AI helps manufacturers maintain lean inventories amid tariff uncertainty

Manufacturers are increasingly deploying artificial intelligence to navigate supply chain volatility caused by tariffs and trade disruptions, with companies like The Toro Company using AI to maintain lean inventories despite global uncertainties. This shift represents a significant business opportunity, as spending on generative AI for supply chains could surge from $2.7 billion today to $55 billion by 2029, according to Gartner, a research firm.

What you should know: Companies are returning to “just in time” inventory management despite ongoing trade tensions, relying on AI to make this approach viable.

• U.S. manufacturers’ inventories have mostly contracted since their post-pandemic expansion, with many firms now at pre-2019 levels despite tariff uncertainties.
• The Toro Company’s chief supply-chain manager Kevin Carpenter uses AI to digest daily news streams into custom podcasts and help determine component purchasing decisions.
• “We are at probably pre-pandemic inventory levels,” Carpenter says. “I mean 2019. I think everybody will be at a 2019 level.”

How it works: AI agents analyze real-time data streams to suggest supply chain decisions that human managers can accept or reject.

• “The tool just puts up in front of you: ‘I think you can take 100 tonnes of this product from this plant to transfer it to that plant. And you just hit accept if that makes sense (to you),” explains McKinsey supply chain consultant Matt Jochim.
• AI systems can sift through news feeds on changing tariff scenarios, assess contract renewal dates, and recommend action plans.
• Finnish crane-maker Konecranes uses AI to optimize shipping routes by combining weather forecasts with data like bridge heights for their 106-meter-tall port cranes.

Market dynamics: The biggest supply chain software providers by revenue include Germany’s SAP, plus U.S. firms Oracle, Coupa, Microsoft, and Blue Yonder, a Panasonic unit.

• Trump’s tariff volatility is driving increased demand for AI supply chain solutions, according to consultancy GEP.
• “The tariff volatility has been big,” says GEP consultant Mukund Acharya, who specializes in retail industry supply chains.
• SAP reports that uncertainty consistently drives technology adoption: “That’s how it was during the financial crisis, Brexit and COVID. And it’s what we’re seeing now.”

Implementation realities: Most firms are still piloting generative AI with modest investments, though full-scale deployments can cost tens of millions of dollars.

• McKinsey surveys show companies relying on larger inventories to cushion disruptions fell from 60% in 2022 to 34% last year.
• Investments often require costly upgrades to data management and IT systems to support AI agents that make autonomous decisions.

Why experts urge caution: Supply chain specialists warn against viewing AI as a complete solution to complex global trade challenges.

• “AI is really a powerful enabler for supply chain resilience, but it’s not a silver bullet,” says Minna Aila, communications chief at Konecranes and OECD business board member.
• “I’m still looking forward to the day when AI can predict terrorist attacks that are at sea, for instance,” Aila adds.
• Gartner analyst Noha Tohamy notes that without AI visibility, “we go for inventory buffering” as companies struggle to understand uncertainty.

The bottom line: AI agents handle routine tasks like ordering and scheduling, but humans still make strategic decisions—at least for now.

• “I hope it doesn’t take it until my kids get through college!” jokes Toro’s Carpenter when asked if AI might replace his job.
• Keeping inventories low helps firms bolster profit margins under pressure from rising costs, as every stored component ties up capital and risks obsolescence.