The Impact of AI and Automation on Supply Chain Careers
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 — the substitute effect and the complement effect. That is, AI and automation lead to functions either being substituted or complemented.
The Substitute Effect of AI and Automation
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, scenario planning, exception handling, and replenishment.
This MIT study looked at the impacts of robots on employment opportunities in US manufacturing and found significant decreases in both employment and wages. One additional robot replaced about 3.3 workers nationally and lowered wages by about 0.4%.
The Complement Effect of AI and Automation
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, let's take the introduction of the spreadsheet in the early 1980s 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.
Views on the Effects of AI and Automation
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. They 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. 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 convincingly support the optimists or the pessimists. Prior to the onset of COVID-19, unemployment was at a record low, which suggests that automation has not led 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 to say, the record supporting either view has been shaky at best.
Supply Chain Professionals Need to Reinvent Themselves
Regardless of where you stand on the impact of AI and automation, it is clear that technology is causing tremendous supply chain disruption. If professionals need to survive and thrive, they will have to reinvent themselves.
This reinvention of supply chain roles also has to be driven by the impact of another fundamental trend: 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. This 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 leveraging 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 transportation modes. The emergence of the digital supply chain twin 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.
Is Your Supply Chain Ready for AI and Automation?
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 coexist, but collaborate to improve the capabilities of both. This cooperation will drive a more efficient and sustainable supply chain that delivers better business outcomes.