A Perfect Antidote to Supply Chain Resiliency
Published on : Monday 05-04-2021
A resilient supply chain becomes flexible, adaptable and more efficient by adopting Industry 4.0 technologies, says Ashish Pujari.
Disruptions don’t come announced. They just show up uninvited and wreak havoc most of the time. While Supply Chain has been a vanguard industry for a lot of test driving of new innovations to weather the disruption storm, it still is a long way to go.
The last decade has seen some serious supply chain disruptions. Some of these were: volcanic ash situation in Iceland that brought supply chains to a grinding halt in Europe, earthquake and tsunami in Japan that affected the automobile sector immensely, Thailand floods, and Hurricanes Maria and Harvey, just to name a few. To top it all, Covid-19 pandemic brought companies and nations to their knees. What we have found in the past six months is that there is one thing that has allowed some companies to better respond to the shocks – and that is centred around having the supply chain be more ‘digital’. For example, companies that have invested in their Industry 4.0 and IIoT are better able to run and maintain their supply chain sites and assets. Companies that are connected to digital logistics networks have better visibility into what is happening and can make better decisions.
So the world needs operational, resilient supply chains NOW more than ever before in order to bring the needed goods and services to end consumers in a predictable and consistent manner. A McKinsey report on the impact of Covid states that 93% of companies surveyed plan to increase resilience across their supply chain. In short – a volatile supply chain needs resiliency.
In my opinion, four clear guiding principles of a resilient supply chain are: (a) End to End Visibility; (b) Intelligent Systems; (c) Flexibility & Adaptability; and (d) Sustainability.
The Industry 4.0 transformation approach seems to be a perfect start to addressing the four points above. Rather than delving into the past and looking at legacy approaches to resiliency, Industry 4.0 creates a disruption and takes the bold approach of starting with an ‘art of the possible’ approach with clear outcomes defined and all in a way, this doesn’t take a very long time to deliver tangible results.
Let’s get into the long grass here on the topic of Industry 4.0. The very movement of Industry 4.0 or the 4th Industrial Revolution hinged on automation, process improvement and productivity optimisation. While these are great lofty goals, a sustainable program needs to map these to real outcomes. In the context of resilient supply chain, these will translate to data transparency, smart decision support and fungible business processes to address sudden disruptions.
Industry 4.0 focuses heavily on interconnectivity, automation and real-time data. These are augmented by Machine Learning to make human intensive processes efficient and Artificial Intelligence to provide insights for smarter decision support. Industry 4.0, also sometimes referred to as IIoT or smart manufacturing, marries physical production and operations with smart digital technology, machine learning, and big data to create a more holistic and better connected ecosystem for companies that have a huge emphasis on manufacturing and distribution. Industry 4.0 takes centre stage since even though each and every business is unique when it comes to its products, markets, customers, and its internal processes, a common challenge underscores all of them – the need for connectedness and access to real-time insights across processes, partners, products, and people.
Industry 4.0 helps supply chains become faster, more granular, more flexible, more accurate, and more sustainable.
Let’s discuss these one by one.
1. Faster supply chains: In the planning arena, the age old way of historical forecasting techniques have been augmented with Demand Driven MRP or AI based planning. Customer’s demand now combines a lot of transactional data along with ambient data to create a much more nimble and realistic demand forecast. Time horizons for these forecasts have also been collapsed.
Example: A leading e-commerce giant is tasting out predictive shipping methods based on browsing behaviour of consumers to reduce the lead time for deliveries. In a situation like this, the actual customer order matching is done later on with a shipment that is already in the logistics network shipped out of the warehouse to the customer vicinity and the shipment is rerouted to the exact customer destination as a last mile matching.
2. More granular supply chains: The last decade has seen a huge shift from mass production to mass customisation to mass personalisation. Micro segmentation takes centre stage in a situation like mass personalisation. Customers are now managed in much more granular clusters very close to a segment of one. All facets of the supply chain from product design, engineering, manufacturing, procurement, distribution and logistics now need to fall in line with this concept of ‘supply chain of one’. Industry 4.0 practices extreme automation through intelligent technologies and real time data is the only way out to balance customer service with profitable operations. Picking up data from ‘things’ and unstructured ambient data from various touch points, segregating that data through Machine Learning and adding AI based decision making clearly addresses the need of the hour.
