AI in Logistics Market

Market Overview

The global AI in logistics market size was valued at USD 7.96 billion in 2022. It is estimated to reach USD 238.89 billion by 2031, growing at a CAGR of 45.93% during the forecast period (2023–2031). The growing e-commerce sector and growth in international trade worldwide are primarily driving the demand for AI solutions in logistics. Logistics forms the backbone of the e-commerce industry as well as international trade. The growing internet penetration with high-speed internet connection is boosting the proliferation of IoT devices in the logistics industry, making implementing AI solutions easier.

Artificial Intelligence (AI) is a technology radically altering the logistics industry. It refers to the use of algorithms and machine learning to automate and optimize various logistics processes, and it is already being used to automate routine tasks and provide previously unattainable insights. The logistics business benefits greatly from the massive networks it encompasses, making it a highly suitable domain for the use of artificial intelligence.

By analyzing data, AI can predict future production and transportation volumes, resulting in more efficient use of resources. As a result, increasingly more responsibilities are being delegated to self-learning digital systems. Ultimately, the function of AI in logistics is to streamline order processing, inventory management, supply chain, and distribution to improve the customer experience. It can be utilized to automate routine tasks to reduce costs, enhance efficiency, and enhance customer service.

Market Dynamics

Global AI in Logistics Market Drivers

Rapid Growth of International Trade 

One of the most powerful driving forces transforming global logistics and supply chain management is artificial intelligence (AI). According to a report released by the United Nations Conference on Trade and Development (UNCTAD), global trade in goods remained strong, while trade in services finally recovered to pre-COVID-19 levels. In 2021, the total amount of global trade reached a new high of USD 28.5 trillion. This depicts a 25% increase over 2020 and a 13% increase over 2019, before the hit of the COVID-19 pandemic.

While most global trade growth occurred in the first half of 2021, it continued in the year's second half. Following a rather sluggish performance in the third quarter, there was a notable upturn in trade development during the fourth quarter. Notably, the volume of products traded surged to a record-breaking USD 5.8 trillion, reflecting a substantial rise of almost USD 200 billion. This revival of international trade is expected to boost global AI in the logistics market.

Increasing Online Market due to Internet and Smartphones

Digital technologies have brought about a fundamental shift in the delivery and consumption of services across international boundaries. Internet usage has grown significantly due to the rapid pace of digital transformation. According to the latest figures, internet users reached 4.8 billion at the beginning of 2021 (ITU, 2021). The latest generation of mobile internet, like 5G technology, enables big data collection and analysis, which improves service quality by allowing users to receive detailed and up-to-date product explanations and inquiry resolution in minutes.

With AI capabilities, a company's network design and forecasting demand efficiency has improved. Companies are becoming more proactive in using tools and technologies that aid in precise demand forecasts and capacity planning. Moreover, AI can have a positive effect on client satisfaction. AI models play a crucial role in aiding organizations in analyzing current routing and optimizing route tracking. Route optimization utilizes shortest-path approaches from graph analytics to determine the most efficient route for logistics trucks. Such factors drive the market growth.

Global AI in Logistics Market Restraint

Difficulties in Adapting, Learning, and Integrating the New Technology

Artificial intelligence continues to encounter numerous practical hurdles. The process of supervised learning in machine learning continues to necessitate human involvement in the classification of training data. For example, many SMEs (Small and Medium Enterprises) can face problems in learning and adapting new technology along with their daily work to enhance productivity, manage resources, and react to the market effectively and efficiently. These factors restrict the market growth.

Global AI in Logistics Market Opportunities

Advancements in Artificial Intelligence 

Artificial Intelligence advancements can work as catalysts for expanding the logistics market in demand and supply forecasting by effectively utilizing easily available huge data sets to forecast demand and supply levels. In a country like India, precisely mapping addresses is a major difficulty for logistics companies. Accurate geocoding allows businesses to conduct dispatches, shipments, and last-mile delivery operations faster and more easily. Real-time data analytics can help in gaining a better understanding of supply chain operations.

Similarly, real-time monitoring lets customers know their order progress and complete information about who handles their shipment and how to increase transaction transparency. Particularly in the Indian market, logistics and transportation must be efficient. Logistics technology may enhance scheduling, routing, and end-to-end supply chain optimization in addition to its benefits to speed, economy, and overall supply chain efficiency. With the utilization of Data Science, Machine Learning, and Artificial Intelligence, NITI Aayog's goal of a digitized and modern logistics system throughout India's diverse territories is an achievable dream. Such advancements are expected to create opportunities for market growth.

Regional Analysis

Based on region, the global AI in logistics market is bifurcated into North America, Europe, Asia-Pacific, and RoW. 

North America Dominates the Global Market

North America is the most significant global AI in logistics market shareholder and is estimated to exhibit a CAGR of 40.35% during the forecast period. North America's strong financial position allows these governments to invest extensively in cutting-edge artificial intelligence technologies, driving global market growth. The global AI supply chain market is fragmented, with several players fighting for market share. In addition, some of the most successful companies in the artificial intelligence supply chain market have roots in the United States. IBM Corporation, Microsoft Corporation, Google LLC, and Amazon.com, Inc. are some of the global leaders in the market. Due to their great brand awareness, diversified product portfolio, robust distribution and sales network, and strong organic and inorganic growth plans, these companies are leading the market. Based in Wilmington, Massachusetts, Locus Robotics created autonomous mobile robots to assist merchants and warehouse logistics providers with e-commerce operations. It recently stated that it has reached 250 million units chosen, indicating that Locus robots can now be used. All these factors boost the regional market expansion.

