How generative AI can transform supply chain and procurement in KSA

23 January 2024 Consultancy-me.com 14 min. read

One of the most exciting and promising technologies of 2024, generative AI has the potential to add value to functions across the business landscape. Experts from TDM Consulting Group outline how generative AI can help Saudi Arabia lift its supply chain and procurement landscape to the next level.

Under the visionary leadership of Crown Prince Mohammed bin Salman, Saudi Arabia has embarked on an ambitious journey to position itself as a global leader in artificial intelligence (AI) and machine learning (ML). Recognizing the transformative power of these technologies, the Saudi government has introduced a series of initiatives to harness AI’s potential across various sectors.

In the world of supply chain and procurement, Saudi Arabia has already reaped benefits of all kinds, with the number of use cases set to take-off in the coming years as the adoption of the technology picks up pace.

How generative AI can transform supply chain and procurement in KSA

Key efforts launched by the Saudi government include:

Saudi Vision 2030: At the heart of Saudi Arabia’s transformation is Vision 2030, a comprehensive roadmap that aims to diversify the economy, reduce dependency on oil, and foster innovation. AI and ML are integral to achieving these goals.

The National Strategy for Data & AI (NSDAI): Launched in 2019, the NSDAI outlines a strategic framework for developing AI and data capabilities in Saudi Arabia. It emphasizes the importance of data-driven decision-making and AI innovation.

Establishment of AI and Data Ministries: The creation of the Ministry of Industry and Mineral Resources and the Ministry of Communications and Information Technology demonstrates the government’s commitment to driving AI and digital transformation.

Investments in AI Research and Education: Initiatives such as the Saudi Data & AI Authority (SDAIA) and partnerships with leading international tech companies aim to cultivate AI talent and promote research and development.

These efforts underscore Saudi Arabia’s dedication to becoming a hub for AI and ML excellence, aligning perfectly with Vision 2030’s goals. Generative AI, a cutting-edge technology, represents a significant component of this transformative journey, offering unparalleled potential for revolutionizing supply chain and procurement operations.

Generative AI and LLMs

Generative AI, powered by Large Language Models (LLM), represents a breakthrough in artificial intelligence. These models, such as ChatGPT and Google’s BERT, are capable of understanding and generating human-like text. ChatGPT, developed by OpenAI, is one such model that excels in natural language understanding and generation, making it a valuable tool for various applications, including supply chain and procurement.

Google’s BERT, on the other hand, focuses on enhancing the understanding of context in language, improving search engine results and language understanding across the web.

Generative AI models like ChatGPT and Google’s BERT are trained on vast amounts of text data and can generate coherent and contextually relevant text. This capability has opened doors to innovative solutions across industries by automating tasks, aiding in decision-making, and fostering natural human-computer interactions.

Generative AI: A Catalyst for Vision 2030
Generative AI, in the form of these Large Language Models, is a revolutionary technology with the potential to bring efficiency, innovation, and data-driven decision-making to supply chain and procurement operations. Within the context of Vision 2030, it aligns with the objectives of economic diversification, localization, and sustainability. Furthermore, generative AI positions Saudi Arabia to compete as a prominent player in international supply chain management.

Generative AI applications

An overview of a number of ways how generative AI can transform Saudi Arabia’s supply chain and procurement landscape:

Revolutionizing Demand Forecasting
Generative AI enhances demand forecasting by analyzing historical data, market trends, and regional factors. In the Saudi context, this is crucial for accurately predicting local and international demand, optimizing inventory levels, and minimizing excess stock.

Optimizing Localized Inventory Management
Efficient inventory management is fundamental to localization efforts. Generative AI helps optimize localized inventory by considering historical demand patterns, supplier performance, and regional requirements, reducing storage costs and promoting local production.

Enhancing Supplier Negotiations
Strong relationships with local and international suppliers are essential for Saudi businesses. Generative AI can analyze data to provide negotiation strategies and optimal terms, fostering cost reduction and strengthening supplier ties.

Driving Sustainability Initiatives
Sustainability is at the core of Vision 2030. Generative AI enables supply chain sustainability by monitoring and optimizing processes, minimizing environmental impact, and aligning with Saudi Arabia’s sustainability targets.

