The pandemic served to make supply chain management a household name. Consumers were suddenly aware of what a supply chain could do and what it could not do during a time of global disruption. For MIT Professor Yossi Sheffi, this felt like a perfect opportunity to educate the masses on a field he’s been committed to studying for many decades.
In Sheffi’s newest book, The Magic Conveyor Belt, he explains “what supply chains are, how they operate, and how the integration of advanced technology with people and processes will be the hallmark of future supply chain management.”
Sheffi has long been on the cutting edge of supply chain trends. In 1987, for example, long before the boom in logistics software, Sheffi co-founded Princeton Transportation Consulting Group, which developed decision support systems for the motor carrier industry. He went on to found three other technology companies before 2000. His last being Logistics.com, which was acquired by Manhattan Associates in 2003. Sheffi also co-founded one of the first non-asset-based third-party logistics companies in the United States in 1988.
His research interests, however, have not been constrained to supply chain technology. In books such as The Resilient Enterprise, Logistics Clusters, The Power of Resilience, and Balancing Green: When to Embrace Sustainability in a Business (and When Not To), he has explored topics such as supply chain resiliency, industrial clusters (in the context of logistics and supply chain management), and sustainability as well as technology and digital transformation. In all of these efforts, Sheffi has striven to make his work accessible to the general business audience.
Now, with his newest book, he seems be taking a moment to step back to marvel once again at how complex yet efficient the modern supply chain is (and then share that appreciation with the reader).
When Sheffi is not busy writing books and teaching classes at The Massachusetts Institute of Technology (MIT), he serves as the director of the university’s Center for Transportation and Logistics, and he is a sought-after speaker at many supply chain industry events. In fact, this fall, Sheffi will be a keynote speaker at the Council of Supply Chain Management Professionals’ (CSCMP’s) EDGE Conference in Kissimmee, Florida, October 1-4.
Recently, he spoke with CSCMP’s Supply Chain Quarterly Managing Editor Diane Rand about his new book and why technology will be the key to the future of supply chains.
NAME: Yossi Sheffi
TITLE: Director, MIT Center for Transportation and Logistics (CTL); and Elisha Gray II Professor of Engineering Systems at MIT
OTHER EXPERIENCE: Director and Founder of the Master of Engineering in Logistics Program; faculty member of the MIT Civil and Environmental Engineering Department and the Institute for Data, Systems, and Society; author of nine award-winning books on supply chain management; launched an international expansion of MIT CTL; founded five companies; consulted with numerous governments and manufacturing, retail, and transportation enterprises all over the world
AWARDS: 1997 CSCMP Distinguished Service Award; life fellow of Cambridge University’s Clare Hall College; honorary doctor of Zaragoza University in Spain; the Eccles Medal (SOLE), the Salzberg Lifetime Award; and many others.
EDUCATION: bachelor’s of science from the Technion in Israel; master’s and doctorate from MIT
Can you explain the title of your new book, The Magic Conveyor Belt? What is the magic conveyor belt?
The idea for the book came about during the pandemic when people started learning more about supply chain management. All of a sudden, everybody who I would meet would ask, “You work in supply chain? How long have you worked in the industry?” I would tell them, “For about 40-plus years!”
I would go on to explain to someone who doesn’t understand what's going on [within a supply chain], [that a supply chain] seems like magic. Because the idea that somebody can collect material somewhere in the bowels of China and go to multiple suppliers, build the product, and send it over the seven seas through different regulatory and customs regimes is magical. In fact, I tell people that if they really understand what's going on [in supply chains], and how complex the process is, they would never be disappointed when they don't find something on the shelf, or if Amazon says it doesn’t have it in stock. Instead, they would be amazed when the product they are buying is there on the shelf.
Once you understand what it takes to develop a product, procure the material, and all the planning that happens even before a product is made, [you realize that] it's a big, complex network. So that's why we titled the book The Magical Conveyor Belt. The conveyor brings product from anywhere to everywhere magically.
While your book has four main sections, let’s talk about the chapter on technology, specifically artificial intelligence (AI). Why do you believe that AI will have such a crucial role in the future of supply chain management?
First of all, I believe that AI is going to change society and change business, which includes supply chain management. I think generative AI, like Chat GPT, will play a crucial role in the future. While it is very hard to predict exactly how this technology will influence and change supply chains, I believe it can be a transformative technology like the internet. When the internet started, who could have predicted that we would have Google Maps or an endless amount of apps to do everything?
What I do know is that there are always side consequences when technology is applied and adopted within supply chains. In the second part of my book, I give a historical overview of what happened in various industrial revolutions. When Ford started the assembly line to build cars, the number of workers at Ford went from a few 100 to about 150,000 during the height of the Model T production. People are often afraid that technology will take over jobs. But, in fact, more jobs were created. Beyond the Ford assembly line, people now had cars and started traveling more, which led to motels and restaurants being opened along highways to accommodate travelers. The whole hospitality industry flourished with millions of new jobs.
I have a quote in the book from the CEO of jd.com, who said a few years ago, “I have 80,000 people working in warehouses, I'd like to cut it by half.” Well, five years later, he has three times as many people because when technology gets more efficient, people do more of it. It's the basic supply and demand model that drives supply chains and technological advances.
But technology can also bring about societal changes. Let’s take for example what might happen when a technology like 3D printing comes to the forefront of our supply chains. I don't think we'll start printing new toasters at home, but we'll be able to print some products locally.
If we will be able to 3D print products in the back of a Walmart or UPS store, this will have vast implications on our supply chains. First, we’ll have to bring raw material to the locations, but stores will no longer need to display thousands of products because we’ll be able to make them on demand. Having this capability requires a totally different mindset. This is just one example of how AI can impact the future of our supply chains and why I feel it is such a foundational technology.
