Business/Technology Reporter
When distributor Endries International added artificial intelligence to help automate a purchasing department task, it sounded good in theory.
Instead of having employees chase down purchase orders from suppliers, emails were automatically sent to suppliers, who would reply to a monitored inbox that was read by AI. The AI would figure out the next steps, whether it was updating the system or notifying the person who needed to take care of it.
“A few months into it, we realized that we had just kind of automated chaos,” said Jenni Detert, Endries’ vice president of information technology during a panel at the Shift | The Future of Distribution conference this week at The Inverness Denver hotel.
“What we really should have done with AI was get to the root cause and why (this) was happening. You know, tell us if our order control should be different or analyze customer forecasts differently,” Detert said. “That’s a big takeaway for us, just really understanding the process before you introduce AI and try to scale.”
Automation has long been part of the distribution industry that moves goods that last mile between producers, manufacturers, businesses, retailers and consumers. So expectations that AI would help improve the bottom line were high. But investments haven’t always delivered, at least not yet, according to a survey of 426 distribution companies by Modern Distribution Management, a research firm owned by the National Association of Wholesaler-Distributors.
The difference between expectations and reality was stark. While 73% expected a minimum of 2% pricing and margin improvement, only 16% hit that mark. Many have invested or are piloting AI systems but the survey showed 54% said they didn’t have AI on their roadmap.
Companies shouldn’t dismiss AI as a failure, said Patti Rausch, vice president of research and innovation at NAW, the trade group behind the conference, which discussed AI tools already in use.
“It’s telling you that AI and distribution is still in very early stages,” Rausch told the crowd. “And that gap between expectation and reality is more of a timing gap and not a value gap. The 16% who’ve hit those numbers, they just started earlier. They built organizational habits around the technology. They treated change management … as seriously as they think about vendor selection. They didn’t just buy a tool. They built a capability.”
Focus on proven tools and then make sure your staff understands how to use it and how it’s used, she advised. AI isn’t a magical solution that will, for example, adjust delivery routes on the fly depending on traffic. That is not helpful to distributors, she pointed out, because delivery trucks are loaded based on the order of the stops.
“You can’t skip stop two to go to stop seven because an algorithm says traffic is better,” said Rausch, adding that it’s also dangerous for drivers to stop in traffic to dig out a package. “The philosophy is to make the planning smarter before the truck leaves, not after. Use better data upstream — weather and traffic patterns, historical delivery times. … That’s the kind of nuance that doesn’t usually make it into a (sales) deck.”
The industry has used AI and automation long before ChatGPT became a household name a few years ago. Predictive AI tracks machinery nearing its end of life, such as brakes on a forklift. Wearable technology integrated in a hard hat or vest can collect data that AI analyzes in real time to send an alert to a worker approaching an unsafe situation. Robots are already retrieving products in warehouses, like Amazon, so humans don’t have to, said NAW president Eric Hoplin who testified before a congressional committee in February on how AI technology is already in use to improve worker safety.
“Employees are embracing AI and these tools that they’re bringing because it’s part of the culture of safety that helps them make it even safer for themselves,” Hoplin said in an interview Wednesday.
There have been other economic challenges in recent years, such as high tariffs that impacted global trade. Declining consumer demand has affected spending. But businesses are spending on automation and investing in technology, and that helped the industry grow into an estimated $8.7 trillion market, up from $8 trillion more than a year ago, he said.
He credits recent growth to the big tax breaks law passed last year that aimed to reduce taxes and incentivize businesses to invest in research and development. That had a significant impact nationwide for all industries, apparently. Between July and November, U.S. Treasury data showed that revenue from corporate income tax had dropped by one-third, or $52 billion, from the same period a year earlier, The New York Times reported.
“From that perspective, distributors are bringing more and more warehouses with more capacity, more trucking capacity and investing more in technology. And our customers are doing similar things,” Hoplin said. “There are a number of things that have hindered growth, but I think we’re seeing some of that spending have net growth in the economy this year.”
