Supply Chain 4.0: Global Retailers Gear Up for the Future
Dheeraj Shah, head of supply chain management, retail industry solutions, Tata Consultancy Services (TCS), has been firmly entrenched in the new and old worlds of supply chain. For more than 20 years, he’s been working with global retailers on supply chain solutions, and most recently he’s been deep into transformative conversations with more than 30 of the world’s biggest retailers on how they plan to sculpt their digital-adoption journey. Shah sat down with Retail Leader to share what he’s learned and what they have to say.
The conversation kicks off a three-part series by TCS that will go deeper into four key areas of digital disruption: pervasive artificial intelligence, the “phygital” supply chain, fulfillment at the speed of thought, and hyper-automated warehousing that uses robotics.
Retail Leader: What is happening to the supply chain system today?
Dheeraj Shah: You hear a lot about “industry 4.0” and “business 4.0.” Basically, it’s the evolution from the steam engine to the digital age, so we are in the age of Supply Chain 4.0. Here, retailers are saying the challenge is to leverage digital to become more connected, transparent, cognitive and intelligent.
RL: What does that mean for retailers and more importantly shoppers?
DS: Retailers are telling shoppers, “Go to my website, order and get it within a day or as quick as two hours.” They are making lofty promises, and the challenge is to keep those promises. In some ways, it’s exciting for retailers to fulfill this customer promise, and retailers must do it with intelligence and an automated, learning supply chain.
For retailers, the supply chain has become like a Japanese, Teppanyaki-style restaurant. All of the backend, I call it the kitchen, is in front of you. The kitchen is on the table. Supply chain, which was the backend, has come to the forefront because the customer can see it all. If you don’t have a product stocked online, for example, but she can see it in-store, she knows your supply chain is messed up.
RL: So the customer’s expectations have increased.
DS: Correct. For Supply Chain 4.0, the sky is NOT the limit. The customer’s expectations are endless. Drones, driverless cars, Hyperloop transport. Retailers are faced with doing anything possible to become an “experiential supply chain.” Retailers are telling me they need to leverage multiple digital technologies for superlative customer experience. That’s a big challenge.
RL: What do you mean by an “experiential supply chain?
DS: The customer experience is what it is all about — an experiential supply chain is being aligned to delight the customer. Platforms and digital options like Internet of Things (IoT), blockchain, robotics and artificial intelligence will enhance that experience.
The question today for supply chain and retailers is not what these digital technologies can do but how to deliver this technology and where.
RL: How far along are retailers?
DS: The global retailers I hear from — and work with — are embracing digital technologies, but it’s early, and the race isn’t the first to finish but the first to start. We have gathered four key things happening right now that will shape the future. First is artificial intelligence, second is a “phygital supply chain,” third is “fulfillment at the speed of thought,” and last is “warehouse robotics and hyper automation.”
RL: What about AI and machine learning, how will they alter the supply chain?
DS: There are three “A’s” that will change the landscape in retail. First, “Algorithmic Supply Chain,” there will be scientific algorithms that will automate and learn on their own. Second is “Anticipatory Supply Chain,” in which machine learning anticipates shipping for an event. The Super Bowl is coming, for example, and machine learning anticipates this to ship early, not at the last minute. And then there’s “Automated Supply Chain,” using AI to help brands and retailers with replenishment.
But for retailers to leverage AI and machine learning, there are five levels to understand. First, there is using digital technology to mimic human action. This is as simple as a shopper calling a retailer, and a machine answers the call using an NLP bot. Second, is AI that mimics human judgment, and third is a machine that can anticipate thinking and follow through on human action and decision. Fourth is to augment human intelligence and last is to completely mimic human intelligence.
RL: Explain “the phygital supply chain.”
DS: It’s the merging of digital with the physical supply chain. Take a box of strawberries in-store. Sensors on the box capture information throughout the package’s journey like the name of the farm, and the temperature and humidity that the strawberries experienced from the farm to the DC to the store. Sensors can make the journey from farm to fork visible to the customer, delivering “freshness assurance.”
Freshness is measured differently for berries and meat and so it is critical to identify the right parameters, considering the physical aspects of products. This is IoT, and it is happening at some level today. The future, however, will pave the way of communication directly with the driver of the truck to adjust the temperature, or auto-ordering from stores and homes using smart devices and smart shelves. This is moving from the “Internet of Things” to “Intelligence of Things,” another IoT.
Another example is the digital blockchain and its ability to prove a product’s authenticity. Blockchain opens doors for a collaborative- or consensus-based mechanism. A bottle of wine can tell a shopper whether or not the bottle is in fact 20 years old, and blockchain can prove authenticity from the de-stemming of the grapes to the production of the wine and check for any tampering with the bottle during shipping. We will be able to give the customer tremendous power through this transparency.
RL: “Fulfillment at the speed of thought” sounds almost sci-fi.
DS: It is very futuristic, things like drones and driverless cars. Some day, we might see an air-traffic controller for drones — once they are legalized and run on a large scale. Or you might have a Google Map for drones to track drones or dedicated lanes like for bicycles for drones or AGVs [automated guided vehicles].
It comes back to experiential supply chain, the shopper will be able to talk to the driver, reroute a package if she needs to pick up her kid from school. Many leading retailers like Walmart have started working on crowd fulfillment like Uber drivers; Amazon is talking about drones with parachute-enabled labels on boxes for delivery. For retailers, this is about disrupting lead-time reduction.
RL: What’s an example of hyper-automated warehousing with robotics?
DS: We are working with retailers on a completely automated and green distribution center, a mix of robotics and human interaction. This is a way towards building an ultimate “lights out” warehouse in the future. Retailers are already using drones to count inventory in a warehouse, “Tell me how many cans of Coke are on the shelf, third level up, on the fourth rack.”
But this is an exciting area if you think about how Target is hiring temporary workers for its peak holiday season. Tomorrow that could be hiring pre-trained robots from robot staffing agencies just for the peak season. This is where “Hu-botics,” the effective cohabitation of humans and robots in a warehouse, will be key. This area is accelerating fast, too, because there’s a lot of mechanization and automation already in the industry.
RL: Why go through all of this, is it cost-effective?
DS: For every digital technology, the approach is different. For IoT, cost-effectiveness will be determined based on whether sensors can reduce waste and be reused, and can they improve their customer’s home life. Again, for them, it’s all about delivering value to the customer. But retailers see that these technologies can improve efficiencies and productivity, and they know these things have to be done.
The days of using technology in business are gone. Now it’s about embedding business into technology, and harnessing the “digital” and “physical” ecosystem.