Compact - Artificial Intelligence in Supply Chain - What to expect - Miebach Consulting
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Compact Artificial Intelligence in Supply Chain - What to expect Supply chain management is changing and AI is leading the way. Whitepaper compact Miebach Consulting June 2021 Author: Bryan Nielson nielson@miebach.com Miebach Consulting Whitepaper compact, June 2021
There are no two ways about it. AI is here to stay.
However, there is so much information on AI that it can become confusing or overwhelming
to the everyday supply chain professional. With this whitepaper, we intend to demystify and
demonstrate the role AI can play in the global supply chain. By comparing the ‘old’ world with
the new AI-led world , we can show what is possible.
Why is AI in the supply chain in the spotlight now? Two reasons: Millenials and unforeseen
events, such as COVID-19 and Suez Canal blockage. Both are driving significant changes in con-
sumer behavior. Especially impactful for the Consumer Goods industry, companies are changing
their go-to-market strategies, prioritizing channel management, and re-evaluating product port-
folios.
Inventory velocity Forecasting demand SKU rationalization and
reduction
Each vs. Case picks Monitoring product quality
Streamlined product portfolio
Companies and their supply chains are adapting and responding to the new realities hastened
by COVID and the shifting demand. The need to balance supply chain resiliency with profitabil-
ity has become mandatory for most organizations. In other words, the new value in the supply
chain is agility.
AI-based solutions enable businesses to become more agile by streamlining processes and im-
proving supply chain efficiencies through big data analytics and insights. Preparing for a resil-
ient future starts with understanding the power of AI and how its implementation in different
areas can provide for an optimized and cost-effective supply chain.
Interactive Voice Response Delivery navigation around Geofencing for inventory
(IVR) for customer service traffic and construction availability at nearby locations
Computer learning for sug- Geofencing and intelligent Delivery estimates in real time
gesting add-ons to orders routing within areas based on traffic on route
Miebach Consulting Whitepaper compact, June 2021
Old World vs. AI-led world
A good example where agility can be demonstrated through AI is the last-mile delivery, specifi-
cally the application of machine learning. This area is commanding a lot of attention due to the
impacts of COVID but also from the “want it now” mindset of consumers.
Over the last decade or two, the trend has been toward static routing. Consistency drives pre-
dictability, which drives efficiency and reduces your delivery cost. Another big benefit to sup-
port static routing is the customer sees the same driver week after week and builds and sus-
tains relationships for the unplanned critical times.
However the dynamism with AI becomes a powerful combination that can unlock previously
unattainable cost savings in the static supply chain last-mile delivery model. Here is the com-
parison:
Static Model (Old World)
Static Model (Old World) • Efficiencies currently trapped in the static
• Static models enable drivers to get comfortable with routing models
and people, driving consistency and predictability
Dynamism with AI (New World)
Dynamism with AI (New World) • Not widely known
• Much more data can be analyzed
• Real-time data - no end of the day downloads and feeds
from ERP
CON
• Suggestive or predictive in nature
• Predictability comes from AI and real-life situations, im-
proving efficiencies
• Complexity is taken out of drivers hands
PRO
Last Mile Delivery
Vendor Spotlight: Locus, a future-ready platform that automates supply chain decisions, provided their input on this topic. They shared some of their data to identify the potential opportunity and compare static vs. dynamism and provide a business case. Krishna Khandelwal, Chief Business Officer at Locus said, “Locus is a technology platform that uses machine learning and proprietary algorithms to automate complex supply chain decisions. Its smart supply chain solutions provide end-to-end visibility and enable enterprises to enhance their operational efficiency by reining costs, streamlining the customer experience, and reducing environmental impact.” Locus’ scalable solutions include route optimization, real-time tracking and analytics, sales beat optimization, territory planning, vehicle allocation and network design. The future-ready plat- form has resulted in $150 million+ savings in logistics costs, 70 million+ kilometer reductions in distance traveled, and 17 million+ kilograms reduction in GHG emissions for clients across sec- tors like e-commerce, retail, e-grocery, CPG/FMCG, home services, home deliveries, 3PL, trans- portation, and B2B distribution. One of Locus’ top customers is Asia’s largest E-Grocery company, which has operations in 25+ cities and over 15,000+ products on its platform. With a customer base of over 10 million, it became important for them to ensure service to customers within the time that has been promised to them. Locus provided a comprehensive route optimization and track- ing solution to the client. Locus DispatchIQ generates optimized routes using AI, thereby enabling the riders to deliver more in less time. This results in increased rider efficiency and better compliance. Locus TrackIQ provides real-time tracking, insights & analytics. The client achieved 99.5% SLA Adherence and on-time delivery for 10 million+ customers. These numbers are staggering and in such a scenario, static routing would never work. Locus’ routing engine considers more than 175 constraints like traffic, route restrictions, hours of service, delivery personnel expertise and ratings, territory mapping, etc. while planning so as to enable the best delivery experience to customers. The machine learn- ing-led algorithm learns every day as tasks get executed on the ground. To put it plainly, machine learning helps decrease the delta from planned activities to actual results as every new scenario helps better predict future outcomes. This application is commonly imple- mented in demand planning and transportation optimization or last-mile delivery. Also, for companies in the CPG space, Locus’s proprietary algorithms help organizations increase outlet serviceability ratio by 12-15% while reducing the total distance traveled by 10-30%.
Upcoming use cases
Another interesting practical use of AI in the supply chain is the digital twin.
Digital twin technology replicates part of your supply chain so you can develop what-if sce-
narios to pressure test the optimal scenario before implementing a solution for that particular
circumstance or environment. This also enables one to understand the tradeoffs between the
scenarios chosen. This application is utilized most commonly in network designs and capacity
planning across the supply chain.
Summary:
One of the best approaches to enabling an agile supply chain is through dynamism and AI. This
combination provides agility and can be defined as sensing dynamic processes based on analyt-
ics. E-commerce demands agility, and the new supply chain values it. With the technology today,
there is a better approach and solution to last-mile delivery—dynamism through AI. There are
a myriad of other areas in the supply chain that can leverage AI with the same benefits of low
investment and effort, with a high return.
E-commerce demands agility, and the new
supply chain values it. With the technology
today, there is a better approach and solution
to last-mile delivery - dynamism through AI.
Miebach Consultants have been successfully designing supply chains for almost 50 years. We know AI
and its successful application in supply chains and in SCRM.
Get in touch with us if you want to discuss how to manage your current challenges.
Miebach Consulting Inc. Author:
151 N. Delaware Ste. 800
Indianapolis, IN 46204 Bryan Nielson, Director
Tel. +1 317 423 3126 nielson@miebach.com www.miebach.com
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