Information Technology

Can Logistics Technology Replace Human Decision Makers?

<p style="text-align: justify;">You are head of transportation for a large apparel company with 2000 stores spread over 900 cities across India. Every week you ship over 20,000 boxes through 15 logistics partners from 6 warehouses.</p><ul><li style="text-align: justify;">You get a call from the Head of Sales, blasting away about a shipment of the latest designer wear delayed by over 30 days.</li><li style="text-align: justify;">Three states have just opened lockdowns, and you have to scramble to deliver material to stores or consumers. You have to ensure 3X capacity given the high season.</li><li style="text-align: justify;">Your boss wants to release contracts for a logistics partner. He wants you to analyze the performance of 20 plus partners over the last three years and give him feedback. He also wants to check any impact of monsoon, festivals, marriage seasons, etc. on delivery time.</li></ul><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">Technology is the key to handling the above situations- real-time tracking, responsive transaction systems, and data analytics will help in the above cases.</p><p style="text-align: justify;">Traditionally, the logistics industry has seen itself as a physical infrastructure industry with massive investments in vehicles, warehouses, ports, ships, etc. Also, most of the workforce is unskilled or semi-skilled. Thus, investment in logistic technologies was limited in handling specific functions of a company.</p><p style="text-align: justify;">Companies source components globally to manufacture today's products. But the advent of global supply chains changed this dramatically. A problem in the chip-making factory in Taiwan creates production issues in car plants in Europe and India.&nbsp;</p><p style="text-align: justify;">Supply chains need to be connected digitally to handle such a scenario, and information needs to flow between companies and countries in real-time.</p><p style="text-align: justify;">There has been a massive investment in technology start-ups in the last few years to digitize various parts of supply chains. Today, you can get data from various sources such as GPS trackers, IoT devices, Sensors in cold chains, Ship and Flight tracking systems, Warehouse control systems, and Smart CCTV feeds.</p><p style="text-align: justify;">The mobile phones used by delivery vans and bikes generate an immense amount of GPS data, Geo-codes of delivery locations, images of products, and delivery documents.</p><p style="text-align: justify;">Logistics has made a jump from too little information to an unlimited torrent of data in less than ten years. With the increasing application of Artificial Intelligence and Machine learning, several tasks are now automated.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Logistics Technology and Human Decision-Making</span></h2><p style="text-align: justify;">Despite all the advances in logistics technology, human decision-makers continue to play a central role in most logistics operations- especially in responding to exceptions.&nbsp;And exceptions are galore. The covid-19 pandemic created massive chaos in global supply chains, and the same is yet to become normal.</p><p style="text-align: justify;">When the Suez Canal was blocked by Ever Given ship for less than 7 days- it created massive snarls in supply chains. A drought in Taiwan halted semiconductor shipments across the world.</p><p style="text-align: justify;">Many extreme climate events such as Floods, Storms, and Droughts are increasing every year. Most mathematical models fail to handle such outliers. Thus, human decision-makers will always be needed to steer supply chains though.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Need of the Hour is Techno-Logisticians</span></h2><p style="text-align: justify;">As a weather forecaster, she will interpret data from various sources, apply data science models, adjust them with emerging data, and make decisions.</p><p style="text-align: justify;">Like air traffic controllers, they will monitor a part of the supply chain and interact with their counterparts, and "hand over" movement of vehicles, ships, aircraft, and cargo to them for further control.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">There are many challenges to the wide adoption of such a model:</span></h2><h3 style="text-align: justify;"><span style="font-size: 12pt;">1. Limited Talent Pool </span></h3><p style="text-align: justify;">The current workforce of logistics companies is yet to adopt logistic technologies such as AI and Machine Learning, to do business. Some Business Schools have already started programs combining logistics theory and technology, but many more will be needed.</p><h3 style="text-align: justify;"><span style="font-size: 12pt;">2. Fragmentation</span></h3><p style="text-align: justify;">Logistics execution has multiple layers. India has more than 4 Mn transportation companies, with most owning less than 5 vehicles.</p><p style="text-align: justify;">To reach the deepest corners of India, consumer companies sometimes work with 30-40 partners- all of them with basic systems or none at all. There is a need to offer an easy system at a low price to many such players.</p><h3 style="text-align: justify;"><span style="font-size: 12pt;">3. Lack of Investment</span></h3><p style="text-align: justify;">Most end customers do not put a premium on service providers' technology capability and focus on the lowest cost model. This results in lower investment in technology and tech-enabled manpower.</p><p style="text-align: justify;">Many more challenges abound, and not all will be solved in the short term. But things are changing on the ground quickly and many times with simple solutions.</p><p style="text-align: justify;">Also, many Indian start-ups have identified the "unorganized" sector of logistics as their key market. They see an opportunity in scale and offer a range of services related to logistics such as lending, brokerage, sales of equipment, etc.