The scale of goods moving around the planet at any moment is staggering. Raw materials are dug up in one country, spun into parts and pieces in another, and assembled into products in a third. Crossing oceans and continents, they find their way to a local store or direct to your door.
Magically, a roll of toilet paper, power tool, or tube of toothpaste is there just when you need it.
Even more staggering is that this whole system, the global supply chain, works so well that it’s effectively invisible most of the time. Until now, that is. The pandemic has thrown a floodlight on the inner workings of this modern wonder—and it’s exposed massive vulnerabilities.
The e-commerce supply chain is an instructive example. As the world went into lockdown, and everything non-essential went online, demand for digital fulfillment skyrocketed.
Even under “normal” conditions, most e-commerce warehouses were struggling to meet demand. But Covid-19 has further strained the ability to cope with shifting supply, an unprecedented tidal wave of orders, and labor shortages. Local stores are running out of key products. Online grocers and e-commerce platforms are suspending some home deliveries, restricting online purchases of certain items, and limiting new customers. The whole system is being severely tested.
Why? Despite an abundance of 21st century technology, we’re stuck in the 20th century.
Today’s supply chain consists of fleets of ships, trucks, warehouses, and importantly, people scattered around the world. While there are some notable instances of advanced automation, the overwhelming majority of work is still manual, resembling a sort of human-powered bucket brigade, with people wandering around warehouses or standing alongside conveyor belts. Each package of diapers or bottle of detergent ordered by an online customer might be touched dozens of times by warehouse workers before finding its way into a box delivered to a home.
The pandemic has proven the critical need for innovation due to increased demand, concerns about the health and safety of workers, and traceability and safety of products and services.
At the 2020 World Economic Forum, there was much discussion about the ongoing societal transformation in which humans and machines work in tandem, automating and augmenting the way we get things done. At the time, pre-pandemic, debate trended toward skepticism and fear of job losses, with some even questioning the ethics and need for these technologies.
Now, we see things differently. To make the global supply chain more resilient to shocks like Covid-19, we must look to technology.
Perfecting the Global Supply Chain: The Massive ‘Matter Router’
Technology has faced and overcome similar challenges in the past.
World War II, for example, drove innovation in techniques for rapid production of many products on a large scale, including penicillin. We went from the availability of one dose of the drug in 1941, to four million sterile packages of the drug every month four years later.
Similarly, today’s companies, big and small, are looking to automation, robotics, and AI to meet the pandemic head on. These technologies are crucial to scaling the infrastructure that will fulfill most of the world’s e-commerce and food distribution needs.
You can think of this new infrastructure as a rapidly evolving “matter router” that will employ increasingly complex robotic systems to move products more freely and efficiently.
Robots powered by specialized AI software, for example, are already learning to adapt to changes in the environment, using the most recent advances in industrial robotics and machine learning. When customers suddenly need to order dramatically new items, these robots don’t need to stop or be reprogrammed. They can perform new tasks by learning from experience using low-cost camera systems and deep learning for visual and image recognition.
These more flexible robots can work around the clock, helping make facilities less sensitive to sudden changes in workforce and customer demand and strengthening the supply chain.
Today, e-commerce is roughly 12% of retail sales in the US and is expected to rise well beyond 25% within the decade, fueled by changes in buying habits. However, analysts have begun to consider whether the current crisis might cause permanent jumps in those numbers, as it has in the past (for instance with the SARS epidemic in China in 2003). Whatever happens, the larger supply chain will benefit from greater, more flexible automation, especially during global crises.
We must create what Hamza Mudassire of the University of Cambridge calls a “resilient ecosystem that links multiple buyers with multiple vendors, across a mesh of supply chains.” This ecosystem must be backed by robust, efficient, and scalable automation that uses robotics, autonomous vehicles, and the Internet of Things to help track the flow of goods through the supply chain.
The good news? We can accomplish this with technologies we have today.
DERIK PRIDMORE Derik Pridmore is an entrepreneur, co-founder and CEO of Osaro, a San Francisco based AI company building machine learning software for industrial automation. Derik was previously a venture capitalist, hedge fund manager, and angel investor, and has over 15 years of investment and operational experience. Derik was a principal at Founders Fund, a Silicon Valley venture fund led by PayPal f… Learn More