We have seen extraordinary advances in supply chain management stemming from artificial intelligence and warehouse robotics. But are companies really investing seriously in the technologies?
A recent survey of global supply chain executives found fundamental changes are only in their beginning phases.
The survey was conducted by the international consulting firm called eft (formerly known as eye for transport) included supply chain executives at retailers, manufacturers and other segments in both North America and Europe.
The “box kicker” of yore is now a technological pioneer who must answer: how quickly and deeply do you want to plunge into the great unknown?
ROI calculations are shifting and billions are being spent on technology while the composition of the supply chain workforce continues changing.
“Innovation is playing a central role in driving this supply chain evolution; it means that the Chief Supply Chain Officer is working as a visionary in defining a business’s competitiveness,” the eft researchers say.
One of the key findings didn’t involve technology at all, but instead deals with the widespread inability to find the right people to work in this field.
“Survey respondents resoundingly declared a lack of talent or ideas was not the issue, but rather a lack of an attractive culture and a refusal to change that are hampering progress,” eft reports.
The industry is ready to push boundaries, build solutions and create new products, according to eft, but these barriers continue to persist.
“We have an industry ready for change – perhaps even on the cusp of it – looking for the leadership to drive it forward,” the eft researchers declare.
Money, Meet Mouth
In spite of all the buzz surrounding AI, investment so far has been modest, although it is being marketed as a magic tool that is an effective answer to almost all challenges pertaining to visibility, automation, cost reduction and much else.
However, 46% of retailers and manufacturers report no usage of AI whatsoever. Exactly one third say they have invested only in experimental programs, 16.7% in specific, limited uses, and only 4% reported they are making extensive use of it.
“This suggests that despite the commonality of the term, it is a nascent technology,” say the eft researchers.
Spending can be a great indicator of how seriously an industry is about adopting a technology, they note. The findings show that manufacturer and retailer respondents were spending on average $17 million on AI development.
Although this number may seem relatively paltry for a technology that has such significant transformational potential and requires significant investment, the researchers point out that expenditure on AI by these companies also represents a total investment of $1.5 billion.
“We are definitely investing in AI applications for improving real time decision-making for Supply/Demand planning and execution,” Ron Castro, vice president of operations and supply chain execution, IBM, told eft.
Money, Meet Robot
Similar to what’s happening with AI, industry expenditures are divided when it comes to adopting warehouse robotics.
About 49% of those polled say they are not using warehouse robotics within their operations. An additional 18% said that their logistics partners –third-party warehouse providers – also weren’t using robotics in their operation, either.
Only 6% of retailers and manufacturers said they had rolled out full warehouse robotics projects and only 18% reported that they were testing warehouse robotics in some capacity.
“For us it’s just basic pick/pack automation inside our warehouse. We’re so highly seasonal that anything [cost effective] we can do to decrease our need for temp labor is a huge win,” Dallas Clarksean, chief operating officer of Fun.com, told the eft researchers.
A big bariers to warehouse robotics investment has been cost. “As a relatively new technology without scale, costs are still in that early adoption phase. This could also be one of the biggest drivers for the second biggest barrier to warehouse robotics implementation – ROI calculations.”
Given the price of implementing a warehouse robotics system, it will require time and scale for prices to drop.
On top of that, 44% of respondents say they face ‘consultative’ challenges, meaning they lack the
expertise and guidance about where to start in implementing warehouse robotics automation or they need help finding the right robotics supplier.
It is likely that in the coming years the industry will see that cost barrier drop when ROI maximization and implementation strategies take over from experimentation, eft predicts.
Show Me the Money
End-to-end supply chain visibility remains the biggest single priority for retailers and manufacturers, the survey found.
“Arguably, the nature of ‘end-to-end’ has shifted in recent years,” the researchers admit “This is especially true in retail, where ecommerce has demanded full if not real-time visibility. In fact, real-time visibility was the second highest priority for respondents.”
However, Uber-like dashboarding – providing key data on a single computer screen – ranked much lower in importance. “This is surprising given that real-time visibility requires some type of dashboarding to take full advantage of,” eft says.
Calculating ROI has traditionally been a relatively straightforward process, generally calling for measuring the cost of something and calculating the recovery of that cost.
The more you get involved in technology, the less it cut and dried it is, eft says “What about all the intangibles or difficult-to-measure variables that are also making technology investments worthwhile? What about the fact that technology investments are increasingly required for companies just to remain competitive? In essence, it’s complex.”
Based on this complexity, it is not surprising that only 46% of respondents were continuing to use the traditional “Cost + recovery of cost” method.
Another 23.2% said they are measuring efficiencies gained, 17.1% look at how the technology helps their supply chains be competitive, and 12.2% at how the technology enables organizational growth.
“As innovation increasingly becomes a necessary expenditure for competitive businesses, we are going to see this shift in ROI calculations continue,” the eft researchers state.