MHD sits down with Craig Stanford, Director of Active Supply Chains, to talk about the power of the e-commerce consumer, and the impact of the Internet of Things (IoT).
During our recent webinar about the Connected Supply Chain hosted by MHD, we asked our audience what the biggest hurdles are to implementing IoT solutions. Thirty-two per cent said the business case doesn’t stack up and 30 per cent said it is difficult to get the right technology fit. The truth is, both are interrelated.
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Artificial Intelligence (AI)
AI technology in supply chain seeks to augment human performance. Through self-learning and natural language, AI capabilities can help automate various supply chain processes such as demand forecasting, production planning or predictive maintenance.
“AI supports the shift to broader supply chain automation that many organisations are seeking,” said Mr Titze. “For example, AI can enhance risk mitigation by analysing large sets of data, continuously identifying evolving patterns, and predicting disruptive events along with potential resolutions.”
Advanced analytics span predictive analytics — those that identify data patterns and anticipate future scenarios — as well as prescriptive analytics — a set of capabilities that finds a course of action to meet a predefined objective. The increased availability of Internet of Things (IoT) data and extended external data sources such as weather or traffic conditions allow organisations to anticipate future scenarios and make better recommendations in areas such as supply chain planning, sourcing and transportation.
“Advanced analytics are not new, but their impact on today’s supply chains are significant,” said Mr Titze. “They will help organisations become more proactive and actionable in managing their supply chains, both in taking advantage of future opportunities and avoiding potential future disruptions.”
The IoT is the network of physical objects that contain embedded technology to interact with their internal states or the external environment. “We are seeing more supply chain practitioners exploring the potential of IoT,” said Mr Titze. “Areas on which IoT might have a profound impact are enhanced logistics management, improved customer service and improved supply availability.”
Robotic Process Automation (RPA)
RPA tools operate by mapping a process in the tool language for the software ‘robot’ to follow. They cut costs and eliminate keying errors. “We are seeing a significant reduction in process lead times RPA technology is used to automate the creation of purchase and sales orders or shipments, for instance,” said Mr Titze. “RPA technology reduces human intervention and improves consistency across manual data sources within manufacturing.”
Autonomous things use AI to automate functions previously performed by humans, such as autonomous vehicles and drones. They exploit AI to deliver advanced behaviours that interact more naturally with their surroundings and with people.
“The rapid explosion in the number of connected, intelligent things has given this trend a huge push,” said Mr Titze. “The once distant thought of reducing time for inventory checks by using drones’ cameras to take inventory images, for instance, is here.”
Digital Supply Chain Twin
A digital supply chain twin is a digital representation of the relationships between all physical entities of end-to-end supply chain processes — products, customers, markets, distribution centres/warehouses, plants, finance, attributes and weather. They are linked to their real-world counterparts and are used to understand the state of the thing or system in order to optimise operations and respond efficiently to changes.
“Digital supply chain twins are inevitable as the digital world and physical world continue to merge,” said Mr Titze.
Immersive experiences such as augmented reality (AR), virtual reality (VR) and conversational systems are changing the way people interact with the digital world. “In supply chain, organisations might use AR along with quick response (QR) codes and mobile technology to speed up equipment changeovers in factories,” said Mr Titze. “Immersive user experiences will enable digital business opportunities that have not yet been fully realised within global supply chains.”
Blockchain in Supply Chain
Although supply-chain-related blockchain initiatives are nascent, blockchain has potential to fulfil long-standing challenges presented across complex global supply chains. Current capabilities offered by blockchain solutions for supply chain include traceability, automation, and security.
“Organisations might use blockchain to track global shipments with tamper-evident labels, allowing a reduction in the time needed to send paperwork back and forth with port authorities and improved counterfeit identification,” said Mr Titze.
“The 2019 Top Supply Chain Technology Trends You Can’t Ignore,” from Gartner provides an outlook into other emerging trends that might disrupt supply chain operations in the upcoming years, such as 5G and edge computing.
Keen to use new technologies to streamline processes and lower costs, a majority of supply chain operators are finding lack of strong leadership and vague methodologies are hampering much-needed digital transformation projects.
