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Retailers could save $41.36 billion through logistics AI, but only 1% of projects reach full scale

The retail industry could save $41.36 billion a year by introducing AI into its logistics operations, according to a new study.

Titled ‘Building the Retail Superstar’, the Capgemini report claimed that retailers could save 6.9% of their logistics costs by using AI to optimise several core functions in logistics.

An additional $123.63 billion could be saved through a 7.5% cost savings in returns brought on by AI.

In terms of specific areas where they could invest, the report cited predictive logistics network management, visual-aided picking and inspection of warehouse assets, reverse supply chain and returns management and route optimisation.

Other areas included reducing distribution pilferage, improving back office functions and optimising categories.

The report highlighted the UK’s Ocado as a company making use of automation in its picking and packing processes. The company’s CEO recently attributed its rising revenues in Q4 to its new customer fulfilment centres.

It also discussed how Tesco is using AI to more efficiently route vans and schedule drivers, including for the in-store staff which pick up online orders. Meanwhile, Walmart in the US uses the technology to analyse whether a temperature rise on a truck is damaging a product and can reroute it to a closer destination if needed.

In addition, Germany-based Otto automatically analyses past transactions alongside variables such as sales, searches and weather conditions to predict customer purchasing patterns.

The survey found that the proportion of retailers deploying AI had risen rapidly over the last two years, increasing from 4% in 2016 to 28% this year.

However, it found that only 1% of projects had reached multi-site or full-scale deployment.

In order to succeed with AI, the report said retailers should focus on quick wins which are easy to implement, despite the lower benefit projections.

It also said they should ensure their data practices are mature, which means integrating datasets across the organisation to provide a single view of data and use a variety of different types of data.

The report surveyed 400 executives from retailers across the UK, France, Germany, Italy, Spain, Sweden and the Netherlands as well as China, India and the US in August 2018.

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