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2017

Artificial intelligence offers significant potential for applications ranging from medical research to the supply chain, and procurement in particular. However, as has been noted before, scientists and researchers increasingly advocate for a clear ethical framework that provides “meaningful human control” and promotes the responsible development of AI.

 

Megan M. Roberts, associate director of the International Institutions and Global Governance program at the Council on Foreign Relations, and Kyle L. Evanoff, a research associate for international economics and U.S. foreign policy at the Council on Foreign Relations, explain the fundamental concerns about autonomous weapons, or so-called “killer robots,” in an article on WPR (World Politics Review). They note that activists and experts alike have questioned whether autonomous weapons can adhere to international humanitarian law’s principles of distinction (the ability to distinguish between combatants and civilians), proportionality (the requirement that an attack should not be launched if it can be expected to cause excessive harm to civilians), and restriction (limits on the use of weapons that cause unnecessary suffering).

 

Concerns about fully autonomous weapons are growing. For example, the United Nations recently closed its first talks on the subject, with experts warning that time is running out to set rules for the use of autonomous weapons. The five-day meeting of the UN’s Convention on Conventional Weapons (CCW) marked an initial step toward an agreed set of rules governing the weapons.

 

In advance of the meeting, more than 100 robotics and AI experts wrote an open letter calling on the UN to ban autonomous weapons. The letter—which included signatories from dozens of organizations in nearly 30 countries, including China, Israel, Russia, Britain, South Korea and France—asked UN leaders to work to prevent an autonomous weapons “arms race” and “avoid the destabilizing effects” of the emerging technology.

 

“Once developed, [lethal autonomous weapons] will permit armed conflict to be fought at a scale greater than ever, and scales faster than humans can comprehend,” wrote Tesla chief executive Elon Musk, Alphabet’s artificial intelligence expert, Mustafa Suleyman and 115 other experts. “These can be weapons of terror, weapons that despots and terrorists use against innocent populations, and weapons hacked to behave in undesirable ways.”

 

Although 22 countries—mostly those with smaller military budgets and lesser technical know-how—have called for an outright ban, the prospects for a ban treaty remain dim for now, diplomats at the UN meeting said, Agence France-Presse reports. Furthermore, while convention members tentatively agreed to meet again on the subject next year, academics attending the UN talks said the slow pace of the discussions fails to respond appropriately to the emerging threat. The “arms race has happened [and] is happening today,” Toby Walsh, an expert on AI at the University of New South Wales, told Agence France-Presse.

 

“These will be weapons of mass destruction,” Walsh told Agence France-Presse during a side-event at the UN meeting. “I’m actually quite confident that we will ban these weapons. ... My only concern is if nations have the courage of conviction to do it now, or whether we will have to wait for people to die first.”

 

Indeed, a pressing issue is to decide “what effective human control means in practice,” the head of the Arms Unit at the International Committee of the Red Cross (ICRC), Kathleen Lawland, told AFP in an email. While the ICRC has not called for a ban, Lawland warns that some kind of action is needed since the technology is advancing so quickly.

 

What are your thoughts on AI in general, and specifically, it’s potential for applications in the supply chain? Secondly, do you agree with Dr. David Hanson, CEO of Hanson Robotics, who has previously said “AI is good for the world, helping people in various ways” but clear guidelines are needed “before the technology has definitively and unambiguously awakened.”

 

Despite earning more college degrees than men for more than 30 years, women remain underrepresented at every level in corporate America. Research shows that companies with higher levels of gender diversity perform better than their counterparts, and many executives recognize this. Indeed, corporate commitment to gender diversity is at an all-time high for the third year in a row, according to a new report.

 

Drawing on data from 222 companies employing more than 12 million people, the results from a survey of more than 70,000 employees from 82 companies, along with a series of qualitative interviews, “Women in the Workplace 2017,” a study conducted by LeanIn.Org and McKinsey, examines why, despite the trend for growing commitment to gender diversity, progress continues to be slow.

