Procurement 101: Supply Chain Automation – How it works and why it’s important

What is Supply Chain Automation?

Supply chain automation refers to the use of technologies like artificial intelligence, robotics, and the IoT to automate processes and decision-making across supply chain operations and logistics. This includes automating everything from production and inventory management to order processing, shipping, returns, and more.

Supply chain automation is important because it allows companies to significantly improve efficiency, reduce costs, achieve greater accuracy and reliability, and better keep up with consumer demand. Manual supply chain processes are often expensive, inconsistent, and prone to human error. Automating enables a data-driven, optimized approach that provides companies with greater control, visibility, and scalability.

As consumer expectations around speed and convenience grow, supply chain automation has become essential for remaining competitive. It empowers companies to get products to customers faster, offer more delivery and fulfillment options, provide accurate tracking and status updates, quickly respond to supply chain disruptions, and make better predictions around inventory needs and production capacity. Overall, automated supply chains are more responsive, productive, and profitable.

Benefits

Supply chain automation provides numerous benefits for companies across industries. The key benefits include:

• Increased efficiency – Automating manual and repetitive processes increases supply chain efficiency by reducing human labor requirements. This allows employees to focus on more strategic tasks and ensures processes run smoothly and quickly.
• Reduced costs – Automating supply chain processes reduces operational costs in several ways. It lowers labor costs by needing fewer employees for routine tasks. It also minimizes waste, errors, and inefficiencies which drive up costs. Companies can save significantly on overall supply chain costs through automation.
• Improved accuracy – Automated systems and processes have greater accuracy than manual ones which are prone to human error. Automation technologies use algorithms and data analysis to improve decision making and execution. This improves the accuracy of everything from forecasting demand to inventory tracking.

Technologies

The key technologies enabling supply chain automation include:

• AI encompasses a range of technologies like machine learning, neural networks, and natural language processing that allow systems to learn, reason, and make decisions without human input. In supply chains, AI powers predictive analytics, demand forecasting, inventory optimization, and other data-driven processes.
• Industrial robots can automate repetitive, dangerous, or precise tasks in warehouses, manufacturing, and logistics. Collaborative robots work safely alongside humans. Mobile robots enable flexible material transport. Robots bring speed, efficiency, consistency, and 24/7 productivity.
• Networks of connected sensors on products, equipment, and vehicles provide real-time data on location, condition, usage, and more. This IoT data fuels transparency and automation across supply chains.

Challenges of Supply Chain Automation

Implementing supply chain automation comes with some key challenges that organizations need to be aware of:

• High upfront costs – The initial investment in automation equipment and software can be quite steep for many companies. The costs include not only the technology itself, but also training employees and hiring workers with the right technical skills.
• Integration difficulties – Connecting new automated systems into legacy infrastructure and processes can prove complex. seamless integration is crucial for realizing the full benefits of automation.
• Lack of skilled workers – There is a shortage of workers knowledgeable in areas like robotics, AI, advanced analytics, and supply chain software. Organizations may struggle to find the talent needed to optimally design and operate automated systems.

Overcoming these roadblocks requires proper planning, change management, and workforce development. But doing so enables firms to unlock tremendous efficiency and productivity gains from supply chain automation over the long-term.

Use Cases

Automation is being adopted across various supply chain functions and processes. Here are some of the key use cases:

Automated Warehouses

Warehouses are employing advanced automation to optimize storage, picking, and shipping operations. Automated storage and retrieval systems allow for high-density storage, while good-to-person robotic systems bring inventory to workers to pick. Automated guided vehicles can transport loaded pallets without human involvement. This improves warehouse efficiency, accuracy and throughput.

Autonomous Vehicles

Self-driving trucks, vans and last-mile delivery vehicles are being tested for transporting freight. This can reduce transportation costs and allow for continuous delivery operations. Autonomous mobile robots are also used within warehouses and production facilities to move materials.

Procurement Automation

AI and machine learning are being applied to automate sourcing, supplier discovery, request for quotations, purchase order creation and invoice processing. This procurement automation saves procurement teams time on manual tasks so they can focus on value-adding work. It also provides real-time visibility into spending.

Industry Adoption of Supply Chain Automation

Supply chain automation is being embraced by companies across many industries as they seek to improve efficiency, lower costs, and better manage complex global operations. Some of the leading industries adopting supply chain automation include:

Manufacturing

• Manufacturers were early adopters of automation to optimize production. Now they are expanding automation across the supply chain. For example, Apple suppliers like Foxconn have implemented automated warehousing to speed up production and fulfillment.
• Automakers like Tesla and BMW are using AGVs in manufacturing plants and Artificial intelligence for predictive maintenance. This improves quality control and reduces downtime.

