Peak employment

Will you have a supply chain job in 20 years?

June 26, 2017
by Larry Berglund

From the June 2017 print edition

Peak Oil is M. King Hubbert’s theory that the maximum volume of oil extraction has been reached. Oil demand may be curbed by innovative energy alternatives coming into the market to mitigate rising oil prices. This author posits that peak employment in Western countries may now be at its apex. Through AI, AGVs, analytical algorithms, autonomous vehicles, blockchain, CAD, CNC, computational statistics, data mining, drones, digitalization, robotics, smart machines, 3D manufacturing, plus unforeseen transformational technologies, employment will continue to fall. We no longer need as many people to produce and deliver goods and services, and this trend will likely increase into the future.

The probability of replacing jobs with technology increases for jobs characterized by performing routine tasks or well-defined repetitive procedures. Clerical jobs will become redundant. So will medical diagnostic technicians. The site ranks library technicians and cargo and freight agents as the positions most vulnerable to automation. Some jobs, which won’t be completely replaced—such as teachers, lawyers, consultants, stock brokers and marketers—will be directly affected. These positions must adapt by leveraging automation to remain relevant.

Supply chain professionals must re-assess our skills so we remain employed and employable. Purchasing managers, for example, will need to focus on skills relating to: emotional intelligence, interpersonal communication, negotiation, conflict resolution, leadership and persuasion. These soft skills that have received lesser attention in traditional training models will become increasingly relevant.

A purchasing professional will still need to make judgements on data analysis, but will no longer gather, distill, validate or perform other analytics on the data: machines do it better and cheaper. People’s worth will be found in their abilities to apply the information. Machines don’t (yet) understand the political milieu as well as people and don’t possess the market intelligence to know that a product launch requires a contractual commitment and working relationship, based on common values, between the parties.

Adidas’s speed factories are a paradox, since they require employees to complement robots. Speed factories create and repatriate jobs formerly offshored to lower-cost facilities, which use mass production to achieve economies of scale. Adidas’s speed factory feasibility operations in Germany, for example, proved viable. The company is working to bring a new factory up to production in Atlanta, Georgia in order to make 500,000 pairs of athletic shoes per year. This will create 160 jobs, and Adidas will provide mass customization through its domestic production requirements. This could become a trend in manufacturing: Asian factories are adapting because low-cost labour no longer provides an economic advantage.

Manufacturing outsourcing led to chronic unemployment issues in the 1980s and 1990s. US steel mills likely won’t come back or require the levels of employment to meet the production capacity they held decades ago. The Canadian lumber industry also shifted from labour-intensive to capital-intensive. Print newspaper readership is dropping. Every industry has the potential to be affected.

A 2013 study by Frey and Osborne at Oxford University discusses the susceptibility of jobs to computerization. According to the study, there is a 50-percent chance that robots will replace the majority of jobs. The report references the findings of a McKinsey Global Institute survey indicating that 44 percent of companies that reduced their workforce since the financial crisis of 2008 did so through automation. MSN reported that the Apple and Samsung supplier Foxconn replaced 60,000 workers through robots. The Japanese company Spread plans to produce 30,000 heads of lettuce per day using robots in an indoor farm requiring 50-percent less labour and a third less energy.

The social and economic impacts of these developments are subject to conjecture. While some will adapt, studies indicate that the majority won’t. Governments creating income guarantees and universal social benefits is not that far-fetched. Business schools, quality standards, manufacturing techniques, engineering disciplines and other forms of Western education and advancement are aimed at efficiencies driving financial benefits. We haven’t kept pace with the social problems. Procurement is driven to find value for money. Without considering the broader issues related to more efficient supply chains, value will continue to be debatable.

In the future, sellers will recognize the need for a large enough customer base to buy machine-built products. Without customers, suppliers will have to downsize the robots, defeating the original efficiency drive. Ironically, procurement will be involved in ordering the robots.

Larry Berglund, SCMP, MBA, is a supply chain management author, manager, business trainer, academic and consultant.