The Secret to Success with Machine Learning in Supply Chain Management
Artificial intelligence (AI) and machine learning–a subset AI–have fundamentally changed the way businesses operate. Gartner predicts that by 2026, 95% of data-driven decisions will be at least partially automated. Yet, many companies struggle to harness AI’s full potential. In fact, Gartner also found that only 10% of CEOs say their business uses AI strategically, and just 9% of technology leaders report having a clearly defined AI vision statement.
This disconnect between AI’s potential and real-world adoption presents a significant opportunity for companies to gain a competitive edge, especially in supply chain management where uncertainty is the norm. AI-powered demand forecasting software can significantly improve predictive accuracy, making it a crucial component of modern supply chain planning software.
However, it’s important to recognize that AI and machine learning are not magic fixes for supply chain challenges. True success depends on high-quality data, sophisticated models, and real-world expertise—and that’s where ToolsGroup stands apart.
The Secret to Smarter Demand Forecasting
AI and machine learning have made significant strides since we first pioneered their use in supply chain planning more than a decade ago, but true success comes from more than just machine learning alone.
The secret? Combining machine learning with probabilistic demand planning.
Decades of experience creating supply chain management software have shown us that forecasting can’t depend solely on machine learning. A strong statistical foundation is essential to navigate the inherent unpredictability of demand. That’s why we champion a hybrid approach—one that integrates probabilistic forecasting with machine learning to deliver more accurate demand predictions and optimize inventory levels in supply chain operations.
The Benefits of Probabilistic Demand Planning
Unlike conventional methods that focus on average demand, probabilistic demand planning provides multiple potential outcomes along with their likelihood of occurring. Sometimes called probability forecasting, it works together with AI-powered demand forecasting software to analyze multiple demand variables and identify the probability of each possible outcome. This approach incorporates both order line frequency and order line size—critical data points often overlooked by traditional forecasting tools.
The result is more accurate demand predictions, delivered faster and more efficiently than methods that rely solely on demand history. This is especially valuable for unpredictable, slow-moving, and long-tail SKUs, as well as products with limited or no order history. By incorporating probability forecasting, businesses can improve supply chain optimization, maintain optimal inventory levels, and build a more resilient supply chain.
Where to Start with Probabilistic Forecasting
- Begin with a self-adaptive probabilistic model that leverages granular historical demand data. This is critical to success when incorporating advanced machine learning and yields significant benefits on its own.
- Improve your baseline forecast by applying machine learning technology to get a more robust, reliable baseline that accurately models the factors shaping demand.
- Layer on more sophisticated machine learning capabilities that incorporate external data sources for a more real-world understanding of demand patterns and supply chain dynamics.
Beyond the Buzzword: The ToolsGroup Advantage
ToolsGroup was one of the first supply chain planning software vendors to harness machine learning for demand forecasting—well before it became an industry buzzword. Or, as a well-known commercial puts it, “We know a thing or two because we’ve seen a thing or two.”
ToolsGroup’s machine learning engine, for example, uses deep learning to analyze historical data and accurately identify future demand trends. Our demand planning software acts as an intelligent assistant, combining the expertise of your team with advanced AI to streamline forecasting, optimize inventory, and improve decision-making. It tells you the “why” behind the fluctuations and recommendations, so you can understand the process better and feel more confident with the decisions you make.
When it comes to supply chain optimization, AI-powered demand forecasting software plays a crucial role. However, true success depends on expertise, experience, and execution. ToolsGroup is proud to be consistently recognized as a leader in supply chain management software, and we remain committed to continuous innovation and improvement to help organizations achieve the best supply chain planning results.
By leveraging cutting-edge AI-powered solutions. Businesses can stay ahead of demand fluctuations, optimize inventory levels in supply chain operations, and drive superior performance in an increasingly complex global market.
