Artificial intelligence: The future of logistics

13.01.2020 by Ümit Günes

Bird's eye view of container port

Digitalization, especially artificial intelligence (AI), will fundamentally change industrial processes. Logistics is the pioneer in this development, says Dr. Michael ten Hompel, head of the Fraunhofer Institute for Material Flow and Logistics (IML).

In the near future, artificial intelligence (AI) will support business leaders while they confront such challenges as the shortage of skilled workers, increased time pressures and the ability to make well-founded decisions quickly. With the action plan "Digitalization and Artificial Intelligence in Mobility," the German Federal Government intends, among other things, to press ahead with the expansion of the country’s high-performance digital infrastructure. One goal is to use digitalization and AI to ease road congestion and intelligently link drivers. According to Michael ten Hompel, managing director of the Fraunhofer Institute for Material Flow and Logistics IML, logistics, in particular, has great potential to pave the way for the introduction of artificial intelligence for the entire economy. "Logistics can be completely algorithmized, it's in the genes, so to speak," says ten Hompel.

Pioneering Artificial Intelligence With Logistics

What does that mean in concrete terms? The processes in logistics, i.e. getting the right goods to the right place at the right time, are usually standardized. But the networking and optimization of these steps is highly complex, so it’s an ideal space to deploy artificial intelligence. With the help of AI, logistics in future could control extremely complicated processes along the entire value-added chain and, for example, enable the rapid manufacture of individual products (batch size 1 production). In addition, logistics has numerous points of contact with other industries such as construction, retail or the trades. According to ten Hompel, logistics is therefore the basis for global free trade. If processes based on artificial intelligence function here, logistics simultaneously create a technological basis for other sectors.

But in practice things look quite different: According to Telekom's Digitalization Index 2019, the topic AI is not yet relevant for 47 percent of those firms surveyed, with just 19 percent having concrete plans to use it in the next two years. However, failing to have an overview of the supply chain is not a more affordable option: According to a study by the German Association for Supply Chain Management, Procurement and Logistics (BME), one in five supply chain interruptions in 2018 caused damage of up to €1 million or more. The solution? Digitalized supply chains that can be monitored in real-time at every station from the factory to the customer.

Internet of Things for supply chains

Individual steps of a logistics process – such as production on the assembly line or goods procurement in intralogistics – are already largely standardized and digitalized today. For example, using intelligent trackers and sensors.

Networked trackers, such as the Low Cost Tracker from T-Systems, show in real-time where goods are, report vibrations, react when the ambient temperature changes or signal when the specified route changes during transport. Smart buttons are also already being used in logistics and are reducing waiting and idle periods. Take, for example, the IoT Service Button from T-Systems: At the touch of a button, it can be used to initiate various processes, such as reordering materials or reporting technical malfunctions.


Sharing Data for Transparent Supply Chains

Such complete networking can only be achieved if the participants in a supply chain share their data transparently. "Data becomes more valuable depending on how well described, shared and processed it is. So we have to figure out how this data gold can be mined in real-time, as well as how it can be handled confidently and responsibly," says ten Hompel. For a complete digitalization of the supply chain, all participants have to share their data in a transparent manner – from the sensor the size of a euro coin on a supplier's warehouse shelf to the coordinates of the container ship that transports the goods across the Atlantic. Secure platforms are obligatory here. But only companies that actively exchange data will likely have a chance at being successful in the future.

Fortunately, such platforms already exist today. The Data Intelligence Hub from T-Systems allows companies to manage their securely data while making it available to other subscribers in order to monetize it. This can be geo-coordinate info, such as weather or traffic data, so firms can better plan the delivery of their goods. It can also include measurements from various machines. But very few companies involved in supply chains are using these platforms. According to ten Hompel, this is a mistake: "Anyone trying completely on their own to make the whole world happy as an established company is still under the spell of late-capitalist romanticism left over from times long since gone. Pretty soon they will only be driving around packages for others."

How Artificial Intelligence Will Influence Industry 4.0

According to his vision, all industrial companies will eventually publish and exchange their data on such platforms. "We already have everything we need to make a total platform economy a reality – not just for logistics," says ten Hompel. Such an intelligent and global platform economy could be the basis for further technologies in the future, such as smart contracting, distributed ledger technologies or blockchain.

In order to ensure that Europe does not lag behind the USA or China in these developments, ten Hompel advises investing today in the development of appropriate platforms and algorithms. Because only those who are prepared to open up and participate in neutral platforms will win the race to be world champion of logistics.

The Fraunhofer IML Institute for Material Flow and Logistics

The Fraunhofer Institute for Material Flow and Logistics (IML) takes a holistic look at logistics research and considers the development of both internal and external logistics.

The institute explores concrete solutions for direct implementation by companies, but also conducts long-term research on complex issues concerning the logistics industry. The idea of the Internet of Things for logistics was born here about 15 years ago. Today, a central component of the research at the Fraunhofer institute is to provide companies with the simplest possible access to the Internet of Things.

The range of topics being investigated there is incredibly broad: A total of 315 researchers and 250 doctoral candidates and other students work at the Fraunhofer Institute for Material Flow and Logistics. Just a few of the things they are looking into include new technologies for artificial intelligence, resource logistics and traffic systems.

Dr. Michael ten Hompel is the managing director of the Fraunhofer Institute for Material Flow and Logistics IML. His best-known development is the shuttle technology for intralogistics. He is also considered a pioneer of the Internet of Things in Germany. In 2012, he was inducted into the Logistics Hall of Fame.


Digital Supply Chain: Smart, Robust, Successful

Digital Supply Chain: Smart, Robust, Successful

With our IoT solutions, supply chain managers create environmentally friendly flows of goods and increase efficiency throughout the entire value chain. The result? Cost savings, greater delivery reliability, and more satisfied customers.

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With our IoT solutions, supply chain managers create environmentally friendly flows of goods and increase efficiency throughout the entire value chain. The result? Cost savings, greater delivery reliability, and more satisfied customers.

More about the Digital Supply Chain

Stacked containers in a container port
Ümit Günes
Ümit Günes

Marketing Manager IoT

Having been with Telekom since 2008, Ümit possesses a comprehensive understanding of various facets of the Internet of Things. He has a keen interest in the digital transformation of the business world. On this blog, he shares insights into the latest developments and trends in the IoT sector that provide genuine value to customers.