Chatbots and IoT: New Opportunities for Logistics

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Digitalization is an important topic in logistics; new technologies are changing the whole industry. The Internet of Things (IoT) creates greater transparency and flexibility, facilitates networking and automation. Relatively new in the industry is the use of chatbots. While they are already being used in online shops and on support pages, they are said to enter logistics soon. As part of the "Digitalization in Logistics" Boot Camp at KLU, 40 students spent three days working on possible applications for IoT and chatbots. We met the organizers, KLU professors André Ludwig and Asvin Goel, and Peter Hahn from IBM and talked to them about the technologies in logistics and the challenges and opportunities they present.

IoT and chatbots seem to be booming buzzwords at the moment. What exactly do these concepts mean?

Asvin Goel, Professor of Logistics and Supply Chain Management at KLU: IoT means networked systems consisting of sensors, microcomputers, controllable machines and the like. The special feature of the IoT is the networking of these different devices. This networking makes it possible, for example, to evaluate sensor data collected at different locations and thus influence processes in logistics, for example.

Peter Hahn, Client Manager at IBM for customers in the Travel & Transport industry: The main focus of the chatbots is to automate voice dialogs. Where two people communicate with each other today, in the future at least one side can be taken over by a chatbot who answers questions or passes on information.

Asvin Goel: A decisive advantage of chatbots is their "intelligence". When we search for information with a classical search engine, the answers are based on a comparison of the keywords of our search query. A chatbot, on the other hand, analyzes the semantics of our request and can thus provide the answer that was actually sought. A chatbot can also include the progress of communication and environmental data to date.

And what role do they play in logistics? How are IoT and chatbots already used in that field?

Peter Hahn: The IoT can create more transparency in the supply chain - so it makes sure that I always know what is happening to my transported goods. IoT solutions are used in some form by almost every major logistics company. In case of doubt, the technology is delivered with the truck you buy. However, these are many small island and niche solutions – the big picture is still missing.

Chatbots, on the other hand, are still in the experimental stage in the industry, although there are many useful applications, such as providing automated answers to standard questions.

Where is the development heading? What other potential does the Internet of Things have for logistics?

André Ludwig, Associate Professor of Computer Science in Logistics at KLU: “There are a whole range of possible applications for the IoT in the field of Smart Containers. Equipped with sensors, embedded software and connected via an IoT platform, containers can have intelligent decentralized control logic. In contrast to a conventional system where all data is processed centrally, containers can then, for example, decide for themselves whom they want to inform when the cold chain is threatened, how they want to be transported depending on the utilization of the means of transport and so on.”

Peter Hahn: The goals of many digitization initiatives at logistics companies are two topics. One topic is increased automation. The second topic is supply chain visibility, i.e. knowing at all times what is happening in the supply chain in order to be able to react more quickly. IoT will play an increasingly important role here.

Today there are already more sensors than people in the world, soon there will be ten to a hundred times as many. Costs will continue to fall and the gain in information will increase massively. In the future, logistics companies will therefore focus even more on this topic.

Asvin Goel: Up to now, every single actor along the supply chain had information about his assets, but could not easily share or pass it on. Today we are at a turning point: with the available sensors, communication and processing technologies, we can now collect large amounts of data and combine them. This results in a more complete picture of reality and also new ways of using the information obtained. By merging the data, a much greater benefit can be generated than was originally foreseeable when using individual sensors.

What about the chatbots? How will they be used in logistics in the future?

André Ludwig: The use of chatbots is particularly worthwhile where regular information requests take place and these can be answered largely automatically by a computer. In communication between customers and logistics service providers much could be automated, e.g., enquiring about delivery status or shipping conditions for standard deliveries, or the transmission of tracking information via chatbots.

Chatbots have long been established in e-commerce and consumer electronics; see Alexa and Siri. It is a justified question to wonder why they should not also be used much more frequently in logistical applications.

Asvin Goel: I think that chatbots will become more and more integrated into companies. In some cases, perhaps without us becoming directly aware of it, as services are used by third party providers who work with chatbots. In this way, the technology will spread and then increasingly penetrate logistics.

The combination of IoT and chatbots will also be exciting. Tracking along the supply chain has become standard, and there are already very advanced systems for exchanging information. What is still missing is the connection between them. I am thinking of the case that a chatbot contacts me when an IoT sensor detects a change that requires intervention.

André Ludwig: One example of this could be that goods will not arrive in the scheduled time window. If a chatbot notifies me based on IoT data, I can look for other solutions, or if the temperature in a container is no longer in the optimum range.

