It’s difficult to envision anything these days without viewing it through the lens of the COVID-19 pandemic.
The topic of digitalization and automation is no different. In the fourth quarter of 2019, Gartner ran a poll asking CEOs whether an economic slowdown would accelerate or slow down digital transformation. Just over half of the respondents said it would accelerate those plans. In May of this year, Fortune ran a similar poll asking CEOs if they were accelerating or slowing. An astonishing 75% said digital plans have been accelerated.
Not a New Concept, But Things Have Changed
Since the advent of robotics, the march toward automated manufacturing, like Constellation’s fully automated brewery, and warehouses, like Ocado’s Andover, United Kingdom facility, has steadily picked up pace. However, the inability of automated solutions to adjust or adapt to changing factors has prevented going completely “lights out.” The combination of AI and adaptive robotics is removing that barrier.
The thought of a driverless logistics network seemed unthinkable just 10 years ago, but now driverless trucks are covering thousands of miles and drones are dropping packages off at front doors, although only in tests for now. China’s JD.com has combined warehouse automation, driverless trucks, drones and other technology in its vision for urban logistics… which includes no people.
The area of planning and analytics, while long targeted for automation, seemed out of reach of “lights out.” But enter AI, machine learning and robotic process automation (RPA) and it’s not such a crazy thought that large planning teams could go the way of the typing pools of the 1950s. Advances of the same technology in purchasing and customer service areas show we are close to automating everything we now define as supply chain.
The Pursuit of Zero
In a January 2019 executive report, my colleague Pier Manenti referenced the concept of zero management from Professor Rene T. Domingo of the Department of Analytics, Information, and Operations at the Asian Institute of Management. Domingo argued that companies following the zero management business concept do not try to “optimize” the supply chain, but rather they try to “minimize” it. In this concept, he suggests, although not actually feasible, the supply chain approach should be to set targets for loss, defect, downtime, inventory, cost, price and lead time to zero.
Prior to the pandemic, the decision to automate a function typically focused on the ability to lower cost, increase quality and increase speed/reduce downtime. During the pandemic, another factor has received increased attention: risk. People get sick. They have reservations about coming into work. If you include risk, it increases the case for the pursuit of zero to include people.
Just to be clear, I do believe we should continue to push the frontiers of technology and that good things will come from AI, driverless vehicles, RPA, adaptive robotics and other forms of technology that have yet to emerge. However, there is a responsibility that goes along with it. According to the International Labour Organization, there were 450 million people employed in supply chain roles around the world as of 2015. Just by way of comparison, the population of the United States in 2020 is roughly 330 million people.
Is Automation the Steroids of Business?
For Major League Baseball in the U.S., the 1990s and early 2000s have become known as the steroid era. This was a time where players could use performance-enhancing drugs without penalty because there was no testing. This created an environment where there was an incentive to use them because if you didn’t, you ran a higher risk of losing your job to someone who did. For many, remaining employed outweighed the longer-term prospect of negative health concerns from using them.
What’s the parallel? Let’s say for sake of argument that automation is counterproductive from a socioeconomic perspective (creates an environment of massive unemployment). The inherent issue is that the incentive to continue to push the frontier is never ending because if my company doesn’t and my competition does, we are at a significant competitive disadvantage (we may go out of business). In other words, absence of global legislation that puts automation at a disadvantage or a change in mindset that employing people over machines makes better business sense, we will continue to accelerate to the point of 100% automation.
Responsibility of the Profession?
In recent years, the supply chain profession has taken on the banner for sustainability. It’s good business to limit or negate the impact of its activity on the environment. Does the same responsibility exist for the generations of workers that are preparing to enter the supply chain profession? Should we be planning for the socioeconomic impact of the inevitable and reevaluating employment, education and income? This transition will take years longer to play out, but it will play out. Whether it is 10, 15 or 25 years away, do we as a profession need to be more active in creating a path for the pool of workers we will displace?
Chief of Research,
Gartner Supply Chain