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Exploring AI Applications in Distribution with DigiKey

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April 19, 2024

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Artificial intelligence has become an integral part of operations at global distributor DigiKey, where it is utilized across various functions such as pricing strategies, inventory management, and the recent introduction of a chatbot.

Kevin Walseth, the manager of technical marketing at DigiKey, highlighted the company's use of AI in pricing optimization. "We leverage AI to dynamically adjust pricing based on competitor and supplier analysis, allowing us to make informed decisions on pricing changes to optimize inventory turnover," Walseth explained.

In 2022, DigiKey unveiled its expansive 2.2 million square foot Product Distribution Centre, solidifying its position as one of the largest warehouses in North America. Housing an extensive inventory of over 15 million products sourced from 2900 suppliers, the centre processes and ships 5.7 million internet orders annually to destinations worldwide from Minnesota.

The wealth of sales data generated by these operations is effectively managed through AI algorithms, enabling DigiKey to identify high-demand products and strategically position them within the warehouse for efficient retrieval and distribution. Additionally, AI is employed to streamline international shipments by assigning harmonization codes and categorizing products based on destination countries.

With the emergence of generative AI technologies, chatbots have emerged as a compelling application for AI integration. DigiKey's AI-powered chatbot, named CHIP, has proven to be a valuable asset for handling internal IT requests with its retrieval and generation (RAG) capabilities.

Walseth emphasized the practicality of AI in everyday scenarios, stating, "AI has become ubiquitous in our daily lives, exemplified by the functionality of ChatGPT. CHIP, our AI bot, has successfully processed over 1000 requests in the past two months, demonstrating its ability to retrieve documentation, fill forms, and facilitate IT support tasks efficiently."

Looking ahead, DigiKey is exploring the potential of deploying chatbots for internal tech support, particularly in scenarios where specific components are unavailable or obsolete. The company envisions hosting these AI-powered solutions in the cloud, leveraging tools like Snowflake and Sigma to standardize and visualize data securely.

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