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How AI and automation are reshaping supply chain roles

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New technologies and AI have the potential to boost collaboration between machines and workers even if some fear the impact it could have on the jobs market.

While AI has been heralded in some quarters as the innovation that will bring about a Fourth Industrial Revolution, its impact on future supply chains is still unclear.

The two most prominent opinions are that either AI and automation will lead to workplace functions being replaced, or job roles will be bolstered by the technology.

The first of these positions assumes that recent advances mean the skills of computers and robots will soon surpass those of workers in numerous tasks. When these advanced technologies become more cost effective, the workforce will effectively be automated away.

It’s not just in low-skill jobs such as warehousing and transportation that workers will be substituted. With advances in automated forecasting, exception handling and supply-chain planning, skilled roles are also at risk. One study has forecast that 47 per cent of US jobs could be replaced by AI. Another looking at the impact of robots on employment opportunities in US manufacturing found significant decreases in both employment and wages.

The opposing and more optimistic 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 probably depress employment for some forms of labour, it has the potential to produce new needs and openings through a process of ‘creative destruction’. This gives rise to the potential for a complementary effect.

This can be illustrated by looking at the introduction of the spreadsheet in the early 1980s, 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 in the future. In the finance and accounting discipline (eg in ‘supply chain finance’) it simplified routine bookkeeping and made many tasks simpler like modelling alternative scenarios.

The spreadsheet hugely reduced the demand for bookkeepers, whose numbers fell by 44 per cent between 1985 and 2017, but greatly increased the need for the people who could run the numbers on this new software - accountants, financial managers and management consultants. In the United States between 1985 and 2017, the ranks of accountants and auditors had grown by 41 per cent to 1.8 million, while financial managers and management consultants had nearly quadrupled to 2.1 million.

What do the experts think? 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. It will become the ‘default choice’ for businesses. While a few highly paid workers may retain their jobs, the rest struggle to find work, or find themselves 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 credible arguments, recent history has not been able to convincingly support either of them. Unemployment is at 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. Erik Brynjolfsson, who studies the economics of information technology, suggests in his explanation of the productivity paradox that measurement of the impacts may be time-delayed and that inappropriate ‘old economy’ measures are being used.

How can you reduce the probability that you will become replaceable? Whichever side you support, what is certain is that technology is 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. The rise of ‘next day’ delivery means consumers expect products and services in their hands more quickly, whilst the application 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 with new roles and skill sets.

Whilst some roles being replaced, new supply-chain roles are also being created that are increasingly focused on working directly in consumer-facing departments. The new customer co-creation paradigm will drive the need for supply-chain professionals who can orchestrate the silos that exist 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.

What is certain is that technological innovations in the supply chain are taking place at breakneck speed. Therefore, as AI and automation enter the mainstream, humans and machines can no longer just co-exist but must work together. In order to seamlessly achieve this, common goals need to be put in place. This cooperation will ultimately benefit all participants that are involved, as it leads to a more efficient and sustainable supply chain that delivers better business outcomes.

Vikram Murthi is vice-president, industry strategy with LLamasoft

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