AI driving supply chain competition as Amazon enters logistics

The news that ecommerce leviathan Amazon is moving into the logistics field is forcing supply…...

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The news that ecommerce leviathan Amazon is moving into the logistics field is forcing supply chain businesses to up their game, and many see artificial intelligence (AI) as the way to improve their competitiveness, according to a special report in the Economist.

Amazon is trialling a pick-up and delivery scheme in Los Angeles which puts them in direct competition with major couriers such as UPS and FedEx. This development is worrying everyone from multinational logistics providers like Maersk down to innovative local start-ups, but it also looks likely to encourage firms to provide a faster, more reliable service while also keeping their costings lean.

The finance company Goldman Sachs has predicted that AI will result in an overall cost reduction for global logistics of at least 5%, resulting in additional profits of up to $25bn (£17.7bn) across the sector over the coming decade. Meanwhile, management consultants and analysts McKinsey predict that up to $2tn (£1.42tn) per year could be saved by using AI in supply chain and manufacturing.

AI-powered drone deliveries are one of the most visible manifestations of the radical shift that AI is already bringing about in the supply chain and logistics industries. Robotic workers in warehouses and factories are another. Tracking the movement of goods and planning delivery routes to improve efficiency and reduce costs can result in savings of millions of pounds.

Behind the scenes, AI is being used in HR and accounting, with applications including predicting which clients are likely to make late payments. AI systems can also predict when equipment might break down, allowing large organisations to prepare for such eventualities. Previous performance data can be matched with ongoing information via smart sensors on the machinery in question.

The ability of AI to make accurate forecasts of future trends is also revolutionising inventory management. Amazon uses AI to predict demand up to 18 months ahead, and AI utilisation could prove the difference between survival and extinction in tomorrow’s supply chain landscape.

Ed Cross

Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.

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