AI Hallucinations Are Killing Supply Chains — But They Could Also Save Them | by Chip Mahoney | The Capital | Mar, 2025

The global supply chain is a fragile beast. One delay, one miscalculation, one wrong decision, and the entire system can unravel. Now, imagine injecting a technology into this delicate ecosystem that occasionally makes things up. Sounds like a disaster waiting to happen, right? Welcome to the world of AI in supply chains — where hallucinations aren’t just a quirky bug; they’re a critical flaw that could cost businesses billions.

At the same time, the Institute for Supply Management (ISM) is sounding the alarm on the economy. The ISM’s Purchasing Managers’ Index (PMI), a key indicator of economic health, has been flashing warning signs for months, particularly in the manufacturing sector. As growth slows and businesses scramble to adapt, AI is being hailed as a potential savior. But there’s a catch: AI’s tendency to hallucinate — to confidently generate false or nonsensical information — poses a massive risk. If we don’t solve this problem, the very technology meant to save supply chains could end up breaking them.

Meanwhile, in the world of consumer AI, the hype is fading. Tools like ChatGPT and AI-powered image generators are fun to use, but they offer little real advantage to users. Everyone has access to the same tools, and the novelty is wearing off. The result? Consumer AI is becoming a…