To what extent will AI impact the 3PL industry?

3PL providers have a challenge on their hands as the pace of change continues to escalate. The hurdles that lie ahead are multifaceted with environmental concerns, technological advancements, workforce dynamics and evolving customer preferences all requiring immediate attention.

Take AI for example. The technology appears to have taken various business sectors by storm and the supply chain and logistics sector is no different. In a survey of 3PLs last year, 84% of providers described AI and machine learning as among the technologies most likely to have industry-wide impacts. There is a clear acceptance that it will impact the industry, but how it will be implemented to maximise its capabilities remains yet to be decided.

AI could allow 3PL providers to make some significant efficiency, cost-saving, and sustainability gains when used appropriately. Two areas that could be profoundly impacted are warehouse operations and transportation.

One of the areas where AI could unlock the greatest benefits is warehouse automation. As AI algorithms mature and gain the capability to predict consumer purchasing habits, productivity in warehouses is poised to increase. We are already seeing warehouse automation projects yielding impressive returns. For example, the recent success of The Hut Group, achieving a remarkable 12-month return on investment on an automation project, sets a new benchmark in the industry. As AI continues to mature, we could see more businesses achieving quick ROI and operational efficiency with AI-powered automation.

AI’s potential to provide near real-time decision-making capabilities is also propelling the evolution of autonomous vehicles from trial and concept to a tangible reality. As AI algorithms improve hazard perception and enable swift judgements, the use of autonomous vehicles becomes increasingly possible. However, despite technological advancements, public perception remains a significant obstacle. If we are to integrate AI into transportation systems on a large scale, businesses must ensure that their safety measures are well communicated to employees and consumers.

The integration of AI in the 3PL sector, while promising, is not without its potential drawbacks. The speed at which AI is entering our work and private lives is staggering. But there will inevitably be times when it isn’t correct. This is fine when asking for a language translation, but will consumers be as forgiving when deliveries are late or don’t arrive at all?

Additionally, the logistics industry tends to be cautious when adopting new technologies. Despite advancements in warehouse and transport management systems, much of the detailed work involved in the 3PL sector is still done by email and phone. Relationships rightfully do play a significant role in the sector and are likely to still prevail even as AI becomes more widely adopted.

One other major challenge is the requirement for strong data points. Supply chains by nature rely on various systems to ensure the smooth running of operations. However, the accuracy and consistency between these systems, let alone integration, is often lacking and leads to confusion and differences that only humans can resolve. Without robust data collection and storage systems, AI can’t work effectively. Promisingly, AI tools are being developed to overcome this challenge, but we unfortunately aren’t there just yet.

As 3PLs continue to face various challenges at the hands of geopolitical tensions, environmental concerns and economic pressures, AI can lend a helping hand. For warehousing and transport, the technology can already support companies by streamlining operations and minimising human error. However, in its current form, the technology must be used alongside the current workforce. With legacy systems still in place across the sector and existing AI systems still prone to errors, the industry certainly isn’t ready for a full transition.

Chris Clowes, senior consultant, SCALA