 

The research identifies several key points. First, women remain significantly underrepresented in the corporate pipeline. Fewer women than men are hired at entry levels, despite women earning 57 percent of recent college graduates. However, the largest gender gap is at the first step up to manager: Entry-level women are 18 percent less likely to be promoted than their male peers, the report explains. Then, at every subsequent promotion, the representation of women further declines, and women of color face an even steeper drop-off at senior levels. As a result, one in five C-suite leaders is a woman, and fewer than one in 30 is a woman of color, the report continues.

 

Perhaps unsurprisingly, women are less optimistic than men about their career prospects. Among the respondents, women were less likely than men to say they aspire to be a top executive. And even the women who aspire to be a top executive are significantly less likely to think they’ll become one than men with the same aspiration, according to the research.

 

Women of color, particularly black women, face even greater challenges. As the report explains, the intersection of race and gender shape women’s experiences in meaningful ways. Women of color face more obstacles and a steeper path to leadership, from receiving less support from managers to getting promoted more slowly, the report notes. For instance, although women in general are more likely than men to report they never interact with senior leaders, black women are the most likely to report they never have senior-level contact, according to survey responses. This may affect how they view the workplace and their opportunities for advancement, the authors note.

 

It is somewhat given that women and men see the state of women in the workplace—and the success of gender-diversity efforts—differently. The survey found that men are more likely to think their companies are doing a “pretty good job” supporting diversity, while women see more room for improvement. Indeed, nearly 50 percent of the men in the study think women are well represented in leadership in companies where only one in 10 senior leaders are women.

 

Among the survey respondents, men are also less committed to gender-diversity efforts, and some even believe that such efforts place them at a disadvantage. For example, 15 percent of men in the survey said they think their gender will make it more difficult for them to advance, and white men are almost twice as likely as men of color to think this.

 

The report goes on to explain that to move toward gender equality, companies need a comprehensive plan for supporting and advancing women. Building on findings from previous years—and incorporating new insights about what top-performing companies are doing—the report authors believe companies should start with these key actions:

·                     Make a compelling case for gender diversity

·                     Invest in more employee training

·                     Ensure that hiring, promotions and reviews are fair

·                     Give employees the flexibility to fit work into their lives

·                     Focus on accountability and results

 

Additionally, it’s critical for executives to understand their company’s particular pain points and tackle them directly. For most, if not all companies, this includes addressing the distinct barriers women of color face—and getting sufficient buy-in from male employees, the authors continue. Until they do, companies’ gender-diversity efforts are likely to continue to fall short, the authors conclude.

 

What are your thoughts on gender diversity in the workplace? Do you think companies are making progress, even if it is slow?

During the last four years, the number of companies using analytics to mitigate third-party supply chain fraud, waste and abuse risk has grown to 35 percent in 2017, from 25 percent in 2014, according to a Deloitte poll.

 

“It’s encouraging to see more organizations using analytics to help prevent and detect financial abuses within supply chains each year,” says Mark Pearson, Risk and Financial Advisory forensic principal, Deloitte Financial Advisory Services LLP. “Unfortunately, increased vigilance doesn’t translate into lower instances of fraudsters trying to perpetrate their schemes. Even the most advanced analytics users should work to constantly evolve their efforts to stem supply chain fraud, waste and abuse.”

 

Deloitte polled more than 3,220 professionals about their organization’s use of supply chain forensics and analytics. Respondents work in industries including consumer and industrial products; technology, media and telecommunications; life sciences and health care; and energy and resources.

 

Between 2014 and 2017, an average of 31 percent of poll respondents reported at least one instance of supply chain fraud, waste and abuse in the preceding year. However, some industries saw higher and lower rates of financial abuse. For example, for the third time in four years, consumer and industrial products professionals reported the highest level of supply chain abuse for the past 12 months (39 percent), a slight decline from 2016 (40 percent). Energy and resources (35 percent) respondents also reported a higher than average rate of financial abuse in 2017, dropping a bit from 2016 (36 percent). Finally, life sciences and health care professionals noted a marked decline in 2017 (26 percent) from 37 percent in 2016.

 

“In the energy and resources industry, I’ve seen complex capital projects rife with bribery, bid rigging, collusion, fraud and other schemes,” says Larry Kivett, Deloitte Risk and Financial Advisory forensic partner. “Beyond reducing sole-sourced procurement to manage risk, supply chain executives can also prevent financial abuses by working to improve supplier invoicing timeliness, accuracy and approval processes.