Fueling Innovation in Procurement
Generative AI fosters a culture of innovation by providing data-driven insights and encouraging experimentation. This innovation is vital for developing a knowledge-based economy as envisioned in Vision 2030.

Transformational effects

Building on the different use cases, the impact of generative AI across all levels of government and business can come together for transformational effects:

Realizing Localization Goals
Generative AI empowers localization efforts by identifying potential local suppliers, evaluating their capabilities, and facilitating partnerships. This aligns perfectly with Vision 2030’s goals of strengthening domestic industries and job creation.

Elevating Saudi Arabia as a Global Supply Chain Hub
By incorporating generative AI into supply chain and procurement practices, Saudi Arabia can position itself as a global supply chain hub. With advanced technologies, efficient processes, and strong supplier relationships, the Kingdom can attract international businesses and become a preferred destination for supply chain operations.

Saudi Arabia’s strategic location at the crossroads of Europe, Asia, and Africa positions it as a pivotal player in international trade. With advanced ports and logistics infrastructure, the Kingdom has the potential to become a global supply chain hub, amplifying its role in Vision 2030.

Geographic Advantage
Saudi Arabia’s central location offers several benefits:
• Efficient Trade Routes: Shortened shipping routes reduce transit times and costs for goods.
• Connectivity: Well-developed road, rail, and air networks enable seamless regional and international connectivity.
• Market Access: Saudi Arabia provides easy access to the growing Middle East and North African markets.
• Trade Agreements: Participation in trade agreements strengthens global trade relationships.

Advanced Ports and Logistics
Saudi Arabia’s infrastructure includes:
• King Abdullah Port: A rapidly growing, world-class port with strategic Red Sea access.
• Jeddah Islamic Port: The largest and busiest port in Saudi Arabia.
• Logistics Parks: Supportive logistics and industrial parks across the Kingdom.
• Air Connectivity: International airports facilitating air freight and logistics operations.

Generative AI’s Role
Generative AI can catalyze Saudi Arabia’s supply chain hub ambitions:
• Enhanced Efficiency: AI-driven demand forecasting and inventory management reduce lead times.
• Data-Driven Decisions: Informed decisions adapt swiftly to market changes.
• Competitive Edge: AI-driven innovation attracts businesses seeking efficient logistics solutions.
• Sustainability: AI optimizes transportation and supports sustainability goals.
• Localization: Aligns with Vision 2030’s economic diversification and localization objectives.

Saudi Arabia’s commitment to Vision 2030, paired with its strategic location and logistics prowess, establishes it as a contender in the global supply chain arena. Embracing generative AI empowers efficiency, innovation, and competitiveness, solidifying its role as a global supply chain hub.

AI and its impact on jobs

The integration of generative AI into Saudi Arabia’s supply chain and procurement sector raises a crucial question: How will this technological transformation affect jobs and the workforce? It is essential to recognize that AI, including generative AI, is not a job killer but a job transformer. It basically changes the role of human workers, removes repetitive and autonomous activities, add data-driven insights, and creates a number of new roles.

Job Transformation, Not Elimination
Generative AI, with its ability to automate tasks, enhance decision-making, and streamline processes, will undoubtedly change the nature of jobs in the supply chain and procurement sector. Routine and repetitive tasks that were once manual will be automated, reducing the need for low-skilled, repetitive labor.

However, this transformation opens the door to a range of new roles and opportunities:

AI Specialists: Demand for professionals skilled in AI, machine learning, and data analytics will surge. These experts will play a pivotal role in developing, maintaining, and optimizing AI-driven supply chain systems.

Data Analysts: With the wealth of data generated by AI systems, data analysts will be essential to extract insights, inform decision-making, and identify opportunities for improvement.

AI Trainers and Supervisors: The “human in the loop” concept is crucial. Humans will supervise AI systems, ensuring they operate ethically and efficiently. AI trainers will train models to adapt to evolving supply chain dynamics.

Supply Chain Strategists: Professionals who can interpret AI-driven insights and align them with broader business strategies will be in high demand. They will bridge the gap between technology and business goals.

