The Growing Role of AI in Supply Chain Management

January 19, 2017

Written by Alexa Cheater. This guest post first appeared on Kinaxis’ industry blog, The 21st Century Supply Chain.

Rapidly evolving technology and a digitally focused world have opened the door for a new wave of automation to enter the workforce. Robots already stand side-by-side with their human counterparts on many manufacturing floors, adding efficiency, capacity (robots don’t need to sleep!) and dependability. Add in drones and self-driving vehicles and it’s no wonder many are questioning the role of humans going forward.

Supply chains, although automated to a degree, still face challenges brought about by the amount of slow, manual tasks required, and the daily management of a complex web of interdependent parts. The next generation of process efficiency gains and visibility could be on your doorstep with artificial intelligence in supply chain management, if only you’d let the robots automatically open it for you.

History of automation

Mankind and machines have worked in harmony for decades, with some citing Henry Ford’s adoption of the assembly line way back in 1913 as its early beginnings. Fittingly, D.S. Harder, an engineering manager at the Ford Motor Company, officially coined the term ‘automation’ in 1946, using it to describe the increased use of automatic devices and controls in mechanized production lines.

The race for automation supremacy set off a race for the ‘lights out’ factory among many rival automobile companies. The idea was to automate all tasks with no human presence required on-site. Production could happen continuously 24 hours a day. It is still the dream of many manufacturers today.

Thanks to automation’s roots in the industrial revolution, many associated the term with mechanical production lines and warehouse floors. But more recently a number of significant developments in various other fields have led to an expanded definition. The digital computer, improvements in data-storage technology and software, advances in sensor technology and the derivation of a mathematical control theory – all have contributed to progress in automation technology outside traditional manufacturing.

Driving further advancements in automation was the development of integrated circuits in the 1960s, which propelled a trend toward miniaturization in computer technology. That led to smaller, less expensive machines also capable of performing calculations much faster, providing a major advantage to those companies able to implement these new automation technologies.

As Robert Bowman from SupplyChainBrain points out, “The focus up to now has been largely on repetitive, transactional processes, in warehouses as well as on the production line.” But that’s beginning to change. We’ve entered an era where automation is extending to processes. It’s no longer just a case of swapping out humans for machines.

Robotics process automation

Robotics process automation (RPA), as defined by Wikipedia is, “an emerging form of clerical process automation technology based on the notion of software robots or artificial intelligence (AI) workers.” It goes beyond physical systems and provides the glue that when looked at from a supply chain perspective integrates multiple systems dedicated to order taking and fulfillment.

RPA works by automating the end-to-end supply chain, enabling the management of all tasks and sections in tandem. It allows you to spend less time on low value, high frequency activities like managing day-to-day processes, and provides more time to work on high value, exception-based requirements, which ultimately drives value for the entire business.

PwC estimates businesses could automate up to 45% of current work, saving $2 trillion in annual wages. “In addition to the cost and efficiency advantages, RPA can take a business to the next level of productivity optimization,” the firm says. Those ‘lights out’ factories and warehouses are becoming closer to a reality.

Four key elements need to be in place for you to take full advantage of robotic process automation in your supply chain:

  • robots for picking orders and moving them through the facility;
  • sensors to ensure product quality and stock;
  • cognitive learning systems;
  • and, artificial intelligence to turn processes into algorithms to guide the entire operation.

In addition, you’ll need strong collaboration internally and among suppliers and customers to tie all management systems back to order management and enterprise resource planning platforms.

Driving the competitive edge

A study by MHI and Deloitte found more than half (51%) of supply chain and logistics professionals believe robotics and automation will provide a competitive advantage. That’s up from 39% last year. While only 35% of the respondents said they’ve already adopted robotics, 74% plan to do so within the next 10 years. And that’s likely in part to keep up with key players like Amazon, who have been leading the robotics charge for the past few years.

Global Annual Investment in RoboticsIn advance of Cyber Monday, the online retail giant threw open the warehouse doors to provide an inside look at the robots helping to automate the most mundane parts of filling online orders. It’s been four years since Amazon spent $775 million to acquire Kiva Systems, a Massachusetts-based startup that makes warehouse robots and software. Now more than 30,000 Kiva robots roam the aisles of 13 Amazon fulfillment centers to help speed up warehouse operations and decrease labor costs. It’s no wonder smaller players are looking to get in the game and apply these same benefits to their own supply chains.

As outlined in a Business Insiders article, the growing investment in automation and robotics only provides further proof it is the way forward.

Robots are becoming cheaper and easier to deploy thanks to less expensive sensors and free open source software. They’re also becoming safer for humans to work alongside, improving safety with the rise of real-time data processing to “see” their environment and avoid any collisions that could injure someone nearby.

Benefits of automation

Robots don’t slow. They don’t tire. They don’t get injured, distracted or sick. And they don’t require paychecks. They increase efficiency, reduce downtime and improve accuracy. Provided of course they’re calibrated correctly. RPA allows stakeholders to collaborate and simplifies the flow of products and related information. It can ultimately improve working capital and lower the cost to serve across the entire supply chain.

