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Advantage Digital: How AI is transforming performance in operations

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Here’s how businesses are using technologies like AI and robotics to transform operations and open up big new commercial opportunities

If you were still sceptical about what AI has to offer in the sphere of operations, a session at our Advantage Digital event will have wiped that doubt away. Here, Paul Clarke, Chief Technical Officer at Ocado, and Alex (Monty) Montgomery, talking about Microsoft’s work with Rolls-Royce, explained how businesses are using technologies like AI and robotics to transform operations and open up big new commercial opportunities.

Ocado: reinventing warehousing and distribution

Ocado’s business is built around delivering high-quality groceries to customers’ homes, so you would expect the pick and pack operation at the company’s distribution centre to be cutting edge. It is. The business has replaced its once state-of-the-art operation, dependant on conveyors carrying crates of products to different picking stations, with a radical new system. The new 3D ‘hive’ consists of stacks of crates reaching almost to the roof of the warehouse. A swarm of intelligent robots roams across the top of the block (which has a footprint the size of three football pitches), selecting crates and moving them to the right location for picking. The robots use AI to collaborate and work out the optimum sequence for packing customer orders, and co-operate to execute it.

The new system has transformed performance, slashing the typical ‘pick time’ for an order from hours to minutes. The software driving the operation also allows for greater personalisation – allowing orders to be packed exactly as individual customers request, for example. It also determines the optimum positioning of products within the hive, depending on factors such as promotions or seasonality. It’s then easy for the robots to reposition crates to achieve this optimum set-up, allowing the pick and pack operation to run with maximum efficiency at any given time.

Before building the hive, Ocado created a simulation to prove scalability and test new software. The business now uses this model to examine performance and to run scenarios to explore the impact of any planned interventions. The simulation is also the perfect tool for showing other businesses how an Ocado-built hive could transform their distribution operations. Ocado is undergoing a transformation from online grocer to provider of distribution robotics and software.

Rolls-Royce – embracing data to enhance operations

Rolls-Royce is another company that understands the potential of data-driven technologies to transform its business. The company remains one of the world’s leading producers of aero engines, but today typically sells customers the airtime these engines enable rather than the physical products themselves.

Sensors on Rolls-Royce engines capture performance data, allowing the company to predict accurately when each engine part will require maintenance or replacement. Scheduling maintenance with pinpoint accuracy minimises unplanned, disruptive downtime and enables airlines using Rolls-Royce engines to keep operations running smoothly. Rolls-Royce monitors its assets worldwide from a control centre in Derby, and from here co-ordinates a global operation to supply parts and carry out maintenance on behalf of its customers.

The company has now established a centre of excellence – R2 data labs – to understand the strategic value of data in its business. Its experience of using data to enable customers to run efficient operations in the air has huge potential in other sectors. Imagine, for example, a system that captures data across a rail network – on engine performance, track conditions, driver behaviour, weather, routes, timetables, fleet configuration, etc – and deploys artificial intelligence to spot patterns, understand their meaning and use this as a basis for working out how to optimise cost, time and performance. It’s a solution that Rolls-Royce is already selling.

Making AI work for your business

Businesses like Ocado and Rolls-Royce are ahead of the curve with AI. Many more, even industry leaders, are likely to find themselves stuck at the experimentation stage. Dale Williams, KPMG’s UK Head of Operations Consulting, wrapped up the session with some key pointers for businesses asking themselves ‘how do we get out of pilot mode?’

  1. Businesses must stop treating the digital agenda like a technology programme. It’s not about the cautious implementation of new systems to digitise existing processes. Digital transformation is all encompassing and fast moving. Using Agile techniques to develop new applications that could ultimately reshape the whole business must be the new normal.
  2. Technology exists to make processes frictionless and decision-making effortless. Decisions have a bigger impact on performance than processes – so technology development must serve the people making decisions about performance, not the technology specialists charged with designing new functions and features.
  3. Businesses experimenting with new technologies get stuck in pilot mode because they fail to consider the board’s perspective. When boards give the green light for technology investment, they do it because they understand the return on investment, the payback time and the time to benefit. If you can articulate that, then you open the way to move out of pilot mode and into transformation.
If you would like to know more about how our operations experts can guide you as you build your digital future, please get in touch: kpmg-hsbc-enquiries@kpmg.co.uk

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