A.I. is here to stay, but what impact does it have on wholesale?
Marching through a modern warehouse operation of 1,000,000+ square feet is wildly amazing. It’s the power of artificial intelligence and automation behind the scenes making it all possible. The media often covers the mainstream uses of AI but rarely touches on the intricacies happening across the supply chain. Looking under the hood, you’ll find a multitude of ways artificial intelligence impacts wholesale. We’ll also cover details of what to expect coming ahead and how to adapt. With that, here are 10 ways artificial intelligence impacts wholesale.
1 – Artificial Intelligence Impacts Wholesale Order Lead Timing
When you think about wholesale, there are a few big items that must be considered. One of the biggest is inventory carrying cost – how much it costs to hold and maintain the inventory within a given warehouse. This cost is made up of things like taxes, employees, costs to cool, opportunity cost of the space, depreciation, insurance, and the overall cost to the business.
To keep this cost as low as possible warehouses are now turning to artificial intelligence. AI monitors the time inventory runs out to the time it takes a vendor to send the new supply to the warehouse.
By tracking this, adjusting for periods of demand and bias, a machine learning algorithm can be created to perfectly time supply with demand to your location. This task can be automated so purchase orders are automatically assembled and sent off to suppliers. This reduces having an excess quantity of supply, lowering overall inventory carrying costs.
Automating the purchase ordering and lead timing is a huge advantage. Make sure your WMS can assemble and accurately time deliveries, one of the features of the dHUB mobile warehouse management system.
2 – Warehouse Layout
In the million square foot warehouse I was talking about, everything is controlled through artificial intelligence algorithms. They determine where there is space, which pod of products should be where, and how to get that item to a picking station. This actually extends to the robots which bring the pods around. Artificial intelligence controls the movement and patterns for the robots to move in. That way, when the AI algorithm recognizes more efficient patterns for organizing goods, it will detect and reorganize the movements of the robots.
In smaller warehouses, the benefits of AI come from capacity and allocation planning. Allowing the computer to understand the size of a space, as well as the size of a product will optimize exactly where to place the item. This also helps when it comes to picking the product efficiently. This information becomes very valuable when presented through a mobile app.
3 – Artificial Intelligence Impacts Wholesale Ordering and Shipping
In larger warehouse networks it’s critical to place the right order to the right warehouse. Getting this wrong means consistent backorders, under or over-allocated resources, and higher fleet costs for delivery – or shipping. Artificial intelligence impacts wholesale ordering by automating the selection across the network of where orders should be fulfilled.
This process works best by providing all the inputs to an AI algorithm. Things like traffic time, availability of a product, demand fluctuations, location and shipping options can all be taken into consideration at once. AI can significantly reduce back-office tasks by accepting these inputs to route your own fleet or shipping with a courier automatically.
4 – AI Makes Fleet Routing and Delivery 30% Better
Speaking of delivery, it’s the job of artificial intelligence to make distribution routes more efficient. In fact, there is a very famous computation problem which is oftentimes presented to recruits as a test for new engineers. It goes like this:
The travelling salesman problem (TSP) asks the following question: “Given a list of cities and the distances between each pair of cities, what is the shortest possible route that visits each city and returns to the origin city?”
The problem was first formulated in 1930 and is one of the most intensively studied problems in optimization.Cited from Wikipedia
Given this problem, AI is by far the most methodical approach to solving it. If you are still routing by memory, it’s very likely you are leaving money on the table. By some estimates, 25-28% of total shipping costs are from the last mile. Reducing your own costs by 30% comes from fuel reduction, time savings around traffic, distance traveled reductions and other factors within the delivery. Utilize a mobile fleet routing system for field sales as well as delivery to have routes planned automatically according to the factors at play.
5 – AI Can Optimize Picking Product
As you can tell, almost anything with the word optimize in it is a likely candidate for AI. This applies very well to picking product in a warehouse. As I alluded to earlier, this could be the way robots deliver the product to a picker or simply the way pickers are brought through the warehouse.
