Industrial Engineering

How AI and Automation Could Impact Supply Chain Roles

How AI and Automation Could Impact Supply Chain Roles
Supply Chain Digital April 2020
By Vikram Murthi, Vice President, Industry Strategy, LLAMASOFT
https://www.supplychaindigital.com/technology/how-ai-and-automation-could-impact-supply-chain-roles

Innovations such as AI and automation have been tipped to kickstart the Fourth Revolution.

While the technology is being widely adopted, it is constantly evolving. Therefore, there is uncertainty surrounding its overall impact, particularly on professional roles within the supply chain.

Some fear that the technology will replace its human counterparts, while other experts suggest it will work in unison with humans, supporting them to focus on higher value opportunities. Amidst all of this uncertainty one thing is for certain: AI and automation will change how we operate.

One side of the coin: a workforce replaced

Recent advancements in AI and automation mean that the skills of computers and robots will soon surpass that of workers in numerous tasks. Consequently, when these advanced technologies also become more cost effective, the workforce will be automated away.

Workers will not just be substituted in low skilled jobs such as warehousing and transportation. But with advancements in automated forecasting, exception handling and supply chain planning, skilled roles are also at risk. One study has forecasted that about 47% of US jobs are at risk of computerisation. Another study looked at the impacts of robots in employment opportunities in US manufacturing and found significant decreases in both employment and wages.

On the flip side: a work force enhanced

The opposing and more hopeful view is that there will be an AI-driven shift in the workforce, as technology increases the ability of workers who are not in direct competition with it. Whilst technology will likely depress employment for some forms of labour, it has the potential to produce new needs and openings through “creative destruction”. This gives rise to the potential for a complementary effect.

The complimentary effect is illustrated by looking at the introduction of the spreadsheet in the early 1980’s, first with VisiCalc and then Lotus 1-2-3. This made working with large quantities of related data much easier without time consuming and error-prone methods. Suddenly, you could change commodity costs, currency exchange rates, component prices or interest rates and instantly see the impact on revenues and profits into the future. In the finance and accounting discipline (e.g. in “supply chain finance”) it simplified routine bookkeeping and made many tasks simpler like modelling alternate scenarios.

The spreadsheet hugely impacted the demand for bookkeepers (44% less in number between 1985 and 2017) but greatly increased the need for people who could run the numbers on this new software like accountants, financial managers and management consultants. In the United States between 1985 and 2017, the ranks of accountants and auditors had grown 41% to 1.8 million, while financial managers and management consultants had nearly quadrupled to 2.1 million.

A professional opinion

Some take the pessimistic view, believing that advances in AI and automation are at a tipping point, after which machines will soon be better than humans in many activities.  Then when access to this technology becomes mainstream, it will be the “default choice” for businesses. Consequently, there will remain a few highly paid workers employed and the rest will struggle to find work, or be stuck in jobs that are poorly paid, unstable and stressful.

Economist Roger Bootle takes a more optimistic view in his book “The AI Economy: Work, Wealth and Welfare in the Robot Age”. Bootle believes that AI and robotics will ultimately drive economic growth and release people from performing mundane, boring and unfulfilling tasks, while creating new roles in areas that will always need a human touch and those which require social, collaboration and design skills.

Despite both sides putting forward believable arguments, recent history has not been able to support convincingly the optimists or the pessimists. Unemployment is a record low, which suggests that automation has not led to labour displacement. On the other hand, economists have been pointing out that the growth in overall productivity attributed to technology has been consistently disappointing.  Though Erik Brynjolfsson, who studies the economics of information technology, suggests in his explanation of the productivity paradox, that measurements of the impacts may be time delayed and that the wrong (“old economy”) measures are being used.

When one door closes, another one opens

Whatever side you support, what is certain is that technology AI and automation are set to change many supply chain roles as we know them. This will cause tremendous disruption in supply chains and for workers to remain necessary, they will have to consider re-inventing themselves.

Changing customer expectations are also set to have a monumental impact on supply chain roles. The rise of ‘next day’ delivery means consumers expect products and services in their hands more quickly.  Whilst the rise of AI and analytics mean a more personalised experience has become the norm. To provide these businesses must invent an entirely new way to architect, design and manage supply chains across broader ecosystems, new technologies and new roles and skill sets.

Whilst there are roles being replaced, new supply chain roles are also being created. These jobs are increasingly focused on working directly in consumer facing departments. The new customer co-creation paradigm will drive the need for supply chain professionals, that can orchestrate the silos across organisations, while at the same time leveraging the latest modelling and analytical tools for insights and decision making.

These new highly cooperative roles will require the leveraging of AI and automation. This will help to make intelligent decisions around new product attributes, product portfolios, product pricing and distribution, network design, product flow paths, capacity, inventory placement and transportation modes. Digital Twin technology will be key to making those interconnected trade-offs, in order to deliver in an environment of ever-changing customer needs, at new levels of speed and scale.

Adoption of AI and automation is becoming widespread across the supply chain, and it’s only growing. However, the technology needs to assist existing workers, not replace them. Now is the time to focus on achieving a harmonious relationship between humans and machines, working hand-in-hand to deliver a more efficient and sustainable supply chain to deliver better business outcomes.