Tag: Industry 4.0

Digital Supply Chain, Industry 4.0, Discrete Industries, and the Covid-19 Coronavirus – a chat with Stefan Krauss

We are in a very strange times! On this fourth Digital Supply Chain podcast on the theme of Industry 4.0, I had a chat with Stefan Krauss. Stefan is aSenior Vice President and he heads up discrete industries at SAP, so I was keen to have a conversation with him about the impact of Industry 4.0 on discrete manufacturing.

Of course, given the time we are in right now, we couldn’t avoid discussing the current Covid-19 coronavirus pandemic, but we also discussed Industry 4.0, and its effects on industries like Automotive, Industrial Machines and Components, and the Shared Services economy.

Listen to the podcast using the player above, and/or see the full transcript below:

 

Stefan Krauss [00:00:02] This whole crisis also shows that there will be a significant impact on the whole supply chain in the world. And I think this will go way and beyond this crisis that I think companies have to deal with this new world and we need to really rethink the supply chain processes.

 

Tom Raftery [00:00:24] Good morning, good afternoon or good evening, wherever you are in the world. This is the digital supply chain podcast. And I’m your host, Tom Raftery.

 

Tom Raftery [00:00:35] Hi, everyone. Welcome to the Digital Supply Chain podcast. This is one of the series themed around Industry 4.0. And my guest on the show today is Stefan. Stefan, would you like to introduce yourself?

 

Stefan Krauss [00:00:49] Yeah. Tom, thank you. And hello, everybody. My name is Stefan Krauss. I’m heading up discrete industries at SAP and I’m very happy to talk with you guys about, you know, how we perceive Industry 4.0. OK. You people. Yeah. Go on. Yeah, but maybe before we start, I think as you know, we are I think all in the middle of a, you know, serious crisis. Let. Allow me to really, you know, wish everybody listening to this broadcast, you know? All the best. Let’s all stay healthy. Let’s make sure, you know, we take care about ourselves and our families. On the other side, I think this whole crisis also shows that there will be a significant impact on the whole supply chain in the world. And I think this will go way beyond this crisis that I think companies have to deal with this new world and that we need to really rethink the supply chain processes.

 

Tom Raftery [00:01:48] Yeah, that that’s. It’s a good place to start, actually. Stefan, thank you for me for bringing that up. We are in the middle, as you said, of the Coronavirus pandemic at the moment. This is March 18th we’re recording this. I’ll be publishing this early next week. So, some things could even change between now and then. But from everything we’ve been reading, it’s looking like this is going to last a while and, you know, I wouldn’t like to be an airline pilot right now, as I said to you before I turned on the recorder, or I wouldn’t it to be a waiter in a restaurant right now or a chef or a restaurant owner. That’s huge implications all around. You said there in your opening that supply chains are going to be massively impacted by this as well. How can we help there?

 

Stefan Krauss [00:02:41] Yeah, I think and again, due to this this pandemic, I think we already see that some manufacturing facilities have closed. I think they have already a shortage on parts to really, you know, keep production alive on the other side. It’s also about, you know, do you want to have all your employees coming, coming to the factory? So maybe we as a software company have it a little bit more easy as we can really work remote from home. But I think in all those places where really people are coming together, it’s it’s a tough time. And as I said, I think we all really see some impact on the whole supply chain that there is a shortage. So, I think overall, if I look then into the future and and they this term, Industry 4.0 is heavily used around the world. And there are also other names like Smart Manufacturing or Manufacturing 2025. I think the fundamental thing is really in my opinion, about how can companies best serve the individual customer demands their customers have. I think this is for me the trigger, which causes really the that’s a challenge both on supply chain and manufacturing processes to be very flexible, agile, and elastic to really react on changing customer demand. And of course, this is in this crisis even more obvious. How can we react? And really, you know, produce the right things as long as we can really now produce and fulfilling here the customer demand.

 

Tom Raftery [00:04:20] OK. Very good. You mentioned discrete industries, can you for people who are not familiar with the term, tell us a little bit about discrete industries. What are they? Who are the customers you’re dealing with, and what kind of concerns do they have?

 

Stefan Krauss [00:04:35] Yeah, that’s a that’s a very good question. And I think we are famous for using those kinds of abbreviations. So discrete Industries are industries like automotive, industrial machine and components, High-Tech, Aerospace, and Defence. And when I look particular to industrial machinery and components and high tech industries, what I find very interesting is those industries or those companies, you know, being part of those industries have a two kind of roles in Industry 4.0, because on the one side, I think they want to optimise, of course, their own manufacturing process, their own supply chain. But on the other side, I think with their products, they are selling to their customers. And this is, of course, very often a B2B business. I think they are also helping their customers to then establish industry 4.0 scenarios, to connect machines products, to embed more and more software into the machines. So, I think this is a very interesting or two very interesting industries to look at right now, where we see tremendous change in the, you know, the business processes, the business models and how they operate.

 

Tom Raftery [00:05:49] OK. And in what kinds of ways are industry 4.0 helping these companies?

 

Stefan Krauss [00:05:59] I think, as I said before, it is really about end to end pro or end to end processes, we want to look at starting with really the customer demand, the customer order, which you then want to drive in a very again flexible way through your whole manufacturing supply chain processes. And I think we see more and more companies who want to shorten, let’s say, the freezing time where you say customer cannot change order anymore because now it’s really going into the production process. And you want to be maximal flexible to say, I can still take last changes. And, you know, executed through the whole, you know, production process. And this is something where I think Industry 4.0 will help cost our customers to really change those business processes and create the transparency and the flexibility to react. And this goes also, in my opinion, very much from top to down. So very often we say from top floor to shop floor. So, you want to really create full transparency through your entire production processes and facilities around the world, down to an individual factory and then even down to the individual machines to really have that kind of information and transparency, you need to really steer the whole processes.

 

Tom Raftery [00:07:28] So this transparency is this is something that companies are thinking about exposing to their customers?

 

Stefan Krauss [00:07:37] Yeah, of course. I think because an additional trend which we see is that more and more, you know, business models are saying we are not necessarily selling the product to the customer anymore, but we see more and more this operating model the outcome based business processes, which means a manufacturer of a machine, may not sell the machine, but they will install and operate it for their customers. And then, of course, you can take data out of machines IoT data basically out of sensors and end to end to optimise of course, on the one hand side, the performance and the output of the machine, but I think it is also very much of course used for predictive maintenance processes, for example, when billing. Right. And it’s about the uptime. It is about the uptime and productivity of machines. So, you can avoid, you know, long lasting repair time and so on. And then, of course, the billing, which is basically the interesting challenge later on to say, hey, I pay by the hour, I pay by the output, I pay by, you know, the number of products which has been produced with the machine and so on. So, yeah, it’s very interesting how those business models are evolving and changing the entire landscape here.

 

Tom Raftery [00:08:59] Yeah, and can we speak to some good use cases? Cause, you know, we have lots of customers and that there must be some really fascinating stories you can talk to about some users of industry 4.0 technologies.

 

Stefan Krauss [00:09:14] Yeah, absolutely Tom and I think one nice example, it’s a German company called Gephardt Fördertechnik. They are a leading company in internal logistics and they have really created an IoT platform which allows not only again in their own manufacturing facilities, but also when they of course sell their products to their customers to create this transparency and have those, you know, machines and products really connected and have a dashboard visualisation to really observe all, you know, the the the activities going on in the machine. And as I said before, really run predictive maintenance processes and so on. So I think this is a nice example where Gephardt Fördertechnik is using SAP products like SAP Asset Intelligence Network, which allows you to really connect all those assets at the customer site in a network. And here you can track both structural and unstructured data to share it with the I call it the right ecosystem. So, with whomever you decide you want to share those information that can be employees on the customer side, it can be people from Gephardt Fördertechnik who, you know, offers services, could be a third party service providers. So, I think this is, of course, fully managed to say who has access to those information to really, you know, have full transparency about the machines.

 

Tom Raftery [00:10:50] Ok great for our customers. And again, you’re interacting with a good number of them. What are the… I don’t want to say forcing factors, but what are the things that are moving them into this space most? And what are the kind of challenges that are coming across once they start going down, you know, the route of rolling out one of these projects?

