Analyzing Supply Chain Automation with the Information Value Chain (5/5)

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5. Impact of Automation on Supply Chains

The benefits that automation brings to supply chains are relatively easy to measure. Lower cost, faster throughput, safer working conditions, greater capacity, lower emissions, etc. For example, Amazon’s Kiva systems increase order fulfillment speeds by a factor of four, and Narrative Sciences application Quill can generate natural language reports in seconds. (Chui, Manyika, and Miremadi, 2015) Lucke and others predict a future in which smart factories can “handle turbulences in real-time production using decentralized information and communication structures for an optimum management of production processes.” (Lucke, Constantinescu and Westkamper, 2008)

It seems inevitable that many of the physical and cognitive tasks that are done manually today will become automated over time. So it is reasonable to assume that automation will reshape jobs throughout the supply chain, and in many cases eliminate the need for human workers altogether. That is not to say that all jobs will necessarily be eliminated - but many of them will. And others will change so radically as to become unrecognizable by today’s practitioners.

This should produce benefits in terms of productivity, safety, and speed for the supply chain. But there are far-reaching risks and drawbacks as well, and it is wise to consider how these could impact all of us over the longer term. Let’s look at four areas in which there are serious concerns about automation: human-machine collaboration, cybersecurity, social and political resistance, and succession planning. 

a) Human-machine collaboration

Human-machine collaboration needs to be treated as a system. For example, attempts to design automation in order to compensate for human error can lead to unintended consequences and situations in which neither the human nor the machine is able to take appropriate actions or make effective decisions. This was seen in the software developed by Boeing to prevent a stall in the 737 MAX, but which instead was identified as the cause of two catastrophic accidents. As Wendel states, “The attempt to design out a persistent pattern of accidents caused by human error can lead to a new, perhaps unanticipated, and possibly even more dangerous pattern of accidents caused or exacerbated by the technology.” (Wendel, 2019)

Another concern that comes with the automation of cognitive tasks is the reliance on “black boxes”. This issue was cleverly explained by science fiction writer Douglas Adams, who conceived of a powerful computer called “Deep Thought”. Asked to provide the “ultimate answer to life, the universe, and everything” Deep Thought calculated the correct answer to be “42”. (Adams, 1979) Without an ability to provide context or to interpret how the computer arrived at that result, the answer is essentially useless.

Interpretability is generally important because “The goal of scientists and the responsibility of engineers is not just to predict what happens but to understand why it happens.” (Holm, 2019) But Black Boxes might be acceptable in cases where the risk created by an error is small (such as in routine image classification), or where the automated solution is statistically more accurate than a manual alternative (such as the inspection of mammograms). To mitigate the risks of the black box effect, designers should consider ways to make complex systems easier for humans to interpret. We should also have contingencies in place to respond quickly when problems are identified.

A possible solution to many of the risks involved in automating cognitive tasks is to have the human act as a supervisor with the ability to override an automation action or decision. There can be many cognitive benefits of freeing humans from repetitive activities and distractions. (Breton and Bosse, 2003) However, automation can also cause humans to become disengaged from a task, which generates a “cognitive cost” in terms of lower situational awareness. Beyond this cognitive cost, there is a perhaps greater risk that automated activities could occur far too quickly for a human to monitor, prevent, or correct critical errors.

Another risk is a potential for work-related injuries. For example, in one case the partial automation of an electronics assembly line increased efficiency and productivity, but resulted in a higher incidence of work-related musculoskeletal disorders. (Neumann, et al, 2002) In order to mitigate this risk, managers to consider both the work removed, and the work remaining, when considering automation solutions for production systems.

b) Cybersecurity

With the growth of automation in our supply chains, every company is becoming dependent on software and data in order to conduct their day-to-day business. Our dependence on cyber physical systems (CPS) also means that every business is now vulnerable to cyber threats including computer viruses, intellectual property theft, and ransomware. 

High profile examples of cybersecurity breaches of CPSs include the 2014 attack on Target (Wallace, 2014) in which customer financial information was stolen, and the 2017 attack on A.P. Moeller-Maersk A/S (Kostov and Costas, 2017) in which a ransom was demanded in order to restore access to business information systems. Recovering from these attacks took months, and cost hundreds of millions of dollars. In order to mitigate this risk, companies need to have an effective cybersecurity strategy in place, which extends beyond their four walls to include their supply chain partners.

c) Social and political resistance

When you combine the risk that automation could eliminate jobs, with a politically-minded community of workers, companies face a risk of social and political resistance. This occurred in the Port of L.A. / Long Beach conflict between the port operators and the labor unions. Port operators wanted to automate processes, but lobbying by labor unions prevented the port operators from receiving permits to install new equipment. This was in spite of an agreement in which the port operators make payments to the union sharing some of the financial benefits of automation. (Choi, 2019)

Broader concerns about the automation of jobs has given rise to a social movement called the New Luddites, or Neo-Luddism. Some futurists are beginning to protest the transformation of people into “serf-like attenders to the needs of the machine.” (Appleyard, 2014) An example of this are the accusations against Amazon that they treat warehouse workers like robots by setting performance standards and measuring the productivity of each worker. These accusations have been the subject of comedy news shows, like John Oliver’s “Last Week Tonight” and have led to negative consequences such as damage to the brand and lawsuits. (Locker, 2019)

d) Succession planning and training

Many supply chain jobs experience relatively high rates of turnover, and this is due, at least in part, to people climbing the career ladder. Scott (1987) explains how large companies act as internal labor markets, where employees typically begin their careers in a small set of “starter jobs” that don’t require experience in a particular company or industry. Through On-the-Job Training (OJT) these employees learn more about the business, and get promoted as they become qualified for more complex, higher-paying positions. Because starter jobs are frequent targets for automation, one longer-term impact of automation on companies could be that they are eliminating the pool from which to hire experienced workers, and will instead need to hire inexperienced workers directly into more complex jobs. Companies may then need to invest in formal training which is equivalent to the OJT that a worker would have received from their starter job.

Key Takeaways

As Schumpter (1950) said, “Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary.” The automation of tasks throughout the supply chain is inevitable. 

From a microeconomic perspective this will be a mostly positive development. It increases the efficiency of supply chains, thus leading to lower costs for consumers and making products and services more widely available. But the macroeconomic effects on employment could include negative social consequences such as lower overall employment and fewer starter jobs for aspiring supply chain professionals.

As a supply chain manager, you can use the IVC to look for automation opportunities today. The most promising opportunities are likely to be tasks which require processing lots of data, without requiring the intuition and judgement which come from experience.

And as a professional seeking to remain relevant, identify opportunities to use technology to automate tasks that you need to do, at the lower end of the IVC, so that you can concentrate on the higher value tasks requiring intuition and judgement.

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Who is Mr. Supply Chain?

Daniel Stanton is a supply chain industry veteran and the best-selling author of Supply Chain Management For Dummies He is dedicated to empowering professionals through education and technology. His courses on LinkedIn Learning (formerly Lynda.com) have been viewed over 1 million times, and he's a frequent speaker at educational conferences and industry events.

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