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FAQs (Frequently Asked Questions) On Supply Chain Automation

FAQs (frequently asked questions) on supply chain Automation

Following are some of the frequently asked questions (FAQs) on supply chain automation that we have encountered in our speeches, workshops, seminars, and other forums.  Feel free to ask more questions if your particular question is not answered below. 

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Why we are qualified to write this list of FAQs on supply chain Automation?

VERY FEW PEOPLE KNOW SUPPLY CHAINS LIKE WE DO - retail, beverages, food, milk, dairy, meat, livestock, explosives, chemicals, cotton, rice, graphite, solar power, natural gas, crude oil, fertilizers, electronics, packaging, glass manufacturing, machine parts, automobiles, industrial goods, mining, etc are just some of the industries where boards and executives have benefited from our proprietary knowledge of the supply chain analytics. 

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Since when no one had heard of supply chain, our co-founder Vivek Sood has been considered one of the most authoritative professionals in the field when it comes to the subject of supply chain analytics in Australia, Asia, North America, South America and Europe.

 He has written four seminal books about restructuring supply chains to gain massive advantage in business. He also regularly delivers keynote speeches at business schools and conferences such as University of Technology Sydney, Supply Chain Asia, Asian Bankers Forum, APEC Business Advisory Council.

He has been quoted in the authoritative business press and over 100 academic papers written by supply chain researchers around the world. Vivek and his team have examined thousands of supply chains during their projects over the last three decades and helped hundreds of executives build safe, cost effective and sustainable supply chains and careers. 

supply chain Automation- FAQs

What is meant by the term 'supply chain automation'?

Supply chain automation refers to two types of activities that are progressively being automated as the technology is being updated. The two types of activities that are gradually being automated as as follows:

  1. Automation of activities that create better integration and better optimisation by weaving together purchasing, inbound logistics, manufacturing, sales and outbound logistics in a company. We will case a case example where, in a client project, a team of PhDs who was manually optimising the flow of a homogeneous product from five large scale plants to customers all over a continent was replaced by an optimisation model we built with their help. This simple model, built over 6 weeks, automated the optimisation process and saved them nearly two million additional dollars every year by better optimisation and less human intervention. These savings do not include the cost of replacing 3 PhD level specialists because they were deployed elsewhere in the company. 
  2. Automation of day-to-day activities within transportation, manufacturing, warehousing, purchasing or other functional areas that are traditionally related to supply chain management and can be considered parts of supply chain management. For example, every time a robot replaces a human on an assembly line, or in a warehouse we have furthered the cause of automation and humanity. Same thing happens every time a purchasing order is approved automatically because the set parameters are met, or if an invoice is paid automatically for the same reason. 
Currently, out of the two areas outlined in the answer above, where do we see the most amount of automation within supply chains?

Let us talk about the two areas outlined in the answer above in turn:

  1. As far as the automation of activities that create better integration and better optimisation by weaving together purchasing, inbound logistics, manufacturing, sales and outbound logistics in a company, the attempts can be best summarised as sporadic, inconsistent and following a shotgun approach. Almost every company uses at least some decision support tools (DSS) that have  built in automation to some extent. However, not many companies select the right supply chain DSS, and even if they the deployment might have some inconsistency or quirk making it less useful than its full potential.  All this is a long way of saying that there is a lot of room for right automation in this arena - though off-the-shelf tools have only limited applicability. Best tools we have seen are almost always inbuilt - some as simple as based on excel and VBA. 
  2. Automation of day-to-day activities within transportation, manufacturing, warehousing, purchasing or other functional areas is taking off in a big way. Manufacturing was well and truly underway by the 90s and some parts of transportation (e.g. automation of the engine rooms in merchant ships) were the trend setters. The latest wave of automation has hit the warehousing and road transportation is lot too far behind. SAP and other ERP systems have automated a number of repetitive transactional processing tasks by now. IoT and AI will automate many others. See our Guide On Supply Chain Automation And Use Of IoT And Artificial Intelligence (AI) In Supply Chains for more details on these. 
What are all the additional costs of automation - including the hidden costs that most novices do not see till it is too late?

