How Prepared Is Your Organization For Supply Chain Disruption?

Marcell Vollmer

Driven by demand for lower manufacturing costs and access to specialist capabilities and technologies, most supply-chain operations rely on a complex mix of large and small businesses. Every single one of these companies depends on each other to deliver as promised, and shares information, advice, and data – all on a mission to provide quality products and services to the end consumer. And as beneficial as these large supplier networks are, they risk bringing the operation to a complete standstill.

Although it is common sense to protect supply chains from severe and costly disruption, many executives compromise this wisdom to provide service levels and products that customers demand while optimizing profitability. Yet growing awareness of reputation, brand issues, and supplier sustainability and labor practices are shedding light on the underlying risks of today’s supply chains.

Emerging risks that could impact your supply chain in 2017 and beyond

In recent years, procurement organizations have focused on making supply chains leaner, more responsive, and highly cost-effective. In turn, businesses can operate with as little inventory in stock as possible and get the right products to the right customers at the right time. However, these advantages are often eaten away by the growing vulnerability and rising risk of damaging disruption of the supplier network.

Because very little inventory is available to act as a buffer against lost manufacturing time and low productivity, hiccups and failure anywhere in the supply chain could potentially impact the entire value chain. And it’s not just direct suppliers that present concern; in fact, greater risk may reside within a supplier’s network of suppliers.

Such impactful disruptions can arise from a number of sources, including:

  • Natural catastrophes: The output of magnetic hard drives declined 30% worldwide when Thailand suffered widespread flooding after months of unusually heavy rainfall.
  • Human-made disasters: The radiation leak at the Fukushima Daiichi nuclear plant, following an earthquake, contaminated the local food chain and created a global ripple effect of severe price spikes, falling stock prices, and component shortages.
  • Supplier delivery delays: Reliance on a single supplier impacted 28,000 employees across six out of Volkswagen’s ten factories in Germany when its seat-cover provider did not deliver on time – leading to a €100 million loss in revenue.
  • Financial or economic crisis: After Lehman Brothers announced its bankruptcy in 2008, the manufacturing sector suffered a significant drop in customer orders of up to 42%, collapsing entire supply chains as a growing number of providers went out of business.
  • Government regulations: An ever-growing set of local, national, and international mandates impact everything from operational processes to product ingredients, especially restrictions on chemicals, hazardous substances, and suppliers financing conflicts and terrorist organizations.

These are just a few of the many incidents that have given chief procurement officers (CPOs) great cause for concern. Even cyber hackers are tricking employees to unintentionally make fraudulent wire transfers, steal or corrupt information, and disrupt operations of multiple businesses.

How procurement can help prevent supply chain disruption

Risk is often manifested in supplier-related issues that present challenging dilemmas for the procurement function. It may seem easier to resolve the problem by identifying and onboarding alternative suppliers, but very rarely is this the case. What’s needed is a clear understanding of which factors drive inventory and how to best manage any looming risks.

Such clarity is possible only with an end-to-end view of the entire supply chain. However, most procurement organizations are unable to achieve such visibility due to:

  • Information residing in multiple systems – internally and externally – that are not tied to each other
  • Fragmented processes that are forcing procurement to work with multiple lines of business individually to maintain due diligence that comes from ongoing process monitoring
  • Risk management processes that cannot be scaled beyond top suppliers to address secondary and tertiary suppliers

Supply chains may be complex, but they don’t have to be unpredictable. By automating and integrating technology into other corporate systems, CPOs can have a better sense of the overall purchasing life cycle. They can precisely correlate how cost savings can impact quality, operations, and delivery. Supplier performance is auditable so that the company can help ensure that every business contributing to the value chain is compliant with all government regulations, corporate policies, and labor practices. More important, procurement can intelligently sense emerging disturbances and define a strategy to counteract them before they occur.

By understanding the how, where, what, and why behind every supplier decision and using tools to measure, report, and validate perceived advantages, businesses can engage a comprehensive risk management program that drives continuous operations, increases reputational and investor value, and improves accountability for the overall chain. Accurate and up-to-date supplier information for all your trading partnerships, readily accessible across your organization—that’s what you need to manage supplier performance and risk.

The thing is, without the help of technology you’ll have a hard time getting your hands on it. Because you’re managing hundreds – if not thousands – of relationships, with new suppliers coming online in the digital economy every day.

For more insight on supply chain management, see Conquer Supply Chain Resource Scarcity With These 7 Technologies.