 

From a life sciences and health care perspective, Pearson says he is surprised to see such a big drop-off in reports of financial abuse from 2016 to 2017, but he wouldn’t take that slowdown as a reason for supply chain executives to get comfortable. Even in highly regulated industries, there are still motives for bad actors to commit supply chain abuses, he says, noting that managing supply chain risk is a constant effort.

 

Indeed, Pearson has previously explained that it’s critical for companies to proactively identify and examine anomalies using data analytics so they may be more likely to increase overall profits and mitigate the risk of fraud, waste and abuse with their third-party relationships. Companies not already doing so should balance forensic accounting processes with advanced data analytics methods to home in on any inconsistencies in their third-party transactions, he believes. What’s more, companies should maintain a “forensic mindset” in examining any big data they collect on their supply chains to “provide a clearer context to suppliers and transactions,” he says.

 

“Many financial execs forget that fraud goes directly to the bottom line: For every dollar of fraud, there’s one less dollar of net income and value that can be returned to shareholders,” Pearson has previously explained. “Supply chains tend to be the single largest source of cash outflow in an organization … so it’s increasingly important to use electronic data to identify, mitigate and reduce fraud, waste or abuse.”

 

What are your thoughts on the use of analytics to help prevent and detect financial abuses within supply chains? Is your company working to mitigate the risk of supply chain fraud, waste and abuse?

Artificial intelligence (AI) and so-called “cognitive analytics” hold considerable potential for supply chain disciplines such as procurement. After all, as Dr. Alan Holland, founder and CEO of Keelvar, wrote on Spend Matters earlier this year, AI is better than humans at detecting patterns in large data sets, e.g., spend analytics; and strategic reasoning in large and complex decision spaces, e.g., strategic sourcing.

 

Indeed, basic machine learning technology is already used by some procurement applications in areas such as spend analytics and contract analytics, Rob van der Meulen, UK PR Manager for Gartner, wrote on a Gartner blog. This is mostly limited to automating the processes of collecting, cleaning, classifying and analyzing expenditure data in an organization to identify savings or paths to greater efficiency, however procurement technology vendors are creating cognitive procurement advisors (CPAs) and virtual personal assistants (VPAs) which use natural-language processing (NLP) and natural-language generation to further increase automation and efficiency, he wrote.

 

“A procurement VPA can improve the end-user experience of traditional procurement tools and increase spend under management by guiding people to the correct purchasing tool,” Magnus Bergfors, research director at Gartner, says in the blog post. “A CPA can provide summaries, recommendations and advice in everything from supplier assessments and performance management, to risk management and compliance.”

 

It was somewhat expected then when SAP Ariba announced plans for an AI-powered enterprise digital procurement bot which will allow users of its cloud-based applications to manage key tasks. It reportedly will interact with the users wherever they are—from web applications or any communication channel.

 

“Through its bot, the company plans to enable buyers and suppliers to converse with their SAP Ariba applications much as they would Siri or Alexa,” the company said in a statement. “Leveraging machine learning, the bot will be able to train and learn about a user’s preferences and a company’s policies and procedures, and guide actions in-line with them to reduce errors and speed processing.”

 

The competitive advantage of using AI-based tools springs from several factors. First, procurement managers become empowered to take fast, proactive measures despite the ever-changing dynamics of inbound supply, Rajesh Kalidindi, CEO & Founder, LevaData, wrote on EBN online last month. AI-based insights provide timely business intelligence to these same managers on emerging risks and opportunities. Furthermore, he wrote, with advanced analytics at their disposal, supply chain managers can transform their sourcing negotiations from annual or discrete events into an ongoing process. These abilities drive up incremental gross profit margins, and also provide optics into potential revenue savings, he continued.

 

With those comments in mind in mind, it wasn’t surprising when LevaData launched its flagship product, Leva, which the company calls “an AI advisor for strategic sourcing and procurement.” As the company explains, Leva is designed to “provide supply chain and procurement professionals with maximum purchasing leverage” by drawing on a proprietary ontology of more than 40 negotiation levers to recommend the most effective lever and its use, in the right context and sequence, to “dramatically” improve negotiation strategy and outcomes.

