I hear this question constantly. Is AI in logistics primarily about cost reduction? Cost matters. It always matters. You should always be trying to optimize cost per kilogram. But if that's the only thing you're optimizing for, you're going to create problems that cost you more than what you saved.
The Four Dials of Supply Chain Optimization
As a business leader, at any given moment you're considering cost, quality, speed and emissions. Those are the big four. And you're turning those dials at different times depending on what the business needs.
Right now, there may be a big swing toward reducing costs. The price of oil starts to climb, and everybody's looking for ways to cut. But six months from now, oil prices go back down, and interest rates fall. All of a sudden, you've got an investment opportunity. Speed matters. Quality matters. Consistency matters. Cost may matter a little less at that point.
We see businesses in different ebbs and flows of this constantly. The priorities shift, and what you're optimizing for has to shift with them.
Why a Global Cost Takeout Can Backfire
It's hard to say you're just going to do a cost takeout globally. If you're operating in Europe and you've got a different set of requirements there, and you pull costs out aggressively, things start taking too long to get where they need to go. Now you've got a revenue problem. That creates a bigger margin problem. And now you're in what I call a death loop. You started by trying to save money and ended up losing more than you cut.
Supply chain optimization has to be tied to the framework of your business.
Asking the Right Questions at the Right Time
Do I need to move faster because I'm selling a ton of product? Do I need higher quality because I'm getting a lot of breakage? Am I in an industry where products need to be in market within 24 hours and they need to be local to that market? Or am I in a business where if it takes a week to get something there, nobody cares?
Those are very different operating environments and they require very different approaches. What you're optimizing for should change by region and by product line. It's dynamic around the world.
What This Looks Like in Practice
When you think about supply chain optimization through these four dials, you can respond to the business in a way that actually helps. Someone says we need to cut costs. Great. Here's where I can do that and here's the data behind it. But here's what it costs us in speed in this region, and here's what that means for revenue.
That's the kind of conversation AI makes possible. Showing the tradeoffs so leadership can make a more informed decision.
Being Part of the Strategic Arm
I've heard some logistics leaders say they want their domain to be described as a profit center. I don't know if that's the best description. But being able to dynamically respond to what the business needs and provide answers backed by real data changes the way leadership sees your function.
Cost, quality, speed and emissions. Those are the four. Get comfortable turning them at different times and you'll be in a much stronger position than the companies that are only focused on one.
Interested in how Trax helps logistics leaders optimize across all four dials? Explore our resources or connect with our team to start the conversation.