 

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Marcell Vollmer

About Marcell Vollmer

Marcell Vollmer is the Chief Digital Officer for SAP Ariba (SAP). He is responsible for helping customers digitalize their supply chain. Prior to this role, Marcell was the Chief Operating Officer for SAP Ariba, enabling the company to setup a startup within the larger SAP business. He was also the Chief Procurement Officer at SAP SE, where he transformed the global procurement organization towards a strategic, end-to-end driven organization, which runs SAP Ariba and SAP Fieldglass solutions, as well as Concur technologies in the cloud. Marcell has more than 20 years of experience in working in international companies, starting with DHL where he delivered multiple supply chain optimization projects.

Blockchain: Hit Or Miss For Supply Chain?

Richard Howells

Earlier this month I participated in an interesting show on the topic of “Blockchain Technology: A Hit or A Miss for Supply Chain Networks?” with Irfan Khan, CEO and president of Bristlecone.

The discussion was based on blockchain’s ability to drive end-to-end value, eliminate inefficiencies, and improve customer experience. Blockchain – a decentralized, distributed ledger payment system using cryptocurrency – is powering digital transformation for companies around the world.

“It’s difficult to make predictions, especially about the future.”

I set the stage by using this quote that has been attributed to several people, from Nostradamus to Mark Twain (who is attributed almost every quote known to man). It works perfectly for blockchain, which, according to Gartner’s latest Hype Cycle for Supply Chain Execution (July 2017), was rated “transformational” but with a market penetration of “less than 1 percent.” The key is to predict and identify use cases to improve transparency, traceability, and performance and that can benefit from secured transactions.

Where can blockchain benefit supply chain processes?

During our discussions, a few areas of opportunity emerged.

Logistics processes

It has been estimated that 90 percent of global trade is carried out by ocean shipping industry, and the cost of trade-related documents and administration is estimated to represent up to 20 percent of the actual transportation cost. And this process relies on a web of disparate systems across freight forwarders, customer’s brokers, port authorities, ocean carriers, and trucking companies. Imagine if we could digitize the process to collaborate across companies and authorities, reduce the paperwork, streamline cross boarder movements, and reduce fraud and errors. Blockchain has the potential to help enable us to manage and track a “digital twin” of shipping containers across the world.

Track and trace and genealogy processes

In many industries, we are continually pushing for improved traceability by both regulatory bodies, and consumers. For example, in the food and beverage industries, we are seeing an increased demand for local and organic products with a clear proof of origin and sustainability.

Let’s look at the simple coffee bean as an example. This starts literally, at the source, in remote farms in Africa where 70-80 percent of the world’s coffee beans are grown. Imagine if we could have mobile machines that could capture the grade, color, size, and quality the coffee carries at source, and by leveraging AI and machine learning, determine a fair-trade price for the specific lot. This could be transmitted to the buyers who could agree a purchase with the farmer and perform an electronic transfer of funds immediately. Imagine also that the quality information and price paid is tracked throughout the harvesting, logistics, roasting and consumption of those beans all over the world. A consumer could have an app that would tell them where the coffee came from, the journey from farm to cup, and even if the farmer was compensated fairly.

This example is not too far-fetched. Check out what a company called Bext360 is doing as a proof of concept today.

Asset lifecycle management

Many industries have capital-intensive, business-critical assets (think airplanes, mining equipment, trucks, tractors) that are expected to be in use for 10 or even 30 years. Over its lifespan, each asset will go through numerous upgrades, repairs, and refurbishments and may also go through numerous owners. This ensures that all the parts used to perform these activities are of high quality, from reliable, legitimate sources and are critical for end user or passenger safety and security. We can now put IoT-enabled sensors on every part within an asset and track (Big) Data at a level never imagined a few short years ago. Ensuring the traceability and security of this data is critical to ensure the history and provenance of parts, the or the maintenance and repair history of a capital-intensive piece of equipment.

Blockchain, along with other technologies such as IoT, predictive analytics, and machine learning has the potential to manage assets from the design of the product, through manufacturing and throughout its active life and keep a secure, digital twin that can be tracked and analyzed for a complete history of that asset.

Blockchain is a key part of a digital supply chain

Blockchain, although relatively early in its existence, has the potential to help digitize our supply chains. However, as we discussed, it is not a solution by itself. We see several technologies coming together to enable the digital supply chain. The Internet of Things enables smarter and connected products and assets that are generating amazing amounts of data from all areas of the supply chain. This “Big Data” is the catalyst for predictive analytics, and machine learning adds intelligence to this data and drives automation and artificial intelligence through physical devices. Blockchain’s role is to automate transactions, ensure traceability, and address cybersecurity.