Faced with increasing competition and shifting customer expectations, many operators are struggling to get much needed changes required to drive meaningful digital transformation over the line. The promise of advances such as fully integrated supply chains, driverless vehicles and fully flexible, customer-focused delivery scheduling tools is not being realised.
According to a recent survey commissioned by FTS Group and Software AG, 60% of respondents nominate a lack of tools and methodologies as the top factor inhibiting the successful completion of digital transformation projects. Meanwhile, 41% indicate a lack of leadership from the top executive team is their biggest concern.
These results are very concerning and highlight that there is considerable work to be done within many supply chain operators, if the promises of digital transformation are to be fully realised. In particular, senior management must clearly communicate that it is supporting these business-critical initiatives and provide sufficient funding to allow the acquisition of the proper tools for the job.
Digital initiatives – at least the good ones – should be based around an end-to-end customer journey/experience. However, most organisations aren’t structured in this way and so the initiative will necessarily cut across multiple domains and lines-of-business. Consequently, you need both a strong commitment and direct, hands-on involvement from executive management to adjudicate competing claims and keep the program moving forward.
Other constraints flagged by survey respondents include a lack of funding, nominated by 34%, and a lack of leadership from line managers (28%).
Room for improvement
Despite a clear need for digital transformation within many organisations, some for survival reasons and others for market growth, the survey found almost a third (32%) are not using digital technologies to transform their business processes and workflows.
This is also cause for concern, as organisations not taking advantage of technologies to improve the way they operate risk falling behind their competitors very quickly. The projects become just another point-in-time exercise and not a critical part of the company’s processes.
Interestingly, 44% of survey respondents still believe they are doing better than others within their industry sector when it comes to implementing digital initiatives. This compares with 39% who believe they are level-pegging and just 16% who feel they are falling behind.
Many senior executives still only view digital transformation as a way to streamline processes through automation. However, its potential for adding value is far more profound than this. As technology solution providers, we need to become more adept at explaining the potential that digital transformation can deliver in clear and definable business terms.
Key technology challenges
The survey also sought to understand what key technologies Australian organisations feel will have the most impact on their digital transformation initiatives during the next two years.
Topping the list is cloud computing, nominated by 44% of respondents, followed by mobility (37%), the Internet of Things (35%) and advanced analytics (26%).
Here the results are not surprising as both cloud and mobile continue to be hot topics within the majority of organisations. However, in reality, cloud and mobile are merely platforms to more easily connect the customer, supply chain and transport partners, and employee with the organisation. What is more important is what services and solutions the organisation will be providing in the cloud or on a mobile device. These are the things that will drive digital initiatives and have a positive long-term impact on this ecosystem.
“By following these guidelines, supply chain operators will be much better placed to succeed with their digital transformation projects.”
Key business challenges
The survey also revealed the key business challenges currently faced by Australian organisations that they are aiming to overcome through digital transformation projects. Topping the list is business agility, nominated by 52% of respondents, followed by cost efficiency (45%), and data capture and analysis (37%).
Where cost reduction had been top-of-mind for organisations in the aftermath of the Global Financial Crisis, these results show that attention has now shifted to becoming more agile. However, while they are often seen as competing priorities, they are actually two sides of the same coin, and both fall under the umbrella of driving organisational improvement.
So, for example, a digital initiative to transform customer service may lead to cost efficiencies in serving those customers through less waste in the supply chain, but it is not necessarily the primary objective of the project.
Digital transformation programs can achieve both improved agility and cost reduction if some key guidelines are followed. These include:
- Establish a digital champion. Assign an individual within the organisation responsibility for driving change and striking a balance between the needs of the business and fiscal discipline. There needs to be a cross functional approach adopted by this individual.
- Utilise off-the-shelf products and platforms. Most organisations see their operations and needs as unique and needing a custom solution. However, this can often be addressed with process change. For example, by establishing ways to automate parts of the development cycle, an organisation can decrease the time needed for new products to be developed.
- Make iterative changes. Rapid, small changes ensure innovation is accessible and not intimidating for an organisation. It also ensures that efficiency improvements happen quickly, freeing up time that can be saved and re-invested. Small wins breed momentum for greater change.