Let us look dispassionately at the costs of automation in reality - we cannot be guided by rhetoric or emotion even though we should listen to it. 

Costs of automation:

  • Cost of buying the automation tools
  • Cost of installing the automation tools
  • On-going cost of running the automation tools
  • Cost of change management within the entire supply chain, including the cost of overcoming the opposition from the affected parties and resettling the affected workforce
  • Cost of timely upgrades to the automation tools
  • Cost of upstream and downstream bottlenecks and flooding created by automation in just a few parts of supply chain
  • Cost of re-streamlining the entire supply chain after the introduction of automation, or the cost imposed by an out-of-tune supply chain
  • Costs of unknown supply chain risks created by automation

Lest you be discouraged, let me say the outset that benefits can surpass these costs in many cases. But you must be aware of these costs so that the board is assured of a supply chain due diligence process incorporated into a supply chain governance protocol. 

Out of all these potential costs, the first few costs will be apparent to everyone, but as you go down the list they will become less and less known to novice supply chain analysts. 

A special note on the last cost point. Just because these costs are unknown right now does not mean they will always remain unknown. They make themselves known in the worst possible way, at the worst possible time. Supply chain governance and due diligence involves doing as much as possible to make them known and quantifiable as early as possible. Many senior personnel have felt the career repercussions of ignoring them at just the wrong time in their careers - because the credibility once lost can seldom be recouped. 

What are the benefits an organisation gains from automating its supply chain?

Cautious though they are, companies are always relentless in their attempts to automate their supply chains. Since the time the manual labour was replaced by sail power, which was replaced by steam - we have always sought to replace humans by machines.

Machines are bigger, can do more in less time, can work longer, without breaks, are less error prone and easier to manage. 

  • By automating the repetitive tasks in any process, the speed can be improved, and, human errors and human fatigue can be reduced.
  • The supervisory level employees get more engaged in data driven optimisation tasks rather than concentrating on low-value assignments.
  • By the implementation of automation, the manual labour will be reduced hence the wage expenses can also be reduced.
  • The automation process is immune to stress and fatigue which are inherently human characteristics. The supply chain process can be tuned to generate the highest possible throughput in a shorter time. 
  • Benefits of opening up further upstream and downstream automation possibilities in supply chain
  • Benefits of re-streamlining the entire supply chain after the introduction of automation
  • Benefits of unknown supply chain future positive options created by automation
  • By using Robotic Process Automation or RPA which is a component in supply chain automation we can automate all low value and repetitive tasks, which smoothens the workflow and reduces the human error in the system. So that
  • Benefits of faster scaling up - manual labours will get replaces with RPA and the supply chain will could be scaled up faster to meet the increasing demands.
Is automation always profitable? When should we automate a manual process - whether in the office, or on a shop-floor?

The second part of this question is easier to answer - we should automate when the sum total of all the benefits (known and unknown) exceeds the sum total of all the costs (known and unknown). 

Automation is not always profitable, and many companies come to regret their decision after the fact - both ways. 

This is because it is very hard to put the above simple directive in action. Here are the common mistakes we have seen in this decision:

  • Difficulty in looking dispassionately at the benefits and costs of automation.
  • Being guided mainly by rhetoric or emotion.
  • Not listening enough to rhetoric or emotion.
  • Ignoring the unknown costs and benefits - or making insufficient effort to make these known in advance, and quantifying them.
  • Being swayed by subsidies or government imperatives when governments can change their tack very quickly. 
  • Being swayed by the press and popular opinion and not doing the due diligence on costs and/or benefits. 
  • Inability to conceptualise a working supply chain model in the future state and inability to cost this working model against the current supply chain model.
  • Insufficient understanding of supply chains, bottlenecks and floodgates, and overall system approach to decision making. Resulting inability to think through the upstream and downstream impact of decisions in supply chains leads to inability to model and quantify the impact of these decisions. 
  • Lack of knowledge of supply chain tools that are already available for this type of analysis, and resulting propensity to reinvent the wheel (poorly). 
Which are the KPIs that can be improved by automation? How to keep track of these KPIs?

