How To Build A Smart Factory That Transforms Your Business Model

Susan Galer

One of the biggest mistakes companies can make on the road to connected manufacturing is taking ideas to developers while keeping decision-makers from the business out of the loop. I recently listened to two experts at the annual SAPPHIRE NOW & ASUG Conference who had a different take on how companies can build a smart factory quickly to improve efficiencies, reduce costs, strengthen competitiveness, and create new routes to market.

“We hear the term ‘fail fast’ all the time, but why fail at all,” asked Raymond Russ, senior director of SAP Solutions at the Fujitsu Center of Excellence. “If you do the right amount of planning with the business, you can create an IoT strategy that will work to connect your company.”

Here are the highlights of the Fujitsu Smart Factory framework Russ laid out with his colleague James Zhang, director of SAP Connected Manufacturing at the Fujitsu Center of Excellence.

Band-aid solutions aren’t the cure

Leading analysts predict the IoT market will impact GDP by $10 trillion, and manufacturing facilities comprise a hefty slice of the opportunity pie. But the stark truth is that 20% of North American manufacturing companies haven’t connected their machines to the Internet. Among those organizations that are exploring IoT, Zhang said many are missing the mark with only quick proofs of concept and pilots in targeted areas.

“The major challenge we’ve found is that you need to also understand the big picture,” said Zhang. “To solve your business process you don’t need a Band-Aid solution. You need to optimize the entire manufacturing model. You need to look at what the smart factory means for your company and what business outcomes you need.”

Understand it’s a journey

Zhang said the ideal approach to creating a connected enterprise is to develop a road map that shows the future, while also focusing on projects that deliver business value in a few months.

“Combining Fujitsu’s DNA as a manufacturer with platform and technologies from SAP is helping our shared customers transform their supply chain and demonstrate a strong business case,” he said. “When you talk with your C-suite in this way, they can see it’s a strong initiative.”

Connected manufacturing case study

Using predefined accelerators, companies can speed up co-creation of IoT-powered solutions for faster outcomes. One example Zhang shared was a building materials company with over 50 facilities worldwide and aggressive growth plans to double its business in the next year. They needed to improve operational efficiency and quality by connecting information from shop floor machines with processes and workers including inspection, planning, production execution, predictive maintenance, and reliability. Using digital innovations, the company reduced time-to-value by over 50% with outcomes in just five weeks.

Transforming business models

The smart factory streams vast amounts of real-time information from machines on the shop floor or in the field to people doing their daily jobs. Sensors and software deliver actionable intelligence that not only changes planning, operations, and maintenance for the better, but also business models. Zhang said that SAP and Fujitsu are co-innovating with companies to use artificial intelligence (AI) with natural language processing, as well as augmented reality and wearables for maintenance instructions, remote collaboration, and warehouse picking.

“There’s big potential for these technologies to increase efficiencies on the shop floor, saving time and increasing productivity,” said Zhang. “Think about if you link this technology with your service organization. You can improve your whole business model from selling products and equipment to selling services.”

Learn 6 Surprising Ways 3D Printing Will Disrupt Manufacturing.

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3D Printing And IoT Usher In The Next Industrial Revolution

Johannes Papst

3D printing and Internet of Things technologies can help stop revenue disruptions and make companies more lean, resilient, and agile.

Many 20th-century companies enjoyed expansion, but they also suffered from a lack of “beginning-to-end connectedness.” If you think about industry, early farming communities lacked modern technology. They succeeded through direct human interaction. Farmers grew crops, brought them to market, and dealt with key stakeholders on a personal level. Mass distribution helped create a disconnect between the source and the end consumer. That lack of connection opens the door for leaner outfits to disrupt your operations. Business models that maintain strong start-to-finish connectedness are able to gain market share.

Internet of Things thinking provides competitive edge

Consider, for example, a pair of competing alternative newspapers in New England. The two companies went head-to-head at the turn of the century. One outfit grew to prominence in Boston. As its war chest swelled, the company expanded into Providence, RI, and Portland, Maine. The corporation was able to hold off competitors for years until it lost its agility.

Meanwhile, the small Rhode Island alternative publication used a lean business model to compete. It focused on connecting with clients and consumers. It disrupted the revenue streams of the established corporation with far fewer resources. The newspaper tapped team members with distribution responsibilities. Writers, sales personnel, editors, and even graphic designers were required to replenish distribution points. The larger outfit outsourced distribution. It sacrificed connectedness to clients and consumers in a cost-saving measure.