For more on blockchain, see Blockchain: Much Ado About Nothing? How Very Wrong!

Article published by Richard Howells. It originally appeared on Huffington Post and has been republished with permission.

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Richard Howells

About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

3D Printing: A New Dimension To Mining

Indranil Som

Maintenance and downtime due to poor inventory optimization is a major challenge faced by field operations in mining.

Investing in 3D printing technology can help mining firms innovate and develop their existing processes, in addition to improving efficiency and costs. This approach can be used to produce parts on site and on-demand, thereby streamlining and optimizing the inbound supply chains. As mining companies operate in many remote and hostile environments and downtime of mining equipment could be extremely costly, the industry faces many practical challenges:

  • The high cost of materials, excess inventory, and warehousing and on-site storage costs
  • Logistic costs of transporting parts in emergencies to ensure the continuous running of machines
  • High dependence on original equipment manufacturers (OEMs) for precision-engineered parts

What is 3D printing?

3D printing, also referred to as additive technology, is the process of making physical objects from a digital model using a printer. Although still at its nascent stage, the technology is already making waves in the manufacturing of prosthetics, medical devices, and lightweight precision automotive and aerospace parts.

Increased use of technology and innovation

By applying 3D printing into their production cycle, businesses can create quality products quickly and easily without the need for a physical prototype, thereby improving efficiency and reducing costs. But time will tell whether 3D printing can meet the demands of the mining industry, which requires high-quality, precision-manufactured items made of multiple materials.

Parts failures and repairs

With access to a digital service parts library and the requisite 3D printing capability, production of parts on site and on demand makes part failure and the site remoteness inconsequential. With spare parts stored digitally, the high cost and environmental impact of transportation and warehousing of inventory are drastically reduced.

Further, 3D printing helps optimize material and energy consumption by consuming only the raw material required to build the final product, thus supporting a leaner and greener approach to production.

Design customization

The tools used in mining can be customized to suit the mining environment and produced cost effectively in small quantities. Using 3D printing, any item in the digital library can be replicated on site to suit the unique requirements of the operations.

Sustainable manufacturing

3D printing increases efficiency, reduces waste, and makes processes more cost-efficient and manufacturing sustainable. Transportation costs will be reduced and as technology evolves, designs will become more energy- and fuel-efficient.

Mining businesses can potentially reduce waste in terms of energy and raw materials, and optimize utilization of used or faulty parts by recycling them. This allows for reusability of raw materials, adding to the sustainability of 3D printing.

Future of 3D printing in mining

In the mining industry, efficiency and cost containment in the supply chain is critical. Adoption of 3D printing can bring about significant changes in supply chain operations due to more on-demand in-sourcing of parts, operations strategies, and policies. It revolutionizes the supply chain operations by impacting manufacturing location strategies, shrinking delivery lead times and removing excess stock and complexity.

For more on how advanced technology can benefit manufacturing in many industries, see Digitalization, Industry 4.0, And The Future Of Industrial Production.

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Indranil Som

About Indranil Som

Indranil Som is the Digital Leader for Energy and Natural Resources industry at SAP India, engaged in consulting with C-level executives to enable organizations unlock business value through technology driven business transformations. He has had over 16 years of management consulting experience with a combination of strategy and technology engagements, encompassing scoping, planning and execution, with leading international firms.

Diving Deep Into Digital Experiences

Kai Goerlich

 

Google Cardboard VR goggles cost US$8
By 2019, immersive solutions
will be adopted in 20% of enterprise businesses
By 2025, the market for immersive hardware and software technology could be $182 billion
In 2017, Lowe’s launched
Holoroom How To VR DIY clinics

Link to Sources


From Dipping a Toe to Fully Immersed

The first wave of virtual reality (VR) and augmented reality (AR) is here,

using smartphones, glasses, and goggles to place us in the middle of 360-degree digital environments or overlay digital artifacts on the physical world. Prototypes, pilot projects, and first movers have already emerged:

  • Guiding warehouse pickers, cargo loaders, and truck drivers with AR
  • Overlaying constantly updated blueprints, measurements, and other construction data on building sites in real time with AR
  • Building 3D machine prototypes in VR for virtual testing and maintenance planning
  • Exhibiting new appliances and fixtures in a VR mockup of the customer’s home
  • Teaching medicine with AR tools that overlay diagnostics and instructions on patients’ bodies

A Vast Sea of Possibilities

Immersive technologies leapt forward in spring 2017 with the introduction of three new products:

  • Nvidia’s Project Holodeck, which generates shared photorealistic VR environments
  • A cloud-based platform for industrial AR from Lenovo New Vision AR and Wikitude
  • A workspace and headset from Meta that lets users use their hands to interact with AR artifacts

The Truly Digital Workplace

New immersive experiences won’t simply be new tools for existing tasks. They promise to create entirely new ways of working.

