Leaders weigh in on AI and its power to future-proof the supply chain
As the world grapples with problems both incremental and existential, the laser-guided use of data and analytics is needed to strengthen the global supply chain. Increasingly technology will be called on to play a pivotal role in helping to both understand and meet the world’s biggest challenges.
The logistics industry is beginning to embrace this era of transformation. “Our most important job is to make clarity out of chaos,” said Hamid Moghadam, CEO of Prologis, the world’s leading developer and owner of logistics facilities. Speaking at GROUNDBREAKERS, the leading supply chain thought leadership forum hosted by Prologis, he said: “There is a lot of information coming at us every day and the skills to understand it are growing more important. This is the time to be decisive.”
Tackling broad decarbonization goals, stabilizing energy prices and more, every company in the supply chain “has to be a technology company, a data company and increasingly a data science company,” said Ted Decker, president and CEO of The Home Depot, who spoke alongside Moghadam at the event in San Francisco.
With the emergence of Big Data — an information flow so large, fast and complex that it’s difficult to process using traditional methods — companies need to move rapidly and utilize advanced data analytics to spot trends, predict scenario outcomes, make informed business decisions, and tackle society’s biggest problems.
Among the most transformative developments is the enthusiasm around AI — “the overnight success that took decades to create,” said Warren Packard, an operating partner at the AI Fund, a venture group that solves challenges using AI.
Enterprise leaders at September’s GROUNDBREAKERS spoke to an audience of hundreds gathered in-person, and thousands virtually from more than 80 countries, about their hopes that AI will boost productivity in areas ranging from customer service to sales and software engineering. It was clear at GROUNDBREAKERS that the logistics industry is eagerly embracing AI, and experts point to the sector as a potential early case study in how AI can reshape an industry.
For instance, Decker spoke about how The Home Depot uses AI in applications as diverse as handling customer queries to inventory forecasting and replenishment. “The opportunities are endless in terms of the power and the magnification of what you can do with that data,” he said.
Data as a Difference Maker
The impact of these AI innovations spans industries and sectors. Using AI to analyze massive amounts of health care data, for example, can lead to better disease prevention strategies. Sensors and remote monitoring systems can collect real-time data on environmental factors, helping overcome challenges related to climate change, natural disasters and resource management.
“AI is a big and fast-moving train,” said Moghadam. “You better get on it or you’re going to get run over by it.” Speaking at the panel “The Future Is Here: Is Your Supply Chain Ready?,” Moghadam made the point that companies that fail to leverage data science will increasingly fall behind competitors that have successfully adapted.
The excitement to board that train has been accelerated by the emergence of generative AI, which can learn the patterns and structure of input data and generates new data with similar characteristics. An IBM survey of global CEOs revealed that 69 percent anticipate broad benefits of generative AI across their organization, while 75 percent believe competitive advantage will depend on who has the most advanced solution. And they are under pressure to get going quickly.
Those broad benefits are especially attractive to companies where sustainability is a business imperative. The data-driven nature of logistics makes it ripe for digital transformation.
Moghadam’s enthusiasm for AI is playing out at his own company. Prologis facilities can provide their customers with data that accurately measures a company’s resource consumption pattern, including water and energy usage, and suggests ideas for improvement.
“We’re no longer just working with our customers at the real estate level,” explained Moghadam. “We’re collaborating on the innovation level. We want to help them meet all their needs, including energy usage. We’re becoming a partner to them to help them grow strategically.”
Readying The Supply Chain for Future Challenges
The past few years have demonstrated that old data-based models of predicting the future supply and demand of goods and services can prove crippling in times of crisis. The singular chaotic moment of COVID-19 turned those reliable finely-tuned designs and projections — a balanced blend of anticipated inventory, capacity and time — on their head.
Additional factors, including geopolitical challenges and increased consumer expectations, have shifted supply chain management and resilience to the top of the C-Suite agenda. “Things have stabilized, but we are one earthquake, one crisis, one pandemic, one weather event away from the supply chain blowing up again,” Moghadam said.
