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How Does Globalization Affect Resources?

Danielle Beurteaux

How do our global and very interconnected markets effect resource volatility?

The evidence points to increasing resource volatility as globalization grows, including in agricultural products. “The globalized world increases the pressure on resources, making even basic food volatile, and especially increasing the pressure on energy and metals,” says Kai Goerlich, SAP’s Idea Director, who led the research.

This research is based on World Bank data and converted into 2010 U.S. dollars for consistency. This is part one of a two-part series.

Top 10 resources and trends

1. Cotton

The top cotton-producing countries are India, China, and the U.S.

The cotton world had a bit of a shock last year when news came out that China was about to unload its massive cotton reserves, which sent prices down. But China didn’t actually flood the cotton market, and cotton production has also decreased somewhat, both of which reversed the price decrease.

The USDA also reports that production levels have recently decreased, particularly in West Africa. Demand from Pakistan increased because its own crop was damaged by pests – good news for India, which increased exports to Pakistan to make up the shortfall.

2. Maize

Maize, aka corn, makes up about a third of global cereal production, according to the World Bank. Maize production has increased over the past 20-odd years, mostly due to its increase as a crop in Asia. The Asian, Canadian, and Australian markets have had an effect on the U.S. Notwithstanding that areas of America’s Midwest are still known as the “breadbasket,” U.S. maize production is actually on a downward trend. It will be interesting to see if the Trans-Pacific Partnership, once (or if) signed will change that development.

3. Platinum

Platinum might be known to consumers mostly for jewelry, but the primary market for this metal is automotive. The majority of platinum comes from South Africa; Russia is the second largest producer. The World Platinum Investment Council is predicting that the metal’s market deficit will decrease this year because of the increased availability of recycled metals and less demand. However, others think the deficit is permanent and predict that platinum will return to its historical price above gold. Much of this depends on demand from global industry, particularly in China.

Here’s an example of the global nature of resources: South African mine workers’ union contracts expire in June. Labor disruptions would, obviously, affect the availability and price of platinum worldwide.

4. Crude oil

It was only recently that the price for crude oil fell yet again due to high inventories, global output, and less demand. What a difference a raging fire can make. The fire in Fort McMurray, Alberta, which began on May 1, has forced the evacuation of the town and the major oil producers have halted or shut down production. This sent crude oil prices back up to almost $50 a barrel, from $26 earlier in the year. Canada is the U.S.’s major supplier of oil.

5. Sawnwood

As with other wood products, there has been an increase in sawnwood production and demand recently, the biggest since the economic downturn post-2008, according to the UN’s Food and Agriculture Organization. There has been an increase in production in some European countries, in part because of recent wind storms that knocked down trees. Also, Europe is slowly reforesting, most dramatically in Ireland with a 52% increase in forested lands.

6. Lead

Lead is a valuable ore that is relatively simple to mine and has a high value, with a global market of approximately $15 billion. While production has slowed somewhat, it’s interesting to note that what’s referred to as the “secondary production,” which includes recyclables, is now almost at par with mined lead. In the U.S., most lead production comes from secondary production, and most of it is used for lead-acid batteries. And even though global stocks and production are decreasing, the price per ton is, too. One reason for that is the search and adoption of alternatives that are more environmentally friendly.

7. Sorghum

Sorghum is grain used mostly for livestock feed and ethanol products. The U.S. is the biggest sorghum producer, followed by Mexico and Nigeria.  Its benefits are that it’s relatively drought- and disease-resistant. But that hasn’t stopped the global sorghum market from experiencing a downturn in demand, driven mostly by China for animal feed. China was responsible for almost 80% of U.S. sorghum exports in 2014-2015. But now it looks like China’s government wants to import less and is using up some of its own stockpiles instead.

8. Sugar

A sweet tooth is about to get more expensive. There’s more sugar demand than supply for the first time in five years. This is good news for sugar producers; the price of sugar recently fell to below production cost. Weather conditions, particularly El Niño, have been a problem in decreasing sugar supply. The EU recently surveyed member states’ opinions on raising sugar supplies because the stockpile is heading to dangerous lows, with potential shortages as soon as this summer.