Students from various disciplines came to the Boot Camp to develop new fields of application for IoT and chatbots. How exactly did that happen?

André Ludwig: We selected 40 students from numerous applications from Germany, Austria and Switzerland and invited them to work with us for three days on the possible applications of IoT and chatbots in logistics. On the first day, IBM trained participants as a technology partner in the use of Watson IoT and chatbot services. Afterwards, the students selected use cases based on the digital transformation agenda of Kühne+Nagel, our business partner for Boot Camp. They then developed their own solutions and prototypes with their newly acquired knowledge of the technologies and the real case studies.

Did the students come up with any really innovative ideas?

Peter Hahn: It's really amazing how quickly students developed exceptionally creative solutions. There were inspiring approaches here at the Boot Camp that would advance the logistics processes. One example of this are smart gas and odor sensors that permanently monitor the condition of food transports and reduce food waste on the transport route. Another group came up with chatbots that provide useful additional information during a web session and cross-sell or up-sell. I was also really excited by the approach of combining various IoT data, external data sources and data from the transport management systems to achieve maximum supply chain visibility.

Asvin Goel: I particularly liked the approach of a group that aimed to improve communication in the B2B area. There are currently two main options in B2B communication: either the companies cooperate closely and have connected their IT systems directly via special interfaces, or the cooperation is less pronounced, meaning a system integration does not pay off. In such cases we communicate via email, telephone, fax or web forms. This means that information must be manually extracted from the information system of one company and entered in the information system of the other company. This process is inefficient and error-prone.

The students presented a solution in the Boot Camp where users can copy and paste information from their system to a chatbot. The chatbot analyzes the data and can automatically extract the information relevant to the business transaction and transfer it to the other system. If information is missing, this - and only this - is specifically asked again. With this solution, employees no longer have to laboriously fill out complex forms, but only have to make manual entries when additional information is required.

Back to the logistics companies. What are the main challenges currently facing new technologies?

Peter Hahn: Logistics service providers are currently fighting on two fronts. On one hand, they are up against their traditional competitors, but also against start-ups and digital giants like Amazon, Alibaba and Uber, which offer new business models and new services without the ballast of the old world.

André Ludwig: The rapid technological progress is being carried by the big tech companies like Amazon, Alibaba or Google into the industries, including logistics. It forces established companies to transfer these technologies into their processes much faster and to become more agile. Start-ups are also entering the market with new business models, as large investments are often no longer required to use new technologies. Clever ideas, new solution patterns and the courage to bring them to the industry are enough.

Peter Hahn: The digital giants are doing massive business experiments, while the traditional logistics companies are driven by performance management with sharp margin control and balanced scorecards. That's the exciting thing about Boot Camps like this: business experiments are developed with little effort instead of waiting for Google, Amazon or Alibaba to disrupt the market with the right idea.

What can companies do to keep up?

Asvin Goel: We need to use the creativity and potential of the generation that took part in the Boot Camp here. We need to learn from the digital natives, see for yourself, get inspired, and precisely because you would have done it yourself in a completely classical, completely different way.

To be internationally competitive, you have to master many different areas. But these areas change over time. That's why it's important to stay on the ball so as not to oversleep or get into certain trends too late.

Peter Hahn: From an entrepreneurial point of view, it is particularly important to use the creativity of young digital natives for topics such as automation. Chatbots and IoT are two good technological levers. The industry must move away from a purely margin-oriented logistics provider to a more experimental company. Otherwise the start-ups and digital giants will take the added value away from us.

Does a format like a Boot Camp help?

Asvin Goel: The students participating in the Boot Camp are digital natives, but not necessarily programming experts. And they don't have to be. We offer you the possibility to deal with things like chatbots or IoT and to apply them in real cases. We help them get inspired by the new technologies and they use their creativity to use them. That's the beauty of the Boot Camp!

Peter Hahn: The Boot Camp is also a benefit for the participating companies. It impressively shows that business experiments can be carried out very quickly and easily with young people and new technologies instead of simply leaving them to others.

André Ludwig: The Boot Camp is a success story. This is the fourth time we've organized it, and every year there are more students who are enthusiastic about this format. After the first day, we saw the participants go out with a smile because they became acquainted with tools they hadn't used before. Few people around here would call themselves techies. But at the Boot Camp they learn to use these tools and apply them to real-world problems of a major logistics company like Kühne + Nagel. Using their creativity and inventiveness they then develop completely new solutions.

Thank you very much for the interview.