Automation and the supply chain

AUTOMATION AND SUPPLY CHAIN REVOLUTION

Internationally acclaimed supply chain consultant and author, Suman Sarkar, talks to MHD about his perspective on supply chain thinking and the proper role of automation.

“In supply chain, most things are relatively simple,” says Suman Sarkar, internationally renowned supply chain consultant, Founder and Partner at Three S Consulting, and author of the much-acclaimed 2017 book The Supply Chain Revolution. “We make it complex. And the same goes for automation – when it helps it can be useful, but if it doesn’t help the world will still go around.”

Suman says that his training as an engineer has informed his perspective as a supply chain consultant – namely to distrust “assumptions” and to search for the “root cause” of problems before contemplating solutions. This carries over into his views on automation.

“Everybody likes to hear about automation because there’s always a shiny new object that will get everybody’s attention,” he says. “But it isn’t always necessary.”

This is because automation only addresses one of Suman’s two fundamental supply chain elements: effectiveness and efficiency.

“People tend to confuse the two. Effectiveness is all about how well you’re doing your job – how well a supply chain can address customer needs. You can’t automate that. That depends on what unique customers you have, what the demand is, what unique supply situations you have, and how you plan to address it. Once a company or a business figures out how to be effective – how they can address customer needs – then efficiency comes into play. Automation has a role to play in efficiency – warehouse automation, finding in real time where your inventory is. But people tend to think that by doing automation in one place they will solve all their problems. It won’t. The fundamentals of supply chain must first be sorted, otherwise you’ll only be attempting to make an ineffective system more efficient. And it’s important to remember that automation doesn’t pay for itself when it’s not effective.”

The Supply Chain Revolution, by Suman Sarkar.

THE SUPPLY CHAIN REVOLUTION

Suman’s book The Supply Chain Revolution was written, he says, out of a sense of frustration.

“We are not heading in the right direction with supply chain,” he says. “The book was a call for people to turn things around. That’s why I chose the word ‘revolution’. Were we heading in the right direction I might instead have used ‘evolution’.”

The revolution Suman calls for is about getting back to fundamentals: better connecting with and delivering service to customers. He says that a lot of supply chain thinking has been driven by complexity and a tendency to go for shiny add-ons while ignoring how companies can be more effective in getting goods and services to customers.

In the upper ranks of companies, supply chain has often been “topdown” by catering to novel ideas for potential investors, at the expense of “bottom-up” consideration of what the actual customer is demanding. And imposing “solutions” from the top can lead to unnecessary use of automation technology.

“Because automation is a tool for improving efficiency, not underlying effectiveness, it’s implementation is akin to using a hammer,” he says. “If you use the hammer for the right purposes, it will do good. If you use it for the wrong purposes, it can do a lot of damage.”

He illustrates his point with reference to a client-discussion he once had around using Enterprise Resource Planning (ERP) systems.

“In the late 1990s and 2000s all companies implemented ERP – it was a big deal,” he says. “ERPs were implemented to simplify the process, but mostly for financial controls. They lay down certain rules by which supply chain sourcing and procurement organisations should do things. But in the world of COVID – when we have significant problems with supplies – what we were finding is that all the rules and processes with the ERP were stopping the company from doing an effective job with their suppliers and building supply assurance.

“We were saying, ‘Hey, you need to build up some inventory because you have no inventory in these areas,’ and the reply was, ‘But the ERP

system doesn’t allow us.’ My suggestion to them was, ‘Then throw away your ERP! Use Excel instead!’

“You cannot allow a tool to be the excuse for not having the right amount of supplies and shutting down because you can’t deliver products to your customers. By all means use automation – but strip back to the essentials and get those right first before re-introducing automation for greater efficiency.”

THE NEAR FUTURE IN AUTOMATION

Suman notes that the most revolutionary gains automation has brought have come in the area that optimises the last mile of supply chain – in particular, advances in GPS technology and route optimisation. And it is in the field of the last mile that he predicts the take-up of one especially exciting new technology: flying cars.

“One thing I don’t often hear people talking about is flying cars,” he says. “We hear a lot about self-driving cars, and about drones, but not flying cars. But it’s a great solution that will make things very easy to deliver in person in highly congested areas.”

He notes that experimentation with flying cars is already taking place across the world – more or less leveraging drone technology on a larger scale.

“These flying cars are somewhere between a helicopter and a car, where you can levitate, and go up as well as horizontal,” he says. “They can carry a lot, and they stop your dependence on roads.”

The primary obstacle facing flying cars will be regulatory challenges across different jurisdictions, but ultimately Suman thinks the technology will win out because their underlying economics make sense.

“I think the most exciting and rewarding application will be delivery in the last mile to consumers – because they can carry a lot of packages and because you retain the human element, the driver, that can navigate trickier delivery scenarios, like when a person isn’t home. A drone can’t do that.

“We’re a few years out, but the technology is there. The main barrier will be regulatory approval. But once a technology has proven itself, everybody in industry falls in line pretty quickly.”

By contrast, Suman is far less optimistic about the potential of driverless cars. It’s an effienciency play to replace driver with automation. There are multiple paths to efficiency, automating current mode of transportation is just one path.

“The history of autonomous cars goes back to the early 2000s, especially the work sponsored by DARPA [the United States’ Automation has a role to play in efficiency – warehouse automation, finding in real time where your inventory is. But people tend to think that by doing automation in one place they will solve all their problems. It won’t. The fundamentals of supply chain must first be sorted, otherwise you’ll only be attempting to make an ineffective system more efficient. And it’s important to remember that automation doesn’t pay for itself when it’s not effective. ”

Suman Sarkar, Founder and Partner at Three S Consulting.

Defense Advanced Research Projects Agency] and done by Google. Google has spent a lot of money on it for a long time and is still struggling to make it commercially viable. The main problem is that the technology you’re using still goes on a road – with every imaginable type of obstacle that roads can throw up.”

The computing power that is needed to help driverless cars navigate is extreme, and in the supply chain context the only real payoff is saving on labour expense – a delivery driver – while possibly incurring far greater expenses in terms of behind-the-scenes navigational technology and higher cost knowledge-intensive labour.

“And what happens if the car breaks down?” Suman asks. “And what about the human function of delivering a product into a person’s hands? Or dealing with a more complicated hand-off? Or when a person isn’t home?”

Suman thinks that the focus on driverless vehicles in supply chain again gives short shrift to what should be the ultimate focus: catering to customer needs.

“From a customer perspective, with a driverless car you not only have to be home, but you actually have to go out to the car to pick up your groceries or food. How does that help from a customer perspective? That’s always where the question should come from. How is it helping the customer? The solution is burdening customers with more work and the financial benefits from customer perspective are questionable. If the customer is not seeing benefits, forget about it. They’re not going to buy it and the road to success is that much more difficult. However, if customer sees benefits with automation – i.e., it’s effective – then it has a better chance of success.” ■