MATTU UNIVERSITY

COLLEGE OF ENGINEERING AND TECHNOLOGY

DEPARTMENT OF MECHANICAL ENGINEERING

ARTIFICIAL INTELLIGENCE

MSc of Industrial Engineering and Management

Name ID No
1. ABDI EPHREM RM0048/15
2. ABEBIYA HAILEMIKAEL RM0049/15
3. DAME TOLOSA RM0050/15
4. NETSANET FIKIRU RM0051/15
5. TSEGA TAFESE RM0052/15

Submitted to;
Dr. Nasim Hasan
 1. Introduction

Logistics is the process of planning, implementing, and controlling the efficient flow of goods,
services, and information from the point of origin to the point of consumption. It involves the
management of resources (such as transportation, storage, inventory, and personnel) required to
achieve timely delivery of products or services to customers.

In recent years, logistics has become increasingly complex due to the growth of e-commerce and
global supply chains. To address these challenges and optimize operations, many companies
have turned to machine learning. Machine learning is a subset of artificial intelligence that
enables computers to learn from data and improve their performance over time without being
explicitly programmed.

Machine learning algorithms can be applied to various aspects of logistics, including

transportation routes, demand prediction, and inventory management. By analyzing historical
data and real-time information, machine learning models can identify patterns and make
predictions about future demand, traffic conditions, and optimal transportation routes. This
allows logistics companies to optimize their operations for efficiency and cost-effectiveness.

For example, machine learning can be used to optimize transportation routes by taking into
account factors such as traffic conditions, weather, and delivery schedules. By analyzing this
data in real-time, logistics companies can adjust their routes to minimize travel time and reduce
fuel consumption. Predictive analytic can also be used to forecast demand, allowing companies
to adjust their inventory levels and avoid stock outs or overstocking.

1.1 The existing problem in logistics that needs to employ the

artificial intelligence:

There are several existing problems in logistics that can be addressed with the use of artificial
intelligence (AI). Here are a few examples:

1. Route optimization: Logistics companies often face the challenge of optimizing the routes
taken by their vehicles to deliver goods. AI-powered algorithms can analyze data on factors such
as traffic patterns, weather conditions, and delivery schedules to find the most efficient routes.
2. Inventory management: Accurately tracking inventory levels is crucial for logistics companies
to avoid stockouts and overstocking. AI-powered tools can help predict demand and optimize
inventory levels based on data such as historical sales data, seasonal trends, and market
conditions.

3. Predictive maintenance: Maintaining large fleets of vehicles and equipment can be costly and
time-consuming. AI-powered predictive maintenance tools can help identify potential problems
before they occur, reducing downtime and maintenance costs.

4. Last-mile delivery: The final leg of the delivery process, known as last-mile delivery, can be
challenging due to factors such as traffic congestion and complex delivery locations. AI-powered
tools can help optimize delivery routes and provide real-time updates to drivers to improve
efficiency.

5. Fraud detection: Logistics companies are vulnerable to fraud through activities such as cargo
theft or false claims by customers. AI-powered fraud detection tools can analyze data such as
shipping patterns and customer behavior to identify suspicious activity and prevent fraud.

Overall, AI has the potential to revolutionize the logistics industry by improving efficiency,
reducing costs, and enhancing customer service.

1.2 Goal of a machine learning project in logistics?

The goal of a machine learning project in logistics is typically to improve the efficiency and
accuracy of various processes involved in handling and transporting goods. This can include
optimizing routing and scheduling, improving inventory management, reducing delivery times,
and minimizing costs.

Machine learning algorithms can be used to analyze large amounts of data related to these
logistical processes, identify patterns and trends, and make predictions about future performance.
For example, predictive models can be trained to forecast demand for certain products or to
predict shipping delays based on weather conditions or other factors.
Overall, the aim of using machine learning in logistics is to help businesses stay competitive by
improving their operational efficiency and reducing costs while also enhancing customer
satisfaction through more timely and reliable delivery of goods.

1.3 Constraints in logistics while artificial intelligence is used:

Regarding logistics and artificial intelligence, while AI has the potential to automate and
optimize various aspects of logistics, there are still several constraints to consider. One of the
most significant challenges is the availability and quality of data. AI models require large
volumes of high-quality data to train effectively, and logistics data can be complex and varied,
making it challenging to collect, clean, and analyze.

Another constraint is the need for collaboration between different stakeholders and systems.
Logistics involves many different parties, including shippers, carriers, warehouses, and retailers,
and they often use different technologies and software systems. Integrating these systems and
ensuring that they can communicate effectively can be a significant challenge.

