Just in time? Manufacturers turn to AI to weather tariff storm

As global trade tariffs loom, manufacturers are increasingly turning to artificial intelligence to effectively manage their supply chains. Companies like The Toro Company, a U.S.-based lawnmower manufacturer, are adapting to the volatility without resorting to excessive inventory. Kevin Carpenter, Toro's chief supply chain manager, notes that they are maintaining inventory levels similar to those seen before the pandemic, specifically in 2019, despite ongoing supply disruptions. The landscape of U.S. manufacturing has been marked by fluctuating inventory levels in response to trade tariffs, particularly under former President Trump's administration. However, many manufacturers are now reverting to 'just in time' inventory management, which prioritizes efficiency and aims to reduce waste by ordering goods only as necessary. Yet, the question remains: how can these companies maintain lean inventories amidst unpredictable tariffs and export restrictions? The answer lies in innovative technologies, particularly AI. Carpenter explains how he utilizes AI to filter through a constant flow of relevant news, from tariff announcements to raw material prices, curating it into a personalized podcast for daily updates. His team also leverages generative AI to analyze vast amounts of data, making informed decisions about component purchasing. According to research from Gartner, spending on generative AI solutions for supply chains could explode from the current $2.7 billion to an estimated $55 billion by 2029, fueled by global uncertainties. McKinsey consultant Matt Jochim emphasizes how AI tools can streamline decision-making processes, presenting actionable insights to supply chain managers. Major software providers, including SAP, Oracle, and Microsoft, are seeing increased demand for generative AI solutions, which are still in their developmental stages. Experts note that while initial investments may be modest, scaling these technologies can require significant financial commitment, particularly when integrating AI agents that can autonomously make decisions. As tariff fluctuations continue, AI-driven tools are becoming essential for managing supply chain complexities. GEP consultant Mukund Acharya highlights that the current tariff environment is pushing companies toward adopting these technologies. SAP's Richard Howells echoes this sentiment, noting that economic instability often accelerates the adoption of technological solutions. AI agents can analyze real-time news and various data points to provide strategic insights, but experts caution against overestimating their capabilities. While AI is a powerful tool for enhancing supply chain resilience, it is not a cure-all. Minna Aila from Konecranes points out that while AI can optimize logistical operations, more mundane data analysis, such as weather conditions for shipping logistics, is often the focus. By maintaining lower inventories, manufacturers can protect their profit margins against rising costs associated with storage and potential obsolescence. Recent surveys by McKinsey reveal a significant decrease in companies relying on large inventories as a buffer against disruptions, dropping from 60% in 2022 to 34% last year. Gartner analyst Noha Tohamy stresses that without AI, businesses would be slower to adapt and more prone to overstocking. Despite the rise of AI, experts assert that supply chain managers are not at immediate risk of job displacement. Strategic decision-making remains a human responsibility, with AI handling more routine tasks like ordering and scheduling. Carpenter humorously expresses his hope that AI won't take over his role until after his children complete their education.