Sun economy stories you may have missed
➔ 101 bills that passed and failed in Colorado’s legislature this year that you need to know about. The Colorado Sun and Colorado Capitol News Alliance parsed through nearly 650 pieces of legislation debated in the legislature this year to find the ones that will most directly impact people’s lives — or would have had they passed >> Read story
➔ Sheep win in San Luis Valley livestock vs. billionaire ranch owner battle. A ruling in the dispute strikes a compromise, allowing livestock grazing but prohibiting firewood collection around the ranch owner’s new home >> Read story
➔ Colorado ranchers are expanding their footprint with invisible fencing that uses satellites to protect their cows. A virtual fencing company out of New Zealand aims to help ranchers graze cattle “anywhere they can see the sky” >> Read story
➔ Colorado voters will be asked to give up billions in TABOR refunds to boost K-12, other programs for kids. Democrats in the legislature referred a measure to the November ballot that would ask voters to increase the state’s cap on government growth and spending by billions of dollars >> Read story
➔ Rumors of ruined Western Slope peach crop were greatly exaggerated, growers say. A cold snap did destroy the peaches in North Fork Valley orchards, but the remaining 80%-90% of the crop will start hitting fruit stands in June — much earlier than normal >> Read story
➔ Democrats abandon rollback of business tax breaks to fund family tax credit after Colorado governor’s veto threat. House Bills 1221 and 1222 were killed in the Senate Finance Committee on Monday at their sponsors’ request in response to a veto threat from Gov. Jared Polis >> Read story
➔ Bill reauthorizing Public Utilities Commission races through state Capitol. The story is what’s not included. Xcel, Black Hills, some businesses backed failed attempts to amend the bill to grow the commission to five members in the interest of “ideological diversity” >> Read story
➔ Colorado’s fierce two-year fight over AI regulation ends with watered-down law, little fanfare. Companies, governments and other groups that create and use artificial intelligence will no longer have to disclose how their AI systems help make decisions on things like hiring, loans and housing >> Read story
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Other working bits
➔ Boulder’s getting a quantum computer lab. Maryland-based IonQ Inc. picked Boulder to be home to a new 22,000-square-foot quantum research and development lab. The ribbon-cutting ceremony was Thursday, and the plan is to have the first quantum computer installed this year, allowing “IonQ to design, test, and iterate on new generations of its semiconductor ion trap chips,” the company said in a statement.
The lab is located at 1685 38th St. near the intersection of Foothills Parkway and Arapahoe Avenue and occupies two floors of Boulder 38, a new 168,000-square-foot research campus with lab and flex space that targets science tenants. IonQ is amassing quantum technology companies and building a quantum network to produce the next-generation type of computing. Earlier this year, it acquired Oxford Ionics, which had a Colorado presence. Other local operations include IonQ Space Missions in Louisville and IonQ Optical Communications in Broomfield. In January, IonQ employed 95 workers in Colorado.
IonQ received a number of local and state incentives, including a Job Growth Incentive Tax Credit valued up to $2.8 million if the company adds 150 net new jobs in eight years. Anticipated jobs are quantum scientists, system engineers and operations managers with an average annual wage of $168,422, according to the state’s Economic Development Commission.
The company also was approved for additional income tax credits of up to $1 million because it is in the Boulder CHIPS Zone, which the EDC established in November.
➔ State to cover up to $2,000 of costs to get certified for contracts. The state’s Minority Business Office on Friday announced Certify Colorado, a new program to help small businesses offset certification costs in order to apply for government and corporate contracts. Getting nationally certified can set a small business back by $250 to $5,000. This program covers up to $2,000 per business.
Eligibility is based on a company’s business filings being in “Good Standing” with the Secretary of State’s Office, submitting a business strategy and completing the Certifications 101 course. The state’s Economic Development Commission approved $250,000 to fund the program. Funds are available until the money runs out. >> Details
➔ New makerspace for Grand Lake. A 3,000-square-foot facility in Grand Lake is stocked with tools for woodworking, leatherworking, silversmithing, boat building and more, according to the creatives behind the new makerspace. That would be the Rocky Mountain Folk School and the Grand Lake Creative District.
The Grand Spirit Makerspace was just an idea in 2019 and after a survey that collected 350 responses, it became a community-driven project that broke ground last September. Beyond the makerspace, the project includes nine live/work rentals offering affordable prices to artists and locals who contribute to the cultural life of Grand Lake. Eight of the units have a storefront or studio space. The grand opening is scheduled for May 23 at noon. >> Details
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