Has the time come for AI in Logistics?

AI is making strong and steady inroads in our daily life. Over the next few years, as AI improves, it will only cement its position in our lives. Right from the auto-suggest in emails to voice assisted services to drone deliveries, technology and AI is maximizing efficiency, but is it time for AI to enter into the logistics industry or is it too early?

According to a report by McKinsey, AI will create a new paradigm in logistics. AI can definitely outperform humans, especially in repetitive but mission-critical tasks and with the growth of e-commerce, it is only time before some level of automation is introduced in the business to improve efficiency. But is the time right today? Let us look at some of the benefits of AI in Logistics

1. Forecasting

It is projected that AI would increase productivity in logistics by more than 40% by 2035. This productivity surge is linked to AI's ability to predict using large volume's of data. The data along the supply-chain is fragmented and getting a top view of the ever evolving situation is not possible without technology. AI can be linked to multiple databases. It can consolidate the data, find patterns, identify gaps and forecast things like asset requirement, vehicle or ship movement, bottlenecks, etc.

2. Analytics

Predictive analytics from AI can help optimize routes, extrapolate information from internal and external information streams to create real-time scenarios for goods movement. This will give a competitive edge over others. International transportation leader DHL has already implemented it in their processes. It monitors social media posts to identify potential supply chain problems and stay ahead of the demand curve.

3. Inventory management

Inventory management involves ensuring the right flow of the goods in and out of the warehouse. Current inventory management tools work on the existing data. They can give alerts about low stock or it can give you a consolidated data about overstocked items. With AI in inventory management, one can expect guidance about future stock requirement based on the consumer behavior or any changes in the geo-political situation.

While the advantages of incorporating AI in logistics definitely make a strong case, there are a few reasons which increase hesitancy, especially in the minds of small and medium sized logistics firms.

Challenges of including AI in supply chain

1. Complex systems

AI is a complex system with ever evolving applications. It is primarily a cloud based system and needs expansive bandwidth, something that is not yet common across the globe. It might also need specialized hardware in some situations. Setting up this infrastructure might come at substantial costs, something that not every supply-chain partner might be able to afford.

2. Need for specialized professionals

Cloud based applications need to be customized to achieve maximum potential. This means that there is a need for specialized cloud professionals. Apart from the creation of the interface, there will be a maintenance cost involved as well. Cloud professionals come at significant costs and if the logistics company is a small and medium sized business, they might not find the ROI very lucrative.

3. Costs of training and infrastructure

Including AI in the systems is not something that is as easy as plug and play. It involves a level of overhaul of the existing systems and a steep learning curve for the employees. While it is important to do away with legacy systems and adapt to the new and upcoming technologies, the adoption costs need to justify the immediate benefits for businesses that are not global market leaders.

4. Finding the right talent

Implementing technologies like AI and ML needs training to all the employees and also includes hiring specialized professionals. As the AI is an adopted technology, finding AI professionals who understand the logistics industry and to be able to infer and interact with the data is essential. Finding and retaining such talent can be another challenge to the industry.

So, while the potential of AI in logistics is huge, we think it might be a little premature, especially for small and medium logistics companies in India, to jump the bandwagon. We expect AI to enter the logistics stream in a more organic way, i.e to have a top-down cascading effect with big logistics service providers and shipping lines, making the first move in this technology segment.

AI based applications that are affordable and simplify the logistics blind turns around predictive analytics or automating repetitive tasks might seem more appealing to small and medium logistics partners initially.

While we know that AI is a reality that every logistics professional will have to equip themselves with, the extent and the speed with which it will become a reality is something that needs to be seen.