 

Stefan Krauss [00:11:16] Ha! This is another very interesting topic. And I just recently had a meeting with our senior management of industrial machinery company. And they are super successful, let’s say, in their current business. So, they are growing every year. Nice business. Still, of course, top management is saying we cannot just lean back and say, hey, this will be the future. So, for them, it’s really about rethinking. Also, you know, what will be our product offerings here in the future? It’s going even beyond saying, you know. Today they very much sell individual products into we sell solutions. We sell something which the combination of products and services, embedded software. We operate it. So, this this this business model. And I think are a major challenge those cost companies face is I think they might be all very experienced in innovation when it comes to, you know, develop and innovate the next product. Most companies are not necessarily, you know, used to say, I also need this business model innovation. How are we changing the company? And there’s a lot of resistance, of course, on middle management, on let’s say employee level, because for them, they still say, hey, why do we have to change? We are so successful today. This is something, I think where I think top management, and this is also a lot of discussions I think where SAP comes into the game. But also, you know, the strategy consulting companies to really help customers on what I think a lot of people call digital transformation. And how can we really define and and let’s say, articulate those changes through all the entire company. And it really starts with the employee level and then it starts with the skills we need here in the future. So, I think we also see that companies, of course, hiring more and more, for example, I.T. experts, even if they are a machinery company or an automotive company. So, they need a shift in skills.

 

Tom Raftery [00:13:23] I saw the CEO of Volkswagen, whose name has just gone out of my head. Say yes. Herbert Deiss. He said just the other day. Well, that is a couple of weeks ago now. He said that Volkswagen is going to have to become a software company. I mean, that’s a huge change and I mean, he’s been forced into that position by the likes of Tesla and the complete upheaval of the automotive industry. But it just to exactly your point to hear Herbert Deiss say that Volkswagen needs to become a software company. That’s amazing.

 

Stefan Krauss [00:13:57] Yeah. I think he is right. And there are other companies also when we look to some of these Start-Up companies building now the e-cars. I have talked to one. I think they are located in Asia and they say. Our goal is not to produce a car. Our goal is to produce the next screen, the fourth screens, so you have the iPhone and you have maybe the desktop at that stuff. But the car will also act as an environment where people can either work or, you know, of course, enjoy movies and whatever. And then, of course, it’s somehow driving. And I think this is a totally shift in mindset. And yes, of course, Tesla is it’s nicely leading this nowadays. It’s also very interesting when you compare so normally, I think I don’t know how long you drive your car, but, you know, we buy a car and we drive a car for three, four, five, six years. And in the past, you know, you had the car like you bought it. Maybe little accessory here and there. But the features, I think was built in how you ordered the car. Now, in this this software world, you can activate certain components later on. Maybe you have some money left and then you want to invest here into this and that. And I just what you know, funny enough, somebody was was selling or let’s say another one was buying and such and such an E-car and all of a sudden, certain software pieces were deactivated. That’s right. That’s a discussion about use rights. Then later on. So, you get a physical car. But let’s see what really software options are activated or gets deactivated. Yeah.

 

Tom Raftery [00:15:39] I was on the game changers radio show yesterday talking about the future of automotive. And I said we’re seeing I called it the iPhonification of the automotive industry. And I referenced exactly your point about how Tesla are now converting also into a software as a service company, where, to your point, they’re able to turn on or turn off the utility of parts of the car. And it’s where they turn it the car into a platform for software sales. And obviously, it makes it easier for Tesla if they have a single SKU of model and they say they differentiate by the features that are turned on or off in software. So that that makes the manufacturing far easier for them and it gives them a completely different sales model that they sell you a a car, and based on how much you pay, you get X features turned on and or not, and then you can have them turned on later. And of course, I suspect it will be a matter of time before like the iPhone, they open up an app store to developers to develop apps to sell on the car. And this this will completely change how automotive the automotive industry works. And it’s only possible through the likes of the the technologies that we’re talking about.

 

Stefan Krauss [00:17:08] Yeah, I think you’re absolutely right. And I think this has a lot of pros, but it may have also some cons. And we have discussed this also with other, you know, customers of us, because I think we also need to consider maybe whether you are in the volume business, like of course you, you have one SKU and then of course, you sell it in a high volume. The question for, you know, industrial machinery companies where of course, we don’t actually have that kind of volume in all the different segments, is it still, because the business fundamentals are still valid right? It is really about, you know, top line and bottom line at the end of the day. And to just say now I have maybe a machine where I have built all the options in, and the options cost money, of course. And then the customer may activate it or may activate it later or even not, it’s not necessarily a good business case if you’re not really in a volume business. So, I think that is not the one answer to everything right now. And this is why, again, I think customers or companies really have to throw a think through on, you know, what of those new business trends and models will really stay relevant, relevant in the meaning of creates, you know, business value and business outcome for them later on. And we see already first all the automotive companies who started, for example, with mobility services, and they stopped it already by saying, oh, looks doesn’t look like a good business case for us. So, this very interesting times where I think it’s very much about also, you know, testing, trying failure, you know, adopting and then and it’s not the continuous improvement business. Many companies have been in for so many years.

 

Tom Raftery [00:18:59] Yeah, it’s it’s challenging. And something just occurred to me the other day as well. The whole idea of the shared services industry is going to be, I suspect, massively hurt by Coronavirus, I mean, are you going to want to get into a car that you don’t know who’s been in it before you?

 

Stefan Krauss [00:19:18] You’re right. Just thinking about it as you said it. Yeah, because I was just reading this morning in the newspaper that, you know, people are asked to, of course, use more and more their cars and not maybe, you know, public trains and buses and so on. And then, of course. Yeah. That’s also very true what you said on those kind of, you know, mobility services. Yeah.

 

Tom Raftery [00:19:39] Yeah. Yeah. That I suspect they’ll take a huge hit. Stefan, we’re coming to the end of the podcast we are at about 19 minutes now, I just said I’d ask you; is there anything that I have not asked you that you think I should have?

 

Stefan Krauss [00:19:57] I think we could talk about this this very interesting topic for hours and hours. I know. I know. Happy we if you want, we can also follow up. But no, no, I think for today, I think we covered the main points. And maybe to summarise it from my point of view. What we see this is not about technology. It’s about really business value. I think companies want and need to achieve. And this is where I think we see leading companies already, you know, heavily in and where, of course, laggards may need to follow. And it’s all about not only the processes, I think it’s also how to use all this data which are available nowadays coming from IoT sensors and so on and so on from the Internet and make good business usage and value out of that. I think this is my, you know, maybe suggestions or, you know, kind of credo companies should look at. And this is also, of course, where we as SAP want to help many companies on this digital transformation, both on a business process talk, but also then, of course, with our solution and service offerings we bring here to the table.

 

Tom Raftery [00:21:13] Super, Stefan, if anyone wants to find out more about Stefan or about discrete industries or about any of the other things. Where should I direct them to go and any links you give me, I can embed them in the in the in the description of the show notes. So, fire away. Where should you, where would you like me to send people?

 

Stefan Krauss [00:21:36] Yeah, I think of course, happy to share with you. I think you all can find me on LinkedIn, of course, Stefan Krauss and Krauss with double S. So, I think it’s a very common name. But also, I think please join SAP’s, you know, SAP.com and then you can find via the link to industries. A lot of those kind of, you know, trends and of course, of solution offerings we have. You can find nice whitepapers which we have written for all of our industry to translate basically those trends which we see in industries into, you know, how SAP can support here. So, I think that what would be my two main sources I would like to point you to.

 

Tom Raftery [00:22:18] Perfect. Perfect. Stefan, that’s been great. Thanks a million for coming on the show today.

 

Stefan Krauss [00:22:22] Thank you very much Tom. See you soon again. And have a great day. And please all stay healthy. That’s is most important.

 

Tom Raftery [00:22:30] Indeed. Indeed.

 

Tom Raftery [00:22:33] OK. We’ve come to the end of the show. Thanks, everyone, for listening. If you’d like to know more about digital supply chains, head on over to SAP.com/DigitalSupplyChain or simply drop me an email to Tom.Raftery at SAP.com. If you’d like to show, please don’t forget to subscribe to it in your podcast application to get new episodes right away as soon as they’re published. And also, please don’t forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.