Within larger warehouses location of items and their position relative to the distance an employee or robot has to move is certainly the most tricky part. To combat the layout issue we can leverage artificial intelligence to coordinate the storage locations and frequency of travel to those locations. This will deliver efficient locations to store items. This also makes it so that warehouse pickers can navigate quickly around the warehouse to pick orders. Managing cross-docking or repositioning of items in accordance with demand rules can dramatically improve how quickly inventory is turned over too.
See how Java Traders got an ROI of 365% from implementing this picking and warehouse procedure.
6 – Artificial Intelligence Impacts Wholesale Pricing
Many businesses keep prices relatively stable for long periods of time, regardless of industry trends. The ability to match, beat or hold stable in the face of competitive pricing strategies can be a make or break moment. Artificial intelligence impacts wholesale pricing by continuously monitoring prices around the internet. Analyzing both on the consumer end (Amazon) and on a supplier end (Alibaba) to see what the regular rate for quantities you have available.
Furthermore, taking into consideration customer pricing levels or tiered quantities while looking at margins is a complicated task manually. Leveraging AI here can simultaneously take into factor price movements, suppliers movements, and your own margins and costs at one time. This delivers incremental, continuously adapting price levels for fast-moving goods.
7 – Maintaining Inventory Across a Warehouse Network
Within a supply chain, managing large quantities of items across a widespread warehouse network requires lots of calculation. It is nearly impossible to do this task without the automated capacity to redistribute and optimize ordering/delivery or product.
Here the use case for artificial intelligence comes by looking at the overall movement of product, demand curves of the product by location, and overall availability of product across the network. This data is translated into automated purchase orders, shipping automation and orders being placed at the closest available location.
8 – Using AI for Warehouse Hardware
The best warehouse planners know in order to be efficient you must have the minimum number of steps or movements between one action and another. In the case of wholesale, minimizing the steps to get from product to packaging, minimizing the amount of time it takes for a robot to get from A to B and not holding any other steps down the line is important.
As a solution here, many warehouses use conveyor belts and sorting belts. These processes in themselves are great, but when utilized with the addition of AI can become intelligent enough to provide feedback into the order of processes.
Here’s an example of how this works. For various types of packages, you could have a system in place interacting with SCADA. This would adjust the position of your scanners, scale sensitivity, or tape to dispense. All the while going through back to the order of picking to make the fastest closed-loop/wave or order based system of getting packages out.
9 – How AI Impacts Wholesale Packaging
This is one area we’ve probably all experienced in our own lives. A package shows up with a product that is 1/4 the size of the box. While this isn’t hard to reimagine given product dimensions and package size, it is hard to do with the wrong packaging material.
In fact, across the supply chain, it’s such a big deal Amazon has entire fulfillment centers designated by the size of the product incoming. So how can we optimize this process? Beyond taking the step of segregating warehouses by product size you can let the box sizes be purchased by the inventory on hand.
Just like an AI system can allocate product efficiently around the warehouse – so to can it plan for box sizes to purchase. This isn’t the most complicated of use cases, but it’s certainly an area for improvement.
10 – AI Making the Future of Wholesale based on Robots
Are robots taking over the function of warehousing? They are cheaper and more efficient for organizing and moving product. They can work 24/7 and don’t slow down. They have the ability to learn and optimize over time.
It’s a sure thing that robots will begin to handle more and more tasks within the warehouse. What you want to make sure of here is that you are able to handle the Internet of Things (IoT). Your WMS and/or ERP should be able to allocate robots to facilities and send orders to robots. This, of course, is at the tip of innovation and will require substantial investment.
For more on the use cases of robots within the wholesale distribution industry, check out this article from the National Association of Wholesale Distributors article.
How quickly the capabilities of artificial intelligence will come along maybe anyone’s guess. One thing’s for sure, it will have a dramatic impact on the companies who choose to invest. Margins within wholesale rarely go up, even as you scale, so anything to reduce bottom-line expenditures to handle the same product volume is a sure bet. Making the move now and adapting as you go, leveraging a mix of in-house technology and outsourced platform architecture will be your best avenue. Start understanding it so you can leverage it further down the line more effectively.
In any case, the goal here was to open up the mind to possibilities available now. The future will unfold from the groundwork laid now.
Join the dHUB Club for More Exclusive Content, Product Updates and Actionable Insight for Wholesalers