5 ways AI will transform logistics in 2024
BENGALURU : As we stand on the cusp of 2024, the sector is poised for significant transformations, driven by technological advancements and a heightened focus on sustainability. Before beginning the new year, it’s imperative to examine the trends that will serve as guiding lights, leading businesses toward a future marked by prosperity and innovation.
Generative AI: Shaping the Future of Logistics for 2024 and Beyond
According to global research, the generative AI logistics market is set to surge from $412 million to an astonishing $13,948 million by 2032, showcasing a remarkable CAGR of 43.5%.
North America is anticipated to lead this transformation, with a current market share standing at 43%. The potential of generative AI lies in its ability to minimise stockouts, optimise delivery routes, identify risks, and enhance resource allocation, promising a transformative impact on productivity.
The application of generative AI goes beyond routine tasks, offering real-time communication enhancements through AI-powered chatbots and virtual assistants. This technology’s ability to forecast disruptions within supply chains, addressing issues like route deviations, unexpected weather anomalies, or breaches of Service Level Agreements, is particularly noteworthy. With generative AI applications like real-time fleet tracking and control towers, businesses can proactively identify potential delays and mitigate risks before they impact revenues.
Despite the significant growth in AI adoption, a McKinsey report reveals that there is still untapped potential, with less than one-third of organizations implementing AI across multiple business functions. The upcoming years are expected to witness a pivotal role for generative AI in reshaping logistics operations, ushering in an era of unparalleled efficiency and innovation.
Addressing Carbon Emissions: A Global Priority for Businesses
Reducing carbon emissions has become a top priority for logistics businesses globally. In 2024, the industry is placing heightened focus on cost, capacity, service, and most importantly, carbon footprint. The logistics response to carbon emissions varies across regions, each exhibiting unique approaches and challenges.
The United States, as the largest contributor to transportation emissions, is expected to take stronger initiatives to reduce carbon emissions in 2024. Indonesia is making progress driven by consumer demand for sustainability. The Middle East, a key player in global fuel production, is investing in technology to reduce carbon emissions. In contrast, India faces significant sustainability challenges, but logistics businesses are actively investing in solutions to address carbon emissions.
Quick Commerce Revolution to Make a Comeback
The global surge of quick commerce, an e-commerce model prioritizing ultra-fast deliveries within an hour, is gaining significant traction. In the United States, major players such as Gopuff, Instacart, and Getir are heavily investing in this trend, with anticipated revenues soaring to $30.8 billion by 2024. The quick commerce phenomenon is also spreading across regions like the Middle East and Indonesia, where substantial market growth is expected in the upcoming years.
India, known for its tech-savvy population, is witnessing a rapid surge in quick commerce adoption. Projections indicate a staggering annual growth rate of 49.5%, potentially propelling the market volume to $7.88 billion by 2027. This rapid rise of quick commerce is reshaping the logistics landscape, fueled by evolving consumer behaviors and heightened expectations for ultra-fast deliveries.
Embracing the Future: The Rise of Asset-Light Logistics
2024 witnesses a notable trend taking center stage in the logistics realm — the increasing favor towards an asset-light logistics model. This revolutionary strategy enables businesses to emphasize customer experiences while diminishing dependence on physical assets for operations, leading to decreased operational costs.
A substantial 67.5% of global companies opt for third-party logistics (3PL) providers to handle their transportation operations, with an additional 63.5% outsourcing their warehousing functions. The financial weight of transportation costs, accounting for over two-thirds of total business logistics expenses, is a key driver behind the rising adoption of the asset-light logistics approach.
Cloud-Based Revolution Set to Transform Logistics
In the dynamic business landscape of logistics, cloud-based solutions are emerging as a pivotal force, driving the digital transformation of operations. The widespread adoption of cloud-based solutions by enterprises is expected to reach new heights in 2024, offering advantages such as speed, cost-effectiveness, control, scalability, and security.
A report projects that within the next five years, a staggering 86% of supply chain-based companies will incorporate cloud computing into their operations, highlighting the growing recognition of the value of cloud-based solutions. The global cloud supply chain management market is predicted to skyrocket from USD 21.79 billion in 2022 to an estimated USD 71.93 billion by 2030, driven by a robust CAGR of 16.10%.
As businesses seek to navigate the evolving logistics landscape with greater agility, efficiency, and cost-effectiveness, the cloud-based revolution will play a pivotal role in reshaping the industry. Whether to build an on-premise solution or opt for a ready-made cloud-based solution is a crucial decision businesses will face, with both options presenting unique advantages and challenges.