 

And if you want to know more about any of SAP’s Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain and if you liked this show, please don’t forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

 

 

 

Digital Supply Chain, Industry 4.0, and the Covid-19 Coronavirus – a chat with Martin Barkman

We are in a very strange times! On this third Digital Supply Chain podcast on the theme of Industry 4.0, I had chat with Martin Barkman. Martin is an SVP and the Global Head of Solution Management for Digital Supply Chain at SAP, so I was keen to have a conversation with him about that, but the conversation went a bit off track!

With all that is going on in the world right now it is difficult to avoid talking about the current Covid-19 coronavirus pandemic which has turned all of our lives upside down. So, despite not intending to, our conversation quickly veered into a discussion of the implications of the coronavirus contagion, and its effects on supply chains, manufacturing, and ourselves.

This is an extremely topical podcast, which ends on a positive note. I hope you find it useful.

Listen to the podcast using the player above, and/or see the full transcript below:

Martin Barkman [00:00:00]   The first thing that I think in in times like this organizations have to understand this is what is my what is my supply? Where do I have products? Can I get the product? Am I relying upon regions that are even more hard hit by the particular crisis and whether it’s this viral situation or just in general I think companies are rethinking making sure that they have alternative sources.
Tom Raftery [00:00:29] Good morning. Good afternoon or good evening. Wherever you are in the world, this is the Digital Supply Chain podcast and I am your host Tom Raftery.

 

Tom Raftery [00:00:39] Welcome to the Digital Supply Chain podcast. We are in the series themed around Industry 4.0 and my special guest on the show today is Martin. Martin, would you like to introduce yourself?

 

Martin Barkman [00:00:52] Absolutely, Tom. And thank you for having me. I am Martin Barkman and I head up solution management for SAPs digital supply chain area based in the United States and super excited to be here talking to you today.

 

Tom Raftery [00:01:08] Thank you. Thank you, Martin. so, digital supply chain and industry 4.0. How are they connected?

 

Martin Barkman [00:01:16] It’s a great it’s a great question. I mean, there’s a lot going on with supply chain today. Obviously, the topic at the moment is everything the world is doing to mitigate the effect of this virus. But even before the virus, supply chains were becoming more prominent and more central to the conversations in company boardrooms and frankly, even amongst consumers. Geopolitically, we saw things like trade tariffs, and regulations coupled with uncertainties around the exit of Britain from the United, from the European zone. All of these put pressure on companies supply chains. And then at the same time, you also have consumers that are pickier and have more desires than ever before.

 

Martin Barkman [00:02:15] Whether it’s the personalization of products or even the speed…

 

Tom Raftery [00:02:21] They’ve been spoiled, consumers have been spoiled by the likes of Amazon who are now giving them deliveries same day and even, you know, sub-hour times and things like that. so, that’s gotta put huge pressure on supply chains as well.

 

Martin Barkman [00:02:32] Yeah, it’s interesting. So, you have governments, you have individual consumer. And then there’s this underlying thread around topics of sustainability. You know, consumers are starting to figure out that having the delivery truck come to their house many, many times every day maybe isn’t the most sustainable option. So, we’re seeing a convergence of a lot of these global trends, consumer trends, and it’s converging around the supply chain. And so, how do you set up a supply chain that can really accomplish all of this in a fundamentally different way? You asked about Industry 4.0, and it’s an interesting term. It actually originated in in Europe many, many years ago. And it was primarily focused around the automation of the factory or the plants. Now we’re seeing the concepts actually extend to the entire supply chain, to the assets that are deployed throughout the supply chain, all the way to the way distribution and logistics is handled. And it’s all about using technology and data to fundamentally change and take a step change in productivity. Other times it’s called industrial Internet of Things, so, I just wanted to throw that out there, that that’s also a term that’s often used.

 

Tom Raftery [00:03:52] Sure, sure. And I mean, we’re not going to harp on the whole Coronavirus thing because, you know, there’s lots of other people talking about that. And, you know, people better, better informed than us. But things like that are going to be putting huge pressure now, you gonna think on supply chains. I mean, particularly there’s going to be a huge increase in the requirement for logistics as more people, you know, stay at home and have a requirement to have things delivered to their home. so, that that’s going to that’s going to change the logistics industry. It’s going to grow the logistics industry, and it’s going to completely you got to think change how a lot of supply chains are organised.

 

Martin Barkman [00:04:31] Yeah. No, no, no doubt. And it is it is absolutely the topic of the day and what companies are focusing on. I mean, you know, the first thing that I think in in times like this organizations have to understand is what is my what is my supply? Where do I have product? Can I get the product? Am I relying upon regions that are even more hard hit by the particular crisis and whether it’s this virus situation or just in general, I think companies are rethinking, making sure that they have alternative sources identified. They understand the implications of those sources.  They have the ability to switch and shift order volumes from one, one to the other. You know, so. That that I think is kind of step one in a time like this, of course, with that comes also an understanding of where you have inventory in the supply chain and how can you use that inventory to ultimately create new finished goods and move those finished goods to the point where they are most, most desperately needed. I think at the same time, demand is is really, really changing. We’re seeing spikes in demand for products that are absolute critical.

 

Tom Raftery [00:06:01] Toilet Rolls?

 

Martin Barkman [00:06:01] Whether it’s. But it’s not just I mean, it’s paper products in general. Right. Diapers and such. Certainly, in personal hygiene products. I mean, right now, Amazon is prioritising the delivery of those to consumers at the expense of maybe some products that are not deemed to be quite as urgent. I think for companies, what’s critical is understanding, you know, just by how much and where and to what degree demand has changed, because ultimately that picture has to be you have to form the unified picture of demand and supply and ultimately how you how you solve for that. so, you want to get your arms around. So, I yeah. This is a you get your arms around that. That demand certainly part of the supply picture is also the capacity. And you mentioned people are now working from home, certainly in some professions that’s a possibility. In professions like running a manufacturing operation, that’s not always the case. The customers we have that I’ve talked to are trying to keep these critical plants up and running plants that are involved in producing products that are more needed now than ever before. But the method in which you do that right, the way you run your shifts, the way you inform and encourage people to work when they are on the shop floor is different. Right. We can’t stand shoulder to shoulder anymore. We have to maintain the social distancing even in the workplace. so, I think its capacity, its inventory, its supplier and supply and its demand and forming that picture and understanding also what is it saying I need to do today? But what are the what ifs and the scenarios? We live in an extremely dynamic environment. so, this week is fundamentally different than last week. so, whatever I thought was my plan last week, it’s very likely that that plan now needs to change. so, I need an environment and an ability to rerun those scenarios very, very effectively. Once I choose a scenario and I say, OK, this is the one I’m going to operate, that, how do I put it into action all the way down to planning the transportation and understanding how to get it ultimately to the end consumer?

 

Tom Raftery [00:08:29] And demands have got to be swinging wildly as well at the moment. I mean, we talk about people working from home. That’s going to mean a huge drop in demand for, you know, petrol, diesel those kinds of fuels to get people to and from work. And on the other hand, there’s going to be a huge uptick you got to think and demand for things like webcams so, people can more effectively work from home.

 

Martin Barkman [00:09:00] Yeah. so, it’s interesting right now, I think we’re all trying to come to grips with what is the the new…the drop in, you know, what is the the drastic change in demand, and as I mentioned earlier, how do companies get their arms around that? But soon we will have to start to plan for the recovery. Is the recovery going to be like the letter V, where it’s a sharp drop and then a sharp rise, is it going to be like the letter U where it’s a drop and then it’s a period of really, really low band in general, but then an uptick. Or frankly, it’s almost gonna be like the letter L you know, the classic where we’re gonna be at a low point of demand for quite some time and then maybe we see a gradual, slow recovery. And the answer is, of course, we don’t know, and it may actually differ for different products. I also think we have to think about the possibility that when we emerge from this, yes, things will be fine, but they will be different. Right. so, if you think back to the 9/11 crisis, we started to fly again, but airport security was fundamentally changed. Will our way of working be fundamentally different when we emerge from this crisis? so, we have to understand how we will emerge and what the scenarios are so, that we can plan accordingly. But then let’s not assume that everything returns to the way it was. It may not be for certain parts of the economy or for certain industries or for certain types of products.

