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Why we need humans to complement supply chain automation and AI
By Laurence Dellicott, senior director - EMEA supply chain, Avnet Silica
A
s manufacturers seek to optimise their supply chains, focus has typically been on using technology to automate as much of the process as
possible. Having an enterprise resource planning (ERP) system that automates key tasks and generates orders, for example, is standard practice.
However, times are changing. We live in a very different world compared to even 12 months ago. Markets are volatile and uncertainty is high. Against this backdrop, relying on automation – even where it has been augmented by artificial intelligence (AI) – is increasingly risky. The technology is not yet sophisticated enough to be left to its own devices in today’s markets.
This is why in 2024, more than ever, we continue to advocate for targeted and intelligent human involvement in the supply
40 September 2024
chain, to unlock benefits such as consensus planning and demand sensing. Let’s look at the importance of each area in detail, and why we need humans playing key roles.
The need for consensus planning to complement demand signalling As an original equipment manufacturer (OEM), when you make a change to your product design, a good supply chain management system will use material requirements planning (MRP) parameters such as lead times, delivery times, and stock targets, to automatically recommend upstream changes. It might identify that the 20,000 units you expected to require this week are not needed until next month. One challenge with this approach is that these automated forecasts can differ wildly from week to week. Moreover, even the
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most sophisticated systems cannot take into account how suppliers might react to a change in your order.
Another risk around using automated systems in isolation in today’s markets surrounds the use of historical forecasts to influence auto-generated orders. Historically, you may have consistently consumed around 85 per cent of what you forecasted. A good supply chain management system can take this into account when generating automated order outputs. However, with the market so volatile, basing future buying decisions on past ones is increasingly risky.
These challenges highlight the importance of taking other factors into account before placing your orders with suppliers. And this is where consensus planning, by knowledgeable humans, adds enormous value. By having individuals or teams validate the orders your supply chain systems generate, and apply
reasoning, judgement, and context, you will be able to adjust your orders intelligently, and avoid some of the pitfalls you may otherwise face.
For example, your automated demand forecasting may highlight an opportunity to reduce orders today, and ramp up again further down the line. However, if you do this, you may end up at the back of your supplier’s queue, meaning longer future lead times. These, in turn, might impact on production schedules, or lead to higher costs. A human with knowledge of both your business and your suppliers can take these subtleties into account when deciding whether to place the order as generated, or amend it.
So far, what we have been discussing pertains to demand signalling, which of course is just part of the picture. Let’s now turn our attention to demand sensing.
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