 

Built on the company’s Cognitive Sourcing Platform, Leva also enables a “cognitive sourcing cycle” which “senses” opportunities and risk, and then offers prioritized actions, ranked by financial impact and time horizon, says Kalidindi. That’s possible, he says, because Leva “ingests hundreds of thousands of sources of insights, including changes to enterprise spend and forecast information, as well as market intelligence, benchmarking, and more than 5,000 news sources, to deliver actionable insights.”

 

What are your thoughts on the use of AI for specific roles in the supply chain? Secondly, what impact do you think use of AI would have on the ability to address complex sourcing issues?

Increasing use of technology such as predictive analytics and the Internet of Things places greater demand on supply-chain professionals to have the technical skills necessary to understand and apply a growing number of new technologies. In the rush to keep up with these technological demands, however, the industry may be leaving behind attention to the “soft” skills such as communications, leadership and teamwork which are critical to managing organizations and turning corporate strategies into reality, Yossi Sheffi, Elisha Gray II professor of engineering systems at the Massachusetts Institute of Technology and director of the MIT Center for Transportation & Logistics, recently wrote in an opinion piece in the Wall Street Journal. In some respects, he adds, teaching soft skills is just as urgent as ensuring that individuals are technically proficient.

 

“Rapid technological innovation, globalization and increasing market volatility help accelerate the pace of change in supply-chain management,” Sheffi writes. “To perform effectively in this environment, professionals need to hone their ability to communicate with people working across wide range of disciplines and a variety of geographies, but traditional education programs may not provide a sound foundation for acquiring and refining these skills.”

 

For example, one of the largest—and most frustrating—challenges young business leaders face is to convince workers at all levels, including those in senior roles, to buy into a strategy or follow practices that may be different from what they have been using, Sheffi notes. This is particularly true for professionals early in their careers who may be adept engineers but aren’t naturally gifted communicators. Moreover, the education and training programs which launch them into the work world often are dominated by problem solving and analysis, where answers are defined as clearly right or wrong and lack the ambiguity encountered every day in the real world, he continues.

 

For example, technically-minded people often use logic to make an argument. For many people, however, pure logic won’t convince them to change their minds, so educators need to teach students how to craft a message that is both persuasive and motivational, Sheffi believes. This is particularly true when “ingrained practices may be challenged, such as convincing managers in a plant that they need to use the planning software the ‘know-it-alls’ at headquarters have purchased,” he continues.

 

The ability to pitch new ideas and practices to skeptical audiences is an increasingly important part of a manager’s tool kit, especially as the advance of automation raises economic uncertainty in work environments, Sheffi writes. To teach this mix of skills, it may be necessary to redesign supply-chain education programs.

 

I was interested to read that Sheffi says MT is experimenting with a blended approach combining online and residential study that may be one model for approaching the need for soft skills. The focus of the online segment is on analytical skills where a “correct” answer always exists, while the focus of the one-semester residential segment is on “action learning” and softer skills using the Socratic method, he explains. This requires class interaction, teamwork and communications skills which are difficult to learn in an online environment.

 

I was also interested to recently see an info-diagram in which Guthrie-Jensen, a management training and consultancy firm, compiled a list of key skills to be needed in 2020. The firm predicts that people with good judgment and decision-making skills will be in high demand because they are able to condense vast amounts of data, with the help of data analytics, into insightful interpretations and make measured decisions. People with the ability to skillfully negotiate with businesses and individuals to create a win-win situation will also be in demand, as will people with considerable cognitive flexibility so they can switch between different personas to accommodate the challenge at hand. Other skills sure to be in demand are critical thinking, people management, complex problem solving and creativity, the firm forecasts.

 

What are your thoughts on teaching, and promoting, soft skills? Do you agree there will be high demand for people with these skills in 10 years or so?

The good news is that almost three-quarters of organizations have business continuity arrangements related to supply chain management, according to a new report. What’s more, it notes that organizations with business continuity arrangements are eight times more likely to report greater supply chain visibility, twice more likely to insure for supply chain losses and three times more likely to display top management commitment than their counterparts.

