AI-Maybe the Sky Will Not Fall

I was reading an article on artificial intelligence (AI) in a supply chain journal. The protagonist for AI says it will put all the brokers out of business because machines will make all the dispatch decisions. Really? Don’t you just love these sky is falling statements? Let’s take a more nuanced look at this, after taking a brief side trip to Steger, IL, south of Chicago.

My summer volunteer work took me to Steger, IL, just south of the Cook County, where I took a mid-day break to eat lunch. Relatively close to one another are a McDonald’s and a Culver’s.  McDonald’s has fewer employees, cheaper costs and for the most part more basic food. Culver, from a McDonald’s point of view, is widely over staffed where there is even enough employees that there is someone available to open the door for customers to walk in. Culver has higher prices but better, more tasty and more substantial food.  And you know what? At lunch time both restaurants parking lots are full of cars. That means both are successful operations.

In this example of two fast food restaurants, I think you can find some “truths” about the affect of AI on the supply chain. Let me stereotype each restaurant’s operation to explain this.

McDonald’s is the super efficient, low cost, few extras operation. Your prices are low but your food is not as good as Culver’s.  If you are running a commodity business where low price is everything, AI will let you do the basics with fewer employees. For some customers the basics are good enough. There will be customers who the lowest price means everything and poorer service will not keep customers away.

Culver’s has more employees per order. It justify that expensive because its patrons, its market, are willing to pay more for better customer service and better quality food.  Culver assuredly utilizes modern technology where it can to be as efficient as their business model allows.

Not one business model serves the  entire market. There are customers who need more the basics and are willing to pay for the extras. Brokers who design their services to provide extra value will need people to deal with people. It is not possible at all (or even wise) to program for everything that is going to happen.  In supply chains, human beings who can handle the ever changing complexity better than machines can. There will be a market for those type of services

A one size fits all market is almost rarely the case. So broad brush statements about AI putting brokers out of business simply is not a correct forecast. There will be changes as time goes on as their always is. Ultimately transportation providers and buyers will need to where the market is going and adjust their operations accordingly.  And yes, employees will be essential for some markets to work and be successful. And there will be a market for the lower flexibility, less service, but very efficient brokers substantially run by AI.

 

 

 

 

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