Above the Fold: Supply Chain Logistics News (December 1, 2023)

We’ve entered the final month of 2023 and I have a terrible case of writer’s block this morning. So, with the few words I have, let’s just go straight to the supply chain and logistics news that caught my attention this week.

AI: “As Critical as Oxygen”

“AI helps us with everything we do leading up to [Cyber Monday] and on the day itself,” said Scot Hamilton, vice president for last-mile delivery routing and planning technology at Amazon, in a post the company published this week. “It is meant to be something you don’t see or feel, but it’s as critical as oxygen. When you don’t realize it’s there, that means it’s working perfectly.”

Here are two of the five ways Amazon is using AI in its operations according to the post:

Amazon’s Supply Chain Optimization Technology (SCOT) helps forecast demand for more than 400 million products each day, using deep learning and massive datasets to decide which products to stock in which quantities at which Amazon facility, while coordinating inventory shipments from millions of sellers worldwide.

Since different customers order different things every day, route design and optimization is notoriously one of the most difficult problems Amazon needs to solve. The company uses more than 20 machine learning models that work in concert behind the scenes. “Planning a route requires as many decision points as there are atoms in the universe, and AI is critical to making this possible,” Hamilton said. “AI is critical because there are too many decisions that need to be made in the moment that can’t be done manually anymore, especially at this scale.”

Amazon is not alone in leveraging AI. As Liz Young reports in the Wall Street Journal this week, “Merchants including Walmart, retail-pharmacy giant Walgreens and online fashion seller ASOS are rolling out the increasingly sophisticated technology that takes in everything from weather patterns to social-media trends to evaluate huge sets of data and guide decisions on where to place inventory.”

In Walmart’s case, for example, the retailer “programmed its inventory-management system to look at weather forecasts and searches on its own website as well as on search engines such as Google. [It] then uses AI to evaluate whether people may be searching for Barbie Dreamhouses in one region of the country and Squishmallow plush toys in another, for instance. Walmart can then move more of those products close to expected demand.”

Yes, there is a lot of hype surrounding AI, but there is also a lot of reality, as these examples illustrate.

Is AI a silver bullet solution to supply chain problems? Of course not, especially since many problems, such as labor shortage and poor transportation infrastructure, go beyond what any technology can solve. But it’s clear that AI is unlocking opportunities for innovation that are just not possible with older technologies — and certainly not possible with manual processes and Excel spreadsheets.

In short, AI is widening the gap between industry leaders and laggards, a gap that will become increasingly difficult to close with each passing day. How long will you stand on the sidelines?

And with that, have a happy weekend! 

Song of the Week: “Tennessee Whiskey” by Chris Stapleton