 

Tom Raftery [00:10:57] And how do companies plan for that?

 

Martin Barkman [00:11:02] Yeah, I think…

 

Tom Raftery [00:11:07] The 64-million-dollar question?

 

Martin Barkman [00:11:08] Yeah, look, I mean, you hear it said every day. Right. These are unprecedented times. Companies that have a good handling of their data, of their information and they’re able to bring it into one environment where they can run these scenarios. Not to pretending that they know exactly what’s going to happen, but they can say, you know what, if this happens, what if we have a quick recovery? What if we have a prolonged recovery? What if they make some more of our products coming out of the recovery maybe is a little bit different? What if a part of the world relapses later this year and the epidemic comes back in a limited form? so, I think companies that have that kind of digital environment are going to be able to plan these different scenarios. They may not know, but they can certainly weigh the different options. But I also think it’s interesting. Right? so, Industry 4.0 if we over time, are able to automate and run more critical parts of the supply chain in an autonomous or perhaps in a remotely controlled way. And this is already happening. I mean, I’ve been to see many production operations. You know, the people there are operating them behind a glass wall or in the case of milling and mining, significant parts of the operation might be controlled in a control centre that’s located hundreds of miles away and then using cameras and digital infrastructure they’re able to control the equipment. The interesting thing about that is when the next pandemic, and I hate to even say it comes, supply chains might be able to operate more autonomously, because people are not necessarily working and standing right next to each other. It’s not that we have eliminated the need for people completely, but we’ve eliminated the need for people to stand closely together performing the tasks and potentially risking their safety as a result.

 

Tom Raftery [00:13:38] so, Martin, I think one of the most important things at this kind of time is transparency in supply chains. Can you talk a little bit about that for us?

 

Martin Barkman [00:13:48] Absolutely. And it’s really interesting because supply chains almost by nature, right? You think everything happens in sequence from one step to the other it’s very linear oriented, and in many cases, it is, right? You start with a but raw material and you convert it into something that you ultimately distribute and sell. However, that’s a very simplified view. And what has been happening already is supply chains are becoming more networks. Right? so, you source raw materials more through a network, in many cases. Your manufacturing setup is a network. You have your own manufacturing sites and you have the ability to go out and work with contractors in a network type of capacity. Transportation. Same thing. You source transportation through a network and you work with a network of providers. And as a result, the supply chains are actually becoming less linear and sequential and more networked. Now, more than ever, visibility of what’s happening in your supply chain is very important. And because it’s more networked, you need the visibility through your network. so, you need to understand. Not just what’s happening within the four walls of your supply chain, but within your supply chain network. so, this is a topic that was already becoming important. I think now more than ever, it’s of upmost importance. Companies are setting up, you know, war rooms and crisis management centres to understand how to maximize their ability to serve their customers. And of course, information and visibility are very, very key to that. Now, beyond this pandemic, there are other cases where having visibility is very important. What if there’s a product recall? How do I ensure that I can trace the source of the recall or the cause of the recall through my supply chain and remove the product that is subject to the recall without overdoing it, without removing a product that does not have to be subject to the recall. so, there there’s just a lot of ways in which this connecting everything and then having that be rendered simultaneously more closer, if not real time. It’s becoming very, very important.

 

Tom Raftery [00:16:23] And for organizations who are in the throes of this right now, I mean, what would you advise them to do if they haven’t got the kind of transparency that they need or if they are starting on that project or if they’re even if they’re in that in that project and they’re looking to increase their  visibility into their supply chain where we’re should. What should they do? What kind of steps should they take?

 

Martin Barkman [00:16:51] Yeah, it’s hard to think of a one size fits all, but. There’s a good chance that there are some pockets of places in their supply chain where the information resides digitally. Sometimes that could be very large pockets, large repositories. I would say an initial key step is assess what is the digital environment you have? What are the existing tools you have in place and look for ways to activate elements of those tools that maybe you haven’t otherwise activated. So, for example, we have customers that are running the SAP integrated business planning application to do the scenario analysis that I talked about earlier. It has inherent capabilities for things like visibility. We call it the control tower. Ensure that you’re leveraging those capabilities to the fullest, which in some cases, if you aren’t, isn’t a big undertaking to go do.

 

Tom Raftery [00:17:53] Okay.

 

Martin Barkman [00:17:55] And certainly that’s something that that companies can consider.

 

Tom Raftery [00:18:00] All these things are kind of on a curve so, they can move kind of further to the right on the curve to increase their visibility, you’re saying?

 

Martin Barkman [00:18:07] Yeah. I mean, it’s a matter of time too, right? And, you know, are there quick wins that can be attained right now? At some point, companies may look to say, you know, how do we how do we take a step change in our in our digital environment, in our infrastructure, so, that we can do this on an ongoing basis, not just when a pandemic comes across, but frankly, sometimes you see a spike in demand that you hadn’t forecasted. You would like nothing more than to meet that demand. But you don’t know if you can or what it would take to meet that demand. so, you need to be able to run these plans and rerun the plans more often. You know, that’s the kind of capability that I think companies at some point are going to start to say, you know what, it makes sense to pursue that.

 

Tom Raftery [00:18:53] Excellent. Martin, we’re coming towards the end of the podcast now. We’re at about 18 minutes, 19 minutes into the into the podcast. Before we end up before we finish up, is there is there any question that I have not asked you that you think I should have?

 

Martin Barkman [00:19:14] I perhaps one thing we should conclude with is, you know what what is, pandemics aside, if we allow ourselves the luxury and the pleasure of removing that that new lens just for a second, maybe what is on the other side? And what do we think is is of utmost importance to companies? And I’d just like to talk about that, because I think we have to allow ourselves the ability to think in those terms, right? For the future and to us and what we see from our customers is supply chain is moving increasingly, from a pure back office function to something that’s at the at the boardroom level, very much part of the discussion. And the reason is we are moving into an era where it’s all about the experience economy, meaning what is it that customers want to experience when they do business with you? What is it that your employees want to experience when they go to work? What is it that your shareholders are looking for you to accomplish right in your community? Same thing with the environment. And we think that’s very exciting for those of us that are passionate about supply chain, because how can you accomplish something on all those axes and on all those vectors without a really, really comprehensive approach to supply chain management, right? What is the point of selling a product that’s marketed well, if in the end the product doesn’t meet customer needs from a quality and functionality standpoint? What is the point of having the most perfectly manufactured product with all the bells and whistles if in the end it’s delivered late to customers? so, the supply chain is what brings that ultimate experience very much together. And we see companies making investments in supply chains in ways that traditionally wouldn’t have been wouldn’t have been thought of. And it’s so, that the supply chain can help the company be successful in the experience economy. And we think that’s exciting and we think that’s very much on top of minds of companies right now, maybe a little bit further back of their mind, given the urgency, but nevertheless, something that absolutely has to be continued to be addressed.

 

Tom Raftery [00:21:57] Excellent, excellent, excellent. Martin, if people want to know more about Martin or about supply chains or about business planning or any of the above, where would you have me direct them? I’ll put some links in the show, notes in the description, this podcast so, you just tell me what to put in there.

 

Martin Barkman [00:22:17] Sure. Let’s assume they want to know about supply chain more so, than they know about me. Certainly, I’m on LinkedIn. But for for supply chain and what we’re doing at SAP, I would invite everyone actually to go to SAP.com, and in there we have sections for supply chain management. We have a lot of interesting content of what we’re seeing are the big trends and what companies are doing. And we have a lot of testimonials from companies with whom we work. And I think that’s an exciting place for people to start to learn more.

 

Tom Raftery [00:22:55] Super, super. Martin, thanks again for joining us on the show today.

Martin Barkman [00:23:01] Thank you so, much. It’s a pleasure.

