The advantages of an automated supply chain are significant for organizations in all industries. Wages are still the highest cost borne by companies, and reducing them is usually the best starting point when looking to increase margins. So implementation of any technology that enables this is inevitably going to be swift. However, the wider implications for human labor, and society as a whole, remain unknown, and they are potentially devastating.
There is now a rapidly growing body of evidence showing the increasing level of automation in the supply chain. A recent report by Frost & Sullivan found that shipments of mobile robotics will rise from 4 million in 2012 to 25.4 million in 2020, with unit shipments of logistics-related robotics driving the expansion as they go up from 1,400 to 95,000 in the same time frame. Furthermore, in a survey by logistics industry group MHI and Deloitte, 35% of respondents said they’d already adopted robotics into their supply chains, rising to 74% in the next six to 10 years.
There have been robots in the supply chain for decades, but AI and machine learning is enabling these robots to become even smarter and teach themselves to operate alone, further reducing the need for human intervention. Paul Clarke, CTO at the United Kingdom-based Ocado, the world’s largest online-only grocery retailer explained: ‘As robots get inexorably smarter with advances in artificial intelligence and know more about the world around them through access to the Internet of Things and Big Data, they will make more informed decisions and be able to adapt to the environments they inhabit. This in turn will lead to richer human-machine collaboration – driving massive gains in productivity, safer workplaces, and better lives.’
The applications for AI and robotics run throughout the supply chain. The distribution center is especially ripe territory, with the ‘lights-out’ warehouse, where every task is automated, long a dream of manufacturers. Attempts to introduce a ‘lights out’ warehouse have been around since the 1980s, when American carmakers in Detroit concerned at the rise of Japanese competitors attempted to fight back by lowering costs through factories that could run unsupervised with minimal human interaction. It is an idea that has taken root across the world since. Siemens, for one, has a factory in Amberg, Germany, in which some of its production lines have been automated to the extent that they can run without supervision for weeks at a time, with the only human intervention, once calibrated, to replenish supplies of components. The idea is gaining particular prominence in China, where rising wages are proving too great an expense for factory owners.
And it’s not just factories that are set to be automated, driverless cars will likely mean an eventual end to human involvement in transportation. Most estimates suggest that there will be fully driverless cars on the roads by 2025 at the latest, with the likes of Google and Uber having invested tremendous amounts in the technology.
There are two questions that must be asked around where humans fit into this vision of a future supply chain. Firstly, what are people going to do for jobs? PwC estimates that as much as 45% of current work activities can be automated, ‘saving’ $2 trillion in annual wages. That’s the total yearly income of 37 million American households. Another estimate by Dr Carl Benedikt Frey and Michael Osborne, two researchers at the Martin School in Oxford, in their report ‘The Future of Employment: How Susceptible Are Jobs to Computerization?’, puts the figure at about 47% of total US employment. They also noted that both wages and educational attainment exhibit a strong negative relationship with the probability of computerization, noting the ‘current trend towards labor market polarization, with growing employment in high and low-wage occupations, accompanied by a hollowing-out of middle-income jobs.’ In the US, a driverless lorry industry would mean up to 3.5 million drivers and 5.2 million additional personnel who work directly within the industry out of a job. Additionally, there are the service stations and even small towns that rely on trucking routes for business that would potentially be left destitute should they lose their primary source of income.
That the Siemens factory still employs over 2000 people - the same as it did 20 years ago - is often cited as evidence that there will always be jobs, those jobs will just move higher up the ladder and become more strategic and creative. However, the shift from menial labor to more strategic and creative positions also presents its own problems to organizations. Where do they find more highly skilled individuals to do these creative jobs? The 2016 MHI Annual Industry Report surveyed almost 900 industry executives, with 58% citing hiring and retaining a skilled workforce to implement these technologies as a major hurdle. It is all very well to say that the jobs are there, but if the infrastructure is not in place to ensure that people are educated sufficiently to fill these roles, companies are not going to hire them and it is the bottom of society that suffers.
The idea that machines are primed to take our jobs began before the industrial revolution, and while the population exploded it never really bore out. However, that was a different technological age, and the speed at which technology and market transformations are taking place is likely to be dramatically faster that we are able to replace the jobs lost. There seems to be a lot of people crossing their fingers and hoping that, because jobs are always replaced, it will happen again. This isn’t good enough, and real plans need to be put in place to deal with the AI explosion before it really begins.