Supply Chain Automation: The Next AI-enabled Operating Model

Perhaps I’m a technology geek, but I buy everything online. I hate “physical” shopping and I travel too much to do it. I’m used to placing online grocery orders late at night, on Sundays. The last time I reordered my dog’s food I was boarding a flight. Lately, I’ve been chatting with Alexa a lot!

I love that delivery is fast and generally on time. Having worked in supply chain for almost 30 years, I know what it takes to offer such an amazing customer experience. Demand planning, supply planning, manufacturing, and logistics and distribution all equally contribute to make clients happy. The Theory of Constraints teaches us that a chain is no stronger than its weakest link. So, in supply chain this means that all the four building blocks (Figure 1) need to work together like clockwork.

Digitalization and automation can be of great help here. In our 2018 Future of Supply Chain Survey, we found that 73% of supply chain organizations are already investing in artificial intelligence (AI) to support supply chain strategies, along with investments in many other technologies including advanced robotics and robotic process automation (RPA). However, chief supply chain officers (CSCOs) shouldn’t forget the Theory of Constraints: the value of digital is multiplied when it is applied holistically rather than by individual functions.

Unfortunately, as discussed in Gartner’s report, “Designing the Supply Chain Organization in a Digital World,” the practice of individual supply chain functions developing their own digital roadmap in isolation is still very common. Launching separate automation investments that are uncoordinated and unbalanced always leads to pockets of local business improvements, which, in most cases, is not reflected in end-to-end improvement.

Using AI-enabled planning technology, for example, supports companies to sense demand and supply signals and then plan their supply chain in a much more frequent, granular and predictive way than in the past. However, the speed of change imparted by improved planning capability would be meaningless, if not counterproductive, unless companies are also able to rapidly respond with greater operational agility, in both manufacturing, and logistics and distribution.

Learning from Leaders

The outlook is positive, though. Results from the 2018 Future of Supply Chain Survey confirm that most CSCOs are working on a holistic digital roadmap aimed at investing to substantially automate several areas of their supply chain altogether.

A bunch of leading supply chain organizations are already undertaking such a holistic approach to supply chain automation:

• Western Digital undertook a multiyear initiative to holistically automate both planning and execution. Supply plans — and a significant portion of plan analysis — are generated automatically, eliminating the use of spreadsheets and reducing the number of planners. The use of predictive and prescriptive analytics drive trade-off planning and policy decisions. Real-time scheduling is constantly communicated to the highly automated factory shop floor. This ensures that robots carry out jobs in a coordinated fashion, resulting in a seamless and connected process of wafer-in, to products-out automation.
• Henkel’s multiyear digital journey is based on a strategy aimed at creating a real-time, always-connected supply chain. The company took a holistic approach to supply chain automation, focusing on four technologies: robots, sensors, analytics and visualization. Along its journey, Henkel is deploying smart robots and Automated Guided Vehicles (AGVs) that are self-learning and real-time connected. It has deployed over 3,000 sensors to measure energy consumption across all facilities and has started using analytics and data visualization technologies to gain better visibility of the end-to-end supply chain.
• Ecolab has developed a plan to automate holistically across the end-to-end supply chain. The automation strategy starts upstream looking at how the company senses demand and then understands what’s possible within the supply chain to serve customers’ needs. It encompasses planning and decision-making when it decides what and where to operate, including how to produce items and how to send them to warehouses. Finally, the holistic approach to automation focuses on achieving greater agility across manufacturing, warehouse management and distribution. Here it’s about back-end automation, focused on eliminating manual touches as much as possible.

These and many more case examples are discussed in Gartner’s report, “The Path to the Lights-Off Supply Chain.” This report is an indispensable guide for CSCOs and their teams to get ready for the AI-enabled technologies that will drive supply chains to the next operating model.