 

Tom Raftery [00:23:04] OK. We’ve come to the end of the show. Thanks, everyone, for listening. If you’d like to know more about digital supply chains, head on over to SAP.com/digitalsupplychain or simply drop me an email to Tom.Raftery at sap.com. If you like to show, please don’t forget to subscribe to it in your podcast application to get new episodes right away as soon as they’re published. And also, please don’t forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.

Industry 4.0, Digital Supply Chain, and Sustainability – a chat with Hans Thalbauer

The buzz around Industry 4.0 is starting to grow so I decided it might be interesting to have a series of interviews themed around Industry 4.0 here on the Digital Supply Chain podcast. 

To kick off this series I asked my friend, and colleague Hans Thalbauer to come on the show to talk about where he sees the relationship between Digital Supply Chains, Industry 4.0, and how they can help organisations become more sustainable.

We had a fun, wide-ranging conversation covering manufacturing, connected assets, and the importance of using data for decision making in supply chains.

Check out the audio of our conversation using the player above, and/or the transcript below:

Good morning, good afternoon or good evening, wherever you are in the world. This is the digital supply chain podcast and I am your host Tom Raftery.

 

TR: Hi everyone. Welcome to the digital supply chain podcast. This episode is one of the series that are themed around Industry 4.0 and my guest on the show today is Hans Thalbauer. Hans, welcome to the show.

 

HT: Thank you very much.

 

TR: Hans, could you, for anyone who doesn’t know, could you introduce yourself to our audience?

 

HT: Yeah, absolutely. I’m if you will, a supply chain veteran. I was working in the supply chain space all my life. I’m with SAP 20 years. All these 20 years I was in supply chain, manufacturing, product life cycle management, operations areas. I’m working with customers around the world and having fun doing that.

 

TR: Good stuff, good stuff. And we’re, we’re on the digital supply chain podcast on the series that is themed around industry 4.0 for anyone who’s unfamiliar Hans, could you tell us what you think Industry 4.0 means, what actually is industry 4.0? Cos it’s kind of a buzz term that’s out there and everyone’s kinda got their own definition. What, what do you think industry 4.0 is?

 

HT: Yeah, you’re totally right. There are many, many definitions about industry 4.0. And if you will, there are also different nuances to industry 4.0 dependent on which region or which country we are. And so, if you just take it from, I think their original definition we are talking about the fourth industrial revolution. We are talking really about a step change in productivity. We are talking about really something significant happening to industries, manufacturing industries. And the digital transformation for manufacturing industries. Industry 4.0very often actually is narrowed down to manufacturing and operations, which is true, right? So there’s a lot happening in these two spaces in these two areas, but it goes beyond, it’s really about the digital transformation of manufacturing industries which is of course much broader than only the manufacturing and operations part. This would be my high-level positioning or, or definition of industry 4.0. So it’s really about the digital transformation of manufacturing industries.

 

TR: Okay. And again, we have a lot of terms here. This is the digital supply chain podcast and we talk about digital supply chain quite a lot, but we also have industrial internet of things and industry 4.0. Is there a, a kind of a natural segregation between those terms or are they kind of the same thing, just you know, different ways of looking at things or how do you see that?

 

HT: They’re the same and they are not. I mean, industry 4.0 obviously started in Germany  with the government initiative about, I want to say even seven to 10 years ago. And really started with the idea of there will be a big change. How can we prepare the industry for this change? The idea is that data are valuable and can be leveraged much different than ever before. Technology like machine learning, artificial intelligence can be leveraged in a very, very different way and really make a big change in how companies run manufacturing. How can actually companies be successful going forward. That was kind of the basic idea and leveraging data in order to do that.

 

In the US industrial internet of things has been created.  Very similar approach going in the same direction. It is broader and narrower at the same time. It has not a strong manufacturing focus. It has much more of a consumer focus and much more these IOT solutions related to consumer products, consumer usage and there are many, many examples of which  everyone is aware around the world from yeah all the products which have been introduced and really have the connectivity and really are consumer oriented. And I think everyone is using them every single day. And so this is kind of where the US discussion has gone much more IOT centric than industrial centric.   

 

If you go to China, there is of course a plan which is called China 2025 which is really also looking into productivity gains in manufacturing. Right? And there it’s really very, very much on manufacturing focus. If you go to Japan, it’s a robotics focus. If you go to India, it’s about Make in India, right? So the big slogan, how to introduce actually a much more efficient and manufacturing industry in India. And so there’s a common thread to all of this. All of it has to do with we get data from machines, from assets, from things, and we want to leverage this data in order to be more efficient, in order to be more precise, to predict outcomes, you know in the future, and really do things differently.

 

By the way, I also would say that industry 4.0 and sustainability go hand. The efficiency in manufacturing. The reduction of energy consumption in manufacturing, the reduction of water consumption during the production processes, all of this actually goes hand in hand. And so both topics for me are connected.

 

TR: Right? No, it is interesting you bring that up because sustainability is obviously a topic that a lot of people are interested in at the moment. It’s, it’s quite a hot topic, but a lot of people may not be aware that obviously sustainability is about doing away with waste. It’s about maximizing use of resources for the, you know, maximizing the, the outcome or the output using the minimal inputs. So it’s getting rid of waste. So to your point, yeah industry 4.0 is all about that, it’s all about getting the best outcome for the minimum inputs or the least waste.

 

HT: Yeah. It’s, it’s really perfectly defined rates are, and what you discussed is perfectly correct. Because when you think about it in the context of sustainability, we are talking about the circular economy. What does it mean? I need to be connected. I need to be connected to the business partners I need to be connected to the things, the more connectivity I have, the better I can manage actually their efficiency. And efficiency in transportation where I really make sure that the truck is never empty. That the truck really has actually the  shortest route to between point A and point B. So it’s all about reducing waste. It’s about water consumption, right? So water consumption, a big, big topic actually during production processes. If you can reduce that also in the product itself, if you can reduce the water in the products, big topic. If you think about energy, it’s biggest topic by itself, right? So with using the energy and then you see actually what companies are doing around the world and especially in the manufacturing industries how they go about  sustainability. It’s really taking the  idea of how can I reduce the carbon dioxide impact? How can I reduce the energy by itself or their consumption by itself. So all of this actually plays hand-in-hand with if I’m more efficient and I can be more efficient with industry 4.0 concepts, then I’m better off not only in my productivity but actually also in my sustainability efforts.

 

TR: Yeah, absolutely. And so  you mentioned different regions like Japan and India and America and Germany. Everyone has kinda got a different focus on it. Are they all industry 4.0? I mean what I’m saying is we’ve, we’ve titled it in some kind of way, IIOT in the U S Industry 4.0 in Germany, but is it all really the same thing? Is it all about maximizing our outputs and minimizing our inputs to get the best results for everyone?

 

HT: I think there is, there is something common around this, right? And then the common things around this is really connecting the assets, connecting the machines, getting the data. So now we have the data, now it’s about getting insights, right? So, okay, good. Now we can see actually much more. It’s a big step forward. I built these data lakes andand, and. The next step needs to be that I really learn from this data. And so there’s a massive amount of data. If you just think about every using the machine, every single assets delivers every milliseconds, hundreds of data. And so you get really this big, big data lakes. So we need machine learning, we need actually algorithms which are able to deal with this data. And I think technology made huge progress there.

 

So we do have technology in place in order to really understand the data and have machines telling us what it really means. So machine learning and artificial intelligence plays a huge role in this context. Why? Because what this leads to is that I really change the way how I run my business. At the moment every single supply chain in the world is an alert driven, reactive supply chain, which means something happens and I need to correct it, right? I’m always actually running after the fact something happened and I always tried to correct it. This is the thing. Exception-based management, exception-based management, alert driven, supply chain, whatever you want to call it. And this is really what, how everything is built up. But what if I can turn this around? What if I can use this data now in order to predict an outcome? Right? So, and this is a big thing and I think it’s not yet well understood in the market that this means all the supply chain around this world become predictive supply chains. So I predict not only the maintenance, I predict the quality of a product while I am producing the product, right? So reduce waste dramatically. It doesn’t go through the entire production line anymore and at the end I find out in quality control that well, it doesn’t meet my criteria. I can do that while I’m producing. I do the same on, on transportation. Right? So I don’t waste the time of, of waiting for a delivery. I can predict actually it might come exactly at this time. Right. And I predict that something might be in the way which doesn’t allow me to deliver at this time. And I can inform all the people who are involved before things happen. Right? And it’s always about, I really am enabling people and companies to look into the future and predicting outcome. And with that, reducing  inefficiencies on a very, very dramatic way.

