Mitigating Your Supply Chain Risk: Part Three
The only thing more important than strategizing your business’s supply chain is taking the steps needed to ensure that your supply chain is thorough, safe, and secure against a wide range of problems and threats. As President and co-founder of supply chain solutions provider INSIGHT Inc, Dr. Jeff Karrenbauer is an expert on all things related to assessing your supply chain risk and learning how to mitigate that risk effectively. In our first installment we asked Dr. Karrenbauer why planning is so important; we followed up with today’s biggest supply chain risks and why businesses fail to plan. Today we learn about the first steps a business can take to start assessing their supply chain right now.
Food Digital: So what can a business start doing tomorrow to begin strategizing and safeguarding itself against supply chain risk issues?
Dr. Jeff Karrenbauer: The first thing is to conduct a very careful audit of your vulnerabilities – and you’ve got to know how to do that. The first thing to do is to commit to saying that this is a serious issue and we’re going to look at it. We’re not going to wait until two years from now – because it’s never going to be ‘the right time,’ you’re never going to be not busy.
To me, the way to do it from a supply chain standpoint is with a very well understood tool. (Yes, we are a vendor, but we’re not the only one.) It’s called a network design model, a strategic supply chain design model. It’s a very well understood mathematical model, and for a manufacturer (if it’s done right) it starts at the source of raw materials acquisition, ends with customers, and includes everything in between – procurement, duties, taxes, ports, everything.
That tool’s primary purpose is redesigning the supply chain. How many warehouses should I have and where should they be? Where should I manufacture? Should I outsource, in light of the entire supply chain and not just labor costs? How do I allocate limited capacity? Which ports should I use?
One of the uses of a tool like that is to start doing war gaming and say: all right, forget that plant. You don’t have it anymore. Forget these ports, forget that distribution center, forget that transportation link – it’s gone. Now, you still have to get that demand satisfied. How are you going to do it?
You impose additional constraints. Sometimes they’re capacity constraints and sometimes they’re more draconian. You just lost that facility. Now what are you going to do? There’s a demand. You’ve got to satisfy it. Tell me how, but you can’t use this guy. Maybe it comes back and says: I can’t without it. That’s good to know! I’ve got a critical facility there, what am I doing about it? Maybe that’s where I need to be redundant. With a tool like that, start sayingwhat-if? It’s war gaming with advanced analytics.
By the way, advanced analytics do not include spreadsheets. Spreadsheets do arithmetic. I could put a formula in that cell. Yeah, that’s called arithmetic. I can sort a column! Okay, so can I on my living room floor with enough time. They’re nice tools, but we’ve gotten to the point where people call that advanced analytics and it’s not. Period. It’s not ever going to be. But that’s the only tool that so many of our graduates come out knowing. There’s the old adage – when all you have is a hammer, everything looks like a nail or you make it look like a nail. So you get some analytical abuse. But this is not spreadsheet stuff: this is much more powerful than that.
Whether you use Insight or not, whether you use tools like that or not, this demands: A) the commitment, and B) the adoption of advanced analytics that are up to the task of looking at the design, or the alternate design in the face of pressure, of your supply chain.
And you’ve got to look at the whole thing. By that I mean the whole supply chain. If you’re really going to do risk analysis, you can’t partition it off and just worry about the ports or certifying the financial stability of your suppliers. That’s not good enough. I’ve seen people say that’s my contingency planning, I went out and made sure my suppliers are still viable. That’s important! I don’t mean to denigrate that, but it’s not enough. You’ve got to look up and down.
McDonald’s Drive-Thru attendants replaced with AI
Fast food goliath McDonald's has trialled an AI voice recognition system at several drive-thrus in Chicago, USA, expanding from the one single test in a restaurant launched a few years ago.
As the price of food rises, businesses look for ways to save money and cutting out entry-level jobs, such as drive-thru attendants, is one option.
AI helps businesses, but threatens jobs
In the post-pandemic era, utilising AI technology seems like a sensible idea. AI outperforms human labour in a number of ways:
- AI drive-thru attendants do not get sick, do not need sick leave, parental leave, holidays, weekends or time off
- AI do not require payment and cannot set up a Trade Union
- AI do not have rights
- AI cannot be late for work
- AI can be cleaned and remain more hygienic than humans
For these reasons, many are concerned that AI could take away job opportunities.
At 16, Jeff Bezos, founder of Amazon and the richest man in the world, took his first job in the fast food franchise. Bezos said he became grateful for the experience of working under pressure and that the role also taught him about being a good manager. Employing AI in such roles will mean less people get to learn from these entry level jobs.
AI accuracy lacking at McDonald's
McDonald's purchased the drive-thru voice technology from the startup Apprente in 2019.
Apprente creates speech-based AI businesses. The business “delivers enterprising solutions for a broad range of customer service applications that presently necessitate human interaction”.
But the AI technology used in the McDonald’s drive-thru so far, is reportedly only 85% accurate and one fifth of orders need help from a human to put through. For customers with specific dietary requirements, this could lead to problems in order mix-ups.
Regardless, CEO Kempczinski has estimated five years before a national rollout.
"There's still a lot of work, but (...) we feel good about the technical feasibility of it and the business case," Kempczinski said in a conference transcript from FactSet.