Supply Chain Transformation

Jan. 14, 2019
To remain competitive, companies need to become more collaborative along the entire supply chain. IIoT and cloud technologies can enable this.

Once we accept that the real competition happens at the supply chain level, it becomes obvious that having a perfectly organized, tuned and efficient supply chain is mandatory. At the plant level, there are several aspects that can determine performance. But at the supply chain level, one single aspect is more important than anything else: collaboration.

Strong collaboration between sales and supply chain, suppliers and a company—and every day more frequently even between customer and supplier—is critically important to beat the competition. No matter how clear this fact may be, achieving an effective collaboration has always been extremely difficult. Every link in the chain has different immediate goals and objectives.

The sales team wants unlimited stocks of products in order to have no limits in increasing sales. The supply chain group is more interested in inventory turns and does not get measured on sales. Suppliers want to maximize their prices and minimize their inventory costs while also getting recognition for its short lead times and low prices. Technology helps facilitate the exchange of real-time information and enable digital transparency, but it’s not enough to solve this natural and embedded conflict.

What can really drive a change in the behavior are new common metrics driven by common and shared real-time information. The digital supply chain requires collaboration with a purpose to a higher level. Correspondingly, it is necessary to define business metrics that measure collaboration and drive operational performance both inside and outside any company. Like any measure to be effective, it must be based on real data. But in this case, they have to be recognized as meaningful and “true” along the whole collaboration chain (and many times it’s still difficult to get people to agree on KPIs inside the same company).

Identifying the right measures is not an easy task. But even more complex is creating a “single system” of systems that run on different technologies from different technological ages at different speeds. It’s easy to understand that if silos of information were dangerous when looking at a single company, they are totally unacceptable when looking at the whole supply chain.

In this scenario, each part of a supply chain needs to plan and prioritize its investments and strategic initiatives in order to become an enabler of the collaboration. This is the reason why some technologies are becoming increasingly popular and accepted even by companies that were initially skeptical—they are simply the only way to make it happen.

The Industrial Internet of Things (IIoT) is the most flexible and cheapest way to collect missing data from existing assets from inside or outside the plant and independently from the technological readiness of the asset itself. If combined with the cloud, IIoT is a great way to collect data at the needed level of detail and make information homogeneous and available to everybody along the supply chain. It easily does away with the existing data silos internal to organizations, integrating and linking new and legacy systems. Cloud computing makes it possible to share data and derive information generated from data sources spread along the supply chain.

This information would not otherwise be available; without it, it would be difficult to measure and drive operational performance along the supply chain. It even helps to align culture, getting everyone—from the first supplier to the end customer—on the same page and speaking the same language. Moreover, cloud is scalable by design and the available resources can grow progressively at the same pace the components of the supply chain grow their ability to generate data. It’s even flexible enough to support the continuous changes and adjustments of the supply chain itself to stay relevant to the market. It enables predictive analysis of the data to help supply chain synchronization and optimizations and to draw insights about current and potential customers at any step of the value chain.

It is difficult to say if it is the technology that drives the change or if it is mainly organizational and cultural. The two aspects are tied together—the organization changes because the technology supports it and the technology evolves because culture and organization demand new tools to support their needs. Regardless of which comes first, we are certainly looking at a disruptive change if not a revolution.

Luigi De Bernardini is CEO at Autoware, a certified Control System Integrators Association (CSIA) member based in Vicenza, Italy; and president of Autoware Digital. For more information about Autoware, visit its profile on the Industrial Automation Exchange.

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