 

TR: Interesting. I’m intrigued that you’re talking not just about manufacturing, but also about the logistics and deliveries because traditionally I think a lot of people would associate industry 4.0 with manufacturing, but not necessarily with the logistics, with the deliveries, with all that kind of stuff.  How, how does that fit in? Well,where, where does, let me ask an even broader question – where does the scope of industry 4.0 start and end?

 

HT: Like I mentioned before, right? So it’s really for me, the transformation of a manufacturing industry and not of manufacturing only, right? So the manufacturing processes, yes, of course. The operation processes. Yes, of course. But it’s really about the end to end processes in manufacturing. Right? We are talking about here, it’s really the digital transformation for the manufacturing industries, which would be, would be, I think, my description of it. And so where does it end? Where does it stop? I don’t know.  It’s really the whole design to operate process.  If I’m more efficient in designing a product if I have feedback and input at the, at the very beginning, if I introduced this idea of… I reduce whatever plastic consumption while I’m packaging my goods and all these kinds of things all go in design direction, right? It’s, it’s actually really about building an environment where I’m allowing companies to really look into the future. Like I described it before to start predicting an outcome before things happen. And with that running actually in a very, very, very different way than before.  So, yeah, that’s how we would describe it.

 

TR: Okay. Okay, cool.  So we’re getting to, I got to say, this is a journey, you know it’s, for any company it’s gotto be a series of projects to kind of roll out industry 4.0 technologies, it’s not going to be one individual project. It’s going to be a series of projects and it’s going to be an ongoing journey to get there. But where does it end? I mean, for many people, they’re still very analog, so they have a long way to go. For others, they’re further along the journey, but you know, will it ever end?

 

HT: It is an ongoing journey. It is a transformation. I wouldn’t put an end point on it. It’s really because we get smarter and smarter by the day by learning more and more and using data in a very different way. I would maybe an idea to describe it is we are still living very much in a transactional world, right? If you run the business processes in manufacturing, operations and logistics, it’s very much a transaction. I have a delivery and I transact the delivery, I execute on it and so on. And we changed it around and create a data-driven world  where I analyze I simulate and I just make my decisions based on this information. Right? I’m not just blindly executing a transaction anymore, I start simulating. And now if you, if you start doing that, it’s not necessary to do it for everything at the same time.  Of course, you start in certain areas and then you grow from there, right? And then you find out all of a sudden that, well, if I connect these data, I can be smarter. Right? So I give you an example.   If I’m, let’s say starting in predictive maintenance and I find out in this product, yeah, if I predict maintenance, if I reduce here, the maintenance schedule ends on, I really can save a ton of money by doing that, right? So I’m predicting I’m not just doing blindly scheduling, my maintenance for the asset, I’m really predicting when I need to do it and then I do it. So that saves a ton of money. But then the, the thing is if you really go to this data and then you find out what if we would design this asset differently, if the product would have been designed in the first place in a different way, the product would be more stable, more robust. And so therefore I wouldn’t even need to maintain this, this part which always breaks, right? So now you could start to connecting from maintenance you start now connecting the engineering world, right? So it becomes a maintenance driven engineering process, which doesn’t really happen at the moment. Right? So and now you can build these connections also to manufacturing and to logistics, right? If I understand from these other departments what they need, what would be the impact? What is the influence? If all of this would be much more harmonized, then actually I am better off in total. And so my recommendation is always, okay, start in the area where, where you, you think actually there is the biggest value for you, right? In many cases it’s in the maintenance or in the manufacturing area, but then really think about the possibilities you have. Learn from this data and now start to connect to the other areas, connect to engineering, connect to assets, connect to logistics. And by doing so you become much, much more efficient overall.

 

TR: Sounds like it’s a lot about breaking down silos and making organizations more horizontal.

 

HT: It is right without necessarily an organizational change. Right. So I think, I think actually what is always in the way is if systems or processes would require, we introduce that and this means also do I need to change my organizational set up of the company? Not necessarily. Here what we are doing is we connect these organizations with data. What we need to have is really the data needs to flow. We need to have a data model which allows that. We need to have a data lake where we not have only a data lake for operations and one for manufacturing and one for logistics. No, we need to have the possibility to correlate the data and connect this data and with that actually make every single organization unit in the company much smarter.

 

TR: Okay. Yep. Makes sense. One challenge I guess I see for for organizations is a lot of organizations are still not thinking data first and obviously to go down the route that you’re describing, that’s a mindset then that they need to switch to. And I guess that’s more people than technology thing, but how do we convince organizations to to make that change?

 

HT:  I think actually people would be and are willing very much so to switch to a much more data driven approach. They would be happy to get   the information they need in order to make a decision immediately in real time. They don’t have it right now. It takes a day in order to get a report. By then they have already made decisions hundred times during the day and transformed and executed on a transaction. So what do we need to get to is we need to get the information to the people so that they can make these decisions and I’mabsolutely convinced, I haven’t seen it once where people would be hesitating adopting this type of approach. They really like this approach. There is of course, one aspect, which is very important when you talk about this whole aspect of automation, the whole aspect of everything runs by robots and so on. There is the fear that it takes jobs away, right? And it’s not just a fear, it’s a fact, right? So in manufacturing on the shop floor in their houses what do you see right now is a lot of robotics are in there  and less and less people work in this environment. But you also where it’s very interesting if you look into statistics, the last 10 years, many new jobs have been created. There are new job titles which were not existing before. A chief digital officer, something 10 years ago, if you would’ve said, where’s your chief digital officer? Everybody would have said, what? What, what is that? Now every company has a chief digital office and not just the chief digital officer, but the whole organization around it. Right? Which, which really tells me this digital transformation really opens up completely new jobs and job titles we haven’t seen before, which tells me also that there’s a huge opportunity actually for people. Of course it means education, it means training, it means different skills, but in the services part of it, so operations, maintenance part of it, this is a big job area. And also in this whole data part, it’s a big, big job area with like I said, many new job titles, which we haven’t even seen before.

 

TR: Indeed, indeed. Hans, we’re coming towards the end of the show. We’re up on around 20 minutes now. Is there anything that I have not asked you that you think I should have?

 

HT: No. I don’t think so. I think  the discussion is very, very important. The discussion also needs to be that we need to understand how we really can leverage data, make this transition from transaction to a data driven approach that we go into this  predictive way of running a supply chain. So looking into the future instead of looking always into the past  this will have big impact in how companies run their businesses. Also, I think what is very, very important, it’s not just a hot topic to talk about sustainability. I think actually it’s essential to talk about sustainability and we need to have that as another dimension in this industry 4.0 discussion because this really enabled, Industry 4.0 enables us to be more sustainable and we need to measure it, we need to control it in a much better way and we need to leverage all the concepts which are being created from sustainability, circular economy, the whole waste reduction concepts and so on as part of the Industry 4.0. So it really goes hand in hand in my mind.

 

TR: Super. That’s great. Lastly, Hans, if people want to know more about yourself or about  Industry 4.0 or any of these things, where should I direct them to go? Where should they go?

 

HT: Well, go to sap.com. There you’ll find actually Industry 4.0 on the top where it’s a big theme and where you find a lot of additional material about Industry 4.0 and the approach SAP is taking. Yup.

 

TR: Okay. Super. Hans that’s been fantastic. Thanks a million for coming on the show.

 

HT: Thank you.

 

 

And if you want to know more about any of SAP’s Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain and if you liked this show, please don’t forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

 

The advantages of Digital Supply Chains – a podcast with Johannes Drooghaag (aka @DRJDrooghaag)

I started a podcast series called The Digital Supply Chain podcast over on DigitalSupplyChainPodcast.com (because I have no imagination and that can’t hurt the search engine rankings!).

