# Innovation Potentials and Pathways Merging AI, CPS, and IoT
## 2 State of the Art and Recent Advances
### Artificial Intelligence
Therefore, it would be prudent if we truly take this lesson to our hearts: Technology and especially AI development is advancing progressive, not linear; prognosis and expectations have to take that into account and avoid the 'trap of linear extrapolation'. This can be connected to the innovation s-curve concept, indicating exponential and not linear innovation speed in many processes. In general, nevertheless especially for business applications as for example in logistics, a series of expectations or expected advantages are connected to the development and implementation of AI applications in transportation, intralogistics and supply chain steering. These foreseen advantages of AI applications in production and transportation include:  
* Cost savings: AI applications are expected to achieve cost savings, especially in the area of personnel costs as robotics and automated intralogistics and transportation applications are expected to provide faster and durable--and therefore finally cheaper--solutions in the logistics domain. * Earnings increases: In many cases AI applications are expected also to increase revenue volumes--whether directly by increasing available product items at the point of sale (avoiding out of stock situations), or indirectly by allowing retailers to match customer preferences and expectations better and therefore increase customer satisfaction and re-buy rates. This is already partly obvious in the online shopping environment as well as with new automated customer support systems such as 'Google Home/Assistant' or 'Amazon Alexa/Echo' [47; 48]. * Increased speed: Obviously especially in logistics and transportation contexts, an area of great expectations is also the dimension of speed, especially by a more aligned cooperation of different actors within operations and transportation processes--e.g., between picking, production, packing and outbound transportation. This may significantly decrease lead times and time to market rates with the application of AI and automation. * Increased flexibility: Finally, especially with speedy AI applications, most logistics and SCM managers also expect increasing flexibility for intralogistics as well as transportation setups; this is a very valuable asset in logistics environments and can be especially crucial in peak times. For example especially in delay and 'troubleshooting' situations very complex and fast decisions have to be taken e.g., for or against express transportation, re-shipments or others--in such situations, AI decision support could be crucial for maintaining customer satisfaction and competitiveness for logistics service providers as well as manufacturers and retailers. As an example for the expected cost savings as well as earnings increases by AI applications in supply chains, an example from the retail sector is provided by [PERSON] et al. [49], in detail depicted in Figure 1. The AI application addressed the classical 'out of stock' problem and replenishment planning in retail and point of sale operations. By identifying the optimal solution regarding the specific replenishment lot size, the application is able to avoid lost earnings as well as too high cost levels for storage, transport as well as discarding unsellable items. Altogether regarding RQ1 it can be stated that there are a multitude of technological advances in the outlined three areas of CPS, IoT and AI--but the advances are more or less still restricted to specific instances of application (CPS: specific manufacturing sites and applications; IoT: specific testbeds and company surroundings; AI: specific applications in games and e.g., picture and pattern recognition). Second, it is important to acknowledge that future inventions can be anticipated--their impacts on the contrary are not foreseeable as highlighted e.g., by [PERSON]:  
_\"In 1963, [PERSON], Nobel laureate for his invention of the holograph, said 'The future cannot be predicted, but futures can be invented' ([PERSON], 1963).