Microsoft’s supply chain is being forced to keep pace with an artificial intelligence boom that has rewritten the company’s old assumptions when it comes to demand.
The recent surge in AI has created what Microsoft Cloud corporate VP Joanna Kostecka calls an “AI arms race,” where demand for cloud capacity can jump by hundreds of percent, instead of following the steady patterns that planners once relied on.
That has made forecasting far more challenging. At the same time, Microsoft is dealing with longer lead times and tight supplies of components, along with power constraints brought on by data centers. Factor in the constant waves of disruptions to supply chains across the globe, and it becomes increasingly difficult to plan around anything resembling a stable supply-and-demand picture.
The company first looked at its existing workflows to identify any waste, as well as unnecessary steps and areas where employees were spending too much time on manual work. The idea was to improve those processes before layering AI on top of them. Once those processes were simplified, Microsoft was able to use AI to automate more of the work, shorten cycle times and add intelligence to decisions that previously required more manual effort.
Planning has gone through a similar change as well. The traditional planning model could take a month from the initial demand forecast through supply, inventory and executive decision-making. That pace may still work for some companies, but Microsoft found that it could no longer keep up with the swings its cloud business was experiencing.
Microsoft did not have to look far for a technology partner. Microsoft and SAP have worked together for more than three decades, with a long history of connecting their technology and business systems.
There was also a practical technology fit. Microsoft’s technology stack and SAP’s applications already worked closely together, which allowed the company to draw from both as it built out its AI capabilities.