You Can't Spell Supply Chain Without AI: How Could There Be a Skills Shortage? (1 of 4)

Updated: Feb 27

{This article is adapted from Richard Savoie's talk at StartCon 2019}

One of the most frequent questions that we get from supply chain, logistics, and mobile workforce organizational leaders is: Why? That is, why is AI disrupting the industry and more importantly, why do I need to know about it? And in most cases, that question is accompanied by: What? That is, what exactly are machine learning and artificial intelligence in the context of supply chain and logistics? What can they do for us? And how are they going to disrupt the labour market? What are the implications to my business, and how are they going to play out globally?

How many people in this room know that the supply chain industry, which represents 9% of the Australian GDP, is currently facing a massive human labour shortage? And it’s not just Australia, it’s the US and Europe, too.

People outside of supply chain often have a bit of incredulity when I talk to them about skills shortages in this industry. “But surely technology is disrupting, automating, AI, ML, robots, autonomous vehicles, yadda yadda yadda could there be a skills shortage” they say, as they press the order button on their phone for a pair of shoes from the Iconic that will arrive in a tidy three hours from now. Shouldn’t we be worried about our jobs being automated away, they say as their iphone dings with the notification that their Woolies groceries and their organic veggie box order have both been dropped at their house.

Well to answer that you need to know what the supply chain is.

It doesn’t seem complicated, right. You take stuff, you make stuff, you use stuff. Well to be more precise, you take many different stuffs and deliver them to processing locations, you then take those processed stuffs and deliver them to factories, you then take many types of finished products and distribute them to retailers or to end customers, who more frequently these days also return them. Who has an iPhone? Apple has over 200 component suppliers, who each have dozens of their own raw material suppliers, and it then takes 400 steps on 94 production lines before they get to Boeing 747s which carry 150,000 phones each to spread them all over the world. Now think of all the products you use every day and you start to get a sense of how the global supply chain is bigger than it’s ever been and continues to balloon as nations develop.

So what you see on this slide from Infosys is the specific areas in supply chain where AI will have the most impact, and some examples of those, and we’re going to dig into a few to show you how this world is evolving and where it might get to.

Data from the Transport and Logistics Industry Reference Committee shows that the last 20 years, jobs in the sector have exploded, far outpacing population growth. An example is road freight transport, where employment levels from 2000 to 2018 increased by 43%. And their projections show the pace of growth increasing.

Consumer expectations, especially around e-commerce, have created a race to the top, AND a race to the bottom, and technology, is going to decide which organisations are in which category because there is no way that human labour can keep up with the pace. Or is that true?

Well if it is true, it means you should stop teaching your kids to code and get them behind the wheel! In Australia, 80% of logistics businesses report a skills shortage, primarily in truck drivers. And indeed in the US, truck driving is the most popular job in 29 states. It provides a critical backbone of the logistics industry.

Clearly if there is such a high demand, then wages in the supply chain industry must be high, which is true. In fact, wage growth in the supply chain sector is growing faster in Australia than IT and science and engineering based jobs. Really. And if wages are high, then people should be gravitating towards those jobs, right? Simple economics.

The answer might surprise you. Stay tuned for our next installment for the answers and some surprising insights into where this is all going...