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The future of supply chain

ProMat 2017 conference offers a look at how Industry 4.0 is changing supply chain


May 1, 2017
by Michael Power

Image: Getty Images

From the April 2017 print edition

The reinvention of industry—so-called Industry 4.0—dominated much of the discussion at ProMat 2017 at the McCormick Centre in Chicago in April. The tagline of the materials handling trade show was “Solve For X,” with manufacturing and supply chain professionals walking the show floor and attending education sessions to learn what’s new in the field.

Markus Lorenz, partner and managing director with The Boston Consulting Group, addressed the issue during his keynote address, Industry 4.0: Bringing Revolutionary Changes to a Supply Chain Near You. In defining Industry 4.0, Lorenz said that it represents the fourth time that industry has reinvented itself. The invention of the loom and the industrial revolution was the first time, followed by the early 20th Century and the introduction of the assembly line. The third time was during the 1970s when automated industrial robots were introduced to manufacturing. Today and the near future represent the fourth reinvention.

The core idea of Industry 4.0 is the movement away from isolated cells to integrated data and production flows, Lorenz told the audience. Until now, factories have often been full of automated cells. The move now is towards machines both communicating with each other as well as sensing certain conditions.

As an example, Lorenz referenced yogurt flavours, noting that when he was a child there were four flavours available from a certain company. Today, there are 96 flavours available from the same brand. This has resulted in an explosion of complexity in the production process, as well as an increased risk of things going wrong. If a machine pours hazelnut yogurt into chocolate containers, the mistake is unfortunate, costly and could even lead to additional problems if someone with an allergy accidently consumes the wrong flavour. Unfortunately, the machines lack the intelligence to “sense” that they are pouring hazelnut into chocolate package.

The solution to these challenges lies in a digital and integrated approach to supply chain management, along with flexible and efficient manufacturing, Lorenz said. Machines that communicate with each other, know their next step and work alongside people will help solve such dilemmas. Lorenz provided an additional food example by discussing robots that could pick good oranges using a camera or monitor VOCs coming from the oranges then put those emitting VOCs into a separate box.

Producers can benefit from such developments, but so too can equipment providers. And while there is an element of not wanting or needing people to perform certain tasks in the future, trends such as self-driving logistics vehicles, augmented reality glasses and other developments will create other roles for workers. While Germany may stand to lose 600,000 factory jobs over the next decade, there will also be new positions created at the same time. “The gain in jobs is something like one million, so that’s a net gain,” he said.
While someone operating a factory machine won’t become a data scientist overnight, that person can be educated to use, for example, augmented reality glasses to become more productive.

Disruptive technologies
Industry 4.0, robotics in manufacturing and related topics also featured during a state-of-the-industry panel discussion at the conference. According to a recent report from Deloitte Consulting, cloud computing, storage and sensors lead in terms of adoption rates, while robotics and automation are set to rise in the next five years, said Scott Sopher, a principal with Deloitte. As well, 86 percent of those surveyed for the report thought that digital supply chain would be the predominant model in five years, and 16 percent feel the supply chain is digital today. “I think that’s a pretty stunning statistic that came out of the survey,” Sopher told the audience. As well, 53 percent of companies surveyed will spend $1 million or more on these technologies, while 50 percent are training their workforce in how to use them. But while it’s clear that these technologies are driving change in the supply chain, it’s not a single technology doing so. Rather several developments, including the Internet of Things (IoT) and augmented reality.

Panelist Venkat Venkataramani, director, CoE for digital supply chain at SAP, referred to the IoT as being about sensors, and can be both a disruptor or a competitive advantage. For example, coffee providers can put sensors into coffee machines to see what pods are used, where they’re used and to collect similar data. Companies can then use that information to decide how to re-route distribution. “It’s really transformed how they look at supply chain and supply chain management,” he said.
Sensors can also be used for tracking and traceability by embedding them into work uniforms, said Randy Bradley, assistant professor of IS and supply chain management at the University of Tennessee. An organization can then know where employees are, if they’re taking the best route or how they’re doing, for example whether they’re too hot. While sensors are largely operational and tactical tools, organizations should begin viewing them as a more strategic instruments.

Automation is now moving towards “co-bots,” referring to robots that stand and work alongside people, Bradley noted. They’re still semi-automated because those people must tell them what to do, as well as when and how to do it. The next generation of robots will become more “self-aware,” he said.

Vendor selection is critical when it comes to robotics, said Mario Adamy, VP corporate warehouse, Albertsons. There will be several options, from semi- to fully autonomous, so Adamy urged the audience to have clear and collaborative partnerships with vendors that understand the business and its needs. Other areas to explore with vendors include risk management and what to do when a robot or automated machinery fails, as well as performance management and how the machinery will be optimized, Adamy noted. “That whole area of vendor selection is critical.”

Also, human capital is important when it comes to dealing with vendors, and the investment in that capital upfront counts towards successful implementation. Those buying such equipment can sometimes be too dependent on vendors, so Adamy recommended asking about training modules and an execution plan. Large vendors sometimes offer to operate and maintain a solution, he said.

When dealing with these changes to the supply chain, Venkataramani recommended looking at the issue in terms of people, process and technology—in that order. Technology isn’t what you lead with, he said. Organizations should look at where they want to be as well as the people running the operations. Then ask about technology. It can be challenging to pick the right partner, but the key to doing so is to crawl rather than run. If you fail, then fail fast and learn quickly from the experience.

Ultimately, ProMat 2017 provided attendees with a look at not only what supply chain solutions exist today, but also what the future holds for the field. Supply chain and procurement professionals would do well to ensure they are up to speed on these developments going forward.

For more coverage of ProMat 2017, see the upcoming June issue of PurchasingB2B.