• Ken Leung

Rise of the machines

With advances in technology, we could see the realisation of an autonomous intelligent supply chain (or auto-telligent supply chain) operated completely by machines. So, what would an auto-telligent supply chain look like and when are we likely to see these in operation ?

In my view, these advanced supply chains will be characterised by customers ordering goods that they want or need using their digital assistants (think alexa or siri on steroids). Smart fridges and cupboards enabled with intelligent sensors will replenish their contents based on their owner’s instructions. When customers ‘go to the shops’ they go for the experience. Increasingly, shops will showcase items by creating theatre to excite and engage customers. For example, furniture could be arranged into themes that change weekly. Apps could also visually identify and locate products that customers come across, which then allows them to buy and arrange delivery with the help of their digital assistants. Interestingly, this raises the question about the role of retailers as technology advances and shopping habits change.

Retailers (let’s assume they haven’t become disintermediated in this new technologically advanced world!) will use big data technology to combine real-time sales data with competitor pricing and promotion information, weather information, customer behavior and seasonal events to create demand signals using advanced predictive analytics powered by artificially intelligent systems.

The demand signals are analysed to create optimal orders in the form of transactions between the supplier and retailers on private blockchains that provide high levels of transparency, efficiency and immediacy. Suppliers allocate stock using a dynamic rating system based on the value of each retailer. Orders and delivery is triggered by smart contracts (a set of conditions recorded on a blockchain triggering automated, self-executing actions when these predefined conditions are met) between the supplier and retailers.

Orders are picked and packed by an autonomous warehouse with the optimal balance of automation and highly dexterous robotic warehouse operatives to provide efficiency and flexibility. The orders are delivered via a fleet of autonomous vehicles, both terrestrial and airborne. Blockchains record the transfer of goods as they move across the supply chain to provide real-time visibility, certify the provenance of products, track purchase orders, shipment notification and receipts. The autonomous warehouse on the client side, receives the stock, unpacks it and uses it to fulfil customer orders. Customer orders are fulfilled through a combination of warehouse automation and autonomous warehouse operatives, which pick, pack and load the orders for delivery via autonomous vehicles direct to the customer.

Based on what, in my opinion, is an autonomous intelligent (or auto-telligent) supply chain, when it is likely to materialize will depend on the maturity of the underlying technology. Let’s look at each in turn.

Warehouse Automation

Warehouse automation has been around for years. These are enabled by automated storage and retrieval systems that allow many levels of stock to be stacked vertically to provide far higher storage densities and better space utilisation than human orientated or manual solutions. The stock is moved from storage areas to the human picker through automated conveyors, dropped via chutes or using automated guided vehicles.

The ‘hive-grid-machine’ created by Ocado is an advanced example of warehouse automation. To maximise space efficiency, items are placed in crates that are stored in huge stacks, up to 17 crates high. The position of each crate is decided by algorithms which place frequently accessed items towards the top of the stack and less frequently accessed items towards the bottom of the stack. The stacks exist within a giant steel framework on top of which robots move around on a grid (or ‘hives’) which are typically the size of several football fields. Using a set of claws, each robot grab crates to a new location or drop it down a vertical chute to a human picker. (1)

Robotic Warehouse Operatives

Whereas robots have been used in manufacturing for some time, robots are also coming of age in a different area of the supply chain – the warehouse. Reducing the time that workers spend retrieving products from shelves for packing has long been a priority for many companies in order to be more responsive.

Ocado has been working with a number of universities, on the SecondHands project, an EU-funded Horizon 2020 project with the aim to design a collaborative robot (or cobot) that can proactively offer support to maintenance technicians working in Ocado’s Customer Fulfilment Centers. The robot will be a second pair of hands that will assist technicians when they are in need of help. The robot will learn through observation and will augment the humans’ capabilities by completing tasks that require a level of precision or physical strength that are not available to human workers. In January, the project presented its first robotic prototype, the ARMAR-6. (2)

Autonomous Vehicles

A number of truck manufacturers have already embarked on pilots as a first step towards fully autonomous trucks that do not require a human driver.

