Supply Chain

Retail supply chains are front-row seats for the impact of AI on jobs

Artificial intelligence is already transforming the industry, and the relationship between worker and machine.
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· 5 min read

Technology has been reshaping the retail industry’s supply chain for centuries, back to 18th century economist Adam Smith’s espousal of division of labor, and continuing with Henry Ford’s moving assembly line.

Today, that technology is artificial intelligence.

“If you take any element of the retail supply chain, there’s going to be an application of AI to it,” said Roy Bahat, who leads Bloomberg Beta, an early-stage venture fund. “It’s a team, between technology and people, and it always has been, but technology used to develop slowly enough that we didn’t really think about it that way.”

In fundamentally shifting the relationship between technology and human workers, the rapid implementation of AI-powered automation is raising important questions about how jobs in design studios, factories, warehouses, shipping centers, and elsewhere in the industry will change. And combined with an e-commerce boom, a supply chain still recovering from the pandemic, and an increasingly tight labor market, this technology is transforming the way retail work works.

Retail’s big picture

Researchers estimate that the robotic automation market will be worth as much as $146 billion in the next decade. Much of that demand is coming from the retail sector, explained Peter Chen, co-founder and CEO of AI robotics company Covariant.

There haven’t been many core mechanical advances in the last few decades, so automation of the types of tasks that require human hands (like picking and packing) reached the limits of the available technology, Chen said.

“Whatever [problems] can be solved with operations plus hardware plus software, they’re solved,” he added. “That’s where AI comes in, to fill in the blanks.”

The cost and explosive growth of e-commerce in particular is fueling the adoption of AI-powered solutions throughout the retail supply chain, said Christopher Geyer, VP at robotics firm Berkshire Grey.

“There’s this tremendous demand for more productivity,” Geyer explained.

E-commerce brings unique and often expensive challenges: It’s easier and cheaper to pack and ship a pallet than an individual unit, like those that often make up e-commerce orders, Geyer added.

On top of e-commerce growth, Geyer said retailers are struggling to find workers. “There’s just not a labor pool out there for these customers to draw workers from,” he said. “They need to increase their productivity, and that is really hard to do with [just] automation,” he explained. “We’ve figured out with AI how to do that unit handling, sort of automate those touches.”

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The heart of the problem: Shelly Steward, director of the Aspen Institute’s Future of Work Initiative, said concern about finding workers to fill supply chains is misplaced.

“What we see is that there’s not a shortage of workers; there’s a shortage of good jobs for workers to take,” Steward said. “As automation and now technology play new and increasing roles in workplaces…there are fewer high-quality jobs and clear career pathways for people to progress over their career, and more low-wage, insecure, short-term task-based jobs.”

Matt Beane, assistant professor of technology management at the University of California Santa Barbara, said traditional employment numbers ignore a latent but important variable: job quality.

Studies indicate that investment in robots leads companies to hire more people overall. But the way jobs change as a result of automation matters, Beane explained.

“If I inject a bunch of robots in my building, de facto what I am also doing is extracting skill touches which makes it harder for a human being to build skill and get ahead in any jobs that remain,” he said. “If you are in an environment where deskilling is a value-adding activity, you can expect to learn less, build less skill, and have a worse career trajectory.”

Planning for the future of work: Bahat, who is also a commissioner on the California Governor’s Future of Work Commission, said that while it’s impossible to predict what AI-powered supply chains may ultimately look like, the future of automation will include policy aimed at protecting workers in their new reality.

“If we want to have a resilient economy, [it needs to be] less catastrophic if your occupation ends up being partially automated,” Bahat said, pointing to pushes for guaranteed income and healthcare as efforts to build increased security for workers.

On top of basic economic security, good jobs give workers agency and voice, added Stewart,  but balancing that with the introduction of AI will be challenging.

“Because technology moves so quickly and changes workplaces so quickly, there’s not one policy or one solution that can protect jobs or workers indefinitely,” she said. “But ensuring that they have the ability to change their workplaces…equips workers to keep adapting, no matter what technology does.”

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.