Smart machines are already capable of self-diagnostics, and with added connectivity features can now report on when they need service, estimated life spans and more. Imagine the possibilities. Your equipment could soon be able to tell you exactly when it needs servicing, how long the downtime would be, and provide an estimate as to when end of life will become a factor. Improvements to AI also mean these smart machines could take things a step further, seeking ways to improve their own efficiency and making recommendations on how best to manage day-to-day operations.

When it comes to supply chain, the possible role of automation extends well beyond manufacturing and logistics. Automation could eventually be the brain behind your supply chain – the autopilot who navigates planning and fulfillment activities, monitors inventory levels and adjusts safety stock. Thanks to advanced algorithms, we may not be far off. Some supply chain software already has the capability to compare multiple scenarios side-by-side and make recommendations on which course of action may be the best. Add in the ability for that same software to connect and share data with the smart machines on the manufacturing floor, and you may be left wondering if your role in supply chain is about to become obsolete.

Where’s the humanity?

Automation should be embraced, not feared, but if you’re concerned about job safety, that’s a whole lot easier said than done. While roles and responsibilities within your supply chain are likely to shift, we’re not at a place where automation can eliminate the human element, and I’m not just talking about engineers required to maintain and repair any faulty robots.

“Kiva’s doing the part that’s not that complicated. It’s just moving inventory around,” says Dave Clark, Amazon’s vice president of worldwide operation. “The person is doing the complicated work, which is reaching in, identifying the right product, making sure it’s the right quality, making sure it’s good enough to be a holiday gift for somebody.”

That’s where humanity still plays a vital role. Currently, machines can only base decisions and recommendations based on programed algorithms. But there’s something to be said for gut feeling, and knowing soft information not included in the data set. When you consider things like how an order change will alter the sentiment of your relationship with a customer when you factor in soft skills, it becomes evident you still need human judgement in your supply chain. At least for now.

Automation in supply chain planning

As noted earlier, the focus of automation in supply chain has largely been on the execution side – manufacturing, logistics, order fulfillment. But the practical application of automation in supply chain planning has largely been overlooked. Once again, Amazon is on the cutting edge. The company reportedly already employs 1,000 people in artificial intelligence, with many likely working on Echo, a wireless speaker that listens to you and speaks back. It can turn off the lights, report on traffic and order things, but backed by artificial intelligence could become something far more than a novelty device.

As Kevin O’Marah, the chief content officer at SCM World, explains, “What Amazon is positioning itself to do is far more ambitious and involves what AI experts call ‘contextual awareness’. This means knowing not only the what, but also the when, why, where and how of consumer need. The long game is all about selling us not just what we want, but what we need, and probably before we realize we need it.”

Amazon has moved well beyond just sensing and responding to demand. It’s developing a complete picture of each customer, and the personal data collected will help future AI applications to know the difference between what you want, and what you need.

AI and prescriptive analytics in supply chain could lead to revolutionary breakthroughs, including automating the decision process. This concept goes far beyond just having software that runs scenarios and shows you ranked results of their outcomes, but lets the machines (in this case computers) actually make the decision entirely, and then filter that control command down through the rest of the supply chain. It’s opening the door for a conversation around optimization versus human judgement.

The rise of AI

According to Amazon’s CEO Jeff Bezos, advancements in AI require three technology foundations:

  • Algorithms
  • Compute power
  • Training data

The first two have been around for decades, but the third is where Amazon sees the most value. And that training data is coming directly from consumers who purchase through the online retailer. It’s where the idea of contextual awareness comes into play. Combine that with technology able to sense and respond, and you have AI that’s capable of understanding complex cause and effect, and taking appropriate actions to reach a desired outcome. Ironically, as is the basis for so many sci-fi movies, machines equipped with AI are also heading down the path of being able to determine what those desired outcomes should be.

From personal assistants like Siri to stock trading to medical diagnosis, AI is able to learn from seemingly unstructured data, take decisions and perform actions in a way previously unimagined. With the endless possibilities of learning from the 2.5 quintillion bytes of data generated every day, it’s well on course to making the implausible a reality. That could be why more supply chain executives are starting to take note.artificial intelligence impact on supply chain strategy

With the growing trend toward digitization in supply chain, AI could be the next arena where organizations can look to differentiate and drive revenue growth. According to Accenture’s digital operations survey, 85% of organizations have adopted or will adopt digital technologies in their supply chain in the next year.

AI is how companies will analyze all the big data associated with digital technologies in order to gain a better understanding of their end-to-end supply chains. That analysis will drive anticipation of future scenarios, effectively reducing time to market and driving more agile supply chains capable of dealing with uncertainties.

As Manish Chandra and Anand Darvbhe of Accenture Strategy point out, “The use of AI in supply chains will ultimately result in spawning an ecosystem where supply chains link themselves with each other, enabling seamless flow of products and information from one end to the other.”

Automation and AI in your supply chain is an important evolutionary next step you can’t ignore. It’s what will allow you to spend less time on repetitive processes, such as planning, monitoring and coordinating, and focus more on innovation, growth and those unexpected exceptions.

What role do robotics, automation and AI play in your supply chain? Let us know in the comments area. 


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