Why automation is the future of supply chain management

Mar 26, 2021
Supply Chain

While automation and AI are set to transform the way humans work across many organizations and verticals, McKinsey estimates that the transportation and warehouse industry possesses the third highest automation potential of any sector, having found over 50 technologies that could be used to automate some part of the supply chain.

Automation is already here

According to Visual Capitalist, 55% of retail, management and logistics professionals are already investing in warehouse automation and 47% in predictive analytics. This trend has been partially driven by a growing shortage of labor. Over the past decade, unemployment rates across the EU have almost halved while the number of roles required in distribution centers continues to increase, especially over holiday peak season when labor is most scarce. The situation is similar in the US, where unemployment levels have reached their lowest levels in half a century.

The automation trend has also been impacted by increasing demand from online retailers. A recent survey found that organizations estimated that e-commerce in 2020 would account for half of all sales, up from approximately one third the year prior. This rise in e-commerce, accelerated by the Covid-19 pandemic, is seeing a greater investment in automation technologies within supply chain processes to meet fast evolving multichannel and omnichannel requirements as well as same-day and next-day delivery.

Finally, the greater focus on transport and logistics automation has been enabled by promising advances in technology. For example, new pallet-handling systems have been found to cut shipment processing time by 50%.

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Advancements in automation

Automation, alongside machine learning and artificial intelligence, are cornerstone components of the Supply Chain 4.0 concept (i.e. the next-generation digital supply chain). The trend is enabled by advancements in both hardware and software to assist the handling and movement of goods, including highly efficient advanced robotics in warehouses, IoT/smart-sensor applications and highly intelligent predictive analytics.

It’s estimated that most supply chain operations could be automated by 2030, with new AI-powered innovations taking over simple and repetitive tasks previously performed by people. A Gartner report shows 30% of operational warehouse workers will be supplemented, rather than replaced, by collaborative robots by as soon as 2023.

Many companies have already automated their front-line transactional purchasing activities. Automation has affected a number of blue-collar supply chain jobs in warehouses and distribution centers, and driverless trucks stand to transform the logistics field, eliminating the need for millions of truck drivers.

One article from Harvard Business Review even suggests “within 5-10 years, the supply chain function may be obsolete, replaced by a smoothly running, self-regulating utility that optimally manages end-to-end workflows and requires very little human intervention.”

Cost benefits of automation

The pace at which organizations adopt new platforms and technologies is largely dictated by the anticipated implementation and running costs and the rate in which realized cost savings and increases in productivity, efficiency and service levels eventually outweigh these.

As automation is introduced at every step of the supply chain, logistics firms’ ability to flex with peak demand, take on heavier cargo, and pick and pack individual products increases. McKinsey expects that, as automation proceeds, logistics costs might fall by up to 40%.

Technology is also enabling more fluid asset sharing in B2B environments, unlocking unused capacity in capital-intensive assets, such as trucks and warehouses—and even trains and ships.

Moreover, leading shippers and carriers are using data and analytics to forecast demand and better optimize their routes in ways we couldn’t imagine even a few years ago. New routing powered by connectivity and analytics can produce efficiencies of up to 25 percent.

Some shippers have trimmed inventories by up to 75%, cut warehousing costs by 15-30%, and reduced administrative costs by 80%.

Digitalized networks and big data: a foundation for automation

Integration with platforms like Shippeo’s create the digitalized foundational visibility network needed to facilitate the automation of supply chain execution. This helps to drive convergence of supply chain functions, which are traditionally siloed, allowing end-to-end business processes to span, synchronize and be optimized like never before.

Shippeo’s platform facilitates collaboration amongst ecosystem partners, sharing data collected, and insights produced, in real-time from an extensive multimodal network. Leveraging automation and artificial intelligence, business value in the forms of productivity gains, boosted service levels and advanced analytics capabilities are unlocked.

It’s real-time transportation visibility platform’s ability to both collect and draw meaningful insight from vast amounts of data, from a diverse network of sources, that creates the foundation for a fully automated supply chain of the future and the team at Shippeo is keenly focused on innovating and contributing in this space. To learn more about Shippeo’s unique and advanced approach to real-time visibility, feel free to contact one of our friendly experts.

Why automation is the future of supply chain management

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