- Don’t forget the human impact. Technology-focused projects often neglect the human impact of the change. Include a human-centred design approach and back that up with a strong change management and training program to ensure the digital initiatives are adopted by people driving the business.
- Promote internal innovation. By focusing on internal innovation, particularly improving procedures and cutting down on waste, organisations can free up time that can be spent getting more of the usual work done or devoting more time to process improvements.
By following these guidelines, supply chain operators will be much better placed to succeed with their digital transformation projects. This means they will be able to take advantage of the benefits offered by new technologies and services to drive efficiencies and improve organisational performance.
Paul Sargeant is the chief operating officer at FTS Group. For more information call +61 2 9657 0999, email firstname.lastname@example.org or visit www.ftsg.com.au.
Australian logistics company, Linfox, will implement an advanced telematics and management solution into its truck fleet, through a partnership with Australian telecommunications business, Telstra, and GPS and fleet management solutions provider, MTData.
The Internet of Things (IoT) technology will be rolled out to the whole Linfox truck fleet and will reportedly deliver advanced transport and logistics data and quality-benchmarking information to enhance public and driver safety on Australian roads.
“We are in a critical time in the logistics industry and it’s important to deliver technology that will ensure greater safety for our drivers and the communities in which we operate,” said Conrad Harvey, Chief Information Officer, Linfox. “Safety is a key issue within our industry and community and by partnering with Telstra to implement transformative technologies that allow us to better monitor and measure safety compliance throughout our fleet, we can work to reduce risk factors and enhance safe driver behaviour.”
Telstra’s IoT solution will include Samsung tablets mounted into Linfox trucks so drivers can access logbooks and complete safety checklists, and have capability, in some vehicles, for in-cabin recording of road-safety incidents.
“The technology will require our drivers to log on and complete safety checklists before they head off on the road and will allow us to gain more accurate in-cab readings of speed and distance,” said Harvey. “The devices will enable us to coordinate our vehicles efficiently, reduce congestion on the roads and above all, ensure a higher level of safety for the community.”
The deal comes three months after Telstra’s acquisition of MTData.
“Linfox is one of Australia’s largest and most successful logistics companies and we are committed to supporting its efforts to achieve safer and more efficient supply chains,” said Michelle Bendschneider, Executive Director – Global Products, Telstra. “With MTData’s expertise in delivering IoT solutions for the heavy vehicle industry, coupled with the unrivalled capability of the Telstra mobile network, we have created an innovative solution to help transform Linfox’s business.”
At the ‘Smart Factory Solutions with IoT Technology’ food and packaging seminar, held by automation company Omron in Sydney, Melbourne and Brisbane last week, technology experts discussed the key features of smart factories of the future, nothing that an estimated 13.5 billion devices will be connected by 2020 worldwide.
“It’s all about collecting and analysing data to improve efficiency,” said Chris Probst, Automation Technology Product Manager, Omron.
“The amount of data doesn’t matter – it’s what you do with the data that counts,” he said.
Probst said many Australian companies are now talking about the Internet of Things (IoT) technical revolution, but not many are prepared for it.
“Companies that embrace new technologies will be better positioned to adapt to changing marketing conditions and customer needs.
“This is the next generation of manufacturing where people and machines work together.”
Hal Varian, professor of information sciences, business, and economics at the University of California at Berkeley and Google’s Chief Economist agreed.
“The ability to take data – to be able to understand it, to process it, to extract value from it, to visualise it, to communicate it – that’s going to be a hugely important skill in the next decade,” he said.
Wei-Jian Ong, product manager for Omron’s Sysmac controllers based in Singapore, said data collection and analysis can help manufacturers streamline their operations.
“The collection of data is now vital for industry,” said Ong. “The Internet of Things (IoT) is basically a network of devices with network connectivity for the collection and exchange of data.
“With IoT you can monitor, analyse and act – you can coordinate and monitor your production line. All machines work together to perform at optimum level.”
“Smart factories need to be more efficient and fully connected to their supply chains,” said Probst. “AIVs (Autonomous Intelligent Vehicles) not only save on labour costs, they can increase operational efficiency.