VR avatars that look and sound like their owners will soon be able to meet in realistic virtual meeting spaces without requiring users to leave their desks or even their homes. With enough computing power and a smart-enough AI, we could soon let VR avatars act as our proxies while we’re doing other things—and (theoretically) do it well enough that no one can tell the difference.

We’ll need a way to signal when an avatar is being human driven in real time, when it’s on autopilot, and when it’s owned by a bot.


What Is Immersion?

A completely immersive experience that’s indistinguishable from real life is impossible given the current constraints on power, throughput, and battery life.

To make current digital experiences more convincing, we’ll need interactive sensors in objects and materials, more powerful infrastructure to create realistic images, and smarter interfaces to interpret and interact with data.

When everything around us is intelligent and interactive, every environment could have an AR overlay or VR presence, with use cases ranging from gaming to firefighting.

We could see a backlash touting the superiority of the unmediated physical world—but multisensory immersive experiences that we can navigate in 360-degree space will change what we consider “real.”


Download the executive brief Diving Deep Into Digital Experiences.


Read the full article Swimming in the Immersive Digital Experience.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation. Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

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Blockchain: Much Ado About Nothing? How Very Wrong!

Juergen Roehricht

Let me start with a quote from McKinsey, that in my view hits the nail right on the head:

“No matter what the context, there’s a strong possibility that blockchain will affect your business. The very big question is when.”

Now, in the industries that I cover in my role as general manager and innovation lead for travel and transportation/cargo, engineering, construction and operations, professional services, and media, I engage with many different digital leaders on a regular basis. We are having visionary conversations about the impact of digital technologies and digital transformation on business models and business processes and the way companies address them. Many topics are at different stages of the hype cycle, but the one that definitely stands out is blockchain as a new enabling technology in the enterprise space.

Just a few weeks ago, a customer said to me: “My board is all about blockchain, but I don’t get what the excitement is about – isn’t this just about Bitcoin and a cryptocurrency?”

I can totally understand his confusion. I’ve been talking to many blockchain experts who know that it will have a big impact on many industries and the related business communities. But even they are uncertain about the where, how, and when, and about the strategy on how to deal with it. The reason is that we often look at it from a technology point of view. This is a common mistake, as the starting point should be the business problem and the business issue or process that you want to solve or create.

In my many interactions with Torsten Zube, vice president and blockchain lead at the SAP Innovation Center Network (ICN) in Potsdam, Germany, he has made it very clear that it’s mandatory to “start by identifying the real business problem and then … figure out how blockchain can add value.” This is the right approach.

What we really need to do is provide guidance for our customers to enable them to bring this into the context of their business in order to understand and define valuable use cases for blockchain. We need to use design thinking or other creative strategies to identify the relevant fields for a particular company. We must work with our customers and review their processes and business models to determine which key blockchain aspects, such as provenance and trust, are crucial elements in their industry. This way, we can identify use cases in which blockchain will benefit their business and make their company more successful.

My highly regarded colleague Ulrich Scholl, who is responsible for externalizing the latest industry innovations, especially blockchain, in our SAP Industries organization, recently said: “These kinds of use cases are often not evident, as blockchain capabilities sometimes provide minor but crucial elements when used in combination with other enabling technologies such as IoT and machine learning.” In one recent and very interesting customer case from the autonomous province of South Tyrol, Italy, blockchain was one of various cloud platform services required to make this scenario happen.

How to identify “blockchainable” processes and business topics (value drivers)

To understand the true value and impact of blockchain, we need to keep in mind that a verified transaction can involve any kind of digital asset such as cryptocurrency, contracts, and records (for instance, assets can be tangible equipment or digital media). While blockchain can be used for many different scenarios, some don’t need blockchain technology because they could be handled by a simple ledger, managed and owned by the company, or have such a large volume of data that a distributed ledger cannot support it. Blockchain would not the right solution for these scenarios.