9. Meat and chicken

The world’s appetite for meat continues to grow. Again, China is driving consumption of chicken, sheep, and pigs, and Brazil takes the top slot for beef. Here’s some interesting data from the OECD about global meat consumption: yet again, China’s economic outlook and tastes are shaping global markets. A Chinese company recently purchased Brazil’s largest soybean producer – soybean is used as animal feed. The Australian government recently blocked the sale of a cattle station conglomerate to Dahang Australia, which is mostly controlled by the Shanghai Pengxin Group. The sale was for 2.5% of Australia’s agriculture land and 185,000 cattle.

10. Tea

It’s been a tough year for some tea producers. Assam, the state in India famed for its teas, has been affected by heavy rains and cool temperatures, which will have an negative effect on the “second flush” (second growth) teas. India is the world’s second largest tea producer (China is the largest; Kenya is third), and most of it is grown on Assam’s tea plantations. Heavy rainfalls, dry periods, and pests are all making tea growing a challenge. Tea is actually the second most popular drink worldwide – the first is water. As noted in this U.N. Food and Agriculture Organization report, tea is pretty picky about growing conditions, and there are only a few areas in the world where it grows well. Overall, tea production, exports, and consumption all grew, and the FAO predicts this trend will continue. However, climate change is a top concern of tea producers and could be the biggest challenge to established producing regions.

Industries are realizing the advantages of the Internet of Things and digital transformation at different speeds and on different scales. IDC reveals how in The Internet of Things and Digital Transformation: A Tale of Four Industries.

For more insight on digital transformation, join us at SAPPHIRE NOW and attend the session “Build Resilience into Digital Supply Networks by Using Live Business.”

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Live Product Innovation, Part 3: Process Industries, IoT, And A Recipe For Instant Change

John McNiff

In Part 1 of this series, we looked at how in-memory computing affects live product innovation. In Part 2, we explored the impact of the Internet of Things (IoT) and Big Data on smart connected products. In Part 3, we approach the topic from the perspective of process industries.

Digital this, connected that. Smart whatsits and intelligent doodahs. Those of us who talk about IoT are often reminded that not every manufacturer makes products per se. But IoT isn’t only about the addition of sensors to products. The principles of live product innovation are equally relevant to process manufacturing.

In fact, the “data refinery” offers the potential to manage the Internet of everything — including traditional Big Data sources in tight conjunction with business processes. If your products are food, packaged goods, or chemicals, the promises of live product insights are still compelling. It’s only the data sources and dimensions that are different.

Live and compliant

The complexity of regulatory compliance in process industries continues to grow — whether you’re talking about the U.S. Food and Drug Administration, the U.K. Food Standards Agency, trade embargoes, or hazardous substance management. And compliance isn’t getting any simpler to manage across jurisdictions and industry sectors.

What’s more, customers increasingly demand shortened delivery cycles and highly targeted or even personalized products. That means you can no longer wait till after you formulate a product and release a recipe to determine whether you can actually sell it. You need instant visibility, whether you’re talking about nutritional safe levels assigned by a particular region for food products or volumes of hazardous substances for supply and transit.

But that’s the advantage of live, compliant product innovation. It enables you to perform analytics on previously disconnected data. And it allows you to manage real-time embedded processes across previously disparate systems.

Product data is everywhere

In our last blog we explored the advantages of smart connected products — the ability to link everything from initial product concepts through downstream product delivery. Now let’s apply that to process manufacturing.

Let’s say you see two factors coming together for the SoySnak product you sell in North America and Asia. Your sales data shows that American consumers want 10Kg packages, while Asian customers prefer smaller multipacks. At the same time, your compliance database alerts you that new regulations on salt levels are about to go into effect in several of your target markets.

You want to respond before the regulations are implemented, for several reasons. You’ll need to update recipes, specifications, labels, and packaging. You’ll need to inform your suppliers, manufacturers, quality planners, financial controllers, logistics providers, and retailers. And you’ll need to get the replacement product into the affected markets, with auditable compliance with salt level requirements. Otherwise, you risk producing a large quantity of unsellable inventory.

This example shows us several things:

  • Insights must be as instant as possible.
  • Those insights might come from a variety of sources that your R&D folks didn’t previously have real-time access to.
  • Your products must be localized to a very granular level.
  • Even a minor change affects everything from recipes to packaging specifications, costs of materials, regulatory reporting, logistics providers, retailers, and on and on.

