Whether labor, raw materials, increased competition through globalization, or a number of other factors, companies everywhere are feeling some serious margin pressures. To survive, let alone grow, under these conditions means reducing costs and increasing revenues. The vast majority of overhead for many operations is relatively fixed, meaning the biggest gains can be made by eliminating waste and increasing productivity. Of course, this is easier said than done when the thinking is that there’s a maximum number of tasks a worker can complete in any hour. But what if you could increase that fixed productivity by augmenting with support, removing obstacles, or amplifying the impact on one unit of labor? For companies in the supply chain today, that’s the reality provided by artificial intelligence (AI).
AI holds the promise of being able to optimize every action, every expenditure of time, fuel, resources, and labor, to maximize throughput in ways that humans would never intuitively do through better optimization. How? By identifying patterns and opportunities to improve how and when work is done and by whom through the analysis of data.
The supply chain generates a huge amount of data, the majority of which is stored in a company’s ERP. When the humans have a question, ERP can pull everything together to answer that question very quickly. The scale of ERP is beyond human capacity for accuracy and speed of recall, but the ERP does not think. It just responds to the rules and demands placed upon it by the human.
Enter AI, which can connect dots and correlate data to pull out meaning in ways that humans never could. In addition to being faster than humans at optimal decision-making, the real benefit of AI is in its ability to find solutions to problems that wouldn’t be apparent to even the most skilled analytics experts. We call this unintuitive optimization. It means making improvements that you didn’t even realize were possible or needed.
The real benefit of AI is in its ability to find solutions to problems that wouldn’t be apparent to even the most skilled analytics experts
In traditional warehouses, there is a lot of waste: wasted movement, wasted space, and cash sitting in inventory. For modern, data-driven warehouses, the AI connected to their business systems will be thinking about their business every second of every day. By analyzing every data point across the entire warehouse, the AI has far greater visibility into the comprehensive operation than any team member ever could. For pennies, it identifies and solves critical operational problems which drives down costs in ways that were previously impossible.
Labor’s Best Friend
But AI won’t just do labor for the workforce, it will create new higher-value labor to be done by the workforce. Based on all indications, AI will spur the largest economic growth since the Industrial Revolution. By supporting this growth, human labor will benefit in three key ways.
1. AI will “grow the pie”with a two-prong economic growth effect. First, AI will increase the velocity of trade. Goods will be moving more and sitting less, with their path from raw materials to consumers streamlined and more precise. With AI’s help, the supply chain can move more products to more customers and at a lower cost by removing the waste from production and distribution. Secondly, AI will create new categories that not only stimulate consumption, but facilitate ancillary markets. Just look at how Nest’s smart thermostat changed what a thermostat could do, how operators interacted with it and the value potential for an entire category of products.
2. The next generation of labor is very human. We know that AI will exponentially increase the demand for programmers and engineers, but it will increase the need for other positions as well. An obvious opportunity is connecting AI outputs back into the human sphere. With an increase in data insights, there will be more demand for designers who can present these results in a way that’s interesting and appealing.The shift in production that creates increased profits also shifts how companies leverage and deploy human labor. As production efficiency improves, more emphasis is going to be put on the customer experience and meeting the heightened expectations surrounding service and support, which are best done by humans.
3. One of the most important benefits that AI will bring to the human workforce is fulfillment. AI will lead to the loss of time consuming, mundane labor jobs, and increase the need for roles that are more gratifying.A happy side effect of this is that an individual’s work is now more valuable. In the near term, people who work side-by-side with AI systems can be more productive than they would be on their own. A more productive person is more valuable and will be compensated accordingly.In the long term, with AI fully matured, only positions that have proven to be better suited for human labor will remain. More fulfilling work with higher pay is a perfect recipe for improved quality of life.
As markets continue to evolve, so too must production and delivery. While there is no one silver bullet to help every company adapt, it’s clear that AI will be part of the answer for companies within the supply chain.