Cristina Ferrero Castaño
Artificial Intelligence and Machine Learning Drive the Future of Supply Chain Logistics
The transportation management industry uses artificial intelligence and machine learning to gain greater process efficiency and performance visibility.
Supply & Demand Chain
May 16, 2021
Artificial intelligence (AI) is more accessible than ever and is increasingly used to improve business operations and outcomes, not only in transportation and logistics management, but also in diverse fields like finance, healthcare, retail and others. An Oxford Economics and NTT DATA survey of 1,000 business leaders conducted in early 2020 reveals that 96% of companies were at least researching AI solutions, and over 70% had either fully implemented or at least piloted the technology.
Nearly half of survey respondents said failure to implement AI would cause them to lose customers, with 44% reporting their company’s bottom line would suffer without it.
Simply put, AI enables companies to parse vast quantities of business data to make well-informed and critical business decisions fast. And, the transportation management industry specifically is using this intelligence and its companion technology, machine learning (ML), to gain greater process efficiency and performance visibility driving impactful changes bolstering the bottom line.
Tools reduce costs, increase revenue
McKinsey research reveals that 61% of executives report decreased costs and 53% report increased revenues as a direct result of introducing AI into their supply chains. For supply chains, lower inventory-carrying costs, inventory reductions and lower transportation and labor costs are some of the biggest areas for savings captured by high volume shippers. Further, AI boost supply chain management revenue in sales, forecasting, spend analytics and logistics network optimization.
For the trucking industry and other freight carriers, AI is being effectively applied to transportation management practices to help reduce the amount of unprofitable empty miles or “deadhead” trips a carrier makes returning to domicile with an empty trailer after delivering a load. AI also identifies other hidden patterns in historical transportation data to determine the optimal mode selection for freight, most efficient labor resource planning, truck loading and stop sequences, rate rationalization and other process improvement by applying historical usage data to derive better planning and execution outcomes.
The ML portion of this emerging technology helps organizations optimize routing and even plan for weather-driven disruptions. Through pattern recognition, for instance, ML helps transportation management professionals understand how weather patterns affected the time it took to carry loads in the past, then considers current data sets to make predictive recommendations.
Pandemic accelerates adoption of AI and ML
The Coronavirus disease (COVID-19) put a tremendous amount of pressure on many industries – the transportation industry included – but it also presented a silver lining -- the opportunity for change. Since organizations are increasingly pressed to work smarter to fulfill customers’ expectations and needs, there is increased appetite to retire inefficient legacy tools and invest in new processes and tech tools to work more efficiently.
Applying AI and ML to pandemic-posed challenges can be the critical difference between accelerating or slowing growth for transportation management professionals. When applied correctly, these technologies improve logistics visibility, offer data-driven planning insights and help successfully increase process automation.
Like many emerging technologies promising transformation, AI and ML have, in many cases, been misrepresented or worse, overhyped as panaceas for vexing industry challenges. Transportation logistics organizations should be prudent and perform due diligence when considering when and how to introduce AI and ML to their operations. Panicked hiring of data scientists to implement expensive, complicated tools and overengineered processes can be a costly boondoggle and can sour the perception of the viability of these truly powerful and useful tech tools. Instead, organizations should invest time in learning more about the technology and how it is already driving value for successful adopters in the transportation logistics industry. What are some steps a logistics operation should take as they embark on an AI/ML initiative?
Data quality should come first
Remember that the quality of your data will drive how fast or slow your AI journey will go. The lifeblood of an effective AI program (or any big data project) is proper data hygiene and management. Unfortunately, compiling, organizing and accessing this data is a major barrier for many. According to a survey conducted by O’Reilly, 70% of respondents report that poorly labeled data and unlabeled data are a significant challenge. Other common data quality issues respondents cited include poor data quality from third-party sources (~42%), disorganized data stores and lack of metadata (~50%) and unstructured, difficult-to-organize data (~44%).
Historically slow-to-adopt technology, the transportation industry has recently begun realizing the imperative and making up ground with 60% of an MHI and Deloitte poll respondents expecting to embrace AI in the next five years. Gartner predicts that by the end of 2024, 75% of organizations will move from piloting to operationalizing AI, driving a five times increase in streaming data and analytics infrastructures.
For many transportation management companies, accessing, cleansing and integrating the right data to maximize AI will be the first step. AI requires large volumes of detailed data and varied data sources to effectively identify models and develop learned behavior.
Review capabilities and consider getting help
Before jumping on the AI bandwagon too quickly, companies should assess the quality of their data and current tech stacks to determine what intelligence capabilities are already embedded.
And, when it comes to investing in newer technologies to pave the path toward digital transformation, choose AI-driven solutions that do not require you to become a data scientist.
If you’re unsure how to start, consider partnering with a transportation management system (TMS) partner with a record of experience and expertise in applying AI to transportation logistics operations.