Sustainability Managers: As AI plays a role in optimizing supply chain sustainability, experts in environmental and social sustainability will be needed to drive and oversee initiatives.

Saudi Arabia’s youth population
Saudi Arabia boasts a vibrant and youthful population, making it well-positioned to harness the opportunities presented by AI-driven job transformation. Vision 2030 recognizes the importance of nurturing this youthful talent and providing them with the skills and opportunities needed for the future.

The youth of Saudi Arabia can embrace the new roles and career paths that generative AI creates. They can become the AI specialists, data analysts, and sustainability managers of tomorrow’s supply chain and procurement landscape. By aligning education and training programs with the demands of this evolving sector, Saudi Arabia can ensure that its youth are well-prepared to contribute to the nation’s economic diversification and leadership in AI.

As Saudi Arabia continues on its path to becoming a global supply chain hub and a leader in AI and Machine Learning, it should prioritize programs that equip its youth with the skills and knowledge required for these transformative job opportunities. By doing so, Saudi Arabia can leverage generative AI to not only enhance its supply chain and procurement processes but also empower its youth to thrive in the AI-driven workforce of the future.

Recommendations for unlocking the potential

As Saudi Arabia embarks on its journey to become a global supply chain hub and a leader in AI and ML, the successful adoption of generative AI in supply chain and procurement operations becomes paramount.

An overview of our recommendations for government agencies to unlock the technology’s benefits:

Develop AI-Centric Policies: Establish clear policies and regulations that facilitate the responsible and ethical use of AI in supply chain and procurement. Address data privacy, transparency, and accountability.

Invest in AI Education: Support educational institutions in offering specialized AI and ML programs. Provide scholarships and incentives to encourage students to pursue AI-related careers.

Promote AI Research and Innovation: Allocate resources to promote AI research and development within the country. Foster public-private partnerships to drive innovation in supply chain and procurement technologies.

Support AI Startups: Encourage the growth of AI startups by providing funding, mentorship, and a conducive regulatory environment. Startups can bring innovation and tailored solutions to the market.

Promote AI Adoption in Public Services: Integrate AI technologies into public services to showcase their benefits and drive acceptance. For instance, AI-driven public procurement can improve efficiency and transparency.

An overview of our recommendations for private sector companies to unlock the technology’s benefits:

Invest in Workforce Development: Prioritize training and upskilling the workforce to effectively utilize generative AI. Establish internal AI teams or collaborate with AI experts to build AI capabilities.

Enhance Data Infrastructure: Develop robust data infrastructure and governance frameworks to support AI initiatives. High-quality data is essential for accurate AI models and decision-making.

Cultivate Partnerships: Collaborate with local and international AI research institutions, startups, and technology providers. Partnerships can accelerate AI solution development and implementation.

Pilot AI Projects: Begin with small-scale pilot projects to assess the feasibility and benefits of generative AI in supply chain and procurement. Use these pilots to refine AI strategies.

Ensure Data Security and Privacy: Prioritize data security and privacy, especially when handling sensitive supply chain and procurement data. Comply with data protection laws and standards.

Integrate Sustainability Initiatives: Incorporate AI-driven sustainability initiatives into supply chain practices. Align with Vision 2030’s commitment to environmental sustainability and corporate responsibility.

Continuous Improvement: Continuously evaluate and improve AI implementations to adapt to changing business needs. Regular assessments ensure longterm success and optimization.

Notably, implementing generative AI in supply chain and procurement operations requires a strategic and collaborative approach from both government and private sectors.

Conclusion

Generative AI holds the key to a prosperous future for Saudi Arabia, in alignment with Vision 2030’s objectives. By optimizing supply chain and procurement operations, fostering innovation, and driving localization and sustainability, generative AI can propel Saudi Arabia into the global spotlight as a dynamic and competitive supply chain hub.

Embracing the technology is not just a means of achieving economic diversification but also a testament to Saudi Arabia’s commitment to a sustainable and innovative future.

About the authors: Talei Almatrafi, Ahmed Amir, and Mohamed Daoud are consultants at TDM Consulting Group, a Riyadh-based management consulting firm.