The smaller outfit electronically connected its sales staff to graphic designers and produced advertisements for on-the-spot client approval. This early form of Internet of Things (IoT) thinking linked various facets of the company in real time. The technology-based thinking shortened approval times and increased revenue. In contrast, the larger outfit relied on traditional 20th-century methods. Slow interdepartmental ad submission and approvals took up valuable sales time. Corrections and changes between clients and the design department were also tedious. The small company’s boots-on-the-ground approach blended human-based methods with IoT ideas.

In a radical move, the small outfit took down its Internet presence. The strategy forced readers to locate hard copies to learn about news and events. They became farmers, in a sense. But the faster-moving newspapers demonstrated the product’s growing popularity to clients. Advertising businesses also acted as distribution points. The company then restored the website with a downloadable, or 3D-like, printable page-by-page replica of the paper product. It delivers the final product to devices by rethinking its web presence in IoT terms.

The more powerful competitor stayed with a popular web design, but the standard site failed at efficiency and didn’t service its clients’ advertising needs. The lean, agile newspaper now controls the market, and the big corporation folded. Industry insiders saw this as a David vs. Goliath competition. As we all know, David’s lean slingshot carried the day.

The out-of-the-box thinking used by the upstart paper can be taken much further today. Merging IoT data collection and 3D printing can help organizations become lean and agile.

3D printing makes companies lean and efficient

In IDC’s report, “The IoT Imperative for Discrete Manufacturers: Automotive, Aerospace and Defense, High Tech, and Industrial Machinery,” the market analysis firm discusses the use of resilient, lean, 3D printing. The report points out that the automotive industry can improve its agility by shortening delivery times for parts. In-house or nearby 3D printing helps cut wait times and makes companies more efficient. In the aerospace sector, grounded or delayed airplanes cause revenue losses and dissatisfied clients. 3D printing technology can reduce delays due to part shortfalls.

High-tech and industrial machinery sectors follow the same line of reasoning. The benefits of 3D printing can strengthen a company and protect it from disruption. For every Goliath-like success, there is a David-like competitor looking gain market share.

IoT and 3D = Industry 4.0

Advanced digital manufacturing resources such as 3D printing comprise what many are calling Industry 4.0. These resources can be coupled with IoT data collection to enable advanced tracking. Business News Weekly recently published a story, “Industry 4.0: How the Internet of Things is Revolutionizing Manufacturing,” which describes this scenario as “the next Industrial Revolution.” Fortune magazine recently reported that HP Inc. plans to go big in the 3D market. HP CEO Dion Weisler believes 3D will spur the “Fourth Industrial Revolution.” But without IoT-based connectedness, companies may suffer revenue disruptions from technology-smart outfits.

The potential of 3D printing has captured people’s imaginations. It will make companies leaner and more efficient. But that looks a lot like previous industrial revolutions, which lacked beginning and end connectedness. Blending IoT data collection and digital manufacturing can make businesses high-tech farmers. That position of strength can either make you a market-climbing David, or a Goliath with a bigger shield.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value: Accelerating Digital Transformation in Industrial Machinery and Components. Explore how to bring Industry 4.0 insights into your business today: Industry 4.0: What’s Next?

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Johannes Papst

About Johannes Papst

Johannes Papst, solution manager for SAP, focuses on aligning SAP solutions with today´s business needs especially in the Industrial Machinery and Components Industry. He has over 20 years of experience with software for the discrete manufacturing industry. His main area of focus is manufacturing processes and working will small and medium businesses.

Taking Flight With Aerospace: The Power Of Digital

Torsten Welte

Market experts predict the world’s fleet of commercial aircraft will double in size over the next 20 years. This is due to increasing demand from growing markets like China. Industry leaders can secure their market share if they use an integrated approach to innovation and technology.

Faced with growing market demand, aviation companies are under pressure to speed delivery of new aircraft while implementing digital technologies to improve productivity and reduce manufacturing delays. The aerospace firms that are successful in these efforts will be able to stay within schedules and budgets, focus more intently on global expansion, and attract the best industry talent. But the road ahead is full of challenges.

The complexity of aerospace

The global impact of the aerospace industry is quite impressive. Last year alone, it provided the infrastructure to transport over 3.7 billion passengers. Aviation companies also delivered more than 1,800 new commercial aircraft, and launched 85 orbital space missions. Many of today’s innovations depend on technology coming out of the aerospace world. As an example, imagine smartphones without GPS capabilities, a technology developed in aerospace.

