Using AI to Create a Vital, Regional and Sustainable Economy

A product often has to travel a long way before it reaches the end consumer from its basic form: development, production, transport and distribution are all part of the process known in business as the value chain.

Regional value chains - i.e. those in which manufacturers and retailers are located in the same region - have many advantages, particularly in ecological terms. Shorter transport routes reduce CO2 emissions, for example, and thus contribute to greater biodiversity. As sustainability is not only good for the environment, but also goes down well with customers, regionality also pays off economically.

"Buying regional products is all the rage! Not only shopping behaviour, but also the product ranges of food retailers such as EDEKA, REWE and Aldi have changed accordingly. Consumers are also noticing this," says Professor Richard Pibernik. His Chair of Logistics and Quantitative Methods at Julius-Maximilians-Universität Würzburg (JMU) is in charge of "KI-Regio - Artificial Intelligence for Regional Value Chains".

In addition to the high demand for the product, regional value chains also score points in terms of cost minimisation: there are fewer logistics costs and lower transaction costs. In addition, fewer middlemen want to earn money from the product.

Combined Expertise From the Business World

However, all the advantages also bring with them some challenges. This is where the expertise from the Faculty of Management and Economics comes into play. Three other chairs and a professorship are also part of the project team.

This combined expertise comes into play where small and medium-sized enterprises (SMEs) in particular often reach their limits: "Smaller manufacturers are less able to benefit from economies of scale and have fewer technical options when it comes to planning and automating processes than their supra-regional and sometimes international competitors," says Richard Pibernik.

When it comes to automation in particular, the use of artificial intelligence processes can provide a remedy. Although these promise considerable productivity gains, they also require substantial investment in IT infrastructure, development and personnel expertise - something that smaller companies are often simply unable to afford.

The aim is therefore to find customised AI solutions in a pilot network of SMEs in the Mainfranken region that will enable producers and retailers to work together more efficiently and effectively. The project is being funded with a good two million euros from the European Regional Development Fund (ERDF) of the European Union. Over the three-year funding period, the aim is to identify the potential uses of AI in regional value chains, develop prototypes and test them in real-life operations.

Spin-off as Inspiration

Pibernik cites the award-winning start-up "BäckerAI" as a role model for the project. Founded by graduates of the University of Würzburg, the company develops AI solutions for predominantly regional bakery chains and is already using them very successfully. With the help of artificial intelligence, BäckerAI ensures that the optimum order quantities for baked goods are determined at all times. In short, the AI knows how many bread rolls are needed and when, for example, thus preventing shortages and surpluses that would ultimately have to be disposed of. An automated ordering process also saves a considerable amount of time.

In addition to scientific expertise, previous results and links with the regional economy will also be utilised to further develop existing concepts and make innovative solutions widely available.

The 24 partners in the pilot network are regional producers and regional retailers who already sell regional products. They include Ochsenfurter Kauzen Bräu, VR-Bank Bad Kissingen and Frischemärkte Trabold.

There are also so-called "supporters", such as small consultancy firms that offer complementary services and help with knowledge and technology transfer. The supporter network also includes companies and organisations that actively contribute to knowledge and technology dissemination, such as the Würzburg-Schweinfurt Chamber of Industry and Commerce, the Vogel Medien Group, Main-Post GmbH and Bayerischer Rundfunk.

Four Chairs and One Professorship

In addition to the lead Chair of Logistics and Quantitative Methods, the Chairs of Information Systems and Business Analytics (Professor Frédéric Thiesse), Information Systems and Business Analytics (Professor Christoph Flath) and Process and IT Integration for AI in Business (Professor Gunther Gust) are also involved in the project. Professor Kim Otto's Chair of Business Journalism and Business Communication is also involved.

Funding Through ERDF

The researchers were supported by the Service Centre for Research and Technology Transfer (SFT) in submitting and preparing the project application. The SFT advises JMU researchers on applying for European ERDF and ESF funding. The term ERDF stands for European Regional Development Fund and ESF for European Social Fund. These funds are the EU's most important instruments for strengthening economic, social and territorial cohesion.

Contact

Prof Dr Richard Pibernik, Chair of Logistics and Quantitative Methods in Business Administration, Tel: +49 931 31-80243, e-mail: bwl11@wiwi.uni-wuerzburg.de