In the wake of pandemic-induced disruptions, organizations have focused more on strengthening their supply chain and logistics capacity. Today, remarkable surges in AI capabilities have led to a wide range of supply chain innovations that help enterprises keep on top of inventory levels and ever-changing customer needs.
Today, AI is used to produce better consumer behavior models, anticipate demand spikes and avoid overstocking while reducing shortages. This helps retailers reduce timing inefficiencies, avoid supply crunches and have better visibility as to when goods will arrive. “We can use artificial intelligence and other algorithms to better balance the load of the system,” said Azita Martin, vice president and general manager of AI for Retail, CPG and QSR NVIDIA during the panel “Logistics That Learn: Transformation Through Intelligence.”
Technologies like the Industrial Internet of Things, which can access distributed data in real-time via sensors and forward that to the cloud, will play a big part in enabling fast, strategic decisions. New machine learning models can also factor in fast-moving global changes, minimizing the dependency on higher-risk geographical areas and rapidly identifying alternative suppliers and changes in credit risk. Sharing data across financial institutions and nations can enable real-time risk evaluation.
The result is a supply chain that is more data-driven and efficient. “Successfully implementing AI-enabled supply-chain management has enabled early adopters to improve logistics costs by 15 percent, inventory levels by 35 percent and service levels by 65 percent, compared with slower-moving competitors,” according to a recent McKinsey report.
Embracing technological advancements in AI could also help companies across the value chain increase and achieve sustainability goals, and help address climate change. According to McKinsey, 90 percent of a company’s environmental impact is found in its value chain, often a complex web of hundreds of energy providers and suppliers across geographies who work together to make and distribute goods.
Many businesses, such as those represented on the GROUNDBREAKER’s energy panel “Energy Transition and Renewable Energy: Is the World Prepared?,” are taking steps to make their supply chain operations carbon-neutral and resilient from distributed assets along the transmission line. This includes buying electricity from renewable sources, working to harden their electrical grid, installing intelligent lighting and heating systems to reduce energy consumption, investing in clean energy initiatives and more.
Susan Uthayakumar, chief energy and sustainability officer at Prologis, noted to the panel, “When the grid was built in the 1900s, it was designed to transmit power that was produced in power plants over long distances to the end customer. Now we’re producing energy from distributed assets along the transmission line. It’s a fundamental shift in the way we produce, transmit and consume energy.”
That change is significant. “The energy transition is underway,” said Carla Peterman, chief sustainability officer at Pacific Gas and Electric Company. “Ninety-six percent of the electricity we delivered to our customers last year was carbon-free.”
Logistics that Learn
Demand for sustainable warehouses is also predicted to grow rapidly, driven by the falling cost of building and sustaining those operations as well as volatile fossil fuel-based energy pricing. Planning is happening now for future demand, said Alice Jackson, senior vice president of System Strategy and Chief Planning Officer at Xcel Energy, an energy utility company. “The infrastructure we’re putting in the ground today is going to be there in 2050. We have to make our bets today on what [our customers] are actually going to [need],” Jackson said.
Similarly, corporate leaders also need to anticipate, adapt and evolve. Companies can combine rapid network speed with AI-driven insights to speed up connections between people, vehicles and goods, enabling teams to swiftly surface critical findings. With tighter communications, businesses are able to run highly efficient supply chains.
Companies can also synthesize data streams to make better decisions. Data that has been contextualized and integrated offers increased risk prediction analytics and forecasting opportunities. Operators and managers can use it to choose better routes, maintenance plans and delivery windows.
There is now a whole new range of AI-based startups emerging, many in vertical markets. These include companies like bearing.ai, now optimizing shipping routes for the long haul transport of goods across the globe; Cheetah, an application provider that offers demand forecasting and inventory prediction for restaurants; Voxel, which leverages computer vision AI to monitor and score industrial safety in logistics and manufacturing environments; and Everseen, now offering computer vision-based product recognition to prevent theft at self-checkout.
It’s just the beginning, and events like GROUNDBREAKERS are providing the platforms and opportunity for collaboration that will only further drive innovation forward.
Don’t be afraid to take chances on new things, and don’t be scared by the words that ‘something’s never been done.’ Take that always as a challenge.
CEO of Prologis