The digitalization of aerospace will drive innovation to produce smarter, more efficient aircraft. Already, modern planes can create over 0.5 TB of data for each flight, as input for next-generation services and groundbreaking 3D printing advances – targeting both primary and replacement parts – are enabling equipment manufacturers to better meet service-level agreements and increase uptime. More than ever, success depends on strong engineering to meet the highest quality and safety standards and a strong focus on the integrated approach to innovation.

Challenging traditional paradigms

Aerospace is one of the most regulated and controlled industries in the world and traditionally has not been made up of “rule breakers.” But innovation in this industry does happen when key players challenge their own business processes, then redefine those processes using an array of new technologies.

Two strong examples of this approach come from commercial aerospace manufacturing. Emerging player SpaceX has redefined the rules of space travel and transformed how payloads are sent into space, delivering an operational model with significantly reduced costs. In contrast, the well-established Lockheed Martin is relying heavily on technology, in the form of the Internet of Things (IoT) and machine learning, to protect people and products. The company is also using a blockchain strategy to speed the discovery and solution of cybersecurity problems and has relied on 3D modeling for many years.

The economics of innovation

The aerospace industry has seen tremendous benefits from technological innovation. 3D printing, for example, has helped redefine the process and cost of manufacturing components. Recently, GE produced a 3D-printed 1,300HP advanced turboprop engine. But while 3D printing an entire engine is impressive, aircraft parts will gain the most from this technology.

With fleets always on the go, it’s difficult to anticipate what parts a plane will need and the optimal service location to store them. A grounded airplane can quickly become an expensive problem, with the estimated cost of a typical “B check” maintenance issue near $60,000 USD. 3D printed parts help avoid that scenario and improve fleet uptime and reduce costs.

The industry has also been an early adopter and innovator of IoT technology. Maintenance, repair, and overhaul (MRO) is the daily task of managing the upkeep of aircraft. Checking working systems and how they interconnect requires data gathering and analysis. Technicians, OEM parts manufacturers, and carriers tend to take a more reactive approach to maintenance. This leads to downtime, delayed flights, and aircraft on the ground (AOG) issues during busy airport hours.

IoT enables companies to launch predictive maintenance initiatives. Maintenance technicians gain an understanding of current known issues through available data. They can also see the time remaining until equipment failure. The maintenance techs then have enough information and time to make repairs before major issues arise.

Soaring with a digital core

Technology modernization, including cloud computing, is a top priority for aerospace. Most aviation companies operate in a hybrid environment. In this situation, cloud-based systems interact with on-premises applications, enabling companies to secure intellectual property while enjoying cloud benefits for traditional business applications, HR, and other things.

Aerospace companies that capitalize on the following strategic priorities will succeed in the changing market:

  1. Customer-centricity. Putting the customer’s point of view at the center of every decision is vital for success in the digital age. Providing tailored benefits, improving product performance, and outcome-oriented service models are key.
  1. Digital business networks. Enabling collaboration and leveraging knowledge benefits all business partners. Scalable and secure, many-to-many networks distribute critical, real-time business information across the network.
  1. Innovation. With even more technology embedded, OEMs aim to make products smarter, more reliable, and affordable for customers.
  1. Agile manufacturing. Advanced automation and integration provide data for process improvement and proof of compliance.
  1. New business models. New digital technologies disrupt traditional business models. The results include process evolution, new market opportunities, and new revenue streams.

Learn how to bring new technologies and services together to power digital transformation by downloading The IoT Imperative for Discrete Manufacturers: Automotive, Aerospace and Defense, High Tech, and Industrial Machinery. Explore how to bring Industry 4.0 insights into your business today by reading Industry 4.0: What’s Next?

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Torsten Welte

About Torsten Welte

Torsten Welte, the global vice president and head of aerospace & defense (A&D) at SAP, has over 25 years of experience in consulting, sales, IT, and program management. Under Torsten’s leadership, the A&D Team delivers industry solutions that help customers innovate and grow their businesses, operate safely, and develop their people. Torsten joined SAP Americas in 2004 and has held several key leadership roles within the North American Aerospace & Defense segment. Prior to his tenure with SAP, Torsten spent 12 years with Deloitte Consulting managing several large SAP implementations as well as strategy engagements across different manufacturing industries.

The Blockchain Solution

By Gil Perez, Tom Raftery, Hans Thalbauer, Dan Wellers, and Fawn Fitter

In 2013, several UK supermarket chains discovered that products they were selling as beef were actually made at least partly—and in some cases, entirely—from horsemeat. The resulting uproar led to a series of product recalls, prompted stricter food testing, and spurred the European food industry to take a closer look at how unlabeled or mislabeled ingredients were finding their way into the food chain.

