Challenges and Risks of AI in Fulfilment

AI presents huge opportunities for businesses within the logistics and supply chain sector. From driving efficiencies to supporting growth within fulfilment, its capabilities can enable businesses to identify areas of improvement and increase profits.

But the use of AI in fulfilment comes with a number of challenges and risks. As an emerging technology that is still very much in development, fulfilment service providers need to be aware of potential pitfalls if they want to utilise this software for maximum impact and maximum benefit.

Read on to learn the key challenges and risks associated with the use of AI in fulfilment operations.

What is AI in fulfilment?

AI in ecommerce fulfilment refers to the use of artificial intelligence (AI) to automate, optimise and improve processes. This includes the storing, picking, packing and shipping of orders to customers.

While automation and robotics have been used in warehouse operations for decades, AI technology is much different. The former is programmed to follow rules and instructions, while the latter learns from data to make decisions and predictions.

This machine learning and predictive analytics is now being utilised within fulfilment operations to help deliver faster, more accurate and more efficient processes.

It can include faster picking through warehouse route optimisation, inventory management that flags when stock replenishment is required or delivery optimisation to find the fastest method of shipping goods to customers. Learn how AI can improve ecommerce order fulfilment.

Why are businesses investing in AI?

AI offers huge opportunities to identify how to be more efficient as a business and, ultimately, increase profit margins.

Faster order processing means more orders can be picked, packed and shipped per shift, while data analysis can be utilised for demand planning and inventory forecasting.

Route optimisation, which gets goods to customers using the most efficient route possible, and labour planning, which ensures the warehouse is staffed appropriately based on order volumes, both help to keep fulfilment moving swiftly without overspending.

It’s this type of AI data-driven decision making, when used correctly, that can help businesses to improve the customer experience while also increasing profits.

It’s important to note however, that while AI offers significant benefits to the fulfilment process, successful implementation depends on understanding and managing the associated risks.

What are the biggest challenges and risks of AI in fulfilment?

AI brings endless possibilities for improving fulfilment processes, but this is what also brings the biggest challenges. Implementing an AI solution without the right preparation can create new business risks by impacting operational performance or creating a cyber security risk, for example.

Here, we look at common issues that should be considered before rolling out AI across your business.

High implementation costs

Introducing AI to the fulfilment process can be costly. Many products are still in their infancy and continue to be developed, which may lead to increased costs further down the line, and you will need to consider ongoing maintenance costs to keep your system up to date.

You may need to upgrade your software or hardware for more compatible solutions to enable successful integration with your Warehouse Management Software (WMS). These changes can be costly and require carefully consideration.

Poor data quality

AI is only as effective as the data it receives, which is a big risk. Inaccurate inventory data, duplicate records and human input errors can all lead to AI using incorrect data and creating poor outputs as a result.

The best way to overcome poor data quality is to focus on data governance, automation and validation before deploying any AI software.

Integration with existing systems

Legacy warehouse management systems and Enterprise Resource Planning (ERP) software can present challenges when it comes to integration, as many were developed before the arrival of AI.

This can make the process of connecting systems complex and time consuming, and in some cases very expensive.

Assess where AI integration can be achieved quickly and efficiently for maximum benefit, whether that it via your ecommerce platform or ERP system, and then take a phased approach to integration and upgrades.

Over-reliance on automation

AI can tackle many tasks quickly, but it should never be used to replace human workers. Removing human oversight is fraught with risks, especially where unusual or complex customer support is needed. AI’s decision making is based on data patterns, which creates limitations in its outputs. It doesn’t have the ability to understand emotions or provide empathy and it struggles with unexpected disruptions. These soft skills can be important in customer service scenarios where something has gone wrong in the fulfilment process. AI is no substitute for human judgement and decision making.

Cybersecurity risks

With increased connectivity comes increased cyber risks. AI system vulnerabilities can increase the risk of hacking or a data breach, so security needs to be addressed within any AI strategy. Data privacy and compliance considerations should be at the forefront, especially when dealing with customer data.

Introduce strong access controls for staff, regularly review your cyber security and actively reduce the risk of cyber attacks by ensuring your team is fully trained to recognise them.

Workforce challenges

Employees can be resistant to change, especially when they feel their job may be at risk, and this can be one of the biggest challenges with AI adoption.

Concerns should be addressed and managed to prevent the use of AI within your organisation being avoided. Encourage staff to adopt AI into their work by communicating its benefits early on and by providing hands on training that upskills teams and demonstrates how the software can aid them, rather than replace them.

Limited flexibility

AI struggles with unusual or unexpected situations it hasn’t experienced before, and it can’t solve complex problems or be adaptive in their role the way a human worker can. Scenarios where this may present challenges are where understanding or empathy are required, which may include when handling bespoke customer requests or navigating seasonal operational changes.

AI is only as good as the information it has been trained on, so it won’t readily be able to address queries that are different to the norm or understand sudden fluctuations in sales driven by the weather or social media trends.

Can AI replace human workers?

One of the biggest risks associated with AI is treating it as a replacement for human workers.

AI can analyse data and identify patterns to make predictions, generate ideas or solve problems, but it can’t think the way that a human does. It doesn’t understand emotions, have any self-awareness or the ability to use common sense reasoning, which makes tasks like customer service and judgement difficult for it to master.

This demonstrates why warehouse and customer service teams remain essential to fulfilment operations and why AI should be seen as an assistant rather than a replacement for workers.

How to reduce the risks of AI adoption

Use our checklist to help you reduce the business risks of AI adoption within your fulfilment operation.

