This alert sets out some key takeaways from the conference, including tips for clients who are regularly engaged in matters involving the supply chain.
This year’s SCM Conference had one key theme: data. Automation and AI are no longer the future; they are the present, and with them comes the opportunity to collect, analyse and learn from unprecedented amounts of data. It has been predicted that, by 2023, 80% of the world’s largest manufacturers will use AI to manage product portfolios. The top three areas impacting the future of supply chains are Artificial Intelligence, Automation and Data Science Management of big data. Managing supply chains will become more complex and reliant on automated systems.
This raises a number of legal questions.
Rights to use
The amount of data currently being generated by the supply chain is equal to approximately 250 books per person per day. With the ever increasing uptake of automation systems and AI technology, this number will grow exponentially in the near future. Data is being generated at every stage of the supply chain, and will have implications for all players – from production to transport to storage to sale. Which raises the question: who has the right to use that data? Is it the technology owner (eg the automation supplier or the software creator)? Or is it the customer?
As noted by Nga Opoku from the Department of Infrastructure, the Commonwealth Government is investing heavily into the supply chain through the National Freight and Supply Chain Strategy. This strategy aims to increase efficiencies throughout the supply chain through the use of data, including by establishing a National Freight Data Hub, which will include arrangements for data collection, protection, dissemination and hosting, and the establishment of a freight data exchange pilot to allow real-time access to freight data. It is not yet clear how this data will be captured and shared, but this will be an interesting area to watch.
Data will also be incredibly important in allowing brands to build trust and loyalty with consumers. Depending on the nature of the data, the information may constitute personal information in accordance with the Privacy Act, and will need to be managed both for compliance and to maintain customer trust.
Lawyers will need to ensure that these issues are addressed in contracts between customers and automation providers. Rights to access and use data should now be considered as part of the commercial terms of the deal, including in terms of value, and restrictions or restraints over that use should be clearly articulated. Contracts should address whether data generated as part of the project is proprietary information of a party (and if so, which one) and whether or not those machine learnings can be used with other customers.
Developing and sharing information
The nature of artificial intelligence is such that, the more often the tool is used, the smarter it becomes. As AI and automation tools are adopted more broadly throughout the industry, the products and capabilities will become more and more effective. This raises the question: should customers share these machine learnings to contribute to the development of these tools throughout the industry, and if so, on what terms? If so, how can we share this information without divulging proprietary information and otherwise breaching the law (including competition laws)?
As noted by Alistair Pennie, Associate Director of Contracting, Procurement and Supply Chain at Six Degrees Executive, data is the biggest change for the supply chain industry going forward. Businesses will need to up-skill to ensure that they have the most appropriate resources on hand to take full advantage of the opportunities. Pennie also emphasised that while data is important, strategic thinking, agility and leadership are key to future success, and supply chain workers are not being reskilled to deal with this change. There will be an increasing demand for employees with skills in the areas of data analytics and management, and increasing redundancies in areas which involve manual labour (including drivers and warehouse operators).
Kevin Gunn, General Manager for Supply Chain at Coles, noted that, at the moment, there is a high degree of inaccuracy in the data shared between the supply chain and retail partners. Increasing the number of employees who are skilled in the areas of data analytics and management will assist in addressing these misalignments and ensuring that the data which is shared between partners is useful and effective. Gunn also emphasised the fact that the movement of the data has now become more important that the movement of the actual product.
To the extent that these machine learnings constitute intellectual property, parties will need to consider whether (and if so, how) that intellectual property is protected. Lawyers will need to consider if, and the extent to which, information should be shared, particularly between competitors. Risks such as cartel conduct will need to be analysed and properly addressed. Consideration will also need to be given, in consultation with clients, to how to best prepare both contracts and business strategy in order to ensure that the business is best placed to take advantage of the opportunities which are arising in this area, while ensuring that their competitive advantage and rights are protected at the same time.
Sean Ryan, Head of Solution Sales at Swisslog Logistics Automation, noted that one of the biggest benefits of an increase in data collection will be that the software will take over the decision making process. This has the potential to improve safety, as the AI software starts to learn which decisions are the least risky in any given situation. Through predictive analytics – including in relation to weather, politics, traffic incidents and marketing data – software programs will be able to predict issues in supply chains based on circumstances that have happened before. This raises the question: what does this mean for safety and contingency planning? This will also have implications for disaster recovery and business continuity planning, with the capability to minimise the amount of time that business could be interrupted as the result of a disaster event.
Lawyers will need to carefully consider the implications of predictive analytics on risk sharing and liability regimes, including in the event that the software fails or otherwise creates additional, unforeseen risks.
Other issues which were raised at the conference include:
- Sustainability: one of the biggest challenges for the supply chain industry going forward will be sustainability. Consumers are increasingly conscious of making sustainable choices, and the amount of plastic used in the supply chain will need to be addressed. Businesses will need to get on board with the “circular economy”, minimise waste and develop ways to reuse and recycle resources.
- Flexibility: the supply chain needs to be agile and flexible in order to deal with the changes which are underway. This means that long term contracts may not always be suitable. On the other hand, long term investment is often required in order to allow a business (whether supplier or customer) to see a return on investment. This inherent inconsistency will need to be negotiated.
- Fresh food economy: According to Rehan Panditaratne, Business Development Executive at Euromonitor International, one of the biggest changes in the supply chain industry is the development of the “fresh food economy”, under which consumers want fresh ingredients turned into personalised meals, delivered on demand. The supply chain industry will need a higher integration between source, preparation point and consumer, and will need to focus more on how to get food to the consumer.