The Connected Value ChainPeople, Processes & Technology together to achieve Industry 4.0.

The Connected Value Chain

Industry 4.0 & being Connected

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The term Industry 4.0 refers to the combination of several major technology innovations, all expected to have a major impact on the manufacturing industry.

Advanced Robotics, Artificial Intelligence (AI), device sensors, cloud computing, big data analytics, the Internet of Things IoT); when combined together, connect the physical and the virtual worlds.

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Manufacturing & The Supply Chain is Rapidly Changing

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There is major pressure on manufacturers to increase operational efficiency to remain competitive, and innovative, as market con-ditions remain challenging and are changing faster than ever before.

Having shorter times to market, shorter inno-vation cycles, more complex products, larger volumes of data, all mean that manufactur-ers are well placed to react to changing mar-ket conditions, quickly and effectively.

The rise in mass customisation, volatile mar-kets, and high productivity, calls for the need for enhanced flexibility; Industry 4.0 technolo-gies can give manufacturers the capability to become extra flexible.

Having a responsive value chain enables manufacturers to have the ability to be more responsive to customer needs, and in a more direct way.

Products as diverse as aircraft engines are being offered as services, on a subscription basis. On the other hand, manufacturers can now make one-off, customised products as cost-effective as those that are mass pro-duced. This allows them to fully tailor products to the customer’s needs and may actually generate significantly higher margins than mass-produced offerings.

The Connected Value Chain

The Connected Value Chain

Everything is becoming smart, from smart phones, smart homes, smart cars to smart factories. Manufacturers are feeling a defi-nite technology push to become smarter – but will they react pro-actively?

The connected value chain allows for bet-ter transparency and flexibility. Companies can be connected vertically and horizon-tally. For example, inventory management systems can connect retailers, distribution hubs, transport companies, manufacturers, and suppliers. Each can clearly receive data about the others’ stock levels, location, fulfil orders automatically, and trigger mainte-nance and upgrades. This levels out any sur-

pluses or shortages which often occur in ex-isting supply chains, and enables the chain to compensate and react to sudden market changes.

Car Manufacturer Jaguar Land Rover suc-cessfully produce cars on an Assemble to Or-der (ATO) basis, giving customers the choice to completely customise their vehicle.

FMCG brands such as Coca-Cola and Marmite have embraced mass customisa-tion, with the production of personalised products, and have seem impressive sales increases as a result.

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Connected Products

Product data is fundamental to value creation in smart, connected products, and will revolutionise the com-plete product lifecycle, as Manufacturers are forced to service both B2B and B2C markets.

Smart, connected products will have a major impact on value chains because we’ve always thought of the product moving through the value chain, but in fact the product is actually talking to the engineering, manufac-turing, service departments and shop floor operators. It’s even talking to the sales and marketing department about what the customer is thinking. Traditional custom-er-relationship management

(CRM) is where customers talk to you about their feel-ings about the product. And now, in this new digital world, we’re seeing products that have early-warning devices that tell us; what value the customer is getting, what the opportunities for upsell are, and when they are going to need a replacement prod-uct. The list is endless.

The product is becoming a sensor in the relationship with your customer, dictating the value add. This will change a lot in terms of how things are created, sold, serviced, operated, and so on, and change how value is creat-ed for the customer.

Every industry will be affect-

ed by Industry 4.0 in some way– as the capabilities of smart, connected products can be realised in all kinds of industries such as farming.

John Deere can connect not only the farm machin-ery but irrigation systems, soil and nutrient sources with in-formation on weather, crop prices to optimise overall farm performance.

A Tesla vehicle in need of repairs can autonomously call for a corrective software download or if necessary send a notification to the customer with an invitation to arrange a visit to a Tesla facility.

The Connected Value Chain

Connected Manufacturing

Connected Service

Bringing together all areas of manufacturing, such as Operations, IT, Engineering, Quality, Finance and Supply Chain, will help create a culture of knowledge and data sharing for a connected manufacturing operation.

