Supply Chain Management in the Age of AI and Sustainability

By Prof PB Sharma & Aishwarya Sharma

On Dec 30, 2025

For decades, Supply Chain Management (SCM) was a game of “just-in-case” or “just-in-time” logistics, focused almost exclusively on cost and speed. However, a new paradigm has emergedrecently with the advent of AI and the global focus on sustainability. The modern supply chain is no longer a linear pipe; it is an intelligent, self-healing web where Artificial Intelligence (AI) and Sustainability are the twin engines of productivity and competitiveness. The whole idea of supply chain gained its momentum with the realization that the whole cannot be produced at one place, its origin goes to creative mind conceiving designs and forms translated to innovative product designs that require a whole of lot contribution coming from various stakeholders forming the supply chain for modern day manufacturing. Today’s manufacturing and the markets require zero defect engineering and that too, highest compliance to quality at a highly competitive cost. This necessitates a new transformative focus beyond quality and productivity. This transformation isn’t just for profit, but to solve the “Double Materiality” challenge, balancing financial success with positive environmental and social impact. After all, the supply chain emissions often account for over 70% to 90% of a company’s total carbon footprint as per WEF report on Scope 3 emissions (2023). This makes the balancing of financial resource management and environmental compliance a necessity rather than an option.

The momentum of modern SCM stems from the realization that complex products cannot be produced in isolation. From the first creative spark of a designer to the final assembly, every product is a tapestry of contributions from diverse global stakeholders. Today’s competitive landscape demands zero-defect engineering and absolute compliance with the highest quality standards—all while maintaining a highly competitive cost structure.

It is here, the value and worth of supply chain management counts for the competitive edge of the organization. For it is not just innovativeness alone, rather the collaborative and cooperative efforts of many tuned together to comply the highest levels of quality conformance and that too with speed and a highly competitive cost. Further, as the sustainability and compliance to the sustainable development goals, SDGs is not just desirable, but a dire necessity to make the manufacturing and markets meet the ever-rising aspirations of the global humanity for productivity and quality with tomorrow’s net zero emission technologies and the health of the environment.

The ecosystem that we need to achieve this noble objective of the supply chain is to make the humans and AI co-create a Net-Zero future. As such, it is not just production and profit that counts, we need today the newer systems of manufacturing and resource management that takes on board people and planet together with competitiveness and innovation.

AI as the Engine of Decarbonization

The most immediate impact of AI on production is to enable manufacturing systems to integrate quality, productivity and sustainability with ease and speed. While productivity and online conformance of quality receive a 360-degree boost with AI making it possible to take onboard all stakeholders right from the very first flow of resources to the end of manufacturing line and to the service beyond inventory management, sustainability integrated with AI offers a radical reduction of the carbon cost of moving goods as well as that of the production line as it brings a renewed focus on green energy technologies and green practices in manufacturing and in the supply chain beyond production lines. The productivity in the age of AI and sustainability is thus witnessing a rapid transition from human-driven logistic management to AI-driven hyper-optimization of supply chain management. This works most effectively with the tripod of:

• Predictive Demand: AI forecasts demand with high accuracy, eliminating the “bullwhip effect.” By producing only what is needed, AI prevents the massive waste associated with overproduction.

• Resources and Process Optimization: AI integrated systems enable optimal utilization of resources and process optimization to maximize quality, cost, and competitiveness.

• Dynamic Route Optimization: Machine learning models analyze real-time variables; traffic, weather, and delivery windows, to find the “greenest” path. According to a report by McKinsey (2023), AI has the potential to deliver energy savings of up to 20% in buildings and 15% in transportation systems. Additionally, AI-driven solutions can help businesses reduce CO2 emissions by up to 10% and cut energy costs by 10-20%.

SCM to Boost the Circular Economy

To move beyond “reducing harm, global organizations and nations have set ambitious targets for 2030. These goals transform SCM from a linear “Take-Make-Waste” model into a “circular” loop to boost the circular economy that has the potential to cut global CO2 emissions by 40% by 2040 as per the Ellen MacArthur Foundation (2024).

Target Area	2030 Global/Regional Goal	SCM Action Required
Material Use	Double the Circularity Rate (e.g., EU goal to reach 24%)	Prioritize secondary raw materials over virgin extraction.
Food Waste	50% Reduction (UN SDG 12.3)	Use AI to reduce post-harvest losses and retail waste.
Packaging	100% Reusable or Recyclable	Implement “Packaging-as-a-Service” and reverse logistics.
Waste Generation	Substantial Absolute Reduction	Shift to modular product design for easier repair and disassembly.

New and Emerging Trends in SCM

As we enter the “Decade of Destiny”, 2026-35, and move the growing economies of the nations on pathways of accelerated sustainable growth, the supply chain needs to undergo a fundamental transformation through “Agentic” systems and deep-tier visibility to maintain both the competitiveness and sustainability. Here, we flag the following emerging trends in the “Decade of Destiny”.

• Agentic AI & Autonomous Orchestration: Unlike traditional AI that just provides insights, Agentic AI systems now act as autonomous collaborators. They can reason, plan, and execute decisions, such as automatically re-routing a shipment or selecting a new supplier to minimize both cost and carbon footprints.

• Digital Twins & Virtual Universes: Companies are using virtual models of their entire supply chain to stress-test scenarios before they happen. These “twins” allow leaders to see the hidden 80% of environmental impacts tucked away in their value chain, enabling material recirculation and waste elimination.

• Regenerative Supply Chains & Biodiversity Tracking: The focus is shifting from “zero harm” to “active restoration.” New tools now quantify how supply chain activities affect biodiversity, leading to “Nature-Positive” procurement where suppliers are selected based on their contribution to local ecosystem health.

• Blockchain-Enabled Radical Transparency: Immutable digital ledgers are providing a “digital fingerprint” for every raw material. This allows for total traceability from a mineral mine or a farm to the end consumer, ensuring ethical labor and zero-deforestation compliance.

These and other related trends shall continue to define the SCM pathways for sustainable manufacturing and service sectors.

The Future of Work: The Augmented Professionals

The role of the SCM professional is shifting from a manual coordinator to a Strategic Orchestrator.

• Human-AI Partnership: As intelligent agents handle procedural tasks, humans are stepping into higher-level roles: designing resilient scenarios, cross-functional alignment, and ensuring that the supply chain remains a force for Social Coherence.

• Workforce Well-being: Emerging trends focus on “Human-Centric” SCM, using AI to sequence tasks to reduce worker congestion in warehouses and providing personalized well-being support for frontline teams.

Toward a Resilient Supply Chain

The integration of AI and Sustainability is not a luxury; it is a survival strategy. In a world of climate volatility, the intelligent green supply chain is the only way to ensure long-term viability. We are moving toward a “resilient future”, one where technology, humanity, and nature live in active, creative harmony and work for elevating human existence to a new high of coexistence, akin to the Vedic proclamation of “Vasudhaiv Kutumbakam”, One World, One Family, One Future.

This calls for a caring organizational leadership to take on board the panchtantras of modern manufacturing’ that is: purpose, productivity, profit, people, and the planet. This would then deliver the vital panchamrit of competitiveness, quality of service, environmental stewardship, economic prosperity and integrative wellbeing and make industry and enterprises partners in progress towards a bright and blissful future for the global humanity.

The authors, Prof PB Sharma is a renowned thought leader, Past President of AIU (Association of Indian Universities), currently Vice Chancellor of Amity University Gurugram, and AishwaryaSharma is a Software Engineering Professional. The views expressed are the personal views of the authors.