What are a few problems that you feel AI will help supply chain managers specifically solve in the future?
We are starting to compile a lot more data. With more sensors embedded in moving trucks and in packaging, that data availability will continue to grow. The more accurate the data is, and the more of it we have, the main contribution [of AI] will be the analysis of this data, being able to look at the cause [of what’s happening]. One of the things that the new AI can do is not only analyze numbers, but also look across the internet at demand patterns, based on text, videos, or weather patterns and connect a lot of these dots and come up with forecasts.
Let’s say there are reports that there's congestion at the Mexican border today. A truck carrying product XYZ is now going to be eight hours late. We made this delay estimate based on congestion on the road and by collecting a lot of data. AI can estimate how long the delay will last. It will give us better visibility and better forecasting as more data is collected over time.
In the midst of the explosion of automation and AI in the supply chain setting, what role do humans continue to play?
We need people to oversee the automation and AI, to make sure what it’s doing making sense. For example, right now, a lot of nonsense is being generated by ChatGPT. Even as the AI evolves, I believe it will be important to continue to have supervision over generative AI. In fact, one of the important jobs in the new economy will be to monitor automated, AI-infused systems. This is a tough and boring job, and companies will need to develop the means to keep the monitors alert and able to intervene when needed.
There's another issue that's also very important; the more we're digitizing the world, the more we are subjected to cyberattacks. We need to know how to do things manually just in case the technology is compromised. For example, more robots and machines are helping doctors in the operating room. But if all of a sudden the robot quit working, you’d need a doctor to step in and finish the surgery. We will always need humans, no matter how advanced the technology becomes.
And continuing with the medical example—an AI system can help detect cancer in an early stage. No machine, however, can replace the doctor and nurse who bring the message to the patient with compassion and nuance and go through the treatment options.
You say that there are six areas where humans surpass computers. What are those areas?
Since people live in the physical and social worlds, they have a much better ability to detect changes or discrepancy between what's a normal and what's an abnormal situation. The second area is that people have a moral code, which machines don't necessarily have. The third is people are much better at adapting to changes in situations and coordinating processes when disruptions occur.
The fourth area, I would say, is creative drive. Take the fashion industry, which seeks out novelty—new material, new design services. People are better than AI at seeking competitive advantage. The fifth area is that people have empathy—a machine cannot replace the recognized smile of the cashier in the local supermarket. And the last area where people surpass AI is assessing risk tolerance. Computers can generate action steps based on probability of risk, but they can’t factor in those social and moral considerations that can impact my decision to take a high-risk/high-reward option or a safer option.
What are some ways that companies can start thinking about how to better integrate humans and technology to improve how they manage their supply chains?
You see this already happening today. If you think about Amazon warehouses, their robots do the same thing that Ford did 100 years ago. In Ford’s assembly line, instead of people going to the car, they brought the car to the people. The assembly line was moving, and the people were static. It’s the same thing that has happened with the Amazon robots. Instead of somebody going in and collecting stuff around the warehouse, the workers are stationary. Today, however, the Amazon robots are much more complex than the Ford assembly line. They are all fueled by AI, and that's how they avoid running into each other.
As technology continues to advance, we’ll have to teach people how to do some work differently. By and large, there'll be a lot of instances where AI and other technology will automate some of the tasks that are part of the job, rather than entirely replace the work.
Take for example Chat GPT. I’m sure writers are worried about the future of their jobs. Yet I’m of the opinion that rather than worry about the technology, we just have to teach people how to use it best. I started experimenting with Chat GPT, prompting it when I want to write something. And it writes a starter idea, sometimes it's stupid, and I just ignore it. And sometimes, it gives me something to start with. I can change it and add to it, which makes it much easier than starting with a blank page. Chat GPT, to me, is augmenting my work. It makes it easier to write a short email, a blog, whatever, and I'm becoming more efficient with this technology the more I use it. It's augmenting my main job so I can do more. It's not the question of replacing other people, I just get to do more with my limited time.
My students always ask me how to keep up-to-date [on new technologies], and I always tell them to “never stop learning.” Take online courses, go to conferences, read journals, always keep learning because otherwise, you will be passed over.
What skills will supply chain managers need in order to be able to work effectively in this new environment?
The most important thing is to acquire critical thinking and to keep an open mind. It’s critical to make sure you are exposed to many different viewpoints so you can debate ideas and learn how to problem solve difficult tasks with empathy and understanding. In supply chain management, you have to be able to sell, debate with people, relate to others, and make connections with your contemporaries.
Specifically, I tell my students to get comfortable with being uncomfortable. You may feel uncomfortable when somebody tells you an opinion or a point of view that you don't agree with. Don't get insulted. Think to yourself, maybe they know something that you don't and question why they have this point of view. Learning how to talk about our differences in a civilized and respectful way will get you far in all areas of your life. In the next few years more people are going to be more anxious, so being able to relate will be at a premium.
How are you and MIT preparing your students for this new reality? What are you doing today at school to help your students?
Our program has changed direction dramatically over the last 25 years. When we started, it was focused heavily on mathematics. Yes, we still teach new technologies and mathematics and computers, but we invest more time in teaching our students communication skills. Being able to express yourself in writing, giving more attention to what you might call “soft skills.”
I still remember about 15 years ago, a senior executive told me, “Your students are very, very smart. But they'll end up graduating MIT and working for a Harvard graduate who's half as smart and gets paid twice as much.” He told me to put more emphasis on soft skills because that’s how students will learn how to work better in teams. I think this advice is still valid today.