How to Balance Cost and Service in Supply Chain Strategy
A new report from McKinsey is incredibly optimistic about the future of AI to generate big wins for shippers.
Of the 278 participants in McKinsey’s 2026 State of Digital Logistics survey, 90% report they’ve adopted at least one AI use case in the transportation function — and 88% of those say AI has met or exceeded their expectations. In warehousing, 96% of shippers have adopted AI for at least one function, and 84% of those say the outcome met or exceeded expectations.
Based on the study, McKinsey defined three success factors for maximizing the return on AI investments. Shippers achieving the most impactful results from AI are doing three things very well:
- Using AI to illuminate trade-offs and make optimal decisions
- Integrating analysis into everyday operations, instead of seeing it as a separate activity
- Turning data into actionable insights that directly inform execution
All these best practices have one thing in common: They begin by pooling real-time data and integrating systems — and end with layering AI and other analytic tools on top of this connected digital ecosystem.
Why are integration and connection so critical? It’s simply not possible to make trade-offs among cost, service levels, asset utilization, and other factors without considering all the relevant data. Shippers can’t make AI-enabled operations decisions as conditions change — for example, shifting routes on the fly — unless disparate systems are communicating in real time, with shared visibility. Similarly, turning data into execution demands tightly integrated systems, across teams and functions, eliminating lags and fueling responsiveness.
For Shippers, the Integration Challenge Is Real
Based on Redwood’s own experience, as well as industry studies, it’s clear AI success depends on achieving the right digital landscape. But, as demonstrated in Redwood’s own AI in Logistics Report, getting there is a big challenge for the average shipper.
When we asked our Customer Advisory Board (CAB) members about their biggest hurdles in implementing AI, 35% cited data quality and availability as the single largest challenge. Another 28% of customers named integration gaps across TMS, ERP, and other solutions as their greatest obstacle.
That means 60% of Redwood customers aren’t struggling with AI itself. Instead, they’re challenged to create the right foundation for AI success. And they won’t gain the highest return on their AI investments until that foundation is established. Too many logistics teams select and configure standalone AI tools for deployment in their existing technology environment, without considering the potential consequences.
If data is siloed, outdated, or incomplete, AI can’t make an optimal decision. Inventory may be deployed to the wrong place, shortchanging more valuable customers and orders. Fleet assets may sit empty, even as deadlines are missed. Service and financial targets might be missed not by inches, but by miles.
And, if all systems aren’t communicating and sharing live data, even the best AI-powered decision won’t be turned into effective execution. Shipments will be delayed and customers will be disappointed, even when AI knows what should happen. Flagged disruptions like a blocked route won’t be addressed in time.
Orchestrated execution is where the rubber meets the road when it comes to AI — and that’s impossible if planning and execution systems aren’t tightly connected with one another.
The Solution? A Living, Breathing Tech Ecosystem
At Redwood, we’ve worked with hundreds of customers over the past two decades. As a modern 4PL with both physical and digital capabilities that span the supply chain, we understand the integration challenge at a deep level.
The fundamental problem is that shippers don’t have supply chains and technology architectures that were built for AI. Instead, they have digital ecosystems that have grown organically over time. Shippers have added apps and upgraded legacy solutions to stay current. But critical systems — like the ERP, WMS, and TMS — aren’t sharing the same data, driven by the same targets, or talking in real time.
No shipper has the time or resources to “rip and replace” their systems to create an ideal, AI-ready tech landscape. But that’s not necessary. What’s needed is an expert partner like Redwood.
RedwoodConnect is the only integration layer purpose-built for logistics, and ready to help shippers quickly capture the promise of AI. Deployed by Redwood’s tech experts, this platform rapidly and cost-effectively connects dozens of digital platforms, systems, and data to create a strong, unified, AI-ready ecosystem.
Connected systems make your AI-enabled supply chain aware, proactive, and resilient. As rates and capacities shift, weather conditions change, regulations and tariffs evolve, and geopolitical events occur, AI can make optimal decisions and even execute them autonomously — grounded in a real-time, holistic view of the supply chain and all its systems. Guided by your own business rules and pre-defined guardrails, the entire supply chain ingests data, pivots as needed, and stays on track toward larger, shared goals.
A new route, carrier, or inventory movement is always guaranteed to be the best decision, made by AI on a dynamic basis and considering all relevant data points. And AI gets better at making decisions over time, based on machine learning that exceeds human cognition.
The Future Is Within Your Reach
If this sounds too good to be true, rest assured Redwood has helped many teams like yours quickly achieve the right environment for AI success.
Via data and systems integration, we help unleash the huge potential of AI to automatically optimize your operations, from service and inventory levels to freight spend and other KPIs. We create a tightly connected, always-on digital landscape where AI not only recognizes a disruption — at any time, at any node — but also heads it off before it impacts the larger supply chain.
When launched on top of a connected, integrated digital landscape, AI can truly transform your operations. We’ve seen it happen firsthand. But it’s impossible to realize the highest return on AI unless it’s positioned for success, added as an intelligent layer on top of centralized data and an integrated digital ecosystem.
AI is the future, and that future is within your reach. Contact Redwood to set your supply chain up for success in the age of AI.
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