For the most recent episode I used Lately‘s transcription service to output the text of the podcast so I could add it into the post but Buzzsprout, my podcast host doesn’t allow posts with a lot of text, so I decided to post the podcast, and the full text of the conversation here. I hope you like it – do let me know in the comments how I could make it better.

This is episode 17 of the Digital Supply Chain podcast. In this episode I interviewed Dr Johannes Drooghaag (also known simply as JD, and @DRJDrooghaag on Twitter).

We had a wide-ranging conversation on Digital Supply Chains covering many aspects including Manufacturing, Industry 4.0, and cybersecurity.

Check out the podcast above, and the transcript below:

TR: Good morning, good afternoon or good evening, wherever you are in the world. This is the digital supply chain podcast and I am your host Tom Raftery.

TR: Hey everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and my special guest on the show today is JD. JD would you like to introduce yourself?

JD: Well, thank you Tom. First, first of all, thank you for having me on your, on your podcast. I’m really appreciate this opportunity. Um, my name is Johannes Drooghaag but it’s shortened to JD because that’s much easier and it doesn’t hurt so much to pronounce. Um, I started my career in industrial automation, the classical way, putting a lot of robots and a lot of sensors and a lot of PLCs in a factory. And through time I learned that there are other options and that we can do a lot more with the, with the data we are collecting and turn it into information or what I prefer actionable information. After some 25 years career in corporate roles, I decided to start my own consulting company and I’m focusing on those two fields on the, on the one hand and the organizational side, do human being that is working with the information. And on the other side, the technology that is creating the data out of which we can create that actionable information. I’m 30 years on the, on um, on the road now and I keep learning every day. And that’s one of the reasons why I’m with you today, Tom, to keep learning from you as well.

TR: Oh dear. No, no pressure on me. So no. Okay. So I, I typically start the show asking the guests on the show to give me their personal definition of what a digital supply chain is. Because you know, everyone has a kind of a slightly different approach to it. It’s a broad topic. So how do you define digital supply chain JD?

JD: Well, for me, the digital supply chain is basically the digital twin, so to speak, of the classical supply chain, which as we all know it with, with all the parts moving and the orders. And the digital supply chain is, is the digital twin in which we can do two things. We can constantly respond to what is happening because we need to respond much faster than we used to do in the past. In the past we had mass production, we had large batches, we had orders which were sent out months before we start producing. Nowadays we have to, we have much more dynamics. Orders are changed, we have smaller volumes, we have smaller production batches. We even want to avoid production batches. We want to create, um, single piece flows in our factories. And the second thing we can do is we can start simulating in our digital supply chain. We can do real what scenarios without actually having to touch the process. So we can start looking for opportunities and for optimization, uh, items. We can also look back to the past and see what failed, what didn’t do, what we were expecting that it would be doing and how can we prevent it and what can we learn from that. And that for me is the digital supply chain. The information that we on the one hand get from the existing supply chains, which are much more complicated than they were in the past. And on the other end, the learnings, the organizational handling of that digital supply chain.

TR: Excellent. Excellent. Very good. Very good. You, um, you started off saying that there were kind of two aspects to, uh, your, looking at digital supply chain. One was the human side and the other was the actionable items. Uh, you know, I’ve, I’ve often said that, in these kind of scenarios that the technology is generally very straightforward. It’s getting people to change because the hard part is, is that, is that your, inkling as well that, you know, technology is generally straightforward. People are hard?

JD: Well, we can make the technology as complicated as we want, but that doesn’t lead to anything, right? So if we put, if we start with a straightforward concept and then make sure that the people who we expect to work with it also actually understand what we are expecting from them, which, which kind of responses we want, then we see that there is a, um, an enormous gap because most people are already pretty much loaded with their actual work. Um, and, and we need them to first of all have the mindset then what that when the system is telling them something, they should take it serious. And now on the other hand, they need to understand what the difference is between some kind of general status update and an urgent item that they actually need to respond to. Now having three decades of experience, I have learned a couple of things. First of all, people do not really trust the system because there’s always something which is not right. If we take a closer look, that means we can learn and we can say, okay, we found something in the system, which is not correct. Let’s improve it. Yeah. But the human behavior is to use that as an excuse almost to also ignore all the other things that they see in the system. And the second thing that I’ve learned is when you’re busy going from A to B and somebody is telling you there’s a smarter way you could go through C and then to B, okay. You were focused on going to B, so you’re not paying attention to that additional information. And that’s an enormous challenge on top of the normal change management and organizational challenges we already have.

TR: Yeah,indeed. And how do you overcome that?

JD: Well, the first thing that I always do with my clients is start with the people and look at what their routines are and look at what kind of information they would need instead of the information that they have. Because what I see in my experience is that most service providers make the mistake of just sending more information to the already available information. And production manager or a scheduler or a planner doesn’t need a new report on top of all the reports they need to report or an information overview that tells them what to do and where they should respond to. So I start by filtering. I start by asking them, if you have 20 reports and I take 10 away, which one would that be? Yeah. And the interesting thing is that in most of the time when I ask for 10, they give me 18 because they’re going to use me.

TR: Yeah. There’s a professor of journalism New York whose name is Clay Shirky and he’s got this great quote that I love. He says, there’s no such thing as information overload. There’s only filter failure.

JD: Exactly. I love that.Yeah, yeah, yeah, yeah. No, that’s great. That’s great.

TR: You, you talked as well, uh, not just about the, the people aspect, but of the actionable items. What do you mean by that?

JD: Well, an actionable item. I always take the example of the, of the scada world where I’ve, I’ve spent five years, um, all over the world. If you look at the scada system, you will always have a state to screen where where the operator can see entire refinery or the entire pipeline or any other utilization of that scada. But as soon as the operator is expected to take action, that is automatically put in focus. So at the moment that the operator is expected to take action, the operator sees that action item and that can be a small decision. That can be a big decision, but the system automatically, um, focuses the attention of that operator on that particular item where an action is needed. Okay. Providers of SCADA systems have learned over over the years and they have learned that if you keep that action item in the entire status screen of the refinery, operator won’t notice it because it’s just one little thing in sometimes they have up to a thousand different aggregated devices in the overview and an actionable, actionable item. And an actionable, actionable piece of information means that first of all, the person who shoots take action is informed in the proper way without any kind of distractions. And secondly, the person has a couple of options or has supporting information to make that decision. Now, if I then compare it to what I see, especially in production facilities, that there’s an operator is overloaded with a lot of status written information, which that person should not respond to. And hidden in that stream is that one item where the person should respond to, well then I cannot blame him for not seeing it or ignoring it or pressing the standard button. So the, the popup goes away. Actionable information means to me, I see it when I need it. I get the information I need to take a decision or that actionable information informs me that something is not the way we wanted it to be and I need to do some, some optimizing or it means I need to get some additional resources.

TR: Right. A lot of that sounds like it’s, um, it’s design led issues potentially are maybe not maybe issues with the wrong word, but uh, properly designed screens and user interfaces should do away with a lot of these issues.

JD: Exactly. And then it’s also a system thing because if you look at a supply chain, then it’s not just a screen on a, on a machine. It is a whole stream of information. And if I have somewhere in my supply chain, the change, which was not part of the current, um, planned activities, I cannot wait until that arrives at my facility. I need to respond to that with the appropriate lead time. And if that means a change over in the production planning and that means that I need to schedule some additional machine change over, I need to know that in the proper appropriate time. So we also need to add some intelligence to it. We need to add, um, which timeframes we need. We need to add which kind of materials we need. And if we start figuring that out at the moment that it has already happened, well we are too late, especially when our supply chain is a bit more complicated then the local grocery shop.

TR: Okay. And so you, we have some customers with some very, very complex supply chains. So yeah, like tying all those disparate pieces of data together can prove challenging.

JD: Exactly. I always use this, this lovely example from my own automotive experience. If we look at at the classical, at a car, we have up to 40,000 components. If we look at an electrical vehicle, your favorite topic, we still have about 10,000 components for just one car. Yeah. Now if make one change, just one change, we might have to reschedule, um, a couple of, of those components in the assembly. Now the further we go down the line in that supply chain and we make that significant change, well the more others will have to respond to that. So supply chains are complicated and supply chains are no longer, um, single or dual parties. The same car with, with 40,000 components has up to 1,500 suppliers of those components. And that needs to be managed and it needs to be managed very actively.

TR: Yeah. Yeah. If I needed them or delayed and getting parts to you. Maybe there’s a Coronavirus outbreak and they can’t get their workers to their factories and they have to hold production. It throws everything out.

We are managing the past. With a digital supply chain we are capable of learning how to manage the future

JD: Exactly and if you do that in a in a smart way, and this is what I really enjoy about the digital supply chain because the Corona virus is an example. We have a crisis that might impact our supply chain. Now if we have a properly built and properly designed digital edition of our actual supply chain, that’s the moment where we are capable to say, okay, what happens if we, for example, slow down this line of supply and what does that mean for the other parts? Can we make changes in the capacity or can we increase some full human from another supplier and decrease some folio with this supplier and navigate around that crisis and that crisis never establishes the way we thought. So we can then the next day updated again and we can really start looking forward instead of what most people in the supply chain business always tell me. We are managing the past. With a digital supply chain we are capable of learning how to manage the future.

TR: It’s a, it’s an amazing change isn’t it? In in going from older, more analog technologies where as you write these, say people ran a lays in the past to the digital where we’re analytes in the future. It’s, it’s, it’s, um, I don’t know how to, how to phrase that exactly, but it, it’s, it’s, it’s a huge, huge change in the way people are now able to do business.

JD: It’s, it’s an amazing change and it’s, there’s the simple, in English, we have a wonderful, in German it’s, it’s, it’s almost as wonderful in English we can say, it makes the difference between reacting and acting in the classical analog supply chain management, UI reacting. You’re always reacting to things that have already happened in a digital supply tent. You can act based on the things that you know that will happen because that’s the information you receive. And that’s how you can build your scenarios.

TR: Yeah, that’s it. Exactly. Um, JD. Looking forward the next five, 10 years, where do you see the, the, the biggest, we’ll say potential for change. Um, where do you see the biggest changes that are going to happen? How will they impact?

JD: Well, the biggest changes that I will see, there’s one thing that we are not yet aware of the up to 80% of the production facilities we currently have are built in the previous century classical, uh, built for big batch batches built to, to produce a lot of the same. And companies are starting to learn that you can still use those industry 4.0 and the IOT and the smart supply chain solutions. You just have to be a bit more creative about how to implement them for those, those classical old things. So one of the things that I am already seeing and it’s developing, fortunately that companies are moving forward with their infrastructure, which is in some cases they still plan to use it for the next 20 years. So people stop. I’m believing that all those, all those, those technologies are only available when they build something new or Greenfield facility or to purchase a new machinery. We see that rolling out into the existing infrastructure and that I believe is a wonderful change.

TR: Yeah, yeah, yeah. We, we had an example, I mean, we have, you know, a bunch of examples with different customers, but there was one that, uh, really kind of blew my mind and it was with Harley Davidson. It used to take them 21 days to create a custom motorbike and when they shifted over to digital manufacturing, they brought the time of manufacture from 21 days down to six hours. Just incredible.

JD: That’s incredible. But, but that’s possible.Yeah. Yeah. it’s going back to what you were mentioning, uh, going from facilities which are built to just build lots of, one type of thing. And then when you try and do custom, in this case, motorbikes, it takes a lot more work and takes 21 days. When you switch to a facility which is built to be completely customizable and your lines could be completely fluid, uh, then you can do mass customization and then kind of lot sizes of one and you can drop the time to manufacturer again, in this case of bikes down to as six hours for a custom Harley.

TR: It’s, it’s, it’s really impressive.

…that’s also what industry 4.0 is about. And that is what, what a smart supply chain is about. It’s not just about more data and more technology, it’s especially about becoming more flexible so you can respond to what happens on the market

JD: That’s, that’s, that is really impressive. But it also demonstrates what is possible if you move away from the classical, from the classical patterns. In some cases, that will mean that you actually need to invest in your existing machinery in some cases will mean that you, uh, that you must must reduce some capacity for the mass production, which you don’t need any way, uh, anymore. And in some cases it means that you actually discover that your equipment is doing, is capable of doing much more than you thought it could. You just have to sit down and, and with, with concepts like design thinking, most of it is logical thinking. You need to be able to investigate, to explore, um, to do some, some testing and discover how flexible you can become. Because that’s also what industry 4.0 is about. And that is what, what a smart supply chain is about. It’s not just about more data and more technology, it’s especially about becoming more flexible so you can respond to what happens on the market. Right?

TR: Yeah, that’s true. That’s true. And in the case of Harley, it wasn’t that they did it in the same facility, so they kind of, I won’t say they cheated, but it took a kind of a hybrid approach. Uh, they built a second facility beside their existing facility and then they transferred all of their staff and all their machinery into the new facility. But it was two thirds the size of their existing facility. And yet, and yet, because it was completely digitized, they were able to then, as I say, bring the, the lot times down from days to hours.

JD: Yeah. But, but this is, this will happen in, in many cases and sometimes you have the luxury to say, okay, I’ve got a second production facility and I can basically redesign my existing process with a single piece flow concept in mind instead of batches and long production. In other cases you will have to do that. And we did it at one major automotive supplier, which unfortunately I cannot mention by name. We did it. We did the same thing we did in the existing facility. We started with machine number one and, and eliminated all the batch containers and, and uh, the batch flow, um, and created a single piece flow structure around that and then took it to the next level. And it was very fortunate that we have a very good tie in of the ERP system from, from SAP at that moment. So we could get all the production data, we could get, um, all the, all the settings, uh, the proper product identifications from the system. And we were capable of building a single piece flow throughout the production facility. It took two years because we had to do it step by step and we could not, um, go from, from, um, from the old school to the new school, uh, by just closing down the factory. But one of the results is, is that we decreased the capital on hand to time, which was around 18 days. Um, we’ve decreased that to two days. So from purchasing the material to shipping it to the next facility was reduced by, by more than 80%. That is serious money.

TR: That’s a lot, yeah. That’s impressive. That’s really impressive. Yeah. That’s amazing. Okay. Look JD. We’re coming towards the end of the podcast and uh, typically at this time of the podcast I’ll ask people, uh, is there any question that I haven’t asked you that you wish I had?

JD: Um, one question Tom, and that’s my favorite second topic. Cybersecurity. Um, so if you ask me, um, JD, what would be your top priority in digital supply chain? Besides all the technical opportunities we have and the organizational opportunities we have? I would say cybersecurity has to be the top priority because the more digitized we get, the more risk we have that something bad happens to the digitized world. So cybersecurity, big picture approach, make sure that it is by design and not by coincidence.

TR: Very good, very good. Very good. Yeah, no, hugely important. As we are, uh, opening up our manufacturing facilities and our logistics and everything as we’re opening them up to the internet, we are massively increasing the threat landscape. So yeah, absolutely. Very, very important to consider cybersecurity from, as you say, from the design phase, right through not, you can’t be something that you kind of cobble on afterwards dead right?

TR: So JD, if people want to know more about yourself, what’s the best place they can go to find information about JD?

JD: Well, they can visit me always on my LinkedIn profile or on my website under your JohannesDrooghaag. My website is JohannesDrooghaag.com. Unfortunately, jd.com was already taken, so I kind of,okay. Um, I am on Twitter. I am on, on Facebook, Instagram. Twitter is my main social media exposure. They can find me there under JohannesDrooghaag as well. Um, and otherwise, uh, drop me a note at my website and I will, uh, reply as soon as possible.

TR: Superp, super JD. I will put those links in the description of podcast when I publish it so everyone can have access to them. Thanks a million for taking time and joining me on the show today.

JD: Well, thank you for having me, Tom. It was a great discussion.

TR: Okay, we’ve come to the end to show thanks everyone for listening. If you’d like to know more about digital supply chains, head on over to sap.com/digitalsupplychain, or simply drop me an email to Tom dot raftery@sap.com.

And if you liked this show, please don’t forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

This episode was originally published on the Digital Supply Chain podcast.