And that leads us to several conclusions:

  • Product data isn’t mission-critical only to R&D. It’s linked to every downstream business process.
  • A live, compliant, and collaborative environment, with the ability to instantly adapt to change, is a business requirement.
  • To achieve that requirement, product data must be part of business processes.
  • The platform the R&D team relies on must be linked to downstream platforms, and it must allow you to leverage and act on real-time insights.

Digital product innovation platform

Of course, the streaming of sensor data from connected things is still relevant in process industries. But for process manufacturers, the most important use cases are more around traceability, supply chain logistics, and product innovation. At some point, data from connected goods will allow new models that more tightly couple the supply chain with innovation cycles.

But a live and compliant product innovation platform achievable today. The question is whether you’ll get there before your competition does.

Come to SAPPHIRE NOW 2017 in Orlando, Florida from May 16 – 18th, 2017, and check out my session “Boost Visibility into Operations for Connected Products with SAP Leonardo” on Tuesday, May 16th, 2017 from 1-1:40 p.m. in Business Application BA324, or check out our R&D sessions.

Follow the conversation on @SCMatSAP and #SAPPHIRENOW.

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John McNiff

About John McNiff

John McNiff is the Vice President of Solution Management for the R&D/Engineering line-of-business business unit at SAP. John has held a number of sales and business development roles at SAP, focused on the manufacturing and engineering topics.

How 3D Printing Could Transform The Chemical Industry

Stefan Guertzgen

The history of 3D printing started 30 years ago with Chuck Hull, the Thomas Edison of the 3D printing industry, who introduced the first 3D printer. Since then, 3D printing (also known as additive manufacturing) has been used to create everything from food and other consumer goods to automotive and airplane parts.

Key drivers of adoption

The tremendous growth of 3D printing has been driven by three key factors. First, the cost is rapidly decreasing due to lower raw material costs, stronger competitive pressures, and technological advancements. Second, printing speeds are increasing. For example, last year, startup company Carbon3D printed a palm-sized geodesic sphere in a little more than 6 minutes, which is 25 to 100 times faster than traditional 3D printing solutions. Third, new 3D printers are able to accommodate a wider variety of materials. Driven by innovations within the chemical industry, a broad range of polymers, resins, plasticizers, and other materials are being used to create new 3D products.

While it’s difficult to predict the long-term impact 3D printing will have on the overall economy, it is safe to say that the it could affect almost every industry and the way companies do business. In fact, the chemical industry has already implemented 3D applications in the areas of research and development (R&D) and manufacturing.

Innovative feedstocks and processes

3D printing provides a vast opportunity for the chemical industry to develop innovative feedstock and drive new revenue streams. While more than 3,000 materials are used in conventional component manufacturing, only about 30 are available for 3D printing. To put this into perspective, the market for chemical powder materials is predicted to be more than $630 million annually by 2020.

Plastics and resins, as well as metal powders and ceramic materials, are already in use or under evaluation for printing prototypes, parts of industry assets, or semi-finished goods—particularly those that are complex to produce and that require small batch sizes. Developing the right formulas to create these new materials offers an opportunity for constant innovation within the chemical field, which will likely produce even more materials in the future. For example, Covestro, a developer of polymer technology, is developing a range of filaments, powders, and liquid resins for all common 3D printing methods; 3M, working with its subsidiary Dyneon, recently filed a patent for using fluorinated polymers in 3D printing; and Wacker is testing 3D printing with silicones.

The chemical industry is also in the driver’s seat when it comes to process development. About 20 different processes now exist that share one common characteristic: layered deposition of printer feed. The final product could be generated from melting thermoplastic resins (for example, laser sinter technology or fused deposition modeling) or via (photo) chemical reaction such as stereo-lithography or multi-jet modeling. For both process types, the physical and chemical properties of feed materials are critical success factors for processing and for the quality of the finished product.

New tools and techniques in R&D and operations

Typically, the laboratory equipment used to do chemical synthesis is expensive and complex to use, and it often represents an obstacle in the research progress. With 3D printing, it is now possible to create reliable, robust miniaturized fluidic reactors as “micro-platforms” for organic chemical syntheses and materials processes, printed in few hours with inexpensive materials. Such micro-reactors allow building up target molecules via multi-step synthesis as well as breaking down molecular structures and detecting the building blocks through reagents which could be embedded during the 3D printing process.