Finally, there are ethical and legal considerations to take into account when using AI in logistics.
For example, AI-powered decision-making algorithms must be transparent and explainable to
avoid bias and discrimination, and data privacy and security must also be carefully managed.

1.4 What data do available in logistics while artificial intelligence is

used?

Artificial intelligence (AI) can be used in logistics to process and analyze large amounts of data
from various sources, including:

1. Transportation data: AI can be used to optimize transportation routes, schedules, and modes of
transport based on real-time data about traffic conditions, weather, fuel prices, and other factors.

2. Inventory data: AI can help companies manage their inventory levels by analyzing demand
patterns, lead times, supplier performance, and other variables.

3. Customer data: AI can analyze customer behavior and preferences to help companies
personalize their offerings and improve their overall customer experience.
4. Supply chain data: AI can help companies monitor and manage their supply chains by tracking
shipments, predicting potential disruptions, identifying bottlenecks, and optimizing production
schedules.

5. Quality control data: AI can be used to identify defects or anomalies in products or packaging,
as well as to monitor the performance of equipment and processes in manufacturing and
distribution facilities.

By leveraging AI in logistics, companies can gain insights into their operations that were
previously impossible to obtain, leading to more efficient and effective supply chain
management.

2. Collect the data

This may involve collecting data from a variety of sources, such as surveys, social media, or
sensor data.

Logistics companies are increasingly using artificial intelligence (AI) to optimize their
operations and improve efficiency. One way to collect data about logistics while AI is used is
through the use of sensors. These sensors can be placed on trucks, shipping containers, and other
equipment to collect real-time data on location, speed, temperature, humidity, and other factors
that impact logistics.

Another method of data collection is through surveys of logistics professionals or customers.

These surveys can provide insight into issues such as delivery times, transportation costs, and
customer satisfaction levels.

Social media data can also be used to gather information about logistics. By tracking mentions of
logistics companies and their services on social media platforms like Twitter and Facebook, it is
possible to gain insights into customer sentiment and identify potential areas for improvement.

In addition, logistics companies can collect data from their own internal systems, including
inventory management software, transportation management software, and warehouse
management systems. This data can be analyzed using AI algorithms to identify patterns and
make predictions about future demand and operational needs.
2.1 Data that could be collected through a survey in logistics:

1. Delivery time: A survey could ask customers to provide feedback on the estimated delivery
time versus actual delivery time for their orders. This can help logistics companies identify areas
for improvement and enhance customer satisfaction.

2. Packaging quality: Customers could be asked to rate the quality of packaging and whether it
was adequate to protect the contents during transportation. This information helps logistics
companies evaluate their packaging standards and make necessary changes.

3. Freight costs: A survey could be used to gather feedback on freight costs and whether they
were reasonable or too expensive. Logistics companies can use this information to determine
whether their pricing is competitive and adjust accordingly.

4. Carrier performance: Questions about carrier performance, such as reliability, communication,

and responsiveness, can help logistics companies identify areas where carriers may need
additional training or support.

5. Order accuracy: A survey could ask customers to rate order accuracy, including correct
product selection, quantity, and delivery location. This information is crucial for logistics
companies to ensure proper inventory management and minimize errors in the distribution
process.

2.1.1 Data that could be collected through a survey regarding

delivery time in logistics using machine learning:

Suppose a logistics company wants to improve its delivery time prediction accuracy. To do this,
they conduct a survey of their customers and collect the following data:

1. Delivery location

2. Time of order placement

3. Estimated delivery time (provided by the logistics company)

4. Actual delivery time

This data can be used to train a machine learning model that predicts the delivery time based on
the input variables, such as delivery location and time of order placement. The model can also be
fine-tuned using additional features, such as weather conditions or traffic congestion.

Once the model is trained, it can be used to optimize delivery schedules and predict more
accurate delivery times for customers. This can help the logistics company improve customer
satisfaction and increase efficiency in their operations.

2.1.2 Data that could be collected through a survey on packaging

quality in logistics using machine learning:

1. Customer satisfaction: Customers can rate their overall satisfaction with the packaging quality
they received on a scale of 1 to 5, where 1 is very dissatisfied and 5 is very satisfied.

2. Packaging material: The types of packaging materials used in shipments can be noted, such as
cardboard boxes, bubble wrap, packing peanuts, or air cushions.

3. Damage occurrence: Customers can indicate if any damage occurred during transport,
including items being crushed, dented, or broken.

4. Item details: Information about the type of item being shipped can be collected, such as size,
weight, and fragility.

5. Shipping method: The shipping method chosen by the customer can also be recorded, such as
ground transportation, air transportation, or sea transportation.

