In 2020, just 12% of supply chain professionals have reported using AI. But this is about to change. As one of the last areas of business to undergo through digitalisation, logistics and supply chain management is about to skip a generation of technology and move directly into the Artificial Intelligence (AI) age. This is almost certainly a daunting prospect for many seasoned supply chain professionals, but it needn’t be. AI will actually make it easier to make the great leap beyond inflexible procedures that are implemented with a loosely-stitched patchwork of spreadsheets, emails, and phone calls.
This is because, rather than incrementally improving existing logistics workflows, a purpose-built AI-powered logistics solution streamlines or even supersedes many of them. The inherent inefficiencies of legacy procedures are eliminated, leaving logistics professionals with a powerful toolkit for reducing costs, developing agility and building proactivity.
Here are just four ways in which AI is moving logistics and supply chains into a new age.
1. Efficiency
At its most basic level, a logistics operation generates a lot of repetitive, detailed, but tiresome routine work. Staff rely on a set of rules and defined procedures to guide them in this workflow.
If staff follow the rules diligently, the operation works as intended, and the organisation’s defined goals are met. But even then, they are not met efficiently: the costs are unnecessarily high, too much time is expended, and the procedures are error-prone. By contrast an intelligent solution has the ability to learn these processes, improve them, and execute them tirelessly at high speed and with complete accuracy.
Example: customs brokerage
Customs brokerage is a complex area of logistics relying on in-depth knowledge of specific regulations, industries, and customers. There is constant cross-checking of information for shipping documents and invoices, which need to be accurate and completely harmonised before sharing with customs officers. The processes involved are time-intensive, and mistakes can be costly.
A well-designed AI-powered platform, trained in industry regulations and brokerage data, can use language processing to swiftly extract relevant information from a broad range of customs documents, and, rapidly produce a customs declaration ready for human review.
- This significantly reduces the amount of man-power needed
- Minimises the opportunities for human error and oversight
- Accelerates the workflow considerably, cutting despatch time and cost
But there’s a lot more to AI-driven efficiency than this simple example. Inconsistent and incomplete address data is a notorious problem in logistics, with ramifications for efficient delivery, financial control, analysis and planning. An intelligent platform can continually identify and correct mistakes in all the data it uses, as an autonomous process. With data integrity, shipments are fulfilled correctly, costs can be allocated accurately, and operational evolutions can be modelled and tested in advance.
The ‘rules-based’ operating methods that most businesses still use in their supply chain, have many critical disadvantages. One of the most fundamental, is that a set of rules represents a snapshot – a moment in time when the rules were decided, on the basis of the preferences and information available at that moment. But within weeks, days or even hours, industry conditions can have changed to such a degree that the rules are obsolete. In an ever-changing operating environment, a set of static rules-based procedures effectively guarantees less than optimal performance.
An intelligent platform doesn’t engender this inefficiency because it continually monitors data from a wide range of data sources, and fine-tunes processes immediately when changes occur, to ensure that high-level goals are met with optimal efficiency.
One other factor contributes significantly to the optimised efficiency an AI-driven platform can bring. Because an intelligent system can take enormous numbers of decisions – on a scale no human-operated system can – it has the power and capability to make each decision in the context of the entire operation. There are no longer silos in which a staffer may take a decision that meets limited goals but is wasteful in the wider context, or that contravenes policy. Similarly, data from the organisation’s logistics operation no longer exists in a form that is opaque to the finance department or senior strategic planners. The consequences and benefits of this are profound.
“An intelligent system can take enormous numbers of decisions – on a scale no human-operated system can. This gives it the power and capability to make each decision in the context of the entire operation, removing silos and increasing efficiency and accuracy"
2. Flexibility
As unfolding events in 2020 have made painfully clear, for a business to survive and thrive it must be adaptable to rapidly changing conditions. Executives should be able to quickly detect and understand new pressures, and have the tools to evolve with a minimum of delay.
At a base level, a business should be able to get the best value and performance from its logistics operation. Yet this apparently obvious goal is rarely achieved because rigidity is built into the way most companies structure their logistics and supply chain operations.