Example: A leading motorcycle brand reduced their order to cash cycles from weeks to 8 hours by implementing a smart and flexible manufacturing that was completely in tune with customer demand at the personalised level.
3. More flexible supply chains: As we all know, demand and supply situations are never stable. Clearly the need is for ad hoc and real time planning. A leading CPG brand that used to do their weekly plans on a regional basis decided to create daily plans based on data from other regions once Covid-19 struck. This helped them to ‘learn’ from patterns that emerged from other regions and apply it to ensure the demand supply balance for all of their SKUs even though for some products demand was at 300% while for some it was at 10%.
Example: Flexible manufacturing through intelligent technologies allowed a leading consumer electronics company to start manufacturing ventilators. Clearly, the enabling function in all these cases was the availability of real-time data layered with intelligent technologies to support decisions.
4. More accurate data for decision support and new business processes and models: With the advent of IoT and 5G technology, there has been a steady improvement in the next generation performance management systems. This, in turn, has created a digital infrastructure that creates real-time end to end visibility across the nth level of the supply chain. A single version of truth for all stakeholders in the supply chain gets created not just at a synthesised and aggregated KPI and dashboard level but also through sensor data management, the exact location and condition of assets to minimise supply chain risks.
5. Industry 4.0 evidently supports the sustainability mission of organisations and nations: Most companies that take a holistic look at sustainability and align their mission to SDGs, look at low hanging fruits like carbon footprint tracking, circular economy, ethical sourcing or right sourcing, plastic reduction and people safety. If one maps these to the 4 key digital pillars of Industry 4.0 footprint – Intelligent products, Intelligent Factory, Intelligent Assets and Empowered People — clearly can see a 1:1 correlation. Automation of both physical tasks and planning through AI and ML driven applications drives efficiency which not only reduces waste, but also provides visibility into defining new processes and business models. Advanced robots and in some situation Cobots manage the manufacturing and manufacturing processes thereby reducing human error and thus improving health and safety standards. At the same time, the overall efficiency of repetitive jobs goes up tremendously. 3D printing technologies clearly have reduced costs and carbon emission by bringing just in time availability closer to consumption points.
In conclusion, Industry 4.0 is the new phase in the industrial revolution that focuses heavily on Automation, Artificial Intelligence & Machine Learning leveraging real time data and a hyper-connected world of stakeholders. Contrary to earlier beliefs, Industry 4.0 is not just to improve manufacturing efficiency but to revolutionise the end to end business processes of the entire company all the way from customer engagement, product design, manufacturing, logistics, asset management and servicing. A resilient supply chain becomes flexible, adaptable and more efficient by adopting Industry 4.0 technologies and creates an inherent robustness that can weather disruption storms.
As illustrated in the image, the visibility, planning and logistics are required to ‘deliver the customer desires’ of ‘grabbing their favourite beverage and start drinking’. This requires collaboration and coordination of a complex global network of partners, contractors and in-house staff; and finally, a well-connected and resilient digital supply chain helps to automate the entire world of complexity behind this simple desire.
Reference
https://www.mckinsey.com/business-functions/operations/our-insights/risk-resilience-and-rebalancing-in-global-value-chains
The views expressed in this article are those of the author and may not reflect those of SAP.
Ashish Pujari (Ash) is a senior leader in the space of Digital Supply Chain, Industry 4.0 and Sustainability. Ash has built his career around these topics in various leadership roles spanning sales management, solution management, consulting and thought leadership. Ashish has worked with leading software and consulting vendors in this space and also has been involved in a couple of successful startups.
Ashish is well travelled across Asia Pacific and has worked with leading manufacturing, consumer goods, and retail and logistics companies in all key geographies in Asia Pacific. Ashish has also demonstrated success in penetrating new geographies like Europe, US, Middle East and Africa and creating a steady-state business through direct presence or creation of a reliable partner ecosystem.
Over the past 3 decades Ash has demonstrated deep domain expertise in distribution intensive businesses like CPG, Pharmaceuticals, Chemicals, Oil & Gas and Consumer Electronics with strong capability in complex solution selling in the manufacturing, retail and logistics space.