• Start with clear objectives – Where do you need support or greater insight? What problems would you like it to solve for you? What would success look like?
• Invest in high-quality data – AI is only as good as the data you feed it, so the more high-quality the information you provide, the more useful and reliable the results.
• Choose scalable technology – Don’t select a solution based on your current need as you may quickly outgrow it. What’s the best solution that can support you needs now and in 12 months, three years, five years?
• Train employees – Invest time and effort into getting your team onboard. Promote the benefits of AI to their individual role, not just the benefits to the company. Staff are more likely to adopt AI if they understand the positive impact it can have on them personally.
• Maintain human oversight – AI cannot think or understand the way a human can, so understand its limitations and maintain oversight where required
• Regularly review AI performance – Are you getting a return on investment? Is AI delivering the benefits you expected? Review performance to ensure AI is being successfully adopted and driving results.
• Work with experienced fulfilment providers – find trusted fulfilment partners that can do the hard work of AI adoption for you and show you how AI can benefit your business’ fulfilment process.

What is the future of AI in fulfilment?

Faster, smarter decision making and more efficient warehouse operations, that’s what the future of fulfilment looks like with AI at its disposal.

Predictive analytics are already being used to enhance demand forecasting, enabling businesses to anticipate trends more accurately and plan resources more effectively. In the future, this is likely to incorporate more real-time data points, from consumer behaviour to the weather, and plan for ‘what if’ scenarios like supply chain disruptions.

The future of smart inventory optimisation will move beyond tracking stock and re-ordering products to forecast sales trends based on external data points like social media. AI will be able to predict sales more accurately, helping businesses to reduce overstocking or sellouts, while collaborative robotics (cobots) will support with the physical aspects of fulfilment.

AI will become much more central to sustainability efforts, driving efficiencies throughout the warehouse and fulfilment process to reduce waste.

While these advances in predictive analytics and smart inventory will transform fulfilment, human expertise and insight will remain critical to the success of the sector.

Should your business invest in AI?

AI can deliver significant benefits for fulfilment operations, but it isn’t the right solution for every business. Before implementing AI, you may want to consider the following factors.

• Business size – SMEs can benefit from AI, but larger businesses are likely to see the biggest impact and a larger return on their investment. Success depends on finding the right solution for the size of your organisation.

• Order volume – if you are processing high order volumes, AI is likely to make a big impact early on. If you process small quantities, you need to consider how much benefit AI can provide.

• Budget – will the expected efficiency gains and cost savings from AI justify the investment?

• Operational complexity – complex operations provide the biggest opportunities for AI. If your operation is smaller and less sophisticated, it will not have as many data points to work with.

• Growth plans – AI could help you to scale your business efficiently, but it needs to be adopted at the right time. Early integration can support more successful long-term growth.

Successful implementation lies with a clear business objective and a specific problem to solve. Don’t fall into the trap of investing in AI because it is the latest trend, instead fully evaluate its capabilities in relation to your own business before integration.

Frequently asked questions on the risks of AI in fulfilment

• What are the biggest risks of AI in fulfilment?
  • Implementing an AI solution without the right research or preparation. This is more than a financial risk; AI is integrated with other software and hardware within your business, which presents new cyber security risks. You need robust cyber security measures in place to protect your data and that of your customers.

• Is AI suitable for small businesses?

• • Yes, AI is suitable for use within small and medium-sized businesses. However, there is no one-size-fits-all solution. Successful adoption relies on finding the right solution to meet your business objectives, whether that is identifying areas that could operate more efficiently or increasing profit margins.
• Can AI improve warehouse efficiency?
  • Yes. AI can identify ways to increase efficiency within a warehouse setting, such as faster order processing, demand planning, inventory forecasting and labour planning. These improvements can speed up processes while helping to increase order dispatch rates and profit margins. Learn more about AI in smart warehousing.
• Will AI replace warehouse employees?
  • No, AI will not fully replace the need for warehouse staff. AI can quickly analyse data, identify patterns and make predictions, but it has limitations and still requires human oversight. Warehouse teams will still be needed to sense check and oversee operations.
• How expensive is AI for fulfilment?
  • Costs for AI vary depending on the tools, its capabilities and the size of your business. Costs may include software licences, hardware upgrades and system integration to get AI up and running, but you will also need to consider the costs of training and upskilling your workforce to make the software investment worth it.
• What data does AI need to work effectively?

• Accurate, high-quality data from the following internal and external sources provides the best results:

Inventory data

Order history

Sales data

Operational data

Customer data

External data on purchasing trends and supply chain disruptions

• How can businesses implement AI successfully?
  • By knowing what you want to achieve from it. Develop an AI implementation strategy and evaluate the various tools available to your business. Create a list of objectives that you want to achieve with AI and a timeline of when these can realistically be attained. Successful implementation is dependent on rigorous research and planning.

Key takeaways: Challenges and risks of AI in fulfilment

AI presents significant opportunities for businesses requiring fulfilment, but with them comes the challenge of successful implementation.

Success is largely dependent on balancing the new capabilities of AI technology with the skills of real people within the warehouse environment. Implementation needs to be carefully planned to ensure AI is utilised correctly by staff and embedded into everyday processes in a way that brings operational benefits. This could be speeding up picking, packing and shipping processes to increase the number of orders that can be processed in a single day, or predicting the amount of stock that will be sold during peak season.

Ultimately, businesses when looking to adopt AI businesses should focus their efforts on solving existing operational problems, rather than investing just to shout about their AI capabilities.

Choosing an experienced fulfilment partner that has invested in AI and is already benefitting from its vast capabilities can help organisations adopt the technology with confidence and in ways that will benefit their bottom line.

At e2b, we’re committed to supporting businesses with improving their fulfilment and prioritising customer satisfaction.

Learn more about e2b and how we can support your business by contacting our team.