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How AI – IOT is Empowering Supply Chain Thrive Amidst Climate Change Turbulence

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By Mahantesh Ambi – Engineering Manager, FourKites

Supply chain management is the lifeline of the economy, and in order to ensure that the right products are available in the right quantity, at the right place, and at the right time while optimising costs and minimising waste, VISIBILITY and INTELLIGENCE are very much necessary. That is the reason why we saw massive adoption of IoT and AI when the information age evolved. These technologies have revolutionised industries by increasing productivity, enabling a truly global outlook, and helping both industry and policymakers make informed decisions based on data.

Even though providing end-to-end visibility for the products is very illuminating, as the supply chains can be complex, involving multiple suppliers, manufacturers, distributors, and retailers spanning across local, regional, or global scales, it is not sufficient! as the industry needs demand forecasting, inventory management, route optimisation, product condition monitoring, predictive maintenance and more. All these can be achieved by leveraging IoT and AI technologies. Industries in the supply chain will be impacted by up to $120 billion by 2026 due to climate change risks.

Un.org claims that human activities such as the burning of fossil fuels like coal, oil, and gas have caused a long-term shift in temperatures and weather patterns. Cutting down forests and using gasoline are the major factors contributing to greenhouse gases such as carbon dioxide and methane. Thus, the most critical need is the supply chain's resilience to climate change because most industries rely on shipments traveling across the globe. Manufacturers, suppliers, carriers, and last-leg delivery partners share the risks of damages to any of the products from climate risks such as heavy rainfall, snow, hurricanes, wildfires, drought, water scarcity, rising sea levels, and flooding.

The Panama Canal, which is ~77km long, is a significant shipping route for facilitating global trade. It is the only global man-made maritime route that uses fresh water. Severe droughts and reduced water levels in the recent past have disrupted the global supply chain. This is a great example of climate change impacting the global supply chain and the global economy. If the drought continues, it could wipe out $200 million in revenue in 2024 Even a recent Gartner survey of CEOs and business executives indicates that environmental sustainability has become a top 10 business priority because of the current climate change risks. And we are enabling the focus to be on ESG (environmental, social, and governance) responsibility and making it a part of company valuation.

Assessing climate change will help companies better prepare for uncertainties, Following are the steps to ensure we can make data-driven decisions
1. Data gathering: Make use of IoT and other necessary systems to retrieve relevant information such as source (supplier) location (lat, lng) and destination/delivery locations, carrier transportation routes, and inventory levels. And also, most importantly, gather weather conditions, such as historic weather patterns and future climate projections.

2. Risk Identification: Build a framework to identify the risks associated with climate change in near future, either using predictive AI models or generative AI models to automatically determine the disruptions happening live or using a manual process. The framework should be able to identify disruptions such as port closure, road damage, traffic on the road, congestion in the port, temperature variations, regulatory changes due to the climate, etc.

3. Assess and build strategies: estimate the supply chain’s vulnerability to the above-identified risks and quantify the potential impact by estimating the financial and operational consequences of various climate-related disruptions. Construct a set of strategies to mitigate these risks and vulnerabilities by building a monitoring system around the framework and reporting to all stakeholders.

4. Stakeholder engagement: insights derived from the above steps, can help coordinate and communicate data-driven insights to all stakeholders.
a. Better route suggestions for a carrier than the one taken by them, which is disrupted or
is going to be disrupted.
b. Better carrier association for shippers, which can lead to reduced cost and faster
delivery
c. Due to data quality issues, carriers fail to provide vessel information for loads. Because
of this, tracking becomes impossible. But AI could help in predicting possible vessel-
carrying loads.

These steps should be automated, as climate change is dynamic and needs regular monitoring to update assessment and adaptation strategies to reflect changing climate patterns and risks.

As there is a strong push for industries to focus even more on sustainability, there is a dire need to move from a linear economy to a circular economy. Predominantly, every company focuses on profitability rather than the impact of their waste damaging the environment. That is why there was a Global Biofuel Alliance at the G20 initiative led by India, with the US and Brazil being its founding members on September 9, 2023. Its primary focus is to expedite the global usage of sustainable biofuels by boosting the usage of Flex-fuel in the market. Flex fuel vehicle engines are able to operate on gasoline with ethanol blending, and if vehicle manufacturers are able to build engines that support up to an 85% (E85) ethanol blend ratio, then the government can reduce petrol prices without owners realising it.

However, the current target set for 2025 is 25%. The Alliance is working on subsidising automotive companies to develop such engines. This move will reduce dependence on oil imports and also help create a sustainable economy.

Ethanol blending is cheap because it can be produced from sugarcane, wheat, corn, and rotten potatoes. Brazil saved ~$150 billion from 1975 to 2022 due to its ethanol blending program. And sugarcane factories are the perfect examples of how a circular economy has to be designed. The leftover dry residue (bagasse) after extracting juice from sugarcane is used to produce electricity and paper. The juice is then used to produce sugar crystals from leftover juice to form molasses. C-grade molasses is used for ethanol and rum production. Just like the sugarcane industry, the government should plan to reuse and regenerate the products in the economy by utilising technologies such as IoT and AI. Similarly, industries should start relying more and more on data and technology. Fourkites has exposure to a lot of data from suppliers, manufacturers, carriers (transporters and distributors), retailers, and last-leg delivery partners.

It is making the best use of this information to derive intelligent insights to help its customers. Partnered customers will be able to get insights about their affected shipments due to supply chain disruption, not only with climate change but with any disruptive event that will eventually affect orders, using an interactive personalised chat application called FIN AI. All customers need to do is ask any question in chat to FINAI. Fourkites is able to provide real-time visibility to the entire order lifecycle by doing demand forecasting, facility/yard management, supply-demand forecasting, route optimisation, and optimised (cheaper and faster) shipment delivery with its OIS solution.

Customers are able to get visibility and make better decisions based on connected data by tracking shipments across different modes of transportation via its live and connected data initiative, My-workspace. This is the reason Fourkites is able to provide best-in-class ETA for loads traveling in all modes of transportation.

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