Digital Transformation in the Supply Chain

digital transformationDigitalization is accelerating the pace of business and transforming global supply chains. In a freewheeling discussion at the ARC Industry Forum in Orlando, I spoke with Richard Howells, Vice President Marketing Digital Supply Chain at SAP about the trends, customer expectations, the challenges, and imperatives of digital transformation in the supply chain.

Supply Chain: Trends and Challenges

“Today’s supply chain is very volatile.  Whether we’re talking about Brexit or trade wars or viruses that are closing down borders, they all are providing different challenges for supply chain executives,” said Richard.  Further, he said that customers have become more demanding.  They have full visibility across the supply chain, and now they are demanding sustainability too.  Customers want to buy products from companies which manufacture ethically-sourced and delivered products.  Meeting these customer demands in a global supply chain, where you’re dealing with multiple suppliers, partners, and contract manufacturers, increases the complexity, explained Richard.

Customer Requirements and Strategies

What customers are looking for:

  • Customer-centric processes
  • Individualized products
  • Doorstep deliveries

The way that supply chains are being designed is changing.  Full visibility is needed across the end-to-end supply chains, because companies are working with a network of partners.  To improve the productivity, utilization, and throughput across the supply chain, it is essential to leverage technologies and Industry 4.0 initiatives. “And finally, you need to drive a sustainable supply chain to make sure that the products are ethically sourced, are biodegradable, and use minimal packaging material.  The complete product lifecycle must be taken into account, so that environmental impact is minimized,” explained Richard.

Technologies are Available

A lot of technologies are available, and there is no dearth of data.  “The challenge is how to leverage that data and other technologies, like machine learning, artificial intelligence etc. that can come into play there,” said Richard.  Expanding on this, he spoke about  predictive analytics that enable users to focus on value-added activities and blockchain to secure the data.  Companies are leveraging blockchain across multiple vendors, owners, and partners in the supply chain to be able to trace from the raw materials all the way through to the finished products and back again.  It is now common to see robotics in the warehouse, in manufacturing, either augmenting or sometimes replacing repetitive tasks.  “So there’s lots of technologies, and those technologies working together really help to drive a digital supply chain and digitize the supply chain processes,” explained Richard.

Role of Industry 4.0 in Driving Innovation

“Industry 4.0 is a real enabler of moving from a transactional-based system that captures lots of data, to a data-driven or making data-driven processes and decisions.  Industry 4.0 can really help automate processes and put context to the data that’s being generated into the business concept,” said Richard. Leveraging that data in different roles for different functions is where IT/OT convergence occurs.

Now, Industry 4.0 is moving from being just a factory initiative to a company-wide initiative across the supply chain.  In this context, Richard cited the example of a smart factory that began with just capturing the information.  But now the processes are being automated and streamlined.  Autonomous cells are created that can help drive individualized products in one manufacturing facility and make multiple products in the same facility.  The role of R&D is critical to design smarter products and assets with sensors in the right place to get feedback.  “We can then leverage that information to improve the maintenance process,  detect and predict when machines may break down,” said Richard.

SAP in the Digital Transformation in the Supply Chain

The digitalization of the supply chain enables companies to address the new requirements of the customers, the challenges on the supply side, as well as the remaining expectations in efficiency and sustainability.  Richard explained that SAP considers everything from the designing, planning, manufacturing, logistics, and operations as part of a digital supply chain.  So, it’s an end-to-end process from design to equipment operation.  The company has integrated solutions that can help address customer demands and challenges. “Because whether you’re talking about sustainability or about Industry 4.0, it all starts with how you design the assets or the products,” he said.  It also has to be delivered in a sustainable way – minimizing or eliminating dead miles, making sure the trucks are full when they’re being delivered, or having different methods of delivery to optimize the process from a sustainability standpoint.  SAP also ensures that equipment and products run in a sustainable manner and are smart enough to share performance information with the R&D department to improve the designs of future products, suggest engineering changes, and ensure timely maintenance.

Greg Gorbach is Vice President, Digitization and IoT at ARC Advisory Group.

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