  • Waymo, who began as the Google self-driving car project in 2009 annouced in March 2017 that its autonomous trucks will be hauling cargo destined for Google’s Atlanta-based data centres as part of a pilot program. (3)

  • Since early October 2017, autonomous trucks built and operated by the startup Embark have been hauling refrigerators from a warehouse in El Paso, Texas, to a distribution center in Palm Springs, California. (4)

  • Scania and Volvo are both developing ‘platooning’ technology that uses connectivity between a convoy of trucks to create an autonomous road-train.

Although the technology is becoming available, the transition to autonomous trucks will need to be carefully managed in order to avoid potential social disruption from job losses. According to José Viegas, secretary-general of the International Transport Forum (ITF) at a press conference releasing the report on managing the transition to driverless road freight transport. “Within 10 years driverless trucks could be common” on many public roads, he said. “The only doubts are exactly when and how” the transition will take place. (5)

Beyond autonomous trucks, the air freight industry is developing airborne ‘cargo drones’ that could provide stiff competition to their terrestrial counterparts. Here are a couple of examples :

  • In January of this year, Boeing, the aerospace giant revealed a prototype for an electric, unmanned cargo air vehicle that it says could haul as much as 500 pounds. (6)

  • Elroy Air, a San Francisco startup is working on a cargo drone prototype. (7)

A report by the Aerospace Industries Association and the Avascent consulting firm, predicted that short-haul cargo aircraft will be making routine flights in the U.S. for early adopters in 7 to 13 years. Long-haul flights by cargo drones would follow about 15 years from now. (8)

At the customer end, Alibaba has been road testing its G Plus robot at its headquarters in Hangzhou, China. The G Plus robot can carry multiple packages of different sizes direct to customers without human intervention. (9)

Machine Learning and Predictive Analytics

According to a recent survey by Forrester on the use of artificial intelligence in supply chain showed that only 13 percent of companies reported that they were implementing or evaluating the adoption of AI systems in that area. (10) However, industry leaders such as Amazon and Ocado have already taken the plunge.

Amazon Supply Chain, apply machine learning to demand forecasting, planning, optimisation in real time on the flow of millions of products and orders each day across the world throughout their fulfilment network. They also leverage it for a host of other areas including product search ranking, product and deals recommendations, fraud detection and merchandising placements.

Ocado use predictive analytics to achieve industry leading levels of order accuracy, They use complex forecasting algorithms that accurately predict the demand for over 40,000 products across three warehouses for the next 28 days. The algorithms can predict seasonality and promotion uplift. Will Peck, Team Leader in Supply Chain Systems at Ocado claim that they can also predict how much a product will sell before they have even sold a single item. “You might not know what you want for dinner next week, but we do.”


The use cases for blockchain technology, beyond bitcoin, are still emerging, especially in the supply chain space. A few innovators are leading the charge :

  • Maersk and IBM, announced the setting up of a joint venture in January with the aim of leveraging blockchain technology to develop a global trade digitization platform built on open standards and designed for use by the entire global shipping ecosystem. It will address the need to provide more transparency and simplicity in the movement of goods across borders and trading zones.According to Maersk,manufacturers, shipping lines, freight forwarders, port and terminal operators and customs authorities can all benefit from these new technologies - and ultimately consumers. (11)

  • 10 of the world’s biggest companies, including Walmart Inc. and Nestlé SA, are working with IBM to build a blockchain to remake how the industry tracks food worldwide. This will significantly improve visibility of the provenance of food sold in grocery stores. (12)

  • SAP also revealed that it has teamed up with Swiss supply chain startup modum.io to further its supply chain ventures. In June modum announced that they discussed how to build digital trust into applications and deliver real business value. As a result modum will now work with Hyperledger Fabric in addition to ethereum in order to support SAP's blockchain. (13)

Whilst these leaders have initiated the use of blockchain in the supply chain space, it may be a few years until it becomes mainstream.


With a dependency on such a diverse array of technologies, and not to mention the challenges of social acceptance that will need to be addressed, the auto-telligent supply chain will likely emerge over a period of time. To chart this emergence, we can use a 5-level maturity scale for the supply chain.

