Artificial Intelligence Poised to Revolutionize the World of Reverse Logistics
By Larry Velman
There is an increasing amount of conversation around the topic of artificial intelligence in the world of reverse logistics. In fact, for the first time in its history, the Reverse Logistics Association featured the topic in a seminar at its 15th annual RLA Conference held this month in Las Vegas, highlighting the relevance of AI as an innovative solution the supply chain industry must embrace to thrive.
With all the misinformation and confusion about AI in the marketplace, let’s start with a solid definition and its correlation to reverse logistics. Simply put, artificial intelligence refers to a machine that is able to observe its environment, learn from collected data and demonstrate reasoning abilities. When we refer to the concept of knowledge and intelligence in a human being, we call it learning and problem solving.
When a machine is doing the learning, it is called “artificial intelligence.” And, while it may be technically man-made and artificial, make no mistake about it. AI is extraordinarily intelligence and, thanks to technology, it has the ability to become exponentially more intelligent with every bit of data collected and stored.
AI isn’t a new concept, although in the world of supply chain it hasn’t been in the forefront until now. In fact, since the 1950s, AI has been improving and has even shown up in pop culture in a way that’s surprised humans.
● In 1997, IBM’s Deep Blue stunned the world when it beat one of the greatest chess champions, Garry Kasparov.
● IBM’s AI-powered Watson computer system was developed to answer questions on the quiz show Jeopardy! In 2011, Watson beat two all-start Jeopardy champions and took the $1 million first place prize.
● In May 2017, Google’s AlphaGo AI team beat the world champion of Go, Ke Jie. Go is considered one of the most complex games in existence, more complex than checkers and chess, and having more possible situations than the number of atoms in the universe.
AI is far more than fun and games. Case in point: Two years after Watson beat Ken Jennings on Jeopardy, it was put into commercial application at Memorial Sloan Kettering Cancer Center in New York. The AI platform now makes management decisions in lung cancer treatment.
There is no question, by definition, the best learning by AI is yet to come.
The Intersection of AI & Reverse Logistics: The Future Starts Now
There is much we don’t know about artificial intelligence. However, one thing is for certain. With mounting returns strangling the bottom line for retailers and etailers, the opportunity AI presents in reverse logistics is more obvious than it’s ever been.
As we know, AI involves the movement of goods from a consumer, store, or fulfillment center, through one of many potential paths. We need the system to always be at its most efficient. However, there are challenges to overcome. The biggest challenge has to do with being intelligent about how to correctly make disposition decisions about returned products to minimize the number of times the item gets touched. To ensure maximum dollar recovery and minimum impact on the environment and the product brand or value, it stands to reason that we need to reduce touches to as few as possible.
Fortunately, the world of Reverse Logistics has been computerized for a long time now. Petabytes of data have accumulated over the years and we are now at a stage where both computer hardware is readily enough available. Further, AI methods are refined enough to make use of this data to increasingly drive more “good decisions” that ultimately lower costs, increase recovery, promote reusability, help the environment, and improve the experience for both customers and vendors along the way.
The best part is that the faster and cheaper computers become and the more data we collect, the more AI can help. Product data is paramount in this important decision-making process. Experience in the Reverse Logistics space demonstrates the challenges we face in obtaining the correct data quickly enough to make the right decisions.
The good news is that product data is out there to be found.
● It’s listed all over the web.
● It’s in our databases and inventory systems.
● It’s in our own sales history and ledgers.
The fact that there is so much of it out there is half the reason it’s not used — there’s so much noise it’s hard to isolate the signal.
Intelligently dispositioning products through the reverse supply chain adds value to all parties involved: the customer, the store, the associate in the store, the retail organization, and the vendor.
We know from experience that the fewer times each product is handled, the less strain on the customer and the more savings to the retailer and the vendor. Today, disposition decisions are pre-defined. They originate with stipulations in merchant agreements with vendors, and flow accordingly to each logistical step downstream.
The obvious downside is the characteristic rigidity in this common configuration. As market conditions and seasonality shift, making changes to better fit the bottom line are very difficult because they are costly and slow to implement.
However, if we fuel the correct and current data into an AI engine, instant decisions can be made and implemented. Product flows can be changed dynamically and on-the-fly, and with no additional overhead.
They say that “necessity is the mother of invention.” With the rapid growth of online commerce, improved supply chains, and increased focus on environmental impact, evolution in the Reverse Logistics space is more relevant than it has ever been.
The time is ripe for the introduction of Artificial Intelligence that will take this burgeoning industry to the next step, and provide many benefits for all of us along the way.
Larry Velman is the CIO of goTRG, the industry’s leading supply chain and SaaS solutions provider. goTRG’s innovative technology powers every touch, movement and decision for the world’s largest companies resulting in superior net margins, controls and sell-through. To learn more about revolutionizing your company’s reverse logistics process with AI, contact goTRG at www.gotrg.com
