Why logistics companies are ready for AI-led disruption
From steam engines in the 18th century to robotic warehouses and driverless trucks in the 21st, logistics has been a tale of gradual automation. More so now, as the growth of e-commerce propels the industry to an AI-led future. “It’s hard to imagine successful logistics businesses going into the future without using AI-related capabilities,” says Manish Saigal, MD and Co-leader of Business Transformation Services at Alvarez & Marsal (A&M), which services logistics clients. The use of AI, ML, data and blockchain, Saigal says, will be the single-biggest opportunity in the logistics sector over the next few years. And in India, “it could be a $10-billion market”.
The driver of the industry’s transformation is e-commerce. The dramatic increase in shipment volumes from the remotest corners of the country is compelling logistics firms to rethink, re-envision, and re-strategise. And many are finding their moat in automation.
Take Shiprocket, for instance. The home-grown logistics unicorn, which enables e-commerce sellers, has built an AI-led Courier Recommendation Engine (CORE) that throws up suggestions to merchant partners on how a product can be delivered at the lowest prices, via the best/fastest routes, and through the best-suited courier partner. “CORE is able to detect signals across geographies, pin codes, courier partners, and customers, and advise sellers on how to allocate their couriers based on that intelligence,” says Praful Poddar, SVP-Product Management at Shiprocket. If a seller has a 70 per cent successful delivery rate, CORE helps that rate improve to 75-80 per cent.
The company helps leading D2C brands improve after-sales service at reduced costs and, in the process, captures millions of data points from multiple transactions across shopping platforms, which it feeds into its indigenous AI system, making it more accurate and useful as time passes. Shiprocket, which handles 10 million shipments per month, says its per order cost across 45 warehouses has halved and delivery times cut by 40-50 per cent since it started using AI analytics for order fulfilment.
More importantly, it helps predict demand and so, “you can store your goods closer to your customer and bring down shipping costs”, says Poddar. Adds A&M’s Saigal: “E-commerce logistics is so dynamic on the demand side that you don’t know where your next order is coming from. Companies are now building AI/ML-led logistics and fulfilment models to cater to demand, which is changing every hour.”
Many logistics companies today use predictive analytics for demand forecasting, route and location mapping, inventory planning, warehouse management, better fleet utilisation, and faster shipments. “The AI can take into account historical data as well as macro trends that are used to plan efficient shipment-fulfilment,” Saigal explains. “Brands themselves are also using AI/ML to optimise sales, plan product and inventory, lower customer acquisition costs, and maximise bang for the buck.”
Some legacy logistics companies, which would earlier fulfil e-commerce orders by carving out a corner of their warehouses designed for B2B operations, are now looking at automation as a means for expansion in B2B2C segments. While India may be far away from fully robotic warehouses, autonomous carts in the aisles and driverless trucks, several basic, repetitive and low-efficiency jobs are already getting automated.
Sure, the positives of AI intervention cannot be denied, but it begs the question: Is it threatening jobs in the sector? Are we re-entering an era of man-versus-machine? “That’s unlikely in the near future,” says Vaishnav Shetty, Chief Digital Officer at Allcargo Logistics. “We work with several companies where manpower has been significantly reduced (more than 80 per cent in some cases) as a result of robotics and automation. However, a completely zero-touch model is still some time away, especially in B2B facilities,” he says. Agrees Saigal: “Some of the most basic jobs will be automated because the scale and volume of shipments today is so high that it’s manually impossible to handle. But what works in logistics is the right combination of man and machine to deliver real value at the right cost.”
Automation, therefore, is improving the size of the pie and enhancing the quality of human intervention. It is creating new “value-add roles” that can collaborate with the machines. Not only will companies get more done in less time now, they can also log more revenues per hour and pay their workers better.
Sounds like logistics utopia.
@mittermaniac
