AI Will Make Your Supply Chain Cheaper

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Jo Lambadjieva
October 29, 2024

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AI Will Make Your Supply Chain Cheaper

In an industry dominated by unstructured documents and outdated communication methods, generative AI is emerging as a powerful tool to streamline supply chain processes. While more high-profile AI applications struggle to demonstrate profitability, the technology is delivering tangible returns in the logistics sector.

The global supply chain has long been plagued by inefficiencies stemming from its reliance on faxes, paper contracts, and various unstructured documents. These outdated methods often result in errors, delays, and extended wait times, impacting everything from inventory management to last-mile delivery.

Alex Nederlof, engineering director at supply chain technology company Flexport, highlights the industry's current state: "We're getting to the end of 2024 and we have physical paper that comes into the office with freight documents that we're still scanning and keying into computers, which is mental compared to most other industries. We're like the taxi industry, pre-Uber."

Generative AI, particularly with its recent advancements in multimodal capabilities, is proving to be a game-changer. The technology can now efficiently parse complex shipping contracts, bills of lading, and other crucial documents that have traditionally been challenging for traditional computer systems to process.

Flexport has integrated generative AI into its core technology stack, using it to examine documents, extract pertinent information, and input it into their systems via an automation layer. Human oversight remains a critical component, addressing the technology's potential for hallucinations before finalizing any actions.

The results are impressive. Flexport's AI-powered document parser is currently processing 15,000 documents per month, reducing operator time spent on these tasks by 80%. The company aims to achieve 50% automation by next year, potentially even surpassing this target.

The cost implications are significant. Nederlof explains, "Parsing the document is about five cents on OpenAI with vision and then a couple of prompts. So you go from a document parsing being anywhere between five and ten dollars to spending five cents, maybe 10 cents, worst case, on the automation. Then a human looking at it at one dollar if they can go fast through the documents."

For e-commerce businesses and Amazon sellers, this development could translate to more accurate inventory tracking, faster shipping times, and reduced costs throughout the supply chain. As AI continues to optimize logistics processes, online retailers may find themselves better equipped to meet customer expectations for rapid, reliable delivery.

The AI angle extends beyond document processing. Flexport is exploring more ambitious applications, including a voice AI system capable of engaging truckers in real conversations to determine availability and book journeys. This type of innovation could significantly streamline the last-mile delivery process, a critical component for e-commerce success.

While the industry awaits the fruition of more ambitious AI projects, these practical applications in supply chain management are delivering immediate value. As Aidan Gomez, CEO of Cohere, aptly puts it: "It's so boring, but it is so valuable. People don't understand the actual scale of impact of some of these crucial, banal things. And if we can scale them up, make them more accurate, more reliable, it really is world-changing."

For e-commerce businesses and Amazon sellers, staying informed about these AI advancements in supply chain management could prove crucial. As the technology continues to evolve and demonstrate ROI, early adopters may gain a significant competitive advantage in the increasingly complex world of online retail logistics.

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