The Rise of the Personal, Automated and Local Value Chain

Ever since the financial crash a decade ago (yes, it’s been that long), investment has increasingly moved from speculation in financial products to supporting the activities of start-ups and entrepreneurs who are hard at work developing new technologies designed to transform the way we capture and supply demand. Until this shift, progress in these areas was linear and relatively deceptive; now, as the money flows, it is poised to become exponentially disruptive. The upswing of an almighty ‘S’ curve of technological disruption is about to take place, a clustering together of radical new technologies that will transform the very nature of the supply chain; new approaches that will improve efficiency, eliminate middlemen and reduce waste.

By Sean Culey

We have rapidly moved from seeing glimpses of early experiments in research labs and beta versions demonstrated at technology expos, to fully operationalised versions in the workplace. Videos and news articles about these new technologies are everywhere; examples include autonomous vehicles, collaborative robotics, 3D printing, the blockchain, artificial intelligence, chatbots and smart home hubs. However, if you took a moment to stop looking at these as individual innovations, but instead stood back and viewed them as inter-connected components, then what becomes apparent is that when combined they will enable the automation of the entire end-to-end supply chain, able to replace swathes of human workers with machine hands and machine intelligence. They have the potential to not only improve the execution of activities, but also to allow companies to completely reimagine their business models in ways that excite consumers, exploit new opportunities and eliminate the middlemen and the competition. This combination of intelligent machines, software, sensors and AI will combine to create what I have named the ‘PAL’ Value Chain.

Why PAL?

The PAL value chain is the next evolution of the way we market, produce and deliver goods; leaving the industrial age of the mass production and mass marketing of commoditised products behind and moving to value chain that is more Personalised, more Automated and more Local to the end-consumer.

Personal

Goods are becoming increasingly customised to the needs of individual consumers or to smaller and more specialised consumer niches. There are three technologies enabling this personalisation:

• Firstly, artificial intelligence and the introduction of sensors throughout the supply chain is allowing companies to monitor and understand data at a much more granular level, resulting in the ability to manufacture products based on demand signals rather than long term forecasts. This increase in ‘sense and respond’ capabilities means than rather than produce large quantities of product in advance and push it to market, final production can be delayed until actual sales demand is received, and as a result develop a more sensitive pull-based model.
• The second is the move from physical products and sales platforms to digital ones. Digital products have the distinct benefit of having a marginal cost of almost zero, incurring virtually no production, storage and distribution overheads – and no waste. Digital products also dramatically increase consumer choice; ever since iTunes enabled people to buy single tracks rather than entire albums, the transfer of media products from physical formats to digital ones has enabled a greater degree of customer choice and customisation. People are now able to watch and listen to what they want, when they want, on whatever device they want, creating a seismic power shift from the producer to the consumer. The creation of electronic marketplaces has also enabled the vendors to utilise machine learning algorithms that track and monitor your buying and viewing history so that rather than creating a single shop for everyone, they can effectively create a personalised shopping experience designed around you.
• Third is the use of new manufacturing techniques such as 3D printing, which enables companies to produce completely new types of products, rethink the production process to avoid the pitfalls and expense of traditional subtractive manufacturing techniques, and make things on demand and to unique specifications. For example, footwear companies such as Adidas and Nike are now able to make shoes to your own required colour and style, rather than mass manufacturing shoes and shipping to retailers to sell. They are even planning to offer personalised orthotics which are 3D printed based on digital photographs of your feet. No more ill-fitting shoes.

Automated

Autonomous vehicles and smart robotics will increasingly replace the need for manual labour to do repetitive tasks such as production, picking, packing and shipping, while the Blockchain, Robotic Process automation and chatbots will handle track the repetitive information processing tasks such as handling the recording and administration of all physical and financial transactions, and resolving customer queries. Each of these machines and algorithms are going to be managed not by human hands and brains, but by AI systems using predictive and prescriptive analytics to automatically determine demand and reschedule supply.

Local

All this automation will enable manufacturers to produce goods where the consumers are, rather than where the cheap labour is. Many manufacturers misunderstood the total cost of offshoring their production, focusing only on the unit cost of labour and not realising the additional transportation costs, lead times, storage requirements and potential quality issues that would arise. The cost advantages of using robots to make products on-demand and in smaller quantities is becoming pervasive and is creating an on-shoring revolution. Manufacturing is returning home. The old manufacturing jobs – not so much. To support localised production facilities, a micro-logistics network, utilising warehouse robotics and autonomous delivery methods ranging from drones to delivery robots is also being developed to satisfy demands for same and next-day delivery.

The PAL Value Chain in Action

To witness the PAL value chain, one only needs to look to the e-commerce behemoth that is Amazon. The Amazon shopping experience is increasingly personalised to your needs, with artificial intelligence systems making a series of recommendations based around your previous purchases, and those of other customers with similar buying patterns to you. Amazon is also increasingly extending the number of ways it can engage with customers. Perhaps the most innovative is its Echo product range, that while masquerading behind the premise of being a smart speaker, is in fact an entirely new platform that enables you to order anything – from tiramisu and toilet paper to taxis and takeaways – simply by voice. Behind this platform and Amazon’s ecommerce site sits an increasingly automated end-to-end supply chain. The management of this supply chain, including the purchasing, placement and picking of products, is increasing undertaken by machine learning based planning and scheduling systems. Finally, in order to meet its Prime Now one-hour delivery promises, it is developing a series of localised, micro-logistics hubs in urban areas with Uber style on-demand delivery drivers, an interim solution until Amazon rolls out its new autonomous, electric delivery robots to compliment the orange Kiva bots and other robotic systems that operate throughout their fulfilment centres. Amazon’s plans in this area include flying delivery drones as well as mothership concepts that include autonomous vans loaded with smaller delivery robots that make the last stage delivery, and even patents for floating airship fulfilment centres that hover over urban areas and despatch delivery drones to the customers houses below.

The PAL model represents a totally connected supply chain, with demand and supply signals passed automatically up-and-down the chain, and multiple points of value generation for consumers and corporations alike. This is fantastic news from a sustainability perspective, especially as goods increasingly become made-on-demand, reducing excess production, transportation, storage and waste. However, it will also see a supply chain increasingly devoid of human labour; managing the fallout from this might be one of the major challenges of the next decade.