 

The report, “Supply Chain Resilience Report 2017,” published by the Business Continuity Institute and supported by Zurich Insurance Group, explains that, when surveyed, 74 percent of the respondents said their organization asks key suppliers about their business continuity arrangements—up from 63 percent last year. This behavior coincides with other areas of good practice, especially organization-wide reporting of disruption, which increases supply chain visibility, the report continues.

 

The leading causes of supply chain disruption—as reported by respondents—were unplanned ICT and telecommunication outage, cyber-attack and data breach, and loss of talent and/or skills. Fire as a cause of supply chain disruption increased the most this year—jumping from the 14th cause of disruption last year to the seventh cause this year. On the other hand, terrorist acts and currency volatility have dropped out of the top 10 causes of supply chain disruption. Chief among the impact and/or consequences of disruption were loss of productivity (cited by 55 percent of the respondents), followed by increased cost of working, then customer complaints.

 

There is, of course, considerable opportunity for improvement, particularly when it comes to the use of technology and big data to overcome skills and resource gaps in supply chain management. For example, the report shows that 63 percent of organizations don’t use any technology to analyze, track and monitor the performance of their supply chains.

 

Interestingly, the report notes that there is an increase in availability of insurance products against supply chain losses. However, it also notes that 51 percent of the respondents said their organization still doesn’t insure against supply chain disruption.

 

“Supply chain disruptions have become increasingly tough for organizations to deal with,” says Gianluca Riglietti CBCI, Research Manager at the BCI and author of the report. “The current threat landscape requires very high levels of preparedness, as it includes a wide range of threats such as cyber-attacks, terrorism and natural disasters. Professionals understand this, which is reflected in the higher number of respondents (74 percent) adopting business continuity arrangements to deal with supply chain disruptions. However, there is still room for improvement, as more than one in five (22 percent) companies don’t have full visibility of their supply chains.

 

The report concludes by emphasizing two other important aspects in supply chain resilience. The first is that reputation is still an important aspect in supply chain disruption, and its management and protection requires organizations to become more aware of the issues around their supply chain and communicate effectively in times of crisis. The second is the element of collaboration, which still faces challenges in being implemented, but represents a significant resource for effective supply chain management, the report explains.

 

What are your thoughts on business continuity and supply chain resiliency? Is your company’s supply chain adequately prepared for disruption?

Following the close of its 2017 fiscal year, the Panama Canal Authority announced that 403.8 million Panama Canal tons of cargo passed through the waterway in FY2017, its largest ever amount of annual tonnage. The 22.2 percent increase from the previous year can be directly attributed to the added capacity provided by the Expanded Canal. Industry analysts say the impact on U.S. ports is already being experienced.

 

According to its latest figures, 13,548 vessels passed through the Panama Canal during FY2017, representing a 3.3 percent increase over last year. Thanks to the larger Neopanamax vessels now able to transit the expanded canal, the growth in traffic created a 22.2 percent increase in total annual tonnage from FY2016, and helped the Panama Canal surpass the already ambitious cargo projection of reaching 399 million tons, says Panama Canal Administrator Jorge L. Quijano.

 

“These record figures reflect not only the industry’s confidence in the Expanded Panama Canal, but also illustrate our continued ability to transform the global economy and revitalize the maritime industry,” says Quijano.

 

The U.S. continues to be the main user of the waterway—representing the origin or destination for 68.3 percent of the total cargo transiting the Panama Canal. The impact of the expanded Panama Canal was also apparent at ports along the U.S. East Coast, especially those able to accommodate larger Neopanamax ships. Some of those U.S. ports set records for year-on-year growth and the total amount of tonnage received, which can be directly attributed to the widening of the Panama Canal.

 

For example, Georgia’s Port of Savannah reports it moved more than one million twenty-foot equivalent container units (TEUs) across Garden City Terminal in the first quarter of FY2018 (July 1-Sept. 30), growing by 5.8 percent or 55,629 TEUs over the same period in FY2017. In September alone, the Port Authority reports it moved 325,141 TEUs, an increase of 5.4 percent or 16,792 TEUs compared to the same month last year.

 

“Sustained organic growth coupled with increased market share are driving these volume increases,” says GPA Executive Director Griff Lynch. “We have also achieved major gains through the addition of Neopanamax vessels to the fleet serving Garden City Terminal.”