Micro-reactors can also be used as small prototypes to simulate manufacturing processes.

In addition to printing equipment used in laboratories, some chemical manufacturers are using 3D printers for maintenance on process plant assets. For example, when an asset fails because of a damaged engine valve, the replacement part can be printed on site and installed in real time. Creating spare parts in-house can significantly reduce inventory costs and wait time for deliveries, hence contributing to increase overall asset uptime.

For companies that do not want to print the parts themselves, an on-demand manufacturing network is available that will print and deliver parts as needed. UPS has introduced a fully distributed manufacturing platform that connects many of its stores with 3D printers. When needed, UPS and its partners print and deliver requested parts to customers.

Commercial benefits

Across all industries, 3D printing promises to reduce costs across the supply chain. For example, the ability to print spare parts on demand can save money through improved asset uptime and more efficient workforce management. 3D printing also helps control costs with reduced waste and a smaller carbon footprint. In contrast to traditional “subtractive” manufacturing techniques in which raw material is removed, 3D printing is an additive process that uses only the amount of material that is needed. This can save significant amounts of raw materials. In the aerospace industry, for example, Airbus estimates 3D printing could reduce its raw material costs by up to 90 percent.

From a manufacturing perspective, 3D printing can streamline processes, accelerate design cycles, and add agility to operations. Printing prototypes on site speeds the R&D development cycle and shortens time to market. Researchers can make, test, and finalize prototypes in days instead of weeks. Also, the ability to print parts or equipment on demand will eliminate expensive inventory holding costs and restocking order requirements and free up floor space for other purposes. In the U.S. alone, manufacturers and trade inventories for all industries were estimated at $1.8 trillion in August 2016, according to the U.S. Census Bureau. Reducing inventory by just 2 percent would be a $36 billion savings.

Barriers to adoption

As with most new technology, barriers must be overcome for this potential to fully be realized. One much-discussed but unresolved issue is intellectual property protection. Similar to the way digital music is shared, 3D printable digital blueprints could be shared illegally and/or unknowingly either within a company or by outside hackers.

In addition to digital files, users can print molds from scanned objects and use them to mass-produce exact replicas that are protected under copyright, trademark, and patent laws. This problem will continue to grow as companies move to an on-demand manufacturing network, requiring digital blueprints to be shared with independent fabricators. This poses a huge threat on companies losing billions of dollars every year in intellectual property globally.

Regulatory issues are slowing the adoption of 3D printer applications. This is especially applicable in the medical and pharmaceutical industries but has potential impact in many markets. For example, globally regulating what individuals will create with access to the Internet and a 3D chemical printer will be difficult. Also, as 3D printing drives small and customer-specific lot sizes, it will likely spur an explosion of proprietary bills of material and recipes, which will be hard to track and control under REACH or REACH-like regulations. Because this is a new frontier, many regulatory issues must be addressed.

In addition to legal and regulatory challenges, the industry has a long way to go in reliably reproducing high-quality products. Until 3D printing can match the speed and quality output requirements of conventional manufacturing processes, it will likely be reserved for prototypes or small-sized lots.

3D printing: a new frontier

While 3D printing has not reached the point of use for large-scale production or to consistently make custom products, ongoing innovations drive high demand. 3D printer market forecasts estimate that shipments of industrial 3D printers will grow by ~400% through 2021 to a value of about $26 billion. Global inventory value is estimated to be over $10 trillion. Reducing global inventory by just 5% would free up $500 billion in capital. Manufacturing overall is estimated to contribute ~16% to the global economy. If 3D printing just would capture 5% of this $12.8 trillion market, it would create a $640 billion+ opportunity.

3D printing will initially help chemical companies increase profitability by lowering costs and improving operational efficiency. However, the industry-changing opportunity is the chance to develop new feeds and formulations. The most successful chemical companies of the future will be the ones with the vision to begin developing and implementing 3D printing solutions today.

Learn more about SAPPHIRE NOW and secure your spot today!

