Is Technology Killing Supply Chain Management?

Stephen DeAngelis

July 17, 2018

Irony is defined as “a state of affairs that seems deliberately contrary to what one expects.” Some pundits find it ironic that even as companies are searching desperately for people to fill supply chain positions other pundits are predicting the demise of humans in the supply chain. Among those predicting technology will make humans redundant are supply chain and retail expert Allan Lyall and his Boston Consulting Group colleagues Pierre Mercier and Stefan Gstettner. They assert, “New digital technologies that have the potential to take over supply chain management entirely are disrupting traditional ways of working. Within 5-10 years, the supply chain function may be obsolete, replaced by a smoothly running, self-regulating utility that optimally manages end-to-end work flows and requires very little human intervention.”[1] They are not alone in their prediction about technology replacing humans in the supply chain, James Ovenden (@IE_James) writes, “The Internet of Things (IoT), machine learning, and blockchain are surely the final technologies for supply chain management to really embrace. We are, so to speak, handing the keys to the farm over to the machines.”[2]

 

The supply chain and technology

 

Lyall, Mercier, and Gstettner ironically use a biological metaphor when they describe the supply chain as “the heart of a company’s operations.” I certainly agree with the metaphor. I’m on record with others as noting that supply chain operations are not an ancillary part of a business but central to it. Why then, some might ask, are business executives going to be keen to turn over so much of the business to machines? As noted above, one reason is business leaders are having a difficult time filling supply chain positions. Machines are needed to do what humans now do in order to keep the business running. Rather than completely replacing humans, however, we are seeing machines working side-by-side with humans. Another reason automation will increase is to deal with complexity. Cognitive technologies can deal with many more variables in a shorter period of time than humans can. No one I’m aware of believes supply chains will get less complicated, which means more automation is inevitable.

 

There has been a lot of buzz about the need for companies to transform into digital enterprises and leverage digital supply chains. Lyall, Mercier, and Gstettner note, “With a digital foundation in place, companies can capture, analyze, integrate, easily access, and interpret high quality, real-time data — data that fuels process automation, predictive analytics, artificial intelligence, and robotics, the technologies that will soon take over supply chain management.” I believe cognitive technologies are more likely to augment human decision making than replace it altogether. Making better decisions is critical to any business. Bain analysts, Michael C. Mankins and Lori Sherer (), note that decision making is one of the most important aspects of any business. “The best way to understand any company’s operations,” they write, “is to view them as a series of decisions.”[3] They add, “Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”

 

While I’m skeptical technologies will completely eliminate supply chain managers, I do believe the dominant leadership style will become “management by exception.” Once automated processes have been established, cognitive technologies will be able to operate fairly autonomously, learning as they go and only alerting humans when an anomaly is detected. Invariably, automated processes will result cost savings, fewer errors, and an excellent return on investment.

 

Supply chain technologies

 

Lyall, Mercier, and Gstettner note, “Many [companies] have used robotics or artificial intelligence to digitize and automate labor-intensive, repetitive tasks and processes such as purchasing, invoicing, accounts payable, and parts of customer service. Predictive analytics are helping companies improve demand forecasting, so they can reduce or better manage volatility, increase asset utilization, and provide customer convenience at optimized cost.” Below is a brief discussion of some of the technologies likely to become ubiquitous in supply chain operations in the years ahead.

 

Sensors: All sorts of sensors are being placed in machines and products. These sensors are one of the most important parts of the IoT ecosystem because they generate the data from which insights are obtained. One type of sensor is radio frequency identification (RFID). Analysts from Ver Solutions note, “Radio Frequency Identification enables the automatic tracking of inventory and assets and therefore simplifies the supply chain whilst reducing operating costs. Using RFID tracking allows business owners to improve inventory management and increase the control they have over the location of their products. Not only does RFID technology eliminate the need for hand-scanning, which reduces the time the process takes, it also helps reduce the amount of errors workers make.”[4]

 

Internet of Things: Ver Solutions’ analysts write, “The Internet of Things is all about connecting devices over the internet, allowing for the interlinking of data and communication between us, our devices and applications.” Ovenden adds, “When used effectively, IoT can cut costs and improve efficiency, meaning companies can do things faster, more accurately, and with less personnel. For example, it can be used is the constant monitoring of machinery for signs of damage. This will allow organizations to deal with potential problems as early as possible, rather than waiting for them to pass crisis point. Not only does this prolong the life of a company’s machinery, it could also prevent potentially dangerous incidents from occurring, even shutting down any connected equipment that might worsen a situation. IoT technology can also help keep check on demand at any point in the chain. Automated messages can be sent as to where a product is needed, leading to better inventory designation.”

 

Cognitive Computing: To be effective, the IoT ecosystem requires sensors on the front end, connectivity in the middle, and advanced analytics on the back end. Many analysts believe cognitive computing (a sub-set of AI) will provide the advanced analytics. At Enterra Solutions®, we define cognitive Computing as combination of Semantic Intelligence (i.e., artificial intelligence + natural language processing + ontologies) and Computational Intelligence (i.e., advanced mathematics). This combination excels at dealing with complex and ambiguous challenges.

 

Blockchain: Lyall, Mercier, and Gstettner note, “Blockchains are beginning to revolutionize how parties collaborate in flexible supply networks.” Ovenden adds, “In terms of hype, blockchain has almost been on par with that of IoT and AI. … It is a cryptographically secure public register of transactions operated by a decentralized peer-to-peer network that has implications for every industry, and its implications for transparency will help few areas more than supply chain. Indeed, Jerry Cuomo, IBM’s vice president for blockchain, has argued that, ‘Supply chain is the most likely application for the technology after financial services.’”

 

Robotics: Robotics covers everything from warehouse pickers to drones to autonomous vehicles. Lyall, Mercier, and Gstettner predict, “Delivery drones and self-driving vehicles aren’t far off.” Ver Solutions’ analysts add, “Drones are … set to transform supply chain management and other industries, as they are set to be adopted across the next 15 years.” They also predict, “In the near future there will be autonomous vessels travelling across our oceans. … British luxury car company Rolls Royce have set a target to have remotely controlled autonomous vessels in international waters by 2025. Ten years later in 2035, ocean-going ships will have the ability to travel completely unmanned, and it is aimed that these intelligent vessels become a common sight across our seas.” The largest impact to date has been the adoption of robots in warehouses to help meet fulfillment challenges created by e-commerce.

 

Summary

 

Lyall, Mercier, and Gstettner insist, “The trend is clear: Technology is replacing people in supply chain management — and doing a better job. It’s not hard to imagine a future in which automated processes, data governance, advanced analytics, sensors, robotics, artificial intelligence, and a continual learning loop will minimize the need for humans.” Ovenden adds, “The worry is that supply chain managers may be reluctant to adopt such technology as a result, fearing that they are essentially training up their replacement. They may be right to be fearful, or we could see human supply chain managers finding new ways to make themselves relevant.” I believe the latter scenario will be the case. Humans will help keep the “heart” in the “heart of the business.”

 

Footnotes
[1] Allan Lyall, Pierre Mercier, and Stefan Gstettner, “The Death of Supply Chain Management,” Harvard Business Review, 15 June 2018.
[2] James Ovenden, “Do IoT, Machine Learning, And Blockchain Mean The End For Supply Chain Managers?Innovation Enterprise, 22 August 2017.
[3] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.
[4] Ver Solutions, “Infographic: How is Technology enhancing Supply Chain Management?Global Trade, 20 November 2017.