If you have done the due diligence properly, as outlined in the answer above, almost all the relevant KPIs will show improvement. 

Exactly which KPIs to track, and how to track them is covered in frequently asked questions on supply chain dashboards. 

What are some of the least known but most important factors that play a key role in the automation process in 2020 and beyond?

The key factors of the supply chain automation process that are not very well known but are quire important are

  1. Machine learning 
  2. Robotic solutions  
  3. Centralised control 

Machine learning enables the software to automate the process in the supply chain environment. As the business grows, the supply chain become complicated. Even the experts will struggle with process automation. In this context AI and machine learning enabled software greatly aid in process automation. 

Robotic solutions create opportunities to replace humans in supply chain processes in a multitude of places - both in the office environment, as well as on the shop-floor. The key is to break down every task into its subtasks to a level where it becomes repetitive and programmable. While the rest of it is also equally complicated, the engineers have already devised robotic solutions methodologies for taking repetitive and programmable tasks and automate them. 

Centralised control is also an important factor in automation that helps to form an apex body to control the whole systems by avoiding non-connected points of control.

We have an annual goal to improve the current turn around time. How can we do it by using automation?

Technically speaking TAT (turnaround time) improvements will only result from increase in speed, or velocity within your supply chain. You could try to do so manually as well, especially if you have only by the end of the year to show this improvement. 

However, by using automation software (bots) in supply chain management the repetitive and programmable tasks can be automated to decrease the turnaround time you can make big strides in an elegant manner. 

To do this task methodically, you will have to break down the relevant supply chain processes into their microsteps (much more minute process mapping than it is done when humans are handling the process). Once you do that, you need experts in each part of the sub-processes to identify the areas of repetitive and programmable nature. This part is as much an art, as it is a science. Do not skip this step - in fact, spend as much time getting this right as you need to. This is where all the gold is buried. 

Once you have identified the areas for potential automation you need to build project case for each of them systematically, as outlined in one of the questions above. 

It is likely that the year will be over before the changes are in place, so your best bet within that timeframe would be to seek a manual solution pending a longer time horizon project. 

Having, said all this I also want to mention that there are situations where we have automated the supply chain process within weeks, but this was aided by a very adept team of PhDs working with us from within the client organisation who already had a very good idea of what they wanted to achieve.  

Will the small and medium scale enterprises get benefited by automating their supply chain? If yes how?

Nearly two centuries ago, industrial revolution took an artisanal economy and created a humongous advantage of scale. Since then every company has been obsessed with becoming bigger.

Today, Corona virus aided lock-down is hastening the adoption of an information resolution that is taking an industrial economy and creating a humongous advantage of smart networking. You can work in a world class team sitting in a village in communist dominated Kerela. 

One of the advantages of the networked economy is automation - which is equally accessible to small and mid-size enterprises as it is to large size enterprises. In fact it evens up the playing field for these entities by partly overcoming the scale advantage of large scale enterprises. You just have to know how to use the network effectively. 

Are there any weaknesses in supply chain automation fortress?

Yes, unfortunately no fortress is bulletproof.

Automation is extremely effective in removing the human error, but it also lacks the human ability to judge, build relationships, plan, and to make quick ethical calls. 

A lot of current automation is experimental in nature and the users have to put up with a lot of fiddling around while the wrinkles in the applications are ironed out. Currently, we are in a very early stage of automation of supply chains. There is a long way to go before this fortress will become bulletproof.

Another down point in automation is its current high initial cost of implementation.

What are the main barriers that prevent companies from implementing supply chain automation? Howe can we overcome these barriers?

Besides the weaknesses mentioned in the answer above, the migges barrier that automation faces is the resistance from the groups of humans who are most directly and adversely affected by automation. 

Frequently called 'the revenge of the luddites' this resistance can take a multitude of covert and overt forms and result in long delays in adoption of revolutionary technologies just because some small groups of humans want to prolong their particular way of life. 

Eventually all luddites are won over by demonstration of the power of new technologies in use. We quoted Buckminster Fuller in one of our books “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

What are the current trends in supply chain automation and how are these trends evolving?