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About Stefan Guertzgen

Dr. Stefan Guertzgen is the Global Director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving Industry Thought Leadership, Positioning & Messaging and strategic Portfolio Decisions for Chemicals.

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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Unleash The Digital Transformation

Kadamb Goswami

The world has changed. We’ve seen massive disruption on multiple fronts – business model disruption, cybercrime, new devices, and an app-centric world. Powerful networks are crucial to success in a mobile-first, cloud-first world that’s putting an ever-increasing increasing amount of data at our fingertips. With the Internet of Things (IoT) we can connect instrumented devices worldwide and use new data to transform business models and products.

Disruption

Disruption comes in many forms. It’s not big or scary, it’s just another way of describing change and evolution. In the ’80s it manifested as call centers. Then, as the digital landscape began to take shape, it was the Internet, cloud computing … now it’s artificial intelligence (AI).

Digital transformation

Digital transformation means different things to different companies, but in the end I believe it will be a simple salvation that will carry us forward. If you Bing (note I worked for Microsoft for 15 years before experiencing digital transformation from the lens of the outside world), digital transformation, it says it’s “the profound and accelerating transformation of business activities, processes, competencies, and models to fully leverage the changes and opportunities of digital technologies and their impact across society in a strategic and prioritized way.” (I’ll simplify that; keep reading.)

A lot of today’s digital transformation ideas are ripped straight from the scripts of sci-fi entertainment, whether you’re talking about the robotic assistants of 2001: A Space Odyssey or artificial intelligence in the Star Trek series. We’re forecasting our future with our imagination. So, let’s move on to why digital transformation is needed in our current world.

Business challenges

The basic challenges facing businesses today are the same as they’ve always been: engaging customers, empowering employees, optimizing operations, and reinventing the value offered to customers. However, what has changed is the unique convergence of three things:

  1. Increasing volumes of data, particularly driven by the digitization of “things” and heightened individual mobility and collaboration
  1. Advancements in data analytics and intelligence to draw actionable insight from the data
  1. Ubiquity of cloud computing, which puts this disruptive power in the hands of organizations of all sizes, increasing the pace of innovation and competition

Digital transformation in plain English

Hernan Marino, senior vice president, marketing, & global chief operating officer at SAP, explains digital transformation by giving specific industry examples to make it simpler.

Automobile manufacturing used to be the work of assembly lines, people working side-by-side literally piecing together, painting, and churning out vehicles. It transitioned to automation, reducing costs and marginalizing human error. That was a business transformation. Now, we are seeing companies like Tesla and BMW incorporate technology into their vehicles that essentially make them computers on wheels. Cameras. Sensors. GPS. Self-driving vehicles. Syncing your smartphone with your car.

The point here is that companies need to make the upfront investments in infrastructure to take advantage of digital transformation, and that upfront investment will pay dividends in the long run as technological innovations abound. It is our job to collaboratively work with our customers to understand what infrastructure changes need to be made to achieve and take advantage of digital transformation.

Harman gives electric companies as another example. Remember a few years ago, when you used to go outside your house and see the little power meter spinning as it recorded the kilowatts you use? Every month, the meter reader would show up in your yard, record your usage, and report back to the electric company.

Most electric companies then made a business transformation and installed smart meters – eliminating the cost of the meter reader and integrating most homes into a smart grid that gave customers access to their real-time information. Now, as renewable energy evolves and integrates more fully into our lives, these same electric companies that switched over to smart meters are going to make additional investments to be able to analyze the data and make more informed decisions that will benefit both the company and its customers.

That is digital transformation. Obviously, banks, healthcare, entertainment, trucking, and e-commerce all have different needs than auto manufacturers and electric companies. It is up to us – marketers and account managers promoting digital transformation – to identify those needs and help our clients make the digital transformation as seamlessly as possible.

Digital transformation is more than just a fancy buzzword, it is our present and our future. It is re-envisioning existing business models and embracing a different way of bringing together people, data, and processes to create more for their customers through systems of intelligence.

Learn more about what it means to be a digital business.

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About Goswami Kadamb

Kadamb is a Senior Program Manager at SAP where he is responsible for developing and executing strategic sales program with Concur SaaS portfolio. Prior to that he led several initiatives with Microsoft's Cloud & Enterprise business to enable Solution Sales & IaaS offerings.