AI in the supply chain - how to manage logistics well in a crisis

Logistics plays an important role in all industries and the fashion industry is no exception. Well-managed logistics that relies on digitization and foresight can overcome crises - the best examples being the recent container ship that was stuck in the Suez Canal and caused global repercussions, or the current pandemic, which is turning into a logistical nightmare for many. FashionUnited spoke to Andreas Nierlich, Sales Director Retail EMEA DACH at Blue Yonder, a leading global supply chain platform, about the current situation and how artificial intelligence (AI), planning and transparency can help manage one’s logistics.

Mr. Nierlich, in view of the recent crises and broken supply chains - how can good logistics help manage crises and make the supply chain more efficient?

Good logistics start with transparency and planning. Transparency about where which goods are currently located; the digitization of the supply chain helps enormously here. When planning, one has to know that the future is not deterministic and therefore cannot be planned 100 percent, but machine learning can predict the probability of future events. Covid-19 has also made very short-term changes in planning necessary, and digitization helps us to react more quickly and flexibly to such changes. It also helps to better assess the future and become more agile.

Companies that rely on AI-based solutions for their supply chain are better able to mitigate impacts of this magnitude than those that are still not open to modern technologies. Being able to make quick decisions based on data and to automate alternative sources of supply in incidents like these keeps the business running.

Artificial intelligence can better assess the likelihood of supply chain disruptions. Although no AI in the world can predict a pandemic, technology is an essential part of the solution. It can make data-based decisions in minutes and redirect the flow of goods so that supply chains do not come to a complete standstill.

Andreas Nierlich / Blue Yonder

Companies like Marks & Spencer, Gap and Macy’s, which are among Blue Yonder’s customers, were early adopters of AI. Is it currently only the big companies that are retooling and investing here?

Not only. Companies like Best Secret, Bonprix or Takko are also among our customers, but also those outside of Europe and not just the big ones. A small shoe retailer from Poland, for instance, recently approached us to promote its growth strategy through AI and more efficient planning. It is important that three forces work together: the awareness that something has to be done, a focus on the areas where AI can be used meaningfully and the allocation of the necessary financial resources.

Where would a company ideally start that wants to rely more on AI and make its logistics more digital?

The first step should be to take stock: Where does AI deliver the fastest benefits? It often makes sense to start at the end of the chain, with the markdowns. There, one can generate added value very quickly and without too many changes in the process, and thus also finance other things. That is often the best argument for a change in the process. But there are no generic recommendations; every company, every situation and every industry is different.

Speaking of arguments for digitization: What is the biggest benefit of investing in the supply chain?

Definitely strategic aspects: A company gains more agility, there is greater automation and thus also more profit. For every euro invested, there are usually ten euros in profit. Typically, this happens very quickly and the investment pays off within six to twelve months. 

That should be a very convincing argument?

Planning and logistics, for example, are strongly interwoven, and in the fashion industry these two areas are particularly difficult to tackle, especially due to long lead times caused by production in the Far East. In addition, there are many factors that influence how a season goes and of course, one cannot predict every trend. While planning and choosing the right kind of strategy is certainly the strength of human beings, digitization and AI help make a multitude of right decisions to implement that strategy. For example, how to distribute goods to the stores. AI is the most advanced in analyzing demand and pricing and can determine: When do I have to write off/reduce so that I can sell my goods optimally by the end of the season? This is where sustainability comes into the picture as well.

Is data security a concern for potential customers should they opt for more digitization in their supply chain?

Nowadays, there are only a few companies that have a ‘no cloud’ strategy. In addition, personal data is often not yet processed. Theoretically, one could go down to the customer level, but the industry is still far away from that. In any case, good data security is guaranteed. Today’s cloud solutions, such as those from Amazon, Google or Microsoft, can guarantee even greater security than local solutions, especially in the case of hacker attacks. These companies invest billions in their public cloud infrastructure. In Europe, the issue of data security is a very central one.

Last but not least, there is news on the corporate side - can you tell us more about Panasonic’s acquisition of Blue Yonder?

Panasonic already acquired a 20 percent stake in Blue Yonder in July 2020; now they will add the remaining 80 percent (for just under 6 billion US dollars), subject to the usual approvals. For Panasonic, the purchase is a long-awaited step into the market for software, which is more profitable than that for hardware. In any case, a software provider is being acquired by a traditional hardware/IoT provider, which points to greater interconnectedness in the future. This dovetailing helps us realise our mission of an autonomous supply chain, enabling customers to optimize their supply chains with the combined power of AI, machine learning and IoT and edge devices to manage processes in real time.

Case study:

Fashion retailer Bonprix was able to roll out a completely new pricing strategy in Germany in just two weeks, which accommodated the company’s disrupted supply chain and a changing consumer behaviour. The Hamburg-based retailer has been using Blue Yonder’s pricing services as a purely market-driven tool since 2014, but in light of the pandemic, the company needed to incorporate more factors such as individual stock levels and demand.

Instead of heavily discounting and overselling high-demand products at the expense of slower-moving ones, Bonprix relied on Blue Yonder’s fully automated lifecycle pricing strategy, which incorporates inventory and demand as well as big data and ever-changing conditions, so Bonprix employees were free to devote their time to other pressing tasks.