With the remote working revolution that originated out of COVID-19 lockdowns came the enhanced focus on all things related to digitisation including automation. 

Prior to that automation in warehousing was gaining pace at a rapid rate while the automation in manufacturing was already well and truly underway. Automation in transportation is just starting to phase in - though it still seems to have many barriers to cross before it becomes routine and commonplace. There will come a time when ships, docks, trucks, forklifts, stackers, pick-and-pack operations, put-away and stow operations will all have considerably more component of automation than they currently have. 

Similarly when it comes to office work within supply chain - whether it is in business as usual planning and control, or business transformation using supply chain as the key tool - automation is well underway - in close alignment with use of Artificial Intelligence (AI) and the Internet of Things (IoT). 

If you are more interested in the current trends in supply chain automation - fill out our survey on supply chain automation and we will send you a free copy of this survey's result report once the survey is finished and the report is ready. 

How the automation process will affect the employees in an organisation?

This question cannot be sidestepped, and it is a favourite question of those who generally like to oppose supply chain automation. But do not forget that this questions has been asked for at least 200 years since mechanisation of workplace started in earnest. 

It is not end of the work - it is just end of the work as we have known it in the past. That kind of revolutionary change happens once every 50-60 years as the technology progresses to another level, and the time for the next change has now come. 

So how will supply chain automation affect the employees:

Let's tackle the issue of people who will lose job as a result of automation of supply chains. There is no denying that robots will replace the assembly line of today that dehumanised the workforce at the start of the last century. Yet, many of those people would prefer to stay in those dead-end jobs rather than find more salubrious employment through training and redeployment.  I have written a blog post on my experience with ship captains who would rather become unemployed than learn to use the advanced technologies that made navigation of the ships easier and safer. 

On the other hand a plethora of new jobs in process analysis and micro-mapping of processes will crop up because these will be the precursors of automation of those processes. This is no different that the industrial engineering wave of the industrial revolution. Many of those new information flow process micromapping disciplines do not even have names or job titles yet. 

 Similarly a plethora of engineering jobs in automation, instrumentation, mechatronics, AI, IoT will be created in the drive towards supply chain automation. It will no different than paving the roads in the rural areas of Bali, or building shopping malls in China - a veritable boom can be expected in this area. 

The vast majority of existing workforce will adapt to the next wave of automation just as readily as they adopted to the past waves of mechanisation and partial automation. They will retrain, redeploy and re-energise their careers with determination and flexibility. 

What are the future employment opportunities that supply chain automation will generate?

The answer above has already started outlining some of the future employment opportunities generated by automation of supply chains. 

Out of the five flows of supply chains - the two most visible flows are the materials flow and the information flow. Our answer so far has focused on the new job opportunities generated by automation of planning and control of these two flows. 

But do not forget the remaining three flows of supply chains - the value flow, the risk flow and the finance flow. These flow are not so visible, and more difficult to map and automate. There are also more luddites in these flows than in the first two flows above. That is the reason for focusing on these three flows after the first two flows are automated. 

How will the supply chain automation evolve in future?

Once the materials flow and the information flow is reasonably well automated, the remaining three flows of supply chains - the value flow, the risk flow and the finance flow - will also gather attention.

In fact their archaic manual processes will stand out like a sore thumb just as a letter of credit (LoC) stands out in international trade circles today.

Demand from the users will force these flows to be automated as well because they will be so far behind the rest of the commercial world that it will become unsustainable to stay in the same place. 

That will open up a plethora of new automation jobs in banking finance, insurance, freight forwarding, international logistics, trade law, arbitration, education and training, management, investments etc.

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Notes on FAQs

Clearly, any such list of frequently asked questions (FAQs) about supply chain can never be fully exhaustive. Neither is anyone, including us, the final authority and arbitrator on this or any other topic. 

You will have your own opinions on many of these topics, and will have many other questions. 

We throw open the comments section to you for your opinions and questions. We will try to address all of these, and the best ones will attract a reward in the form of one of our books, or publications. 

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