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AI to Underpin the Nimble Supply Chain of the Future

AI to Underpin the Nimble Supply Chain of the Future

As the COVID-19 pandemic accelerates digital transformation across the globe, the future of logistics will be built on technologies which evolve supply chains into smart ecosystems that underpin smart decision-making.

Worldwide e-commerce revenues leapt more than 20% from 2019 to 2020, reshaping the supply chain landscape in a matter of months, according to global tech market advisory firm ABI Research. The technologies helping businesses meet these logistical challenges include artificial intelligence, machine learning and computer vision, along with hardware like drones, robots, automated guided vehicles and autonomous vehicles.

An Autonomous Freight Network

TuSimple-Truck
Artificial intelligence is taking predictive maintenance to the next level – picking up on subtle clues to optimize maintenance schedules, identify faults and predict breakdowns before they cause costly downtime or damage (Credit: TuSimple)

For example, US delivery giant UPS uses AI to manage its ORION fleet system – creating optimal delivery routes based on data supplied by customers, drivers and vehicles. As a result, UPS expects to reduce delivery miles by 100 million annually.

AI and robotics are also streamlining distribution, with supermarkets optimizing pallet packing, truck loading and delivery routes to enable the most efficient unloading at the other end. Ocado Group, spun out from a British online-only supermarket chain, provides software and robotics platforms for grocery retailers around the world.

Autonomous vehicles are the next logical step, with UPS partnering with self-driving truck company TuSimple in 2020 to establish an Autonomous Freight Network (AFN) in the US. It comes as 11,000 autonomous commercial vehicles are expected to ship in North America by 2025.

The AFN integrates with existing logistics networks and transportation management systems, enabling long-haul autonomous freight operations while reducing shipping times and improving fuel-efficiency.

Such technologies are not new, just as the technologies which underpin working from home during the pandemic are not new. What is new is the willingness for businesses to put aside long-standing reservations and fully embrace these technologies in order to maintain a competitive edge in the so-called ‘new normal’. 

According to Susan Beardslee – ABI Research’s Principal Analyst, Freight Transportation & Logistics, 

“The pandemic laid bare existing gaps in digitization, integration and tenuous contingency plans. 2021 will continue to see expanded investment and adoption of digital, automated and integrated solutions to provide much-needed resiliency in the global supply chain through optimized visibility, flexibility and reliability.”

ocado group
Ocado Group, spun out from a British online-only supermarket chain, provides software and robotics platforms for grocery retailers around the world (Credit: Ocado Group)

Artificial Intelligence and Weather

Artificial intelligence is set to automate and optimize many complex tasks within the supply chain. Beyond simply plotting the most efficient trucking route, AI can quickly respond to dynamic situations such as weather and traffic conditions.

For John Harmon – Senior Analyst with global retail advisory and research firm Coresight Research,

“Supply chains need to be bidirectional, handling both supply and demand data. In return, retailers can also benefit from other fulfillment methods, such as using dark stores, automated micro-fulfillment centers, and drop-shipping from the manufacturer. Further out, autonomous vehicles such as self-driving cars, robots, and drones can offer contactless delivery.”

Taking a holistic approach to supply chains can deliver a wealth of benefits. US clothing retailer Fruit of the Loom used AI to scour its data for insight, discovering that shoppers stock up on winter fleeces when autumn forecasts predict a temperature drop of at least 12 degrees Fahrenheit within six days. Rather than the actual temperature, it is the size of the drop which impacts buying habits.

Armed with this insight, Fruit of the Loom marries weather and inventory data to reveal which stores are not able to meet demand. Predictive analytics makes for a more nimble supply chain, ensuring its retail partners have full stocks of fleece products ahead of autumn cold spells in their area. 

Fruit of the Loom
US clothing retailer Fruit of the Loom used AI to scour its data for insight, discovering that shoppers stock up on winter fleeces when autumn forecasts predict a temperature drop of at least 12 degrees Fahrenheit within six days.

Embracing Technologies

Technologies such as AI, analytics, cloud and the Internet of Things are already mature enough to have an immediate impact on logistics. The challenge lies in adapting operating models to embrace them, says Suketu Gandhi – Partner, Digital Supply Chain with global strategy and management consulting firm Kearney.

“These technologies can radically transform the operation of manufacturing plants, distribution centers and transportation networks to constantly sense supply changes, shocks and pivots. The biggest hurdles are operating models and decision cycles which are built for batch, not real-time processing.”

Industry fragmentation, a lack of standards, slow progress on full digitization and an inability to share data along supply chains also present hurdles for many organizations, says Inna Kuznetsova – CEO of insights platform 1010data. True data sharing between providers, leveraging fourth-party logistics provider capabilities to move from the rear-view mirror view to prescriptive actions, will deliver benefits along the entire supply chain, she says.

“A single box may pass through five or six service providers on its way from a plant in Asia to the distribution center overseas, with different levels of digitization between them, as well as a lack of standards in capturing and keeping data. Once companies start requiring their providers to implement standards and collect data, they will get to the next level.” 

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