Asia-Pacific is predicted to exhibit a CAGR of 46.37% over the forecast period. Technological breakthroughs in nations such as China, India, Japan, Australia, and South Korea are driving the AI industry in Asia-Pacific. The market players in the region are consistently engaged in leveraging AI in their logistics business. For instance, East Japan Railway Company, one of the world's largest logistics firms, wants to implement autonomous train driving by 2027. AI technology will benefit intralogistics, trunk line logistics (B2B), and the final mile (corporate-individual) in logistical operations, which is already being researched in Japan's logistics business.

Additionally, Yojee, a Singapore-based start-up, has developed software that leverages artificial intelligence (AI) and blockchain to assist logistics companies in coordinating their fleets and maximizing the utilization of current last-mile delivery infrastructure. It also uses blockchain technology to trace and preserve transactions and delivery, allowing them to be validated anytime. Such developments are expected to drive the regional market growth.

In Europe, the market expansion is fueled by government investment to develop and promote artificial intelligence. The European Commission aims to support capitalizing on its potential to the fullest, including the potential of AI. The European Investment Bank (EIB) will support companies and start-ups through a targeted investment platform under the European Fund for Strategic Investments (EFSI). Similarly, the European Commission and the European Investment Fund launched a pan-European venture capital funds-of-funds program (VentureEU) for start-up and scale-up companies, which will propel growth in AI in the manufacturing market.

Furthermore, several regional companies are taking initiatives to automate their logistic operations using AI, driving regional market growth. For instance, Fizyr, a Dutch start-up, uses AI to automate human work in logistics by developing software for automated picking and positioning in tough logistics conditions. Rather than purchasing a proprietary picking cell, as most piece-picking companies do, Fizyr's modular software package interacts seamlessly with any camera, robot, and end-effector, allowing businesses to choose the optimum equipment for their needs at any moment.

Segmental Analysis

The global AI in logistics market is bifurcated into technology, application, and industry verticals.

Based on application, the global AI in logistics market is bifurcated into self-driving vehicles and forklifts, planning and forecasting, machine and human collaboration, automation of ordering and processing, and others. 

The self-driving vehicles and forklifts segment dominates the global market and is predicted to exhibit a CAGR of 45.68% during the forecast period. Many different autonomous vehicles nowadays are based on dynamic AI technologies. Forklifts and self-driving or autonomous vehicles have the potential to improve delivery efficiency greatly. Self-driving automobiles will reduce delivery times and shipping costs by transporting goods autonomously from factories, retail locations, and distribution hubs to their destinations. They also enhance data collection, sharing, and integration to ensure an optimal operating system. This will enhance the efficiency of the distribution process by removing obstacles and difficulties in transportation.

Automation of order processing reduces the difficulties associated with manual operations. It fosters an ideal environment for order processing, allowing logistics to be more strategic and value-added across the board. The procedure of ordering and processing has a significant impact on the operational efficiency of a corporation. Operators must search the warehouse when picking manually to find the SKUs required to execute each order. However, since AI automation is similar to optimization, operators can increase their throughput while creating and sending orders with AI-automated systems.

Based on technology, the global AI in logistics market is divided into machine learning, natural language processing, context awareness computing, and computer vision. 

The machine learning segment is the highest contributor to the market and is projected to grow at a CAGR of 43.72% throughout the forecast period. A machine learning-powered data capture system not only processes documents faster but can also handle bigger volumes of data. It can also do it with almost cent percent accuracy, which is the same as or better than a person. An automated system, unlike a human, does not become exhausted, bored, or careless when doing tedious, repetitive tasks. Similarly, the right technology can aid in the creation of a strong logistics "data warehouse" that can aid in tactical and strategic decision-making.

Contextual awareness is the capability of computing systems to obtain, fetch, and reason the situational context and adapt to their applications. A context-aware system starts to gather raw, low-level contextual data, interpret the raw contextual data into high-level interpreted context, motivate the interpreted context to derive implications and adapt the application behavior, depending on the implications. Context-aware computing utilizes software and hardware to automatically collect and analyze data to guide responses.

Based on industry verticals, the global AI in logistics market is bifurcated into automotive, food and beverages, manufacturing, healthcare, retail, and others. 

The retail segment is the largest contributor to the market and is projected to increase at a CAGR of 44.59% throughout the forecast period. The demand for retail logistics is experiencing a gradual growth due to the expansion of global trade operations, particularly in emerging nations. The market is anticipated to experience growth as a result of enhancements in logistical infrastructure. In addition, the retail logistics system is responsible for the timely delivery of durable and non-durable goods to clients sourced from reputable suppliers and distributors. Moreover, the use of logistics in the retail industry has yielded expedited delivery schedules, reduced expenses associated with order fulfillment, and enhanced ability to prioritize customer service over administrative tasks.

The integration of artificial intelligence technology in logistics within the food sector has been initiated as a response to intense competition and increasing consumer demand. In a time when individuals have become fussy eaters, food and beverage industries are turning to artificial intelligence (AI) to stay profitable. Companies are hacking logistics to see how AI can affect the storage and distribution of fast-moving consumer products. AI improves supply chain planning by assisting food and beverage industries in forecasting demand in relation to product supply and ingredient orders.

Recent Developments

• September 2023- Toyoda Gosei introduced an AI-based system that automates truckload volume calculations to enhance product delivery transport efficiency.

• September 2023- During the company's annual customer conference, attended by nearly 300 of the world's largest shippers, Uber Freight announced the most comprehensive evolution of its logistics technologies designed to facilitate the global movement of products.