This Week in Logistics News (June 11-15, 2018)

If you were stranded on a desert island with a boom box and one music cassette, which band and album would you be listening to?

It’s an easy question for me to answer: Depeche Mode and Violator.

As my college roomates could attest to, I drained many D batteries blasting Depeche Mode music on my boom box. Some Great Reward. Black Celebration. Music for the Masses. Violator. Songs of Faith and Devotion…Depeche Mode’s music is the soundtrack of my life, from young adulthood through today.

I saw them in concert again last weekend, an early Father’s Day gift. This was probably the sixth time I’ve seen them in concert (I’ve lost count), and while the band members are visibly older, along with me and the rest of the audience, their music never gets old.

I’m now trying to get my kids hooked on them. It’s just a “Question of Time” until they “Just Can’t Get Enough” either.

In the meantime, here’s the supply chain and logistics news that caught my attention this week:

The Physical Transformation of Supply Chains

While there’s a lot of buzz today about digital transformation, the reality is that there’s a lot of physical transformation that also needs to take place, and it will be a long and costly process, just ask P&G, Home Depot, and Target.

Those three companies are investing significant money and resources to transform their distribution networks, which were originally designed to flow truckloads of products from large distribution centers to stores but are now becoming outdated in this new market where speed of delivery and inventory reduction are paramount.

At the Descartes Evolution 2018 conference in March, Mark Holifield, Home Depot’s Executive Vice President of Supply Chain and Product Development, discussed how the retailer is investing $1.2 billion over five years to redesign its distribution and delivery network to “create the fastest, most efficient delivery in home improvement.” Jennifer Smith from the Wall Street Journal provides additional details in an article this week:

The home improvement retailer will add 170 distribution facilities across the U.S. so that it can reach 90% of the U.S. population in one day or less, said Mark Holifield, the company’s executive vice president of supply chain and product development. The new sites will include dozens of direct fulfillment centers for next-day or same-day delivery of commonly ordered products, as well as 100 local hubs where bulky items like patio furniture and appliances will be consolidated for direct shipment to customers.

The bottom line is that digital supply chain transformation is not enough; companies also have to transform their physical supply chain networks (and their approach to talent management) to adequately meet the more demanding challenges and opportunities before them.

Amazon: Vendor Managers Replaced by Algorithms

Will artificial intelligence and machine learning replace humans in supply chain management?

The question is asked frequently at industry conferences and the common answer is that AI and machine learning will mostly improve the way supply chain professionals do their work, not necessarily replace them.

But then you come across stories like this one published in Bloomberg this week highlighting how Amazon, under an initiative called “hands off the wheel,” has shifted tasks “like forecasting demand, ordering inventory and negotiating prices to algorithms.” Here’s an excerpt from the article:

Now, instead of calling their vendor manager at Amazon, the makers of handbags, smartphone accessories and other products simply logged into an Amazon portal that would determine if Amazon liked the deal being offered and the quantity it was willing to buy. No small talk. No give and take. Thousands of Amazon man hours spent forecasting demand, planning marketing strategies and negotiating deals was now handled by software, a major leap in efficiency.

“Computers know what to buy and when to buy, when to offer a deal and when not to,” says Neil Ackerman, a former Amazon executive who manages the supply chain at Johnson & Johnson. “These algorithms that take in thousands of inputs and are always running smarter than any human.”

This reminds me once again of the Seven Stages of Robot Replacement that Kevin Kelly wrote about in a WIRED magazine article published in December 2012:

In the coming years our relationships with robots will become ever more complex. But already a recurring pattern is emerging. No matter what your current job or your salary, you will progress through these Seven Stages of Robot Replacement, again and again:

1. A robot/computer cannot possibly do the tasks I do

[Later.]

2. OK, it can do a lot of them, but it can’t do everything I do.

[Later.]

3. OK, it can do everything I do, except it needs me when it breaks down, which is often.

[Later.]

4. OK, it operates flawlessly on routine stuff, but I need to train it for new tasks.

[Later.]

5. OK, it can have my old boring job, because it’s obvious that was not a job that humans were meant to do.

[Later.]

6. Wow, now that robots are doing my old job, my new job is much more fun and pays more!

[Later.]

7. I am so glad a robot/computer cannot possibly do what I do now.

Which stage are you in?

And with that, have a happy weekend!

Song of the Week: “Question of Time” by Depeche Mode (recorded live in Boston, 6/9/2018)

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