6. Temperature and humidity monitoring: If temperature and humidity monitoring devices were
used during shipping, this information can be collected as well to determine how well the
package was protected from environmental factors.

Using machine learning algorithms, this data can be analyzed to identify patterns and
correlations between different variables. For example, the algorithm could identify which types
of packaging materials are most effective for protecting certain types of items during shipment.
This information can then be used to optimize packaging processes and improve the overall
quality of logistics operations.
2.2 Data that can be collected using sensors in logistics:

One common example is the use of GPS sensors to track the location and movement of
shipments in real-time. This information is invaluable for logistics companies, as they can use it
to optimize their routes and delivery schedules, reducing costs and improving efficiency.

In addition to GPS sensors, logistics companies can also use temperature sensors to monitor the
conditions inside shipping containers or trucks carrying temperature-sensitive goods such as food
or pharmaceuticals. This ensures that these goods remain within a safe temperature range during
transit, preserving their quality and preventing spoilage.

Other types of sensors that can be used in logistics include humidity sensors, pressure sensors,
and motion sensors. These can provide information about the conditions that goods are exposed
to during transport, such as changes in atmospheric pressure or the amount of vibration
experienced during transit. By collecting and analyzing this data, logistics companies can
identify areas where improvements can be made to reduce damage and improve overall delivery
times.

2.3 Collected data by using social media in logistics using machine

learning

One example of data collected using social media in logistics using machine learning is
sentiment analysis. Sentiment analysis involves using machine learning algorithms to analyze
social media posts, comments, and reviews to determine the general sentiment regarding a
particular logistics company, product or service. By analyzing this data, logistics companies can
make data-driven decisions about their business strategies, including marketing campaigns,
customer service improvements, and developing new products.

For instance, a logistics company might use sentiment analysis to analyze social media posts and
reviews related to their delivery services. They could identify common complaints or issues that
customers have experienced with their delivery services, such as late deliveries or damaged
packages. The company could then use this information to develop targeted solutions to address
these issues, ultimately improving customer satisfaction and retention rates. Additionally, by
understanding customers' preferences and pain points, they can tailor their offerings to meet
specific needs, leading to greater efficiency and profitability.

3. Prepare the data

The process of preparing data for a machine learning model in logistics typically involves several
steps, including:

1. Data Cleaning: The first step is to clean the data by removing any irrelevant or duplicate data
points, as well as fixing any errors or inconsistencies in the data. This can include removing
outliers or correcting missing or incorrect values.

2. Feature Engineering: Once the data has been cleaned, feature engineering can be performed to
transform the data into a format that can be used by a machine learning model. This involves
selecting relevant features and creating new features that capture important information about the
data.

3. Data Normalization: Another important step is to normalize the data so that all features have a
similar scale. This helps ensure that no one feature dominates the others and gives undue weight
to certain aspects of the data.

4. Splitting Data: Finally, the data needs to be split into training and testing sets. The training set
is used to train the model, while the testing set is used to evaluate its performance on new,
unseen data.

Overall, the goal of data preparation is to ensure that the data is clean, relevant, and transformed
into a format that can be used by a machine learning model to make accurate predictions about
logistics operations.
4 Choose a model in Logistics using machine learning to optimize
transportation routes, predict demand, or manage inventory.
4.1 Choose a model in Logistics using machine learning to optimize transportation
routes
One popular machine learning model for optimizing transportation routes is the Vehicle Routing
Problem (VRP) model. The VRP model focuses on finding the most efficient route for a fleet of
vehicles to visit a set of locations, while minimizing total travel distance or time. There are
several variations of the VRP model, including the Capacitated Vehicle Routing Problem
(CVRP), which takes into account vehicle capacity constraints, and the Multi-Depot Vehicle
Routing Problem (MDVRP), which involves multiple depots and requires allocating vehicles to
specific depots.

To apply the VRP model using machine learning techniques, one approach is to use a
combination of optimization algorithms and predictive models to generate optimized routes
based on historical data and real-time inputs. This involves collecting data on factors such as
delivery volumes, vehicle capacities, traffic patterns, weather conditions, and customer
preferences. Using this data, machine learning algorithms can be trained to predict optimal
routing strategies based on various constraints and objectives, such as minimizing delivery time,
maximizing efficiency, or reducing costs. These predictions can then be used to guide the route
planning process and improve overall transportation performance.

