22 Apr 2020   |   Viewpoint

Viewpoint: Automate demand chains to protect economies in times of crisis

As COVID-19 so starkly illustrates, supply chain automation is not proof against a slump in demand. But it’s become clear automated demand chains have helped maintain market activity, and could protect our economies in future crises

Sami Mahroum. Photo: World Economic Forum

Until the coronavirus struck, we took comfort in the belief that automated supply chains provided insurance against human fallibility. 

But the stark fact is that automation has done little to prevent widespread disruption during the pandemic. In car manufacturing, despite high levels of automation, companies have shut down plants and laid off thousands of staff.

In the first two weeks of March 2020, before the US went into total lockdown, manufacturing, transportation and warehousing were shedding thousands of workers.

The five countries with most automation - China, Germany, Japan, South Korea and the US, which account for 75 per cent of the world’s robotics installations - have seen parts of their domestic supply chains disrupted. Some 75 per cent of US companies surveyed said they have faced a disruption of their supply chains.

The reason for that is clear: No amount of automation can protect a company or an industry from a slump in demand.  There is no point in keeping robots manufacturing products and components ‘just-in-case’ when there is no demand ‘just-in-time’. 

What we are witnessing in the coronavirus crisis is that ‘demand side’ automation is in the driving seat. This can be seen in the data on the performance of different sectors. For example, US data show that industries where demand side automation has been deployed for some time, like the retail, food, home entertainment, and information sectors have done well both in terms of employment growth and stock market gains. PayPal, Netflix, Amazon and Ali Baba have seen big increases in their share prices.

Given this, it is the automation of demand chains rather than supply-chains that should take priority in the future. Here I am thinking of channels used by consumers to initiate and consume a product or service.

In their current forms, these are primarily online platforms, like Netflix, Coursera, Amazon, Uber App, and so on. But there is a limit to how much humans can consume or initiate demand using these online channels. Therefore, the next phase of automation should focus on the physical channels to automate demand chains.

This would involve the deployment of technologies such as 3D Printing, unmanned ground vehicles, drones, exoskeletons and companion robots.

3D printing would allow a customer to design a pair of shoes, or choose a template, and print them off at the nearest 3D printing booth. An unmanned ground vehicle or drone would then pick them up and deliver to the customer’s doorstep.

Smart domestic appliances, for example fridges, could automatically order the weekly shop, while smart wearables continuously monitor health and make any necessary appointments for medical check-ups. 

The list of demand chain technologies is growing, and while they may not be main stream today, many exist as prototypes. 

The key attribute of these technologies is that they enhance and sustain human agency. If more consumers today could fly their own drones to run errands, operate companion robots to perform tasks, use smart wearables to self-monitor their health and don exoskeletons to protect themselves from infections, there would have been less need to put economies in lock down - and global supply chains would have been sustained.

As the COVID-19 crisis illustrates, installing robots to run our supply chains provides no insurance against pandemics. Human agency lies at the core of market activity and restricting it causes a downward spiral in economic activity.

That has been starkly illustrated by the rush made by governments to inject trillions of dollars into the system, to induce a minimum level of market demand. 

The coronavirus experience has exposed the huge vulnerability of demand chains to human misfortune. The global lockdown may have shown us how much current technologies enable automation of human agency – with people playing sports, singing in a choir, and attending classes or meetings on automated platforms – but it has also shown how, relatively speaking,  under utilised and underdeveloped these technologies still are.  

A main reason for this is the lack of physical and social infrastructure to support and enable a ubiquitous use of these technologies to increase human agency. Our cities, as it turns out, are not as smart as we might have thought. As the history of technology shows, discovery of a new technology is just the starting point, technology adoption takes much longer. None of the major technologies we have today - electricity, telecommunications, cars, planes, or the internet - would be in widespread use were it not for the governing institutions that have been out in place around them. 

The frailties exposed by the coronavirus-induced lockdown should be a turning point, persuading governments of the need to establish institutions to regulate the safe use of technologies that protect and enhance human agency.

Autonomous machines may work well on the supply side, but on the demand side human agency is irreplaceable.

Sami Mahroum is professor of Innovation Policy at SMIT, Free University of Brussels, and director of Research and Strategy at the Dubai Future Foundation

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