AI’s Current State and Future Prospects in Latin America’s Logistics Industry

Diego Rodríguez

Logistics & Industrial Practice Director

AMI

Sulivan Rocha

Analyst

AMI

Artificial Intelligence (AI) has been touted as one of the most remarkable technologies ever developed in history. It has enormous transformative potential for the markets where it is applied and is rapidly transforming industries worldwide. The logistics industry is no exception, and applications of Artificial Intelligence optimize supply chain operations, improve decision-making processes, and improve overall efficiency. This article analyzes AI’s current state and future prospects in the logistics industry in LatAm, exploring its impact, adoption rate, challenges faced, successful applications, emerging trends, and potential advancements in the coming years.

The Impact of AI in LatAm’s Logistics Industry

Technologies that use Artificial Intelligence, such as Machine Learning, Natural Language Processing, and Computer Vision, are already revolutionizing two critical areas in the logistics industry in Latin America.

• Route Optimization and Delivery Planning: In real-time, AI-enabled systems can optimize transportation routes by considering external factors such as traffic, weather conditions, and any other variables relevant to that delivery itself, as well as tracking vehicles and establishing parameters to predict maintenance. By minimizing distance traveled and maximizing efficiency, logistics providers can offer faster deliveries, lower fuel consumption and emissions, improved driver safety, and greater predictability of the entire operation.

• Demand Forecasting and Inventory Optimization: Analysis algorithms that have embedded AI analyze historical data, market trends, and external factors that can affect demand to accurately predict and optimize inventory levels and assist in the planning and control of the production of industries that also manufacture the products. The entire supply chain efficiency can be improved with these analyses, enabling industries to reduce excess inventory costs.

Adoption Rate and Challenges in LatAm

While the adoption of technologies using AI in the logistics industry is gaining traction in LatAm, the region receives less than 5% of global private investment according to experts interviewed by AMI, and many challenges still exist for its widespread implementation:

• Infrastructure limitations: The lack of road infrastructure and technological infrastructure, such as widespread high-speed internet connectivity, makes applying cutting-edge technologies to leverage AI applications more challenging.

• Skilled Workforce: As with any new technology, the availability of skilled professionals to work with this technology is not as abundant, such as Data Scientists and Data Engineers, making it clear that companies need to invest in talent development, promote education with AI programs and collaborate with the academic sector to bridge this gap.

• Costs and Investments: Implementing AI involves substantial upfront investments in technology, infrastructure, and talent. For some companies, the cost of adopting these solutions can be a barrier to entry.

• Data Availability and Quality: AI algorithms require a tremendous amount of quality data to deliver accurate predictions and insights. The low availability of data in certain companies and industries can inhibit the implementation of these solutions.

Successful AI Applications in LatAm

Despite the challenges in applying these new technologies, several companies in LatAm have successfully embraced AI technologies to improve their operations, reduce costs, drive innovation, and increase efficiency. Some examples are:

• Rappi: a leading delivery startup in LatAm, uses AI algorithms to optimize its delivery routes in real-time, minimize wait times, and improve its customers’ experience by analyzing their personal preferences.

• Driv.in: a Chilean startup that offers a transportation management platform that features services such as delivery tracking and fleet management based on AI.

• iFood: one of the largest delivery companies in Brazil, has more than 100 AI models applied that were created by the company itself for transport and delivery management.

• MercadoLibre: one of the largest e-commerce in Latin America, uses AI for demand forecasting and inventory management. By analyzing data on product demand, sales history, and market trends, the company ensures it works with efficient inventory levels and minimizes product losses and shortages.

• Supermercados Peruanos: One of the leading retailers in Peru employs AI to create greater visibility into external demand factors impacting its fresh and ultra-fresh categories, reducing food waste. The company also implemented AI to create short-term demand forecasts at the store level to predict peak consumption related to sports or weather events.

• C&A: one of the largest fashion companies in the world, announced in Brazil that it has implemented software, developed in partnership with Palantir Technologies for the management of flows and logistics operations, reinforcing the company’s ability to increase the assertiveness and quality of its operations.

• AI27: a Mexican startup that offers a security risk management platform for logistics, working with mathematical models to predict and analyze the risks of each trip.

• CargoX: CargoX, a Brazilian freight exchange platform, uses AI algorithms to match truckers with available cargo, optimizing routes, reducing empty miles, and increasing operational efficiency. This has led to cost savings and improved resource allocation within the logistics network.

Emerging Trends and Future Prospects

The current scenario provides several opportunities for companies in the sector that may have highly representative gains, some of them being the gain in productivity but, most importantly, the increase in margins, especially when consumer spending outlooks are unfavorable. At AMI, we see companies interested in AI in Latin America focused on improving the bottom line to digitize the supply chain to drive efficiencies. The collaboration of different initiatives within the sector to develop interoperable systems that further increase the efficiency of all logistics operations is still one of the greatest restrainers. Some emerging trends indicate a promising future for AI in the logistics industry in LatAm, such as:

• AI-Powered Supply Chain Visibility: AI-driven solutions will enable logistics companies to achieve end-to-end visibility across the supply chain, facilitating real-time tracking and predictive analytics.

• Automated warehousing: Integrating AI with automation technologies is expected to revolutionize warehouse operations, order fulfillment, and last-mile delivery, especially in the e-commerce environment.

• Blockchain Integration: Blockchain technology can enhance supply chain transparency, traceability, and security. By integrating AI with blockchain, logistics companies can achieve real-time visibility, reduce fraud, and improve trust among supply chain partners. Usyncro is an excellent example with its digital corridors in air freight shipments between Latin America and Spain.

• Natural Language Processing (NLP) and Chatbots: NLP and chatbots will enhance customer interactions, enabling automated responses, order tracking, and personalized customer support. AI-powered chatbots can handle customer queries, resolve issues, and provide real-time updates, improving customer satisfaction.

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