Startups are applying artificial intelligence to supply chain disruptions

  • By Nick Carey / Reuters, LONDON

Over the past two years, a series of unexpected events has disrupted global supply chains. COVID-19, the war in Ukraine, Brexit and a container ship stuck in the Suez Canal have all combined to delay shipments of everything from bicycles to pet food.

In response, a growing group of startups and established logistics companies have created a multibillion-dollar industry that uses the latest technology to help businesses minimize disruption.

Interos Inc, Fero Labs, KlearNow Corp and others use artificial intelligence and other cutting-edge tools to enable manufacturers and their customers to respond more quickly to supplier shortages, monitor raw material availability, and navigate the red tape of cross-border trade.

Photo: AFP

According to analysts, the market for new technology services focused on supply chains could be worth more than $20 billion per year over the next five years.

By 2025, more than 80 percent of new supply chain applications would leverage artificial intelligence and data science in some way, said technology research firm Gartner Inc.

“The world has gotten too complex to try to manage some of these things in spreadsheets,” said Dwight Klappich, an analyst at Gartner.

Interos, valued at more than $1 billion in its latest funding round, is one of the most successful companies in the emerging market.

The Arlington, Virginia-based company says it has mapped 400 million businesses worldwide and uses machine learning to monitor them on behalf of corporate clients and alert them immediately if fire, flood, hacking or other events cause a potential disruption.

Before Russian tanks rolled into Ukraine in February, the company assessed the impact of an invasion.

Interos said it has identified about 500 US firms with direct supplier relationships with companies in Ukraine.

Further down the chain, Interos found that 20,000 US firms had ties to second-tier suppliers in Ukraine and 100,000 US firms had ties to third-tier suppliers.

Interos chief executive officer Jennifer Bisceglie said that after the war began, 700 companies contacted the firm for help evaluating their commitment to suppliers in Ukraine and Russia.

The company is developing a new product to play out other hypothetical supply chain disruption scenarios, such as China invading Taiwan, so customers understand their risks and where to find alternative suppliers, she said.

Supply chain shocks are inevitable, Bisceglie said.

“But I think we’re going to get better at minimizing those disruptions,” she added.

US-based Delta Air Lines Inc, which spends more than $7 billion annually on catering, uniforms and other merchandise in addition to its aircraft and fuel budget, is one company that uses Interos to keep track of its 600 key suppliers and a total of 8,000 suppliers to retain.

“We don’t expect to avoid the next crisis, but we do anticipate that we will be much more efficient and effective than our competitors at assessing risk when this happens,” said Heather Ostis, vice president, head of global supply chain management at Delta.

Based in Santa Clara, California, KlearNow sells a platform that automates cumbersome, paper-heavy customs clearance processes.

That was a lifesaver for EED Foods, based in Doncaster, England, which imports Czech and Slovak sweets and cured meats for overseas customers in the UK.

“Before Brexit we were very afraid that we would have to close, but instead we are busy like never before,” said EED Purchasing Manager Elena Ostrerova.

Ostrerova said her company was still growing at a 40 percent annual rate after Brexit came into effect in early 2020, partly because some competitors have given up rather than tackle the cumbersome new paperwork of importing from the EU.

KlearNow’s customs clearance platform tracks hundreds of shipments from Central Europe, counts totals on thousands of items, corrects errors in everything from country of origin to gross net weight and provides an entry number that contains all information about a shipment – for the company that transported it to Britain, she said.

“We have minimal human involvement,” which saves the company the time and expense of manual data entry, Ostrerova said.

Berk Birand, chief executive officer of New York-based Fero Labs, said the COVID-19 pandemic has highlighted the need for manufacturers to adapt to changing suppliers so they can continue to make identical products regardless of the origin of raw materials.

The startup’s platform uses machine learning to monitor and adjust how raw materials from different suppliers affect product quality, from varying levels of contamination in steel to the viscosity level of a surfactant, a key ingredient in shampoo. The system then communicates with plant engineers to optimize manufacturing processes to maintain product consistency.

Dave DeWalt, founder of venture capital firm NightDragon, which led Interos’ $100 million Series C funding round last year, said regulators will take a much greater interest in supply chain risk.

“If you have a supply chain issue that could cost you significant shareholder value, you also have a huge responsibility,” DeWalt said. “I think that’s coming in the near future.”

Large logistics companies are also using machine learning to increase their competitiveness. US truck fleet operator Ryder System Inc uses real-time data from its fleet and that of its customers and partners to create algorithms to predict traffic patterns, truck availability and prices.

Silicon Valley venture capital firm Autotech Ventures has invested in KlearNow and newtrul, which combine data from transportation management systems in the highly fragmented US truck sector to predict price changes.

“Mapping your supply chain and interconnectivity at the item level is the holy grail,” said Autotech partner Burak Cendek.

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