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How artificial intelligence makes logistics more sustainable
Artificial Intelligence is gradually coming into all spheres of life, quietly simplifying and speeding up numerous business processes. Such technologies are crucial where data volumes need to be processed in large quantities. One of such areas is logistics.
Evgeni Nepeivoda
CEO at Novo BI
Evgeni Nepeivoda, Chief Executive Officer/Co-founder at demand forecasting software developer Novo BI, talks about how AI is helping to organize and support supply chains today.
Artificial intelligence in logistics is an AI-based business solution that logisticians use to process and analyse data and optimise various processes. According to the report by MHI and Deloitte, 74% of leading logistics companies plan to increase their investments in innovative technologies, particularly in artificial intelligence. Also, a survey of over a thousand logistics professionals from around the world revealed that 25% of them plan to invest into AI products in the next three years.
AI technology has been used in this field for a long time. This practice first appeared in the US in the early 2000s, and to this day, all of the major influential companies that are implementing new solutions in this area are American.
In Russia, the level of implementation of AI solutions in logistics is not as far behind as it may seem. This is particularly related to the government's policy of technological sovereignty and comprehensive digitalisation, which is why such projects are developing at an accelerated pace. At the same time, business itself is open to implementing AI solutions - they are in high demand in the market. Already today, most of the warehouses in Russia look very technological: they are equipped with a lot of sensors and processors that are integrated into the Internet of Things, and in some places, cargo is already being moved by pilotless vehicles.
AI technology has been used in this field for a long time. This practice first appeared in the US in the early 2000s, and to this day, all of the major influential companies that are implementing new solutions in this area are American.
In Russia, the level of implementation of AI solutions in logistics is not as far behind as it may seem. This is particularly related to the government's policy of technological sovereignty and comprehensive digitalisation, which is why such projects are developing at an accelerated pace. At the same time, business itself is open to implementing AI solutions - they are in high demand in the market. Already today, most of the warehouses in Russia look very technological: they are equipped with a lot of sensors and processors that are integrated into the Internet of Things, and in some places, cargo is already being moved by pilotless vehicles.
Why AI is effective in logistics
Artificial intelligence in logistics is primarily used to optimise supply chains. Every logistics company has them - some small, some big, but they are always one of the most valuable parts of the business in this field. If you optimise the supply chain, you can improve the financial position of any company. This is where artificial intelligence helps to process huge amounts of data, replacing entire planning departments. Every two years, the amount of data in the world doubles, making it increasingly difficult for humans to process it efficiently and quickly. This is where AI comes in, analyzing large amounts of data to offer the best solutions.
Gartner research predicts that digital transformation in the supply chain over the next 10 years will lead to revenue growth of more than 20% and a 50% reduction in manufacturing costs. In addition, Gartner's CEO survey reveals that respondents expect AI to have the greatest impact on the industries in which they operate (including those directly related to logistics) over the next few years.
There are a number of logistics software products and business solutions on the market today that have AI as a technology. At the same time, it can be combined with other technologies - distributed registers, machine learning, big data, predictive analytics. This combination helps companies to get the best economic results from implementing a product which, if properly configured, will correctly and quickly make all calculations and offer high-quality optimal solutions based on them, and thus save a huge amount of company resources.
Gartner research predicts that digital transformation in the supply chain over the next 10 years will lead to revenue growth of more than 20% and a 50% reduction in manufacturing costs. In addition, Gartner's CEO survey reveals that respondents expect AI to have the greatest impact on the industries in which they operate (including those directly related to logistics) over the next few years.
There are a number of logistics software products and business solutions on the market today that have AI as a technology. At the same time, it can be combined with other technologies - distributed registers, machine learning, big data, predictive analytics. This combination helps companies to get the best economic results from implementing a product which, if properly configured, will correctly and quickly make all calculations and offer high-quality optimal solutions based on them, and thus save a huge amount of company resources.
Implementing AI-enabled business solutions
AI solutions are popular with medium to large logistics and manufacturing companies that have a lot of data flowing through them. They usually turn either to classic products from large international vendors or to small innovative companies, which are now growing and developing very rapidly. If we are talking about solutions that help to perform serious tasks on a company-wide level and are designed to have a big economic effect, rather than a local program, for example to optimize the work of the HR department, such products are expensive and take a long time to implement.
