimination of human labor, and productivity are affecting the profit margins of an organization. The moderating variables include management styles and type of technology implemented within the firm. The style of management and type of technology (artificial intelligence) implemented influence the relationship between the dependent and independent variables. I selected these variables because they assist in determining whether the use of artificial intelligence with a particular firm is profitable or not. Benefits such as efficiency, productivity, reduction of labor costs are directly linked to the revenue within a company. Additionally, the moderating variables such as management style and technology type also influence how artificial intelligence is used or applied within a particular firm. Notably, the variables will be measured using a thematic analysis of the survey responses. After administering the questionnaires, data will be organized into certain themes relating to the chosen variables.
7 Theoretical Framework
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2 Literature Review
8 Introduction
The most significant factor in the supply chain is managing and controlling the flow of goods and services. New technology has increased efficiency and lowered cost in supply chain management. The introduction of artificial intelligence has enhanced production and delivery speed (Material Handling and Logistics, 2020). Typically, artificial intelligence has changed the methods of operations in the supply chain and procurement industry. AI has helped in capability optimization in manufacturing industries; through this process, the companies have improved productivity, quality, and low costs with increased profit margins (Jacobs, 2020). Artificial intelligence usually enhances production efficiency, which is essential in warehouse management.
9 Artificial Intelligence and Efficiency
Moreover, AI has played an integral role in warehouse management by ensuring timely delivery, packing, picking, and dispatching. Additionally, AI is significant in the supply chain because it can handle massive data and make analyses. Data analysis is critical in the supply chain for several reasons; firstly, it helps supply chain management formulate forecasts in terms of weather and customer patterns. The integration of artificial intelligence has lowered the inventory costs hence increased revenues. According to the OECD (organization for economic cooperation and development), artificial intelligence has benefited the manufacturing industries with varied benefits (Jacobs, 2020). Firstly, it has enabled efficiency in terms of inventory management.
Inventory management is a process of sourcing and storing products systematically. The objectives of proper inventory management are to ensure flow in the manufacturing industry. Toorajipour et al. (2021) noted that AI assists supply chain managers in evaluating and sort related variables in inve...