In short, best value and performance is never achieved by contracting with only one or two carriers. And a legacy rules-based operation won’t provide continual industry-wide monitoring for best value and performance; it can’t cross-reference every invoice to ensure adherence to contract terms; and it will definitely not require staff to check and switch to the best-value carrier each time an item is booked out from the despatch bay.
With a purpose-built AI platform, these things are automatic. They are the key to flexibility, because with the ability to use a large number of carriers and automatically choose the best option for each shipment on any route, a business not only cuts costs but also minimises delays and avoids bottlenecks. By not limiting itself to a restricted number of carriers, a business ensures that there’s always another way to get the delivery done.
An AI powered, multi-carrier operation:
- Offers flexibility in times of flux, such as the COVID-19 pandemic
- Ensures the best option is chosen for each shipment - on any route
- Cuts costs (often by 30% or more)
- Increases performance by minimising delays and bottlenecks
Over and above this kind of operational flexibility, strategic flexibility should be a core quality of a logistics operation.
In the majority of legacy supply chains, there’s so much inherent rigidity and inertia that a business is prevented from re-configuring quickly even if it understands the need to. But the predicament is often worse than that because without recourse to the kind of data analysis an AI solution can provide, a business may not even be able to imagine how to adapt.
A retail chain suffering a sudden 75% reduction of footfall will not survive if it can’t urgently re-invent its revenue model. BUT - with the right tools, new strategies can be simulated and tested using real data, and rolled out without delay. Technologies such as 7bridges, are enabling customers to do exactly that: to repurpose high-street stores for online fulfilment and implement decentralised stock distribution so that goods are held closer to the customer, ready for rapid delivery.
The ability to model and test scenarios with real data brings flexibility and the confidence to develop in new directions. A rapid expansion into a new regional market, or B2B revenue stream quickly transformed into B2C: these are some of the strategic adaptations that our customers are currently making, with the enabling support of our AI-powered platform.
3. Resilience
The more global a supply chain is, the more exposure there is to disruption somewhere along the chain. But the more flexible and agile a business is, the greater its ability to ride shocks when normal business conditions are disrupted. With the many threats affecting supply chains now – cyber-attacks, adverse political events, extreme weather and more – resilience is a key design requirement in a state of the art logistics operation.
A purpose-built AI logistics system gives businesses the means to make earlier and more intelligent responses to market shocks like COVID-19, and enables optimal adaptation to otherwise critical disruptions in the supply chain.
While the ability to be agile and operationally cost-effective during times of crisis can help businesses stay ahead of their competition, the essence of deep resilience is not reactive but proactive. Armed with the unprecedented data-driven insights AI can provide, a business can ‘design out’ strategic weaknesses, and pivot to a model that can make an opportunity out of a disruptive situation.
“Armed with the unprecedented data-driven insights AI can provide, a business can ‘design out’ strategic weaknesses, and pivot to a model that can make an opportunity out of a disruptive situation.”
4. Costs
AI sounds impressive. But, it may sound expensive too, and it can be if there isn’t a clear understanding of aims and the value proposition.
The general, wider potential of AI in business is still a matter of exploration and debate, but in specific use cases such as logistics, there’s a very definite set of benefits and a rapid return on investment for any organisation that adopts an existing well-designed platform.
Even with a relatively slim implementation of an AI powered logistics platform like 7bridges, a business immediately benefits from considerable savings in carrier charges and staff resource costs. With a full integration, customers see 50 percent reductions on their direct logistics costs and greatly streamlined workflow – all of which can have a profound impact on service quality and profitability.
There is of course another way of thinking about cost. It’s the cost of falling behind other businesses that are increasingly prominent in a growing number of value chains. Those businesses make extensive use of advanced data analysis and intelligence to set the supply chain and logistics bar very high, and they’ve made it a core competitive advantage.
Good logistics is about more than keeping costs down; it has now become a defining component of brand value, and a business that can offer its customers an excellent experience is well-equipped to survive and grow, even through a disrupted business environment.
Considering an AI solution to reduce your costs and improve your logistics performance? 7bridges has an AI-powered logistics solution that can generate ROI for your business in less than 1 month.