The presentation and approval process itself may take around three months, and implementation usually takes from three - four months to a year - after all, this is a serious b2b-integration into the enterprise architecture. The payback on such an upgrade depends largely on the solution: as a rule, high-quality solutions put the company in the black within a year, covering all implementation costs. The point about AI products is that the longer a business uses them, the greater the benefit they bring - they have a cumulative economic effect.
The presentation and approval process itself may take around three months, and implementation usually takes from three - four months to a year - after all, this is a serious b2b-integration into the enterprise architecture. The payback on such an upgrade depends largely on the solution: as a rule, high-quality solutions put the company in the black within a year, covering all implementation costs. The point about AI products is that the longer a business uses them, the greater the benefit they bring - they have a cumulative economic effect.
Technology solution trends in logistics
AI solutions for logistics help businesses
follow ESG principles. More and more companies need to measure their carbon footprint and other metrics that show what cost to the planet each commodity is delivered and help optimise resource costs as much as possible. Hence the second trend - the fight against overproduction - flows out. The world needs to redistribute goods, because in some places they are produced with a large surplus, and somewhere, on the contrary, there is an urgent need for this or that thing. This is a real problem, not only for the global supply chains, but also for the economy as a whole. And it is the artificial intelligence that solves it best - it helps to plan resources more effectively and tells you how to redistribute flows in such a way that there are no overstocks, overstocks and shortages.
The ASCM also highlights in its research several trends that are new for 2023. These are robotics, which companies are now increasingly turning to to address labour shortages. This leads to another trend: smart logistics and the Internet of Things, which can provide practically real-time visibility into a product's location, speed, estimated time of arrival, local weather conditions, and so on. Also today, many companies are actively working to eliminate logistical vulnerabilities so that the interaction between transport networks and their digital copies is seamless - this includes rethinking the physical links between warehouses, highways, ports and other areas.
There is a big demand for end-to-end supply chain planning in Russia right now, but it is driven by geopolitical factors, and the problem is not an oversupply, but rather a shortage of goods that has emerged in the past year. Also, a common trend is classical optimisation of logistics routes and warehouse management, because in times of crisis, many businesses need to cut costs, and AI solutions are helping to get rid of inefficiencies and expensive processes in the supply chain. To summarise these trends, it can be said that the main requirement of logistics companies today is to help their business grow sustainably.
follow ESG principles. More and more companies need to measure their carbon footprint and other metrics that show what cost to the planet each commodity is delivered and help optimise resource costs as much as possible. Hence the second trend - the fight against overproduction - flows out. The world needs to redistribute goods, because in some places they are produced with a large surplus, and somewhere, on the contrary, there is an urgent need for this or that thing. This is a real problem, not only for the global supply chains, but also for the economy as a whole. And it is the artificial intelligence that solves it best - it helps to plan resources more effectively and tells you how to redistribute flows in such a way that there are no overstocks, overstocks and shortages.
The ASCM also highlights in its research several trends that are new for 2023. These are robotics, which companies are now increasingly turning to to address labour shortages. This leads to another trend: smart logistics and the Internet of Things, which can provide practically real-time visibility into a product's location, speed, estimated time of arrival, local weather conditions, and so on. Also today, many companies are actively working to eliminate logistical vulnerabilities so that the interaction between transport networks and their digital copies is seamless - this includes rethinking the physical links between warehouses, highways, ports and other areas.
There is a big demand for end-to-end supply chain planning in Russia right now, but it is driven by geopolitical factors, and the problem is not an oversupply, but rather a shortage of goods that has emerged in the past year. Also, a common trend is classical optimisation of logistics routes and warehouse management, because in times of crisis, many businesses need to cut costs, and AI solutions are helping to get rid of inefficiencies and expensive processes in the supply chain. To summarise these trends, it can be said that the main requirement of logistics companies today is to help their business grow sustainably.
What's next
McKinsey estimates that investment in warehouse automation will grow the most slowly in logistics, at around 3-5% a year until 2025. The slowdown, I believe, is due to the fact that logistics companies already have a high degree of digitalisation and automation. Instead of "playing around" with new solutions now, companies prefer to reap the economic benefits of those already implemented. However, McKinsey predicts that by 2030, most operations will be automated, and artificial intelligence will take over many routine activities, so that people will be free of such work. And I believe that very soon, companies will get rid of the human factor as much as possible - minimize errors caused by forgetfulness, inattention of employees. However, I don't think this is something to be afraid of. We live in an interesting time, where the world belongs to active, ambitious people who will never be unemployed. And even if they are replaced somewhere by artificial intelligence, they will definitely find opportunities to learn new skills or apply their existing ones in a completely different way.
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