Data can be used to help manufacturers understand how their systems in the facto-

ry and broader value chain are performing, and how they can be improved. Utilising available technology and software systems to create data is essential to solve com-plex manufacturing challenges, and to turn connected factories into connected value chains.

It is important to integrate Service into the complete product offering, and not just as the traditional post-sales support, to deliver better value. Creating a Product as a Ser-vice business model could help manufactur-ers engage with their customers more and create new revenue streams. For example, customers have gained enhanced user experiences with products such as Philips Lighting, where they can control lightbulbs via a smartphone, turning them on and off, programming them to blink if they de-tect an intruder, or dimming them at night. These sensor-based products feed user and

condition information to the manufacturer, so to be used for various activities, such as the delivery of pro-active and preventative maintenance. This service based business model is taking maintenance to the next level in the factory, and goes beyond the product, to include fixed assets such as pro-duction machinery. Suppliers of machinery could fix vital problems before they’ve even broken down, through the use integrated sensors and devices. This innovative way of connected the product and service, could improve unplanned downtime statistics and reduce maintenance costs.

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Connected Logistics

Connected Demand

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The adoption of connected logistics could improve the operational efficiency and production processes of various logistic ap-plications such as inventory management, warehouse management, fleet manage-ment and logistic planning.

Connected logistics may allow for a more horizontal value supply network, rather than the traditional vertical network, resulting in knowledge sharing, cost sharing, and a

more efficient allocation of production and flexibility. Connected manufacturing is shak-ing up the traditional supplier relationships and opening up the opportunity to collab-orate with similar companies in the same industry or to strengthen the supply chain through vertical integration. Manufacturers should evaluate which is more beneficial to them in the long term, and which would create more value to the customer.

Connected demand is a means of predict-ing demand, and producing product in a less traditional, supply-demand way. For ex-ample animal monitoring systems can cap-ture vital 24/7 data on the animals health to alert the farmer of animal productivity prob-lems and events . This cloud based software allows for better management of animal di-etary needs and improves overall produc-tivity and profits.

Search terms in google have been a good indicator of global flu activity. Aggregating the search data means that flu trends and locations can be monitored, and demand for the associated products determined, in a smart connected way. Connected tech-nology and devices could mean less distur-bance, fewer surprised and a more sustain-able, demand driven supply chain.

The Connected Value Chain

Where to Start?

Ensuring the organisation, its people, processes, and technology all talk to each other is key to having a connected value chain. One place to start is by creating a Technology/Digital-isation Transformation Strategy; which should include the following steps;

Existing Infrastructure

The first step would be to access and evaluate all existing IT and OT (Operational Technol-ogy) infrastructures in your manufacturing operations. Taking a good look at the current state of operations, and considering the future state, whilst always keeping in mind the key objectives that need addressing, such as; reducing downtime, improving productivity, re-ducing waste, increasing overall equipment effectiveness (OEE), and so on.

Understanding how data is collected and presented is important in order to identify any flaws with existing systems and establish where there could be improvements. Ask yourself what level of operation your organisation falls under, and what steps can be taken to move up the ladder, to achieve Operational Excellence and Industry 4.0 standards?

Level 1: Ad-hoc reactive operations Level 2: Planned and controlled operations Level 3: Standardised processes in place Level 4: Consistent Performance Level 5: Operational Excellence / Industry 4.0

Control Systems & Connected Devices

Once the infrastructure is known, you can now look at what sensors and devices are con-nected together, and what feeds and receives data. Some control systems may need up-dating or replacing so that they all fully integrate with each other.

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Network Infrastructure

These devices and systems all communicate with other through an IT network, so the next step would be to evaluate your existing network structure. Creating a physical map of cur-rent networks, with the number of machines and equipment communicating with each would be a useful exercise, as it may identify where networks could be updated and streamlined.

Security

Finally, take a look at security. What security policies and procedures are currently in place to protect your data, and identifying any potential risks or flaws in these standards.

The Connected Value Chain

What are the Opportunities?

There are many opportunities that Manu-facturers can gain when connecting value chains.

