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OM in the News: Merck Introduces Automation to its Supply Chain

September 15, 2018

German pharmaceuticals firm Merck plans to deploy artificial intelligence and predictive analytics throughout its entire supply chain by the end of 2019, reports The Wall Street Journal (Sept. 11, 2018). Occupying the forward edge of an industry-wide shift towards automated supply chains comes with a competitive advantage. But it also will require that Merck address those jobs affected by the technology, a process called AI augmentation.

The company is using analytics software from Aera Technology to mitigate supply shortages, predict spikes in demand and bottlenecks with about 100 products. It plans to expand the pilot program to its 5,000 products by the end of next year. Merck views AI as a way to augment the jobs of the company’s supply chain planners, and reduce often tedious and repetitive work. By 2021, AI augmentation will save billions of worker hours.

The Aera software captures supply chain data from dozens of data bases and ERP systems throughout the company. Then machine learning algorithms analyze it and suggest recommendations, such as whether and when to adjust product supply or demand forecasts. The algorithms factor in external data such as weather, natural disasters, trends in patient health and expansion plans of pharmacies.

In the pilot test, 10 supply chain planners get detailed alerts via automated phone messages every morning about supply shortages and spikes in demand. The system offers suggestions, based on real-time demand data, such as whether to increase inventory, start production or identify a replacement product across 100 drug products globally. By the end of 2019, one hundred supply chain planners will be using the technology. The goal is eventually to have the retrained supply chain employees make more accurate decisions about how to better position inventory, in order to guarantee supply for patients more effectively.

Classroom discussion questions:

  1. What is predictive analysis?
  2. What is the goal of AI augmentation?



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