Here are some common factors that can help identify potential blockchain use cases:

  • Multiparty collaboration: Are many different parties, and not just one, involved in the process or scenario, but one party dominates everything? For example, a company with many parties in the ecosystem that are all connected to it but not in a network or more decentralized structure.
  • Process optimization: Will blockchain massively improve a process that today is performed manually, involves multiple parties, needs to be digitized, and is very cumbersome to manage or be part of?
  • Transparency and auditability: Is it important to offer each party transparency (e.g., on the origin, delivery, geolocation, and hand-overs) and auditable steps? (e.g., How can I be sure that the wine in my bottle really is from Bordeaux?)
  • Risk and fraud minimization: Does it help (or is there a need) to minimize risk and fraud for each party, or at least for most of them in the chain? (e.g., A company might want to know if its goods have suffered any shocks in transit or whether the predefined route was not followed.)

Connecting blockchain with the Internet of Things

This is where blockchain’s value can be increased and automated. Just think about a blockchain that is not just maintained or simply added by a human, but automatically acquires different signals from sensors, such as geolocation, temperature, shock, usage hours, alerts, etc. One that knows when a payment or any kind of money transfer has been made, a delivery has been received or arrived at its destination, or a digital asset has been downloaded from the Internet. The relevant automated actions or signals are then recorded in the distributed ledger/blockchain.

Of course, given the massive amount of data that is created by those sensors, automated signals, and data streams, it is imperative that only the very few pieces of data coming from a signal that are relevant for a specific business process or transaction be stored in a blockchain. By recording non-relevant data in a blockchain, we would soon hit data size and performance issues.

Ideas to ignite thinking in specific industries

  • The digital, “blockchained” physical asset (asset lifecycle management): No matter whether you build, use, or maintain an asset, such as a machine, a piece of equipment, a turbine, or a whole aircraft, a blockchain transaction (genesis block) can be created when the asset is created. The blockchain will contain all the contracts and information for the asset as a whole and its parts. In this scenario, an entry is made in the blockchain every time an asset is: sold; maintained by the producer or owner’s maintenance team; audited by a third-party auditor; has malfunctioning parts; sends or receives information from sensors; meets specific thresholds; has spare parts built in; requires a change to the purpose or the capability of the assets due to age or usage duration; receives (or doesn’t receive) payments; etc.
  • The delivery chain, bill of lading: In today’s world, shipping freight from A to B involves lots of manual steps. For example, a carrier receives a booking from a shipper or forwarder, confirms it, and, before the document cut-off time, receives the shipping instructions describing the content and how the master bill of lading should be created. The carrier creates the original bill of lading and hands it over to the ordering party (the current owner of the cargo). Today, that original paper-based bill of lading is required for the freight (the container) to be picked up at the destination (the port of discharge). Imagine if we could do this as a blockchain transaction and by forwarding a PDF by email. There would be one transaction at the beginning, when the shipping carrier creates the bill of lading. Then there would be look-ups, e.g., by the import and release processing clerk of the shipper at the port of discharge and the new owner of the cargo at the destination. Then another transaction could document that the container had been handed over.

The future

I personally believe in the massive transformative power of blockchain, even though we are just at the very beginning. This transformation will be achieved by looking at larger networks with many participants that all have a nearly equal part in a process. Today, many blockchain ideas still have a more centralistic approach, in which one company has a more prominent role than the (many) others and often is “managing” this blockchain/distributed ledger-supported process/approach.

But think about the delivery scenario today, where goods are shipped from one door or company to another door or company, across many parties in the delivery chain: from the shipper/producer via the third-party logistics service provider and/or freight forwarder; to the companies doing the actual transport, like vessels, trucks, aircraft, trains, cars, ferries, and so on; to the final destination/receiver. And all of this happens across many countries, many borders, many handovers, customs, etc., and involves a lot of paperwork, across all constituents.

“Blockchaining” this will be truly transformational. But it will need all constituents in the process or network to participate, even if they have different interests, and to agree on basic principles and an approach.

As Torsten Zube put it, I am not a “blockchain extremist” nor a denier that believes this is just a hype, but a realist open to embracing a new technology in order to change our processes for our collective benefit.

Turn insight into action, make better decisions, and transform your business. Learn how.

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Juergen Roehricht

About Juergen Roehricht

Juergen Roehricht is General Manager of Services Industries and Innovation Lead of the Middle and Eastern Europe region for SAP. The industries he covers include travel and transportation; professional services; media; and engineering, construction and operations. Besides managing the business in those segments, Juergen is focused on supporting innovation and digital transformation strategies of SAP customers. With more than 20 years of experience in IT, he stays up to date on the leading edge of innovation, pioneering and bringing new technologies to market and providing thought leadership. He has published several articles and books, including Collaborative Business and The Multi-Channel Company.