The IT revolution: How artificial intelligence is transforming the logistics industry

Never underestimate the importance of transport management to the British economy. The industry is worth billions (circa £60bn in 2013) and around 150,000 VAT registered UK companies are dependent on road transport to trade effectively.

As transport costs are typically between 3-10 per cent of a company’s turnover, they are an important factor for both individual organisations and the economy as a whole. One of the long held aims of the industry has been to reduce the number of freight vehicles on the road. As such a significant part of the GDP in both the UK and the rest of Europe, the prospect of being able to remove 30-40 per cent of freight vehicles from the roads has massive environmental and economic implications for all of us.

So what is the best way of achieving this ambitious target? Some in the logistics industry have asserted that collaboration is the way forward, but I am sceptical of this claim. True collaboration is difficult to achieve and as yet, appears to have had little impact on vehicle numbers. The only way to significantly reduce the amount of trucks and vans on the road is to improve utilisation - and the most effective way of doing this is through the use of new technology.

Industry culture

Logistics processes may look ripe for automation and the application of AI, but it’s fair to say that as a sector, we have been relatively slow to embrace technology.

This is largely due to the industry’s culture - an operational background, staffed by hands on people who like running and looking after trucks and warehouses. This means that a haulier who loves trucks may often spend a lot of money on vehicles, but may not appreciate the value of an equivalent investment in IT. Transport company owners have told me on several occasions that they are comfortable making the decision to spend £150k on a truck in less than a minute, but it would take months to come to terms with spending £5k on much needed computer technology.

One of the problems that the industry has had implementing technology is the complexity involved in managing daily changing variables. Some really good strategic and analytical systems using sophisticated algorithms to help run operations have been developed and trialled, but few have the capacity to cope with the flexibility required. Ultimately, most decisions are still made by humans. Fortunately, the average transport manager has an impressive capacity for split second decision making, combined with an understanding of when volume will peak and which days will be busy, in addition to a huge amount of knowledge. A technical solution is often the last resort.

Taking control

However, change is afoot. The big users of transport such as car manufacturers are looking for more control of their transport processes. For example, Honda is now using software to manage several carriers with significantly fewer people, bringing the whole operation back in-house.

The company is now reaping the rewards of a significant monetary saving, increased control and improved service levels using technology to carry out activity that would have been unthinkable just two or three years ago. Transport management systems fall into two categories.

Carrier systems - These run, manage, control and track vehicles on a dynamic operational basis. They cover the planning of transport, the administration of running vehicles and the legalities surrounding driver management. They also include the physical elements of running vehicles, often referred to as telematics. The data currently comes from black boxes in vehicles that measure engine and driving performance. Transport planning is mainly a computer aided manual exercise as few carriers embrace the technology available.

A number of other systems coming to the fore include dash-cam cameras and navigation systems for carriers meeting specific requirements for HGVs. As smartphone applications are being developed, these are impacting on the black boxes and other fixed hardware currently in use.

Transport management platforms - These sit above carrier systems and manage most of the complexities, administration and control. Today’s sophisticated platforms are often modules of large ERP systems. Most are US centric, designed for that particular market, which is vastly different to the European transport sector with its myriad of tariff mechanisms, diverse currencies and historic road system. SAP is one of the few European platform options, but its processes are limited; it is very much a shipment administration system.

Unfortunately, transport management is often a reactive process at the end of the sales order cycle. The end result is a pool of highly skilled staff with an infinite knowledge of what, when and how to ship - who then become bottlenecks in the fulfilment process.

The emergence of AI

However, for the first time we have systems with the capacity to replicate the infinite knowledge of the human brain. The systems being developed use algorithms and specific optimisation tools to create synergy with companies, with the ultimate aim of increasing vehicle utilisation on a 24-hour basis.

These systems automate as much of the transport process as possible, using less people and improving the visibility of good management information which enables organisations to make sound business decisions.

Although used on a strategic basis for some time, artificial intelligence planning is just seeping through into dynamic operations and is now being used for day to day planning. The new breed of systems can work with all the variables, making changes and identifying optimal solutions instantly.

Smartphone applications have also entered the mix, presenting a real dilemma for the many companies who have made multi million pound investments in systems that only 18 months ago were the best solution. Although highly sophisticated and capable of managing infinite complexity, the cost of installing and using applications on a smartphone is a matter of pence. This means that the black box systems currently used to monitor everything from temperature to load information in vehicles are now being superseded by a more cost effective smartphone solution.

Today, a smartphone app can track a shipment, not just the vehicle, providing real-time information and real-time data. As a result, the culture is changing with companies like Honda demanding to take control of their operations by implementing this type of system. Retail organisations such as Amazon, eBay and PayPal which have a real understanding of how to use technology and how it changes operation management are leading the way.

Other game changers

In addition to transport management systems, there are other technological advances that will have an increasing impact on both transport and business processes.

Driverless vehicles – The lack of drivers is one of the most serious problems facing the logistics industry and there is a radical solution on the horizon – driverless vehicles. Trials for driverless vehicles are taking place on the M6 in Manchester as well as in other countries, including Germany. It may be some way off yet, but it will happen.

The development of electric and driverless vehicles brings optimisation along with it and will have a dramatic impact on the number of vehicles on the road – although I do believe there will be a period where human beings will be necessary for administration purposes.

3D printing - Logic dictates that if a machine can construct a 3D image of a product today, as they become increasingly sophisticated, these machines will start to produce 3D parts and 3D manufacturing – which is likely to decentralise the manufacturing process. The way that materials and products are transported will also change. The rise of 3D printing will involve moving the raw materials required to make things which will be more efficient than transporting products today, which all have different shapes and sizes and use an extensive amount of packaging.

These innovations, just like the new advanced transport management systems developed over the last 12-18 months, seemed unlikely just a few years ago - yet they are now a rapidly approaching reality. Their potential for improving vehicle utilisation and reducing vehicles on the roads can only be a good thing. 

However, organisations need to keep up with what technology can offer and embrace that technology to successfully fufill the changing demands of 21st century industry, their clients and the end consumer.

Steve Twydell, CEO of the 3T Group

Image source: Shutterstock/stockphoto mania