How Prescriptive Analytics Shapes Business Transformation and Supply Chain Social Responsibility

     

Growing up in a small oilfield town, we didn’t have a McDonald’s; we had Joy’s Grill. Joy, the owner, and his wife, Wanda, ran a straightforward automated operation in their diner with one row of booths and a counter open to the grill. She took the orders and yelled out “mash one,” which queued Joy to throw another patty on the grill. He finished the order, Wanda served, and whoever had a free hand, rang up the checks at the register.

But what if Joy had had Flippy, a new hamburger flipper robot by Miso Robotics that can flip up to 300 hamburgers a day? Joy could have freed up his time and spent more time chatting with the customers, which was a valued part of the dining experience. The only drawback may have been Flippy’s $100,000 price tag. But to a chain like Burger King or Wendy’s where the burger-flipping personalities hide behind the counter for multiple shifts per day, Flippy’s job prospects improve. 

Corporate Social Responsibility: Robots vs. People

Late last year, the topic of universal basic income frequently appeared in the news. The reason? Robotics are ramping up to take on more entry-level positions. Pew Research reports that average citizens see a revolution coming in the workplace, and they are concerned.

Other researchers, however, point out that the accelerated use of robotics is more about augmenting the workforce than replacing it.

Almost 2 million jobs will lose out to robotics by 2020, mostly in manufacturing, but Gartner predicts millions more will be added to augment the business transformation. By 2021, this combination will generate $2.9 trillion in business value and recover 6.2 billion hours of worker productivity, following a transition period of job losses, then recovery.

This forecasted transformation makes sense. Robot Flippy, although almost nil on the sick days, needs transportation and setup, maintenance follow-up, quality assurance oversight, and performance review. Another example of robotics taking one role to support another is the hiring robot developed by HireVue. The robot interviews candidates while scanning their faces with AI technology to detect behavioral responses in addition to what is being said. The scoring ability by the robot allows more candidates to be screened, which means more candidates hired. In industries where unfilled positions have burdened HR, the robot interviewer is an extension of the process, not a replacement.

It’s important to note that Flippy’s first onboarding wasn’t primarily profit-driven. Caliburger, the first burger chain to use Flippy, wanted to offset labor shortages which had made it difficult to find and keep employees long-term. As U.S. aging boomers leave the workforce, labor shortages are becoming more common across industries.

On a broader scale, replacing people with robots brings up corporate social responsibility issues and what the pending transformation will bring.

Prescriptive Analytics Works to Shape Supply Chain Social Responsibility

Reshaping the Workforce Responsibly

Robotics versus people is not the first major transformation in business history. Economic waves from the Industrial Revolution to the internet have tipped the labor balance before shifting to the new norm. With the 2.3 million jobs that AI is predicted to own by 20211 , businesses need a game plan in order to best take advantage of the opportunity.

This is where prescriptive analytics backed by an Intelligent, constraint-based model comes in. Prescriptive can absorb granular details like multiple locations, shifts, functions, efficiencies, lines, cost, etc., and factor in constraints like workforce availability and level of expertise. With this type of information, instead of using “gut feel” to augment or automate certain parts of the business, companies can actually run scenario analyses. These will help the company determine the best way to leverage automation/augmentation so as to reach certain goals — e.g., improving throughput rates, cutting costs, etc.

Not only can it help augment or automate, prescriptive analytics (in the form of optimization) can help reallocate existing workforce or help plan for net new jobs / workforce needs. Perhaps a company wants to set limits such that only 0.05% of their workforce is laid off — prescriptive analytics enables them to do so.

Providing the Ability to be Profitable and Sustainable

Another thing that has become increasingly important over the years is supply chain sustainability. Companies are taking more and more social responsibility when it comes to where they source their products — cutting out business with companies that use child labor / sweatshops, or companies that heavily harm the environment. This is another form of corporate social responsibility with which prescriptive analytics can help.

In fact, one of River Logic’s own customers utilized the power of constraint-based optimization when making sourcing decisions around a very common form of oil that could be sourced from dozens of plants. However, there were environmental impacts on deforestation that the customer needed to consider, because they had a core value around social responsibility and environmental sustainability.

River Logic helped them consider all of the transportation costs to source from different suppliers, the environmental impacts of each (in the form of deforestation, emissions, etc.), the cost of raw materials, contract lengths, etc. in order to help them find the ones that best met their business objectives (in this example, it was managing cost while meeting their sustainability constraints). With prescriptive analytics (i.e., River Logic) the customer was empowered them to make the best decisions for their business while still respecting their core value of sustainability.

Closing Remarks

Companies that are committed to social responsibility will want to weigh people replacements carefully. While enticing to use for cost savings, consumer pushback could threaten a corporate brand if planning is not well thought out. Using prescriptive analytics to model what-if scenarios based on constraints and corporate objectives can help portray a balanced view of financial outcomes, and social impacts.

 

1Gartner Says By 2020, Artificial Intelligence Will Create More Jobs Than It Eliminates,” Press Release, Gartner Research, December 13, 2017

Grant Thorton

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