Often, a crisis brings about a re-evaluation of basic systems. As the world wrestles with the multi-faceted impacts of COVID-19, the global supply chain has come under very close scrutiny.
At first, the supply chain was faced with quickly moving around essential medical supplies. Next, it had to accommodate spikes in demand for various consumer products. And eventually, distribution issues affected the food supply chain.
It’s at this precise moment that changes, such as digital transformation, are receiving a much needed second look.
“Supply chain resiliency is essential in order to deal with the crises, and leaders are evaluating how to manage these risks going forward,” says Tinglong Dai, associate professor of operations management and business analytics at the Johns Hopkins Carey Business School.
An important tool in managing risk is digital technology. While digital technology and artificial intelligence (AI) have been hot topics of discussion for supply chain managers for a while now, adoption is still slow.
In fact, just 12% of supply chain professionals say their organizations are leveraging AI, according to the 2020 MHI Industry report.
However, even before COVID-19 hit, there was forward movement in bringing this technology into supply chain management. Of the 1,000 supply chain professionals in manufacturing, transportation and other industries surveyed, 60% expect to be introducing AI into their operations within the next five years.
As to the importance of this management tool to the industry, 20% of supply chain leaders believe the digital supply chain is the primary model, with 80% anticipating it to be the predominant one within the next five years.
There is, however, no need to wait that long to implement these technologies. They can be applied immediately to solve pressing issues. Dai points to the benefits that warehousing companies can gain by using automation to decrease touchpoints within their facilities.
As companies continue to look to technology for ways to mitigate this virus it will "lead to a broader understanding of the capabilities of AI now and that will, in turn, result in future applications of automation," Dai says.
The use of increased automation inevitably leads to a discussion of whether it will cause unemployment. In a paper Dai wrote with several colleagues, “Impact of COVID-19 on Manufacturing and Supply Networks—The Case for AI-Inspired Digital Transformation,” that notion is explored.
The paper addresses the issue as follows:
[T]he COVID-19 pandemic challenges a commonly raised argument against wider adoption of AI, concerning its implication for a “jobless future.” The job losses in the U.S. exceeded 33.5 million by May 7, 2020, cutting all the jobs created in the past decade. Some 52% of Americans under the age of 45 have experienced job losses, reduced working hours, or furloughs. Given most of the job losses have been concentrated in sectors with low AI and digital penetrations, one may argue that AI-inspired digital transformation could have helped to avert or at least mitigate such steep losses.
The paper also argues that a more highly developed digital strategy could have aided manufacturing companies, such as Airbus, BMW, Boeing, Ford, GM and Volkswagen, that had to shut down factories and lower capability. They could have reacted differently if they had AI-enhanced capabilities to more quickly anticipate and react to supply and demand volatility. If these manufacturers had been able to produce remotely with a network of human operators, it's possible that the shutdowns could have been averted, Dai asserts.
Another way to address the current crisis and future ones would be to utilize technology to create a common digital platform that would allow for seamless sharing of resources, thus improving supply chain efficiency.
The ability of supply chains to be able to respond quickly and efficiently during the pandemic or any major disruption will enable companies, and countries, to see favorable outcomes. And Dai firmly believes that digital solutions are key to this. “Those supply chains that had already undertaken significant digital transformation prior to the pandemic seem to be more resilient.”