Firstly, creating a smart connected factory, with intelligent production systems and ma-chines communicating with each other (IoT), integrating the physical and digital world and then rolling this out into the value chain, is a massive advantage to manufacturers.

Having cloud data applications is a must when Industrial Machines, real time big data analysis, virtual networks, physical devices and human networks are to be connected

and collaborated together.

There is huge competitive advantage to be gained from having improved process effi-ciencies, through the adoption of Industry 4.0 methodologies, procedures and tech-nologies, as Manufacturers will develop and produce products based on knowledge and data, to be one step ahead of the game.

Having operational flexibility is a huge gain, as Manufacturers have the ability to react quickly and efficiently to sudden changes in market conditions.

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What are the Challenges?

A major challenge of connecting value chains is understanding what makes up the supply chain and pulling together disparate systems and processes. Only when this is es-tablished, then a Technology/Digitalisation Transformation Strategy can be accurately formulated.

Cyber Security is a key concern for Manu-facturers when tasked with implementing Industry 4.0 technologies in the cloud. Deal-ing with huge amounts of data from a wide range of sources opens up a huge threat to the damage and malpractice of hardware or software, so it’s imperative to have plans in place to protect these information sys-tems. Employing reliable, external partners to help with security is vital, as most man-ufacturers are not in the position to do this alone.

As demand for new technologies rise, so is the demand for new human skills and the associated processes. Manufacturers may experience a shortage in the supply of technological capable employees. An in-

vestment in training staff for new and future technology applications will be necessary.

Getting employee buy-in early on in the pro-cess is so important. Low acceptance from employees can mean the difference be-tween success and failure of a new project such as this. If employees get on board early on it will also mean that inter departmental relations will be more effective, as they will collaborate and share information and ide-as more freely.

The lack of trust amongst stakeholders or suppliers to share data/datasets may be apparent. Manufacturers may not be ready or confident enough to collaborate and share data amongst their partners. Manu-facturers need to stop managing the supply chain and start collaborating with it, to gain the full benefits.

The Connected Value Chain

Finally, changing the business model to product-as-a-service will be a testing. Manufactur-ers have traditionally produced physical goods and captured value by transferring own-ership to the customer through a sales transaction. The owner is therefore responsible for servicing the product and its general upkeep. Smart, connected products are opening up the opportunity for manufacturers to access product data, have the ability to repair the product, and have control over the complete performance of the product, whilst optimis-ing the service. This new model means that manufacturers keep ownership of the product and the cost of its operation and service, whilst the customer often pay as they go.

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SummaryHaving smart factories alone is not enough if manufacturing is to embrace the oppor-tunities of Industry 4.0. Creating connect-ed value chains, which connect people, products, services, logistics and suppliers, is where the opportunities lie. Manufacturers need to fully digitise the entire value chain starting with the manufacturing facility. This includes the integration of existing technol-ogy, new technology, and forging a digitali-sation strategy that includes not just the fac-tory but the complete supply chain.

Don’t under or overestimate the capabilities of your engineering and IT department. Em-ployee buy-in is essential when creating new processes, and implementing new technol-ogies and methodologies. Offer training in-ternally and externally, so that staff feel like

they are part of the Industry 4.0 journey, and not an afterthought. If necessary, seek out an external technology partner, who can audit your existing technology usage and recommend Industry 4.0 technology invest-ments.

Don’t stand still and watch your competi-tors leapfrog you. Like any other big project, move forward with an achievable strate-gy, and make sure you have the capabili-ties to achieve it, whilst understanding the true value to be gained. Don’t wait to see how Industry 4.0 pans out before invest-ing, investments will inevitably need to be made today, even though many of the fu-ture products and processes are yet to be known.

Manufacturing Improvement Solutions

To learn more about The Connected Supply Chain and how Industry 4.0 Manufacturing Operations Management (MOM) technologies could benefit your manufacturing operations, please click here or call us on +44(0)1274 599955.

Alternatively if you’d like to sign up for a free Industry 4.0 Technology Survey on your existing systems, please email enquiries@cimlogic.co.uk

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