Robert Skeggs, Associate Partner at Eton Bridge Partners, assesses the implications for operations and supply chain of the rise of Artificial Intelligence.

Ask any business people about the next Big Thing in commercial technology, and it’s virtually certain the majority will nominate Artificial Intelligence.

AI has been on the radar for some time, accompanied by lurid projections of the impact it will make on working lives and job numbers in various sectors.

So let me share some thoughts on how it is likely to affect my area of specialism, operations and supply chain.

At its simplest, AI refers to a generation of computer systems that can sense their environment and think, learn and take action. It’s already with us in areas such as speech recognition, predictive text, driverless cars and virtual assistants such as Alexa.

Let’s look at some of the benefits AI can bring to operations management. As Matt Beeton, CEO and Founder of APT Business Solutions, says: “AI is a huge opportunity for businesses to make efficiencies in our supply chains and throughout operations. We can drive down overheads, reduce mistakes associated with repetitive tasks and decrease the risk associated with dangerous tasks.”

Specific applications include:

> Inventory management
Using intelligent algorithms and predictive analytics, AI can identify stock levels and automatically re-order when necessary.

> Improved customer service
Chatbots and avatars can be programmed to respond to FAQs 24 hours a day.

> Anti-fraud
There are machines that can detect fraudulent invoices with 97% accuracy[1].

> Route optimisation
Deliveries can be made faster and more economical with route planning, traffic navigation and reduced fuel consumption.

> Automated assembly, packing and loading
More and more robots are being used on production lines and distribution sites.

> Platooning
A convoy of trucks driven close together with only the front one controlled – not even necessarily driven – by a person. This is only at trial stage in the UK but is already legal in 17 states in the USA[2].

> Self-driving vehicles
The next step from platooning, these vehicles could run 24/7 and eliminate labour costs entirely.

This list helps to explain why the greatest concern associated with AI is the loss of jobs. Indeed, studies suggest robots could replace up to 800 million human roles by 2030[3]. Although AI is expected to be employment-neutral across the UK economy because of the new jobs created in other sectors, manufacturing, transportation and storage are likely to be hardest hit.

Successful AI implementation

AI, therefore, promises many benefits but it must be implemented correctly if its true potential is to be realised.

> Change Management
Implementing AI is a disruptive, hugely transformational change project. Few people enjoy change and organisations must programme a strategy to incorporate all aspects of the business, not just operations, to ensure the workforce is at ease with the introduction of AI.  AI must be seen as a tool that is there to help humans rather than being a rival for jobs.

> Data Management
AI will fulfil its potential only if the quality of data input is impeccable – if you put the wrong data in, the results will be worthless. The need for trained people to protect, manage and exploit this data and ensure it is relevant and accurate will be paramount.

> Developing talent
Accenture’s Intelligent Operations research[4] has identified that the most important competence today is having creative and entrepreneurial individuals able to understand how to apply AI to solve specific business challenges. Effective recruitment and ongoing training of AI-enabled operations management systems are, therefore, essential.

> Acknowledgement of the human touch
Many studies suggest AI is a huge opportunity to enhance efficiency in operations. However, it is critical to recognise it will not solve everything. Blindly adopting AI is not the answer because there are areas in which the human touch will always be essential. Concepts such as care, understanding and togetherness will never be understood by machines.

Indeed, Matt Beeton adds: “Our ability to get on with one another will become even more critical to business. Humans manage the grey areas where decisions are not binary, or adequately managed by algorithms.

“Technology will never take away the need for the human element. Investing in training and developing our people must not be forgotten, so we can exploit the technology in the best way.”

Conclusion

Numerous published studies overwhelmingly suggest AI is a huge opportunity to make efficiency in operations. However, AI will not solve everything, and it may bring significant threats to operations management – principally the predicted vast job losses of the low skilled.

How businesses manage these redundancies, train their workforce and introduce AI – and how employees adapt and re-skill – will determine just how successful AI is.

Please get in touch with Robert Skeggs to discuss your operations and supply chain executive search needs.

References:

[1] www.forbes.com/sites/adelynzhou/2017/11/14/ey-deloitte-and-pwc-embrace-artificial-intelligence-for-tax-and-accounting/#133b6bd73498

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/637361/truck-platooning-uk-feasibility-study.pdf

[3] https://www.mckinsey.com/featured-insights/future-of-work/jobs-lost-jobs-gained-what-the-future-of-work-will-mean-for-jobs-skills-and-wages

[4] https://www.accenture.com/gb-en/insight-intelligent-operations