 

Then there’s the South Carolina Ports Authority, which reports 10 percent container volume growth in September and strong results for the first quarter of FY2018. The port authority further notes it moved 179,856 TEU last month, the strongest September on record. The month also pushed SCPA’s volume for the first quarter of FY2018 to 539,995 TEUs, a nearly four percent year-over-year increase, according to SCPA.

 

In anticipation of continued growth, the SCPA Board of Directors recently approved a $69.5 million contract for the purchase of six new ship-to-shore cranes to serve growing container volumes and big ships calling the Port of Charleston.

 

“As the largest crane purchase in our history, the contract approved today is an important part of our overall investment in infrastructure and capacity to ensure the Port is well-positioned for the future,” said Jim Newsome, SCPA president and CEO. “When the cranes arrive in late 2019, deepening of the Charleston Harbor to 52 feet will be nearly two-thirds complete and construction of our new container terminal will also be nearly finished.”

 

What are your thoughts on Neopanamax ships increasingly using the expanded Panama Canal to call on U.S. ports on the East Coast? Has it had any impact on your supply chain’s performance?

Although supply chain managers recognize the importance of digital transformation, organizations worldwide struggle to balance the necessary key elements.

 

Consider, for example, that of 1,625 business leaders surveyed for “The Digital Transformation PACT (People, Actions, Collaboration and Technology),” a report from Fujitsu, 84 percent of the respondents said their customers expect them to be more digital, while 71 percent said they believe their company lags behind competitors. Furthermore, 46 percent of the respondents said their business has already implemented digital transformation projects, while 86 percent said the company is planning for the impact of technology on the business beyond the next 12 months.

 

At the same time, however, one in three (33 percent) respondents said their company cancelled a project in the last two years at a cost of $499,000, while 28 percent of the respondents said their organization has experienced a failed project costing $655,000. Ultimately, 66 percent of the respondents added that they believe their company will lose customers to competitors as a result of digital transformation.

 

“Technology can be truly transformative, but making the most of digital requires more than the latest tools,” says Duncan Tait, CEO, SEVP and head of Americas and EMEIA at Fujitsu. “While businesses today recognize the need to adopt and adapt to technology, there remain significant issues which are contributing to substantial rates of failure and high associated costs. To realize their digital vision, it’s crucial that businesses have the right skills, processes, partnerships and technology in place.”

 

When considering their approach to the people involved in digital transformation, most business leaders (90 percent) are taking steps to increase their access to digital expertise, with 70 percent admitting there is a clear lack of digital skills within their organization. Looking to the future, skills will continue to be a key business issue, with 93 percent of the respondents saying upskilling staff will be “vital” to their organization’s success in the next three years.

 

Interestingly, when it comes to actions, or the processes and behaviors needed to make digital transformation work, 90 percent of the respondents said their organization has a clearly defined digital strategy, while 83 percent are confident that the rest of the business knows what the strategy is. However, three quarters of the respondents said projects are often undertaken that aren’t linked to the overarching business strategy. What’s more, 66 percent of the respondents noted that the cost of failure has put them off future digital transformation efforts.

 

Next, business leaders are taking positive steps in collaboration, with most businesses undertaking or planning to undertake co-creation projects (cited by 63 percent of the respondents), with partners including technology experts (64 percent) and existing customers (42 percent). It’s worth noting, however, that 73 percent of the respondents also said that a lack of success within a quick timeframe would quickly put an end to their strategic partnerships.

 

Finally, business leaders are planning to implement a wide range of technology in the next 12 months: over half are planning to introduce cyber security solutions or the Internet of Things, with cloud computing (cited by 47 percent) and artificial intelligence (cited by 46 percent) following close behind. Survey respondents are aware of the disruptive impact of technological change, as 86 percent say the ability to change will be crucial to their company’s survival in the next five years. Notwithstanding, 71 percent are concerned about their organization’s capacity to adapt to technologies like artificial intelligence.

 

“The introduction of new technology into a business has always called for balance. However, as the pace of technological change continues to build, balance has never been more important,” Tait says. “Only by bringing equilibrium to people, actions, collaboration and technology - can organizations thrive in this digital era.”

 

What are your thoughts on digital transformation? Does your company have the correct people, processes, collaborative plans and technology in place?