Innovative Supply Chain Tech: Necessity or Nemesis for SME Manufacturers?
Imagine a bustling Australian factory floor, workers and machines in a harmonious dance of production. Among them, a new kind of team member is making its presence known - not one clad in safety gear, but one that thrives on data and algorithms.
Yes, I’m talking about Artificial Intelligence (AI); that buzzword dividing opinion amongst manufacturers Australia wide. I have been seeking perspectives on this topic over the past few months and it seems most folks fall into one of two camps. On one side, sceptics dismiss AI as mere buzz, devoid of practical applications. On the other, advocates sound the alarm on job displacement. I tend to think the truth is somewhere in the middle; AI won't replace our workforce, but we can't afford to ignore it.
To explore this a little further, I’ve been talking to people close to the latest AI technology. You may have noticed this topic in recent podcast episodes. One of the industry experts I tracked down is Elton Brown, a seasoned professional with decades of experience in logistics and supply chain management. Elton has spearheaded innovative supply chain solutions across a variety of sectors, from retail to healthcare, distinguishing himself as a leading voice in supply chain automation and the transformative role of AI in this space.
"What's the real impact of AI on manufacturing jobs?" I asked. Elton's describes AI as a transformative force, not one that eradicates jobs but reshapes them. A force that, especially in Australia - with our high labour costs and extended lead times - presents not just a challenge but a massive opportunity for growth and innovation.
But what does this mean for the small and medium-sized enterprises (SMEs) that form the backbone of our industry? How does AI fit into their daily operations? Elton painted a picture of AI as an already integral part of our manufacturing ecosystem, working behind the scenes in ways we might not even recognise. For instance, consider pricing strategies. What once could be represented by a simple price elasticity curve now requires millions of calculations, considering variables like competitor pricing and seasonality. AI can handle such complexity with ease, optimising pricing in ways that would be insurmountable for humans alone.
And it's not just pricing. Inventory optimisation, a mainstay concern for manufacturers, has become an increasingly intricate dance of service levels versus working capital. AI excels in navigating these complexities, offering solutions that balance the supply chain triangle with unprecedented precision. According to McKinsey, AI can cut supply chain errors by up to 50% and help avoid lost sales due to stockouts by as much as 65% and Gartner is forecasting AI will inform 25% of global supply chain industry decisions by 2025.
If you’ve been at a trade show recently, you’d have seen the rapid innovation of AI which is now embedded in many enterprise applications, a trend that's only going to intensify. By way of example, Microsoft has integrated AI into its Dynamics 365 software to predict and respond to changes in demand. This is no longer the future; it's our present, with more than half of the world's GDP driven by digitally transformed enterprises, heavily reliant on AI. IDC predicts that by 2025, a staggering 90% of enterprise applications will have AI capabilities embedded within them.
Ask yourself: In what ways have we underestimated the potential of AI in enhancing our decision-making processes? Could it be that AI is already set to inform a quarter of supply chain decisions? With such promise of increased accuracy and reduced costs, shouldn't we be looking to embrace AI's full potential? How confident are we that our competitors aren’t already leveraging these emerging capabilities? It’s not a matter of if but when and I suspect you don’t want to be left behind.
Now please don’t let me mislead you; AI isn’t a silver bullet, and for the most part, it certainly isn’t a simple turn-key solution. A recent McKinsey survey highlighted the challenges in AI implementation within supply chains, such as change management, process design, and missing capabilities. Elton suggested that, if you want to take this seriously, you might even need to hire a data scientist to help you really take your data and AI driven supply chain to the next level. That’s definitely not something many folks would have ever considered, and those folks aren’t necessarily walking the streets of your local industrial complex knocking on doors. The good news is though that data science is increasing in student numbers across the globe and there are local university programs like SME@UTS that enable SME companies access to teams of students to help businesses solve complex business problems.
So, for SME manufacturers in Australia and beyond, it's time to look beyond the fear of replacement. AI is not a nemesis lurking in the shadows; it's a powerful ally, waiting to be harnessed. Let's not bury our heads in the sand. Instead, let's roll up our sleeves and prepare to work alongside the great enabler that AI promises to be, steering our manufacturing future towards a horizon brimming with potential.
As Elton succinctly put it, we're already using AI — sometimes knowingly, often not. But to leverage its full potential, we must acknowledge its presence and integrate it with a strategic understanding of its vast capabilities. In doing so, we don't just secure our place in the future of manufacturing; we pave the way for it.
If you’re interested to hear the whole interview with Elton (and other interesting takes on the intersection of manufacturing and technology) check out the Manufacturing Tech Australia podcast and if you want to talk about how to lift the technology maturity within your business and successfully adopt these game-changing technologies reach out for a chat.