Retail & eCommerce

• Retailers like Amazon and Walmart rely on automation in their massive warehouses. AGVs transport inventory, automated picking systems fulfill orders, and robotics handle packaging and shipping. This allows them to meet rising consumer expectations for faster delivery.
• Startups like Ocado have built end-to-end automated fulfillment centers to deliver groceries and other ecommerce orders more efficiently.

Logistics & Transportation

• Logistics companies are adopting automated freight and parcel sorting systems like those used by UPS and FedEx to speed up processing. Autonomous trucks and vehicles are being tested for delivery routes.
• Ocean shipping giants like Maersk are automating port and cargo terminal operations. This increases container throughput and simplifies customs procedures.

So automation is transforming supply chains across sectors. Companies that embrace it are seeing improved productivity, lower costs, better customer service, and increased competitiveness.

Implementation Process

Implementing supply chain automation requires careful planning and execution. Here are some key steps:

Assessing Needs

• Conduct an in-depth analysis of current processes and pain points. Look for inefficient workflows, redundant tasks, and delays.
• Define goals and KPIs. Determine what you want to achieve through automation – cost savings, accuracy, speed etc.
• Involve key stakeholders to get buy-in and gather requirements.

Selecting Solutions

• Research automation technologies that can address your needs. ERP systems, warehouse robots, transportation management systems etc.
• Compare solutions on capability, total cost of ownership, ease of integration, scalability and vendor reputation.
• Select the tools that provide the best ROI and can be seamlessly integrated with legacy systems.

Training and Integration

• Devise a change management plan and train staff on using the new solutions.
• Begin with small pilots focusing on non-critical processes first to test and refine.
• Integrate automation incrementally department by department to minimize disruption.
• Refine configurations and address challenges through continuous feedback.
• Leverage experienced consultants if needed for specialized solutions.

Future Outlook

The future of supply chain automation looks bright as companies continue to realize the benefits of implementing these technologies. Here are some key areas of expected expansion and innovation:

• Continued growth of robotics and automation in warehouses. As costs decline and robotics improve, more distribution centers will add automated systems for inventory management, picking and packing orders, and material handling. This provides faster fulfillment and higher productivity.
• Increased adoption of autonomous vehicles. Self-driving trucks and delivery vans will transform supply chain transportation in the coming years. This provides more efficient routing, fuel savings, and safety improvements.
• Expanded use of predictive analytics and AI. Machine learning algorithms will enable supply chains to forecast demand more accurately, identify potential bottlenecks, optimize inventory levels, and take proactive steps to avoid disruptions.
• Advances in blockchain and IoT. These technologies will enhance supply chain visibility and track-and-trace capabilities from start to finish across global networks. Supply chain data sharing and transparency will improve.
• Cloud-based supply chain management platforms. Software-as-a-service models will replace legacy systems with agile, mobile-friendly platforms to better manage global, omnichannel supply chains. Real-time data integration and collaboration will improve.
• Increased adoption of predictive maintenance. Sensors on equipment will provide data analytics to predict maintenance needs before shutdowns occur. This prevents costly downtime and disruptions.

In summary, supply chain automation will become faster, smarter, and greener in the coming years through new innovations and maturing technologies. Companies will need to adapt quickly to realize the full benefits.

Conclusion

In summary, Supply Chain automation provides several key benefits such as improved efficiency, reduced costs, increased visibility, and enhanced data-driven decision making. By leveraging technologies like AI, ML, IoT sensors, robotics, and automation software, companies can transform their supply chain operations.

However, implementing supply chain automation also comes with challenges around change management, cybersecurity, integration complexities, and required investment. Careful planning and adoption in phases is key. Use cases are already abundant across manufacturing, logistics, warehouses, and inventory management.  

As technology continues to advance, supply chain automation will likely be more widely embraced across industries. To stay competitive, organizations should start evaluating where automation can add value today, while keeping an eye on future developments.  

The takeaway for supply chain professionals is that automation is here to stay and will be critical for driving the next level of performance. By beginning the automation journey now, companies can realize significant benefits while building capabilities for the future. The time to start is now, before competitors gain an advantage. Reach out to automation experts who can help assess your operations and build a roadmap tailored to your specific needs and priorities. The future of your supply chain depends on it.

‍