4.2 Choose a model in Logistics using machine learning to optimize transportation

predict demand
One popular method used in machine learning for optimizing transportation logistics and
predicting demand is the Gradient Boosting Regression (GBR) model. The GBR model is a type
of ensemble learning that combines multiple decision trees to make more accurate predictions.
To use the GBR model for transportation logistics, we would start by collecting historical data on
transportation routes, including origin and destination locations, delivery times, and any relevant
external factors such as weather or traffic conditions. We would also collect data on demand
trends over time, including seasonal variations and any other patterns that may influence
demand.
Next, we would use this data to train the GBR model, which would learn to predict demand for
different transportation routes based on a variety of input variables. These might include the
distance between origin and destination points, the day of the week, the time of day, and any
relevant external factors. Once the GBR model has been trained and validated, it can be used to
optimize transportation logistics by predicting demand for different routes and helping to allocate
resources more efficiently. For example, it might recommend changes to delivery schedules or
suggest alternative routes to avoid traffic congestion or other bottlenecks.

Overall, machine learning models like the GBR can be very effective tools for optimizing
transportation logistics and improving efficiency in the supply chain.

4.3 Choose a model in Logistics using machine learning to optimize transportation

manage inventory
One possible machine learning model for optimizing transportation and managing inventory is a
demand forecasting model. This model uses historical data on product demand, transportation
times, and inventory levels to predict future demand and optimize transportation and inventory
management decisions.

Demand forecasting models can be trained using a variety of machine learning algorithms, such
as linear regression, decision trees, or neural networks. The model would need to be fed with
data on past sales, customer orders, and inventory levels, as well as information about
transportation routes and lead times. Once the model has been trained, it can be used to forecast
future demand and optimize transportation and inventory management decisions. For example,
the model could help determine the optimal transportation routes based on predicted demand and
available inventory levels, or identify periods of high demand where additional inventory may be
needed. By using machine learning to optimize transportation and manage inventory, businesses
can reduce costs, improve efficiency, and better meet customer demand.

5 Train the selected model

5.1 Train the model using machine learning to optimize transportation routes.
To optimize transportation routes using machine learning, we need to first collect data on various
factors that can impact route optimization. These factors can include traffic patterns, road
conditions, time of day, weather conditions, vehicle capacity, and more.
Once we have collected sufficient data, we can use machine learning algorithms to analyze this
data and identify patterns and trends. We can then develop models that can predict the most
efficient routes based on these patterns and trends. One approach to building such a model is to
use reinforcement learning. In this approach, we would create a simulation environment where
we can test different routes and receive feedback on how well they performed. This feedback
could come in the form of metrics like time taken to transport goods or cost of delivery.

We would then train our model by having it interact with the simulation environment and learn
from its experiences. The model would adjust its behavior over time to maximize its
performance based on the feedback it receives. Another approach is to use supervised learning,
where we would train our model using historical data on transportation routes. We would
provide the model with examples of optimal routes for different scenarios, along with
information on the factors that influenced those routes. The model would then learn to predict
optimal routes based on new input data.

Overall, the key to optimizing transportation routes using machine learning is to gather a large
amount of relevant data and use sophisticated algorithms to extract insights from that data. With
the right approach, we can develop models that can make accurate predictions about the most
efficient routes, saving time, money, and resources.th success. The choice of algorithm depends
on the specific requirements of the problem at hand, such as the size of the problem, the
complexity of the constraints, and the available computational resources.

6. Evaluate the (VRP) model

The Vehicle Routing Problem (VRP) model is a mathematical optimization model used to solve
problems related to the efficient routing of vehicles to deliver goods or services to customers.
The VRP model is widely used in logistics and transportation planning, as it helps to minimize
transportation costs, reduce delivery times, and increase overall efficiency.

One of the main advantages of the VRP model is its ability to handle complex routing problems
with multiple constraints, such as vehicle capacity, time windows, and delivery priorities. The
model considers all possible routes and selects the optimal solution that meets all the constraints
while minimizing the total distance traveled.
Another advantage of the VRP model is its flexibility, as it can be adapted to different types of
delivery scenarios, such as one-to-many, many-to-many, or pick-up and delivery. This makes it a
valuable tool for businesses that need to optimize their delivery operations.

However, the VRP model also has some limitations. One of the main challenges is the
computational complexity involved in solving large-scale problems with many variables and
constraints. This can lead to long processing times and require significant computing resources.

Additionally, the VRP model relies on accurate data inputs, such as customer locations, delivery
windows, and vehicle capacities. Any errors or inaccuracies in the data can lead to suboptimal
solutions or even infeasible routes.

Overall, the VRP model is a powerful tool for optimizing vehicle routing problems in logistics
and transportation planning. Its ability to handle complex constraints and adapt to different
delivery scenarios makes it a valuable asset for businesses looking to improve their delivery
operations. However, its computational complexity and reliance on accurate data inputs should
be taken into consideration when evaluating its effectiveness.