Launched in fall 2020, the Extensiv Supply Chain Scholarship aims to foster the talent that will drive the future of our industry, inspiring fresh ideas and voices in logistics and the supply chain.

Below, we present Brandon Norman, the Fall 2024 Extensiv Supply Chain Scholarship winner, and his essay making the case that the integration of artificial intelligence (AI) and internet of things (IoT) technologies will likely be the most impactful advancement in global logistics for decades to come.

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Artificial intelligence.

Most likely, this is what you will hear if you ask about “the next big thing” across many industries. Supply chain management is no different, except that artificial intelligence, or AI, has been used in supply chain and demand planning for years in some form. Instead, what will really drive advances in supply chain management in the future will be the integration of AI and sensors—basically the combination of traditional machine learning (ML), AI, and IoT form the layers in the cake, topped with some generative AI as the icing. Retailers have been using artificial intelligence in many ways for quite some time, including how they forecast and plan supply and demand. Still, there are blind spots that systems can miss.

What happens if a product gets damaged or an inventory count is wrong? Even the best AI-driven planning system will not give accurate results if the inputs have large gaps or missing information. Similarly, AI has been used in scheduling within the supply chain, such as setting, making, and updating appointments. Again, without some additional automation, the values being created miss key opportunities.

Multiple IoT technologies have also been tested in the past, possibly the most well-known being radio frequency identification (RFID), which was developed decades ago and got an initial push with retailers in the United States in the early 2000s. At that time, it was seen as a game-changing technology that could substantially improve inventory awareness. Walmart even mandated usage of the technology.1 However, after missteps and acknowledgement of the high upfront costs, the excitement around RFID waned for another ten years or so—until Walmart and other retailers made new commitments to the technology, requiring it for multiple product categories, such as apparel, footwear, home goods, and even tires.2

Evaluated separately, these initiatives seem impressive enough. Both bring significant improvements in efficiency and cost reduction across the supply chain. The real magic is when AI systems are combined with IoT solutions. For example, when RFID labels or tags are used to track inventory in real time, supply and demand planning systems get more frequent updates on what is selling and what is not in stores. More accurate adjustments can be made to purchases from suppliers and, as the system continues to learn, eventually managers can rely on AI for predictive insights, not just a view into historical or present trends. But the opportunities go deeper—much deeper.

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If you know where a product is in the supply chain and how much stock you have at different stores and warehouses, you can get more precise in planning how and where you ship orders. You can identify places where you are losing inventory to theft and then do something about it. You can avoid sending the wrong item to the wrong store. And you can set up ways to alert managers automatically when something looks wrong for any of those examples.

If you are a retailer and you share information with suppliers, then the suppliers can find ways to save too. If a supplier knows how much inventory their customers have and how fast they are selling the products, they can plan their own production and inventories to lower costs and become more efficient. The companies that supply them with materials could then get better with how they produce the materials, components, ingredients, etc. As the system continues to expand to more products and more locations—not to mention more companies—each player in the supply chain can benefit.

All that sounds good, right? But the internet of things offers even more interesting possibilities. Sensors can be added to products to provide information on the conditions around them. Temperature, humidity, light, and other IoT diagram-2factors can be tracked and combined with the inventory data to predict potential problems when a product is in a truck, at a warehouse, or in a store.

Things like pharmaceuticals and nutraceuticals, which might be sensitive to temperatures, can be monitored to make sure they are kept cold. Foods can be tracked to make sure they remain safe to eat. Recalls can be managed easier. Products that have expiration dates can be marked down earlier so they sell instead of being thrown away. With the right sensors, consumers could even scan a piece of fruit to tell if it's ripe or not. The possibilities are incredible.

All that sensor data will not help, however, unless you have the right system to make sense of it. That brings us back to AI. With millions and millions of bits of information on location, temperature, vibration, where something was made and when, and other facts, people will struggle just to keep up with the flow of new data coming in. Artificial intelligence and machine learning can be used to take all that data, sift through it, and find patterns we might otherwise miss. A person will still be making the decisions and taking actions based on the data, but AI helps speed things up and make the process easier.

The icing, so to speak, is being able to use normal language to prompt the AI system to show the results you need. It does not make sense to constantly revise reports if no one is using them constantly. Rather, by making it easier for the average user to ask a question in their own language, the system can tailor its results specifically to the situation at hand with GenAI, speeding up calculations and decisions since it might not need to consider every piece of data.

Obviously, there are numerous ways the supply chain can advance. Robots in warehouses can reduce the need for human workers to handle dangerous or repetitive tasks, for example. Small warehouses attached to stores allow customers to get online orders faster, right down the street. But underneath those innovations sit artificial intelligence and sensors.

To truly change the way things get done in the supply chain, rapidly expanding AI and sensors is a must.

Sources

1. Swedberg, C. (2022, March 3). Walmart Recommits to RFID. RFID Journal. LINK

2. Kay, M. (2022, February 9). Walmart to Use RFID to Improve “Store Level” Inventory Accuracy in Home Goods, Consumer Electronics. Forbes. LINK

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