By 2020, a scandal like this will be eminently preventable.

The separation between bovine and equine will become immutable with Internet of Things (IoT) sensors, which will track the provenance and identity of every animal from stall to store, adding the data to a blockchain that anyone can check but no one can alter.

Food processing companies will be able to use that blockchain to confirm and label the contents of their products accordingly—down to the specific farms and animals represented in every individual package. That level of detail may be too much information for shoppers, but they will at least be able to trust that their meatballs come from the appropriate species.

The Spine of Digitalization

Keeping food safer and more traceable is just the beginning, however. Improvements in the supply chain, which have been incremental for decades despite billions of dollars of technology investments, are about to go exponential. Emerging technologies are converging to transform the supply chain from tactical to strategic, from an easily replicable commodity to a new source of competitive differentiation.

You may already be thinking about how to take advantage of blockchain technology, which makes data and transactions immutable, transparent, and verifiable (see “What Is Blockchain and How Does It Work?”). That will be a powerful tool to boost supply chain speed and efficiency—always a worthy goal, but hardly a disruptive one.

However, if you think of blockchain as the spine of digitalization and technologies such as AI, the IoT, 3D printing, autonomous vehicles, and drones as the limbs, you have a powerful supply chain body that can leapfrog ahead of its competition.

What Is Blockchain and How Does It Work?

Here’s why blockchain technology is critical to transforming the supply chain.

Blockchain is essentially a sequential, distributed ledger of transactions that is constantly updated on a global network of computers. The ownership and history of a transaction is embedded in the blockchain at the transaction’s earliest stages and verified at every subsequent stage.

A blockchain network uses vast amounts of computing power to encrypt the ledger as it’s being written. This makes it possible for every computer in the network to verify the transactions safely and transparently. The more organizations that participate in the ledger, the more complex and secure the encryption becomes, making it increasingly tamperproof.

Why does blockchain matter for the supply chain?

  • It enables the safe exchange of value without a central verifying partner, which makes transactions faster and less expensive.
  • It dramatically simplifies recordkeeping by establishing a single, authoritative view of the truth across all parties.
  • It builds a secure, immutable history and chain of custody as different parties handle the items being shipped, and it updates the relevant documentation.
  • By doing these things, blockchain allows companies to create smart contracts based on programmable business logic, which can execute themselves autonomously and thereby save time and money by reducing friction and intermediaries.

Hints of the Future

In the mid-1990s, when the World Wide Web was in its infancy, we had no idea that the internet would become so large and pervasive, nor that we’d find a way to carry it all in our pockets on small slabs of glass.

But we could tell that it had vast potential.

Today, with the combination of emerging technologies that promise to turbocharge digital transformation, we’re just beginning to see how we might turn the supply chain into a source of competitive advantage (see “What’s the Magic Combination?”).

What’s the Magic Combination?

Those who focus on blockchain in isolation will miss out on a much bigger supply chain opportunity.

Many experts believe emerging technologies will work with blockchain to digitalize the supply chain and create new business models:

  • Blockchain will provide the foundation of automated trust for all parties in the supply chain.
  • The IoT will link objects—from tiny devices to large machines—and generate data about status, locations, and transactions that will be recorded on the blockchain.
  • 3D printing will extend the supply chain to the customer’s doorstep with hyperlocal manufacturing of parts and products with IoT sensors built into the items and/or their packaging. Every manufactured object will be smart, connected, and able to communicate so that it can be tracked and traced as needed.
  • Big Data management tools will process all the information streaming in around the clock from IoT sensors.
  • AI and machine learning will analyze this enormous amount of data to reveal patterns and enable true predictability in every area of the supply chain.

Combining these technologies with powerful analytics tools to predict trends will make lack of visibility into the supply chain a thing of the past. Organizations will be able to examine a single machine across its entire lifecycle and identify areas where they can improve performance and increase return on investment. They’ll be able to follow and monitor every component of a product, from design through delivery and service. They’ll be able to trigger and track automated actions between and among partners and customers to provide customized transactions in real time based on real data.

After decades of talk about markets of one, companies will finally have the power to create them—at scale and profitably.

Amazon, for example, is becoming as much a logistics company as a retailer. Its ordering and delivery systems are so streamlined that its customers can launch and complete a same-day transaction with a push of a single IP-enabled button or a word to its ever-attentive AI device, Alexa. And this level of experimentation and innovation is bubbling up across industries.

