News focus: Rise of the robots

Will Green is news editor of Supply Management
14 October 2015

Intelligent machines are coming to a workplace near you. Will Green asks what this means for supply chain and procurement managers

The figure you need to keep in mind is 64 per cent. The BBC has created a calculator to help people estimate the risk of their job being automated over the next 20 years, as part of a focus on intelligent machines.

For buyers, the risk level is 64 per cent or ‘fairly likely’. The profession is the 141st most likely out of 366 jobs.

For purchasing directors the risk is not much better at 59 per cent, a ranking of 150. In case you’re wondering, the most at risk job, with a 99 per cent likelihood, is telephone salesperson.

For procurement professionals, the prospect of arriving at work and finding a robot sitting at your desk must be a sobering thought. Certainly, there can be no doubt the machines are coming.

Daniel Ball, director at Wax Digital, says: “Robots in the sense of mechanical beings are already well-established at the warehousing end of the procurement and supply chain life cycle. We’re now seeing a new breed of intelligent automated assistants moving further into the workplace, delivering medical supplies to wards for example.”

Jim McNiel, chief marketing officer at Netscout, predicts automated cars will be a normal sight on roads within five years.

“I think we’re going to see a fair number of self-driving cars in the US by 2020,” he says.

And once that happens, freight vehicles will not be far behind. DAF Trucks is experimenting with technology that allows several lorries to drive in convoy, known as ‘platooning’, with all the vehicles’ acceleration, braking and steering controlled by the driver of the lead truck. A report by AXA has calculated that over the next 10 years, savings of £33.6 billion, and up to £47.5 billion, could be found in the logistics sector as a result of driverless technology through labour savings, reduced fuel consumption, insurance and better vehicle utilisation.

McNiel says automated freight deliveries could be scheduled more intelligently at various points throughout the night, cutting road congestion. But he accepts more work needs to be done to counter cyber threats to autonomous vehicles. “Right now you can hack a car that is connected [to the internet] and control the brakes, engine or accelerator. There needs to be safety checks put in for those systems,” he says.

The internet of things

The internet of things (IoT), by which more and more goods are being linked to the internet, also promises to revolutionise supply chain operations. Research by Accenture found 32 per cent of boardroom executives recognised IoT will “significantly improve supply chain transparency”.

Electronic chips inside products could potentially send “demand signals” directly to suppliers with no involvement of the buying organisation. Goods in shipment could be tracked and told where they need to go via a chip. They could be receipted upon arrival automatically and, once the machine had consulted the electronic contract, payment could be sent.

“No purchase order or invoice would be needed,” says Accenture. The company says consumer goods firms that are ‘digitally enabled’ have procurement costs equal to 0.22 per cent of net revenue, compared to 0.5 per cent for their peers.

Meanwhile, the march toward 3D printing continues. This technology has the potential to shake up conventional supply chains. Research by UPS has found 70 per cent of high-tech manufacturers in Europe are using 3D printing for new product design and 63 per cent use it to make spare parts.

Intelligent machines have also found their way into the London Gateway port, where containers are loaded onto trucks using automation, slashing turnaround times.

Ball says the potential goes far beyond deliveries. “The much bigger impact, at least in the next few years, will be robots in the internet sense of the word – applications that act intelligently and autonomously to perform data tasks,” he says.

“Here we’ll see a seismic shift in process, with the emergence of genuinely smart robots taking control in a number of areas that still often involve intensive manual intervention. We’re talking about spend analytics, supplier risk, invoice processing, factoring, benchmarking and category research.”

Alan Day, chairman of State of Flux, a supply chain and procurement consultancy, agrees. He believes that in future, human intervention will only be required in a couple of key areas of procurement, beginning in the area of stakeholder engagement and “finding what’s needed, not wanted”.

“All this still needs human intervention,” he says. “But once you’ve got the requirements and you’re running a request for proposal (RFP), that’s just a series of decision trees. That’s decision analysis, which is basically robotics.

“The value we then add is not around running the process of an RFP, it’s around internal customer understanding and needs analysis.

At the back end, it’s around supplier relationship management.”

Robot measurement

Day believes robotics could also be used for aspects of supplier performance management.

“Theoretically you could automate a lot of your performance metrics,” he says. “When you get within certain boundaries, or if suppliers fall behind a target or outside a banding, this should trigger a series of decision trees on whatever activity kicks in, even if it’s just raising an action item to address it.”

However, there is an element of deal making that we humans may be reluctant to let go of, according to McNiel. “To this day, we have this haggling, merchant mentality with everything we do in procurement,” he says.

“There’s probably going to be a time when you can use algorithms, supply and availability, to set a fair price. I don’t think that will happen in my lifetime. We’ll probably have self-driving cars everywhere before we have an automated negotiating system. Walmart is never going to stop being a tough negotiator on procurement.”

So, will we see a thinning in the ranks of purchasers? Day doesn’t think so, though he does believe the days of the “three-bids-and-a-buy” guy are numbered.

“It changes our skill set,” he says. “It’s far more behavourial based. It’s a ‘trusted advisor’ role.”

McNiel doesn’t believe automation will end deal making, but it might make it more efficient. “We think about the value of getting into a negotiation and driving a hard bargain. But we never calculate how much time was wasted in doing that,” he says. “There’s certainly an opportunity to think creatively. The more information we have and the more transparent these things are, the better off everyone’s going to be.”

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