The role of AI Capability in the link between Sustainable Supply Chain Performance and Supply Chain Agility

The purpose of this study is to examine the relationship between supply chain agility (SCA) as a mediating variable, sustainable supply chain performance (SSCP), and artificial intelligence (AI) capability. The paper proposes that the potential of AI can be viewed as a strategic resource that can enhance the organization's agility and sustained competitive advantages by combining the Resource-Based View (RBV) and the Dynamic Capability Theory (DCT). A cross-sectional, qualitative research design was employed. Data from 250 specialists in Pakistan's supply chain manufacturing companies was gathered using a standardized questionnaire. With the use of SmartPLS 4, partial least squares structural equation modeling (PLS-SEM) analysis was used to examine the suggested conceptual model. The measuring model demonstrated strong validity and reliability. The findings showed that AI Capability factors significantly improved Supply Chain Agility (β = 0.671, p < 0.001) and Sustainable Supply Chain Performance (β = 0.342, p < 0.001). Furthermore, Sustainable Supply Chain Performance is significantly impacted by Supply Chain Agility (β = 0.463, p < 0.001). The mediation analysis also revealed that Supply Chain Agility partially mediates the relationship between AI Capability and Sustainable Supply Chain Performance, indicating that companies with more agile supply chains that facilitate their use of AI capabilities have higher levels of sustainable supply chain performance. In the context of a developing economy, the current study integrates three dimensions of AI capability, supply chain agility, and sustainable supply chain performance into a single framework. The findings validate the RBV and DCT and show that capabilities enabled by AI and organizational agility have a positive effect on all three dimensions of performance economic, environmental, and social. The study provides concrete recommendations for managers and policymakers, emphasizing the significance of investing in AI technology, digital skills, collaborative information sharing, and agile supply chain management practices to accelerate digital transformation and sustainable supply chain management.