Finding the AI Value Proposition for Finance and Supply Chain
So you’ve got your AI foundations in place. What’s next in adopting AI as part of your innovation journey?
We are the first to admit that housekeeping activities such as reviewing your strategy and cleaning your data aren’t the most gripping and exciting parts of any innovation journey. The bottom line is they have to be done if you want to move to the next level or – speaking more poetically — if you want to surf the hype wave through the trough of disillusionment, and into the plateau of productivity.
However, once you’ve got your foundations in place, you’re ready to build outwards and upwards to gradually adopt the value-adding applications. The good news is this is where the fun work begins, even with the knowledge that we must be measured and realistic about the possible applications of AI in the world of finance and supply chain.
While it’s clear that the entire spectrum of value-based use cases are yet to be uncovered for finance or supply chain, we foresee some general applications that may provide some food for thought while you’re shaping up your own AI strategy in the months to come.
Of course, these are general concepts only and would need to be assessed and finessed against your unique business goals.
How could AI add value to Finance?
Noting that a company’s financial data is, by definition, specific and commercially sensitive to that company, then the range of applications of AI within the Finance function appear to be somewhat limited. Given that AI is underpinned by large volumes of data from external sources, it’s difficult to see a myriad of applications when it comes to tasks such as financial reporting, taxation and payroll, for example.
However, consider the possible opportunities that may arise from leveraging the data that feeds into the Finance department, such as sales and operational data. There is great potential for the development of programs that look for patterns and trends to assist with future forecasts and budgeting. Another possibility would be an AI that learns to look for gaps in the sales plan that might be a call-to-action for root cause analysis of lost sales.
There are some lessons to be learned from the world of agribusiness, where some interesting developments are happening in terms of weather and pest forecasting, to reduce the risk of crop failure and enable more accurate predictions of future yields.
AI also has some promising applications in terms of credit and risk assessments, given its ability to analyse a wide range of externally available data points (transaction data, credit scores and demographics, for example). However, a cautionary tale to bear in mind is that of the Wells Fargo lending scandal of 2023.
If you’re not familiar, there were damaging allegations that the bank’s automated credit assessment system denied home loans to minority customers in the US, or at least pushed them into a higher interest rate bracket based on demographic rather than financial information. The lesson here is to tread carefully (and with expert human oversight) when it comes to integrating sensitive consumer data.
However it is applied, it is this kind of knowledge that will really arm any forward-looking digital CFO with the knowledge required to become one of your organisation’s most valuable strategic advisors. It will also help to reposition the function’s value beyond the traditional capabilities of reporting and compliance.
What about AI and supply chains?
From a supply chain perspective, the range of possible applications for AI are somewhat clearer. By bringing in predictive insights from large data external data sets relating to the market (e.g. size, competitor information), economic conditions (e.g. inflation and interest rate data), demographic trends and even weather data (such as seasonal purchasing trends), the expected benefits would include marginally more accurate capacity planning, better demand forecasting and hence, optimised inventory management.
Another promising application is in shipping and transport optimisation. Supply chain planning solutions typically use static lead time inputs to plan inventory movements, which impact the dependent material availability dates used for customer order fulfillment, production scheduling and distribution planning. The static lead times are inherently inaccurate, which leads to a “ripple effect” of supply chain disruptions (particularly in terms of time and cost) in execution of the plan.
AI can be applied to analyse data to recommend more efficient and reliable shipping routes, by considering factors such as traffic and weather conditions; therefore improving reliability of delivery times and reducing the risk of unplanned delays.
Do I need to bring in an AI “expert”?
If you’re ready to start exploring the applications of AI to Finance and Supply Chain in 2024, you might be wondering if the next step is to bring on an AI expert to help you move forward.
While it may seem like an obvious next step, we would encourage you to pause and consider who should really be helping you steer and manage the ship on your AI journey, particularly as you start to bring to life the practical and unique applications for your business.
The key message is to treat your AI journey like any other strategic project and that means enlisting the right support to build and lead your team. As with any other project, technical and subject matter expertise are critical components but very rarely are they the right resources to lead and co-ordinate.
With the help of specialist AI partners, you’ll be able to make the right decisions around which experts to bring into the project, and when. They will also help to ensure your AI ambitions remain aligned with the overarching strategy. Without that alignment, any activity you undertake in the AI space will essentially be a waste of time and resources – no matter how innovative the technical results may be.
Cornerstone Performance Management delivers enhanced, data-driven business performance through collaboration between our passionate experts and clients.
We are enablers of change and transformation in Supply Chain, Information Management, Financial Planning & Analytics, Management Consulting, Project Management, and Managed Application Services. Meet our team or reach out to have a discussion today.
