Supply chains have been around for a long time. The ancient silk and spice routes along which exotic goods once travelled to the West show that even global examples are nothing new. What is relatively new is the concept of the supply chain as an analytical model. Business management guru Keith Oliver is believed to have coined the phrase in the early 1980s in the course of attempting to change the way people viewed the entire ‘point-of-origin to point-of-consumption’ narrative.
His work was very influential. It is now orthodox wisdom that the various processes which together make up the manufacture and distribution of a product be viewed not as isolated, disparate spheres of activity, but as interdependent aspects of an integrated system – or as links in a chain. Only when it is seen in this way can the whole be made to work with maximum efficiency.
It is a big picture. Supply chains are about more than just logistics – though the physical transportation of goods is intrinsic to them. They are really about relationships: between raw material suppliers and manufacturers, between manufacturers and vendors, between vendors and consumers (to instance only the principal players); and they are about keeping those relationships balanced, open and running fluently.
How can automation help? Supply chains are, in one sense, chains of people in (ideally) constant contact with each other. In what ways can those contact points, and then to what extent can the sequence as a whole, be made to function autonomously? How difficult is it, and how great are the resulting efficiency gains?
Robotic Process Automation (RPA) shows that a number of routine, office-based processing tasks can be automated to good effect. Insofar as this is the case, and particularly as the technology develops further, RPA has strong supply chain applicability. Rather than relying on a human to do it, for example, a seller of goods can use RPA to keep a warehouse in real-time communication with a sales department (one way might be through automatically generated e-mails), thus keeping advertised availability of stock accurate and pre-empting customer disappointment.
This kind of automation, if it works well, represents a significant step forward for system efficiency. Inventory management along these lines no longer depends upon highly fallible manual updates nor upon scheduled stock takes. It keeps stock lists functional in real time just as, in a factory, predictive maintenance keeps machinery one step ahead of breakdown and repair.
Real robots on the warehouse floor may automate this dialogue between supply and demand further. As Internet of Things (IoT) devices, the kind of robots that today retrieve inventory from shelves in storage can exist in two-way communication with software-based Warehouse Management Systems. These operational overviews are thus equipped with a correct and comprehensive picture of what is needed from, what is coming off, even what is being returned to the shelves at any given time.
Connectedness is key to smooth supply chain functionality, and in the case of hardware this means IoT technology. Smart shipping containers show how it can work when it comes to moving products or product parts around on the international stage.
These steel freight boxes may now be fitted with battery-powered sensors which continuously relay information about their contents’ geographic location, via satellite and cloud services, to dashboards in ports. Those hubs are then able, using that wealth of real-time information, to co-ordinate total traffic flow in an intelligent, uninterrupted, informed manner.
But tagged containers are only the beginning of the story. IoT aims to render the logistical thread in every supply chain fully automated, if not robotised. Work has been going on in the fields of autonomous shipping and driverless trucks for years. And even the notoriously tricky ‘last mile’ in the chain has inspired the development of a host of aerial and pavement-pounding delivery robots.
Efficiency is always the aim. And having fewer human beings on the haulage side of things is in part simply the consequence of moving beyond a culture of paperwork – arguably supply chain efficiency’s greatest enemy. In the course of a single international passage, for example, so-called smart contracts can automatically activate interim payments, customs clearances and bills of lading equivalent to literally hundreds of manually executed sign-offs – along with all the errors and delays that implies.
Smart contracts in supply chains are typically set up using blockchain technology. And, though far from fully-fledged, blockchain promises to bring yet further-reaching change to the ways in which complex trade relationships work. As a digital ledger of business whose content is updated securely (because by mutual consent) and yet universally and simultaneously, it has the potential to synchronise the records and activities of commercial partners across the whole supply chain – and potentially to cut out points of lag and latency altogether.
Automation thrives on data, and big system automation requires data that have been taken out of their traditional siloes and integrated to create big pictures. Not only do these pictures enable individual participants in a supply chain to respond in a proportional and timely manner to developments elsewhere in the chain (surges in consumer demand, for example, or shifts in governmental regulations); but, thanks to the power of AI analysis, they empower companies credibly to predict challenging developments ahead of time.
All of which promises great things – but only at the price of great investment. Companies committed to the automation of supply chains must embrace the hardware, software and training that go with digital technology, and come to terms too with certain cultural changes. The transactional transparency of something like blockchain, for example, or an adherence to emerging, shared protocols, both fundamentally challenge the traditional business values of secrecy and self-governance.
Supply chain automation is about more than just scanners and barcodes. It is premised upon the practices of deep digitalisation and cloud-based collaboration. As such, it signifies just one aspect of a commercial environment that is only slowly, though definitely, taking shape.