Only very small operations today will be operating at level 0. Most organisations of any significant size will be operating at level 1. Retailers like Waitrose would fit into this group. Leading organisations such as Amazon and Ocado operate at level 2, with Ocado’s hive-grid-machine providing a good illustration of this.

Although some companies are pushing the boundaries on cobots, trialing semi-autonomous vehicles, and piloting supply chain use cases for blockchain, I feel that level 3 is perhaps another 5-10 years away, bearing in mind the cost and effort to transition. The emergence of the autonomous intelligent (or auto-telligent) supply chain, at level 4 of the maturity scale, will require a level of technology sophistication and social acceptance that I believe is still over 10 years away.

The emergence of the auto-tellient supply chain is also likely to push autonomous supply-chain-as-a-service solutions into the mainstream. These could be provided by specialist platform providers, such as Ocado, incumbent logistics players, such as Kuehne & Nagel, or generalist platform providers such as Amazon. Not all companies will want to invest heavily to mature their own supply chains, choosing instead to buy in the service. Over the next 5-10 years, companies should think carefully whether they should develop roadmaps to evolve their supply chains to level 4 or gradually migrate to a level 4 service, as autonomous services make their way into the mainstream. Both have advantages as well as their risks.

Ken Leung is a Co-founder Outvie Consulting and an expert in business design and transformation.


  1. Welcome to the automated warehouse of the future, James Vincent, theverge.com, May 2018. https://www.theverge.com/2018/5/8/17331250/automated-warehouses-jobs-ocado-andover-amazon

  2. SecondHands project members present first robot prototype ARMAR-6, Alex Voica, OcadoTechnology, January 2018. https://www.ocadotechnology.com/blog/secondhands-project-first-robot-prototype/index.html

  3. Waymo’s self-driving trucks will start delivering freight in Atlanta, Andrew J. Hawkins, theverge.com, March 2018. https://www.theverge.com/2018/3/9/17100518/waymo-self-driving-truck-google-atlanta

  4. Self-driving trucks are now delivering refrigerators, Alex Davies, Wired.com, November 2017.https://www.wired.com/story/embark-self-driving-truck-deliveries/

  5. ITF Report: The future of autonomous trucks, Emily Atkins, InsideLogistics, Septemer 2017. https://www.insidelogistics.ca/features/future-autonomous-trucks/

  6. Boeing’s experimental cargo drone is a heavy lifter, Alex Davies, Wired.com, January 2018. https://www.wired.com/story/boeing-delivery-drone/

  7. Forget package delivery drones – Here comes autonomous containers, Cyndia Zwahlen, June 2018. https://www.trucks.com/2018/06/13/package-delivery-drones-autonomous-containers/

  8. Large unmanned systems and the next major shift in aviation, AIA and Avascent, March 2018. https://www.aia-aerospace.org/uasreport2018/#report

  9. Alibaba made a driverless robot that runs 9 mph to deliver packages, Shannon Liao, theverge.com, May 2018. https://www.theverge.com/circuitbreaker/2018/5/31/17413836/alibaba-driverless-robot-deliver-packages-speed

  10. AI in the supply chain : Logistics gets smart, Maria Korolov, cio.com, May 2018. https://www.cio.com/article/3269513/supply-chain-management/ai-in-the-supply-chain-logistics-get-smart.html

  11. Maersk and IBM to form joint venture applying blockchain to improve global trade and digitise supply chains, Maersk, January 2018. https://www.maersk.com/press/press-release-archive/maersk-and-ibm-to-form-joint-venture

  12. Walmart-led blockchain effort seeks farm-to-grocery-aisle view of food supply chain, Kim Nash, The Wall Street Journal, June 2018. https://blogs.wsj.com/cio/2018/06/25/walmart-led-blockchain-effort-seeks-farm-to-grocery-aisle-view-of-food-supply-chain/

  13. SAP launches blockchain supply chain initiative, Annaliese Milano, coindesk.com, May 2018. https://www.coindesk.com/sap-launches-new-blockchain-supply-chain-initiative/

Featured Posts
Recent Posts