Consider manufacturing, where the IoT is transforming automation inside already highly automated factories. Machine-to-machine communication is enabling robots to set up, provision, and unload equipment quickly and accurately with minimal human intervention. Meanwhile, sensors across the factory floor are already capable of gathering such information as how often each machine needs maintenance or how much raw material to order given current production trends.

Once they harvest enough data, businesses will be able to feed it through machine learning algorithms to identify trends that forecast future outcomes. At that point, the supply chain will start to become both automated and predictive. We’ll begin to see business models that include proactively scheduling maintenance, replacing parts just before they’re likely to break, and automatically ordering materials and initiating customer shipments.

Italian train operator Trenitalia, for example, has put IoT sensors on its locomotives and passenger cars and is using analytics and in-memory computing to gauge the health of its trains in real time, according to an article in Computer Weekly. “It is now possible to affordably collect huge amounts of data from hundreds of sensors in a single train, analyse that data in real time and detect problems before they actually happen,” Trenitalia’s CIO Danilo Gismondi told Computer Weekly.

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials.

The project, which is scheduled to be completed in 2018, will change Trenitalia’s business model, allowing it to schedule more trips and make each one more profitable. The railway company will be able to better plan parts inventories and determine which lines are consistently performing poorly and need upgrades. The new system will save €100 million a year, according to ARC Advisory Group.

New business models continue to evolve as 3D printers become more sophisticated and affordable, making it possible to move the end of the supply chain closer to the customer. Companies can design parts and products in materials ranging from carbon fiber to chocolate and then print those items in their warehouse, at a conveniently located third-party vendor, or even on the client’s premises.

In addition to minimizing their shipping expenses and reducing fulfillment time, companies will be able to offer more personalized or customized items affordably in small quantities. For example, clothing retailer Ministry of Supply recently installed a 3D printer at its Boston store that enables it to make an article of clothing to a customer’s specifications in under 90 minutes, according to an article in Forbes.

This kind of highly distributed manufacturing has potential across many industries. It could even create a market for secure manufacturing for highly regulated sectors, allowing a manufacturer to transmit encrypted templates to printers in tightly protected locations, for example.

Meanwhile, organizations are investigating ways of using blockchain technology to authenticate, track and trace, automate, and otherwise manage transactions and interactions, both internally and within their vendor and customer networks. The ability to collect data, record it on the blockchain for immediate verification, and make that trustworthy data available for any application delivers indisputable value in any business context. The supply chain will be no exception.

Blockchain Is the Change Driver

The supply chain is configured as we know it today because it’s impossible to create a contract that accounts for every possible contingency. Consider cross-border financial transfers, which are so complex and must meet so many regulations that they require a tremendous number of intermediaries to plug the gaps: lawyers, accountants, customer service reps, warehouse operators, bankers, and more. By reducing that complexity, blockchain technology makes intermediaries less necessary—a transformation that is revolutionary even when measured only in cost savings.

“If you’re selling 100 items a minute, 24 hours a day, reducing the cost of the supply chain by just $1 per item saves you more than $52.5 million a year,” notes Dirk Lonser, SAP go-to-market leader at DXC Technology, an IT services company. “By replacing manual processes and multiple peer-to-peer connections through fax or e-mail with a single medium where everyone can exchange verified information instantaneously, blockchain will boost profit margins exponentially without raising prices or even increasing individual productivity.”

But the potential for blockchain extends far beyond cost cutting and streamlining, says Irfan Khan, CEO of supply chain management consulting and systems integration firm Bristlecone, a Mahindra Group company. It will give companies ways to differentiate.

“Blockchain will let enterprises more accurately trace faulty parts or products from end users back to factories for recalls,” Khan says. “It will streamline supplier onboarding, contracting, and management by creating an integrated platform that the company’s entire network can access in real time. It will give vendors secure, transparent visibility into inventory 24×7. And at a time when counterfeiting is a real concern in multiple industries, it will make it easy for both retailers and customers to check product authenticity.”

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials. Although the key parts of the process remain the same as in today’s analog supply chain, performing them electronically with blockchain technology shortens each stage from hours or days to seconds while eliminating reams of wasteful paperwork. With goods moving that quickly, companies have ample room for designing new business models around manufacturing, service, and delivery.

Challenges on the Path to Adoption

For all this to work, however, the data on the blockchain must be correct from the beginning. The pills, produce, or parts on the delivery truck need to be the same as the items listed on the manifest at the loading dock. Every use case assumes that the data is accurate—and that will only happen when everything that’s manufactured is smart, connected, and able to self-verify automatically with the help of machine learning tuned to detect errors and potential fraud.

Companies are already seeing the possibilities of applying