</p><p style="text-align: justify;">In summary, we can see that technology is working more as an assistant in human decision-making in logistics. Robots will play their role- but humans are where the industry needs to invest more.</p><p style="text-align: justify;"><span style="font-size: 10pt;"><em>This <a href="">article</a> was contributed by our expert Apurva Mankad.</em></span></p><h3 style="text-align: justify;"><span style="font-size: 18pt;">Frequently Asked Questions Answered by Apurva Mankad</span></h3><h2><span style="font-size: 12pt;">1. How can AI be used in logistics?</span></h2><p style="text-align: justify;">AI has many uses in Logistics- let us look at some of the key use cases.</p><p><span style="font-size: 12pt;"><strong>Digital twin of vehicles </strong>: </span>AI will help create a Digital Twin of vehicles. Data from sensors inside vehicles can be used to create a Real-Time view of vehicles' various parameters. Using AI will help to PREDICT faults and likely breakdowns of vehicles, thus ensuring timely action.</p><p style="text-align: justify;"><span style="font-size: 12pt;"><strong>Video analytics </strong>: </span>Technology such as Cognitive AI has become commonplace. The same will now be applied to all aspects of a warehouse. Vehicle docking, tracking of human operators, CCTV based attendance are becoming common tools across Smart Warehouses and will be deployed widely.</p><p style="text-align: justify;"><span style="font-size: 12pt;"><strong>Smart routing </strong>: </span>Data on the movement of vehicles on a set of routes is fed into an AI engine. The AI engine creates a pattern of movements and maps the same with the season, terrain, etc., to create a model. In the next move of vehicle on the same route- AI can predict timeliness, possible delays, and safety aspects.&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">2. How is AI changing the logistics industry?</span></h2><p style="text-align: justify;">AI is helping the logistics industry complement human effort. For example, it was impossible for a human to monitor data from the control tower's hundreds of vehicles and alerts.&nbsp;</p><p style="text-align: justify;">AI can look at such data and immediately identify specific cases where attention is needed. This helps to focus on most likely events and most important issues- in a proactive manner.&nbsp;</p><p style="text-align: justify;">AI can now match demand and supply from multiple customers and transport providers. This ensures that the best match for demand is found even before the vehicle reaches its destination. This reduces empty trips and thus costs for everyone in the ecosystem.</p><p style="text-align: justify;">In warehousing, AI can now monitor forklift movements and alert operators in case of any deviation or collision with an object. AI can analyze the overflow of material and alert warehouse managers to decongest a warehouse and not send more loads.&nbsp;</p><p style="text-align: justify;">AI can monitor fire hydrants to ensure a water supply; thus, in case of any fire, the warehouse is not caught without water.</p><p style="text-align: justify;">Overall, AI is doing several tasks that humans could never do, thus improving safety and efficiency.&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">3. What technologies are used in logistics?</span></h2><p style="text-align: justify;">Modern Logistics is all about data and analytics and AI. A range of technologies are used. Here are some of the most popular ones.</p><ul><li style="text-align: justify;"><strong>Vehicle sensors and GPS</strong> : This helps to track vehicles, check the health of the vehicle, and reduce fuel consumption</li><li style="text-align: justify;"><strong>Route and load planning </strong>: The vehicle can be planned based on available load and capacity. This ensures that optimized size vehicles are placed to reduce costs. A delivery route can be planned based on location data to ensure maximum deliveries in minimum time and distance.&nbsp;</li><li style="text-align: justify;"><strong>RFID and BLE </strong>: Warehouses are increasingly tagging all material with RFID to track the same and ensure inventory accuracy.&nbsp;</li><li style="text-align: justify;"><strong>Edge computing </strong>: Data feed such as CCTV feed, Proof of Delivery documents, returned material scanned in the Mobile device or Edge computer and analyzed. Based on the algorithm, data for the same is sent to the cloud server for action. This reduces the need to transfer huge files, and analysis is rapid right at data capture.&nbsp;</li><li style="text-align: justify;"><strong>APIs </strong>: Application Programming Interfaces or Web Hooks provide data between systems and ensure that all stakeholders get required information in real-time. There is no need to feed data into different systems.&nbsp;</li><li style="text-align: justify;"><strong>Robotic Process Automation (RPA) </strong>: Logistics is full of documents. Now, RPA can help automate the process of reading such documents and feed data into the software.&nbsp;</li></ul><h2><span style="font-size: 12pt;">4. What is the future of the logistics industry?</span></h2><p style="text-align: justify;">After Covid-19 induced disruptions, Logistics and Supply Chains are the key focus for all companies and countries. There is a massive movement toward the digitization of all processes in the logistics chain.&nbsp;</p><p style="text-align: justify;">In India, there is a massive focus on building physical and digital infrastructure to help the economy grow much faster without creating bottlenecks.&nbsp;</p><p style="text-align: justify;">The Indian government has taken multiple initiatives such as Fasttag, E-way Bill, E-invoicing, Port Entry Automation, ONDC, and Vahan Portal to help all stakeholders digitize information.&nbsp;</p><p style="text-align: justify;">MNCs, Indian companies, and venture capital firms are investing massive amounts into warehouse modernization, technology start-ups, last-mile delivery networks, and multi-modal logistics parks.&nbsp;</p><p style="text-align: justify;">All above indicate a very robust and high-growth future for the logistics industry.</p><p style="text-align: justify;">&nbsp;</p>
KR Expert - Apurva Mankad