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The Impact of Artificial Intelligence and Automation on Supply Chain Careers

By Vikram Murthi  February 17, 2020

By Vikram Murthi, Vice President, Industry Strategy, LLamasoft

Rapid advances in automation and Artificial Intelligence (AI) technologies have the potential to significantly disrupt supply chain roles. While automation and AI can augment the productivity of some supply chain workers, they can replace the work done by others and will likely transform almost all work to some degree. Experts and pundits put the impact of these advances broadly into two buckets – that AI and automation leads to functions being substituted or complemented.

The Substitute Effect

Advances in AI and automation have been so rapid that computers and robots will eventually be better than workers in numerous tasks. Workers will face obsolescence through labor substitution not just in warehousing (robots) and transportation (self-driving trucks) but also in supply chain planning and execution with automated forecasting, exception handling and replenishment. One study has forecasted that about 47% of US jobs are at risk of computerization. Another study looked at the impacts of robots in employment opportunities in US manufacturing and found significant decreases in both employment and wages.

The Complement Effect

The more optimistic view is that technology increases the opportunity for workers who are not in direct competition with it. Even if technology depresses employment for certain types of labor, it can create new needs and new opportunities through the “creative destruction” of the complementary effect.

For example, lets take the introduction of the spreadsheet in the early 1980’s first with VisiCalc and then Lotus 1-2-3. This made manipulating 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 modeling alternate scenarios.

This groundbreaking technology tremendously 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.

Pessimism or Optimism?

A pessimistic view of the combination of these two effects would be that advances in AI and automation will be so rapid, that machines will eventually be better than humans in most activities, and will be the “default choice” for businesses. As a result, there will be a few highly paid workers who will still be employed and the rest will struggle to find work, or be stuck in jobs that are poorly paid, unstable and stressful.

A fundamentally optimistic view is what the economist Roger Bootle adopts in his book “The AI Economy: Work, Wealth and Welfare in the Robot Age”.  Mr Bootle paints a picture that AI and robotics would improve productivity and propel economic growth, and at the same time release people from performing the most mundane, boring and unfulfilling tasks. New jobs will be created, including those that will always need a human touch with increased social, collaboration and design skills.

Which of these alternate visions of the future should we believe? 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 lead to labor 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.

Needless the say, the record supporting either view has been shaky at best.

Supply Chain Professionals Need to Re-invent Themselves

Regardless of where you stand on the impact of AI and automation, it is clear that technology is causing tremendous disruption in supply chains and if professionals need to survive and thrive, they will have to re-invent themselves.

This re-invention of supply chain roles also has to be driven by the impact of another fundamental trend – which is rising customer expectations. Customers want products and services in their hands more quickly, they expect a more personalized experience and all this at a lower cost. Which means more customized products and services, faster order fulfillment times and super efficient delivery. This will require an entirely new way to architect, design and manage supply chains across broader ecosystems, new technologies and new roles and skill sets.

These new roles emerging in the supply chain discipline will require working directly with customers, customer facing departments, product development, manufacturing and logistics to define the right product and service portfolios.  This customer co-creation paradigm will drive the need for supply chain professionals, that can orchestrate the silos across organizations,  while at the same time leveraging the latest modeling and analytical tools for insights and decision making.

These highly collaborative roles will require the leveraging of AI and automation to make intelligent decisions around new product attributes, product portfolios, product pricing and distribution, network design, product flow paths, capacity, inventory placement and transporation modes. The emergence of the digital twin of the supply chain, is 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.

The supply chain ecosystem has always been at its core a people business. We’re moving toward a world where humans and machines no longer just co-exist, but collaborate to improve the capabilities of both. This cooperation will drive a more efficient and sustainable supply chain that delivers better business outcomes.