“Mobile robots are easy to deploy, with no facility modifications required. They work safely around people and can operate 24/7.”
Probst said smart factories were also helping to significantly improve workplace safety.
“The Smart Factory of the future will improve workplace safety, improve yield and traceability, drive down production costs and eliminate errors,” he said. “This will enable a ‘flexible’ manufacturing revolution.”
Global information technology firm Unisys predicts that the future growth of the airfreight industry and its ability to capitalise of the e-commerce market will be heavily impacted by the rise of the Internet of Things (IoT) and voice-enabled artificial intelligence (AI) smart devices and systems, warehouse drones and strategic alliances between airlines and distributors.
“As the air cargo industry undergoes growth and transformation, driven by rapidly increasing capacity supply on passenger flights, and the shift to business-to-consumer small parcel shipments as a result of e-commerce, cargo operators will be forced to embrace such innovation to be more efficient, nimble and proactive in an increasingly competitive and price conscious market,” the company said in a statement.
Venkatesh Pazhyanur, Senior Industry Director of Freight Solutions at Unisys, noted that the freight industry as a whole must make an effort to keep up with evolving technologies.
“The cargo industry needs to embrace disruptive technologies from the consumer world, including Internet of Things, digital assistants and drones, to increase efficiency and meet customer expectation for greater transparency throughout the supply chain,” said Pazhyanur.
The company added that the Asia-Pacific air cargo industry is experiencing growth and transformation driven by rapidly increasing capacity supply on passenger flights, and the shift to business-to-consumer small parcel shipments as a result of e-commerce. This growing passenger demand will increase the number of passenger flights and add to cargo capacity supply, it added.
According to the International Air Transport Association (IATA), the number of people travelling by air globally will almost double between 2016 and 2035, with the greatest growth in Asia Pacific. At the same time, the rising popularity of e-commerce is changing the nature of cargo shipments, incrementally increasing the number of small parcels – predicted by management consultancy McKinsey & Company to grow five per cent annually in mature markets and 17 per cent annually in China.
“At Unisys we predict these market pressures will bring innovation in three areas in the cargo supply chain: smart warehouses will become even smarter, drones will finally take off in the cargo supply chain – but inside the warehouse, and new alliances between airlines and global distributors will enable longer term capacity management,” added Pazhyanur. “Much of the underlying technologies are already being used in other sectors – including the consumer world. But now, more than ever, cargo operators will be forced to embrace such innovation to be more efficient, nimble and proactive in an increasingly competitive and price conscious market.”
Analysts from Research and Markets have announced in their latest report on industrial automation that the global industrial automation services market was worth US$35.2 billion ($44.5 billion) in 2016 and is estimated to reach US$64.5 billion ($80.6 billion) by 2022, growing at a compound annual growth rate (CAGR) of 10.6 per cent for the forecasted period.
Industrial automation involves automation of manufacturing, quality control and material handling processes, with control systems, information technologies and robots used to handle different processes in an industry. Various types of industrial automation include fixed or hard automation, programmable automation and flexible or soft automation. Project engineering and installation holds major share in this market. Advantages of industrial automation include increased productivity, improved product quality, reduced routine checks and improved operational efficiency.
According to the report, the US is currently at the head of the industrial automation market, followed by Europe. Asia Pacific (which includes Australia) is expected to be the fastest growing region in this industry. The reports says during 2015–16, US companies exported nearly US$10.5 billion worth of products to foreign markets.
Some of the key growth factors of this industry are the need for operational efficiency, rapidly growing SMEs, a growing inclination towards Internet of Things (IoT) and cloud-based automation, the growing demand for smart factories, mass customisation, supply chain synchronisation, integration of systems and increasing R&D and innovation in artificial intelligence and advancement in the M2M communication technology. High installation and maintenance costs and lack of trained professions are some of the constraints in this industry.
Major companies in this industry include Honeywell International, General Electric Company, Mitsubishi Electric, Rockwell Automation, Johnson Controls, ABB, Samsung Electronics, Siemens AG and Schneider Electric. The report also pointed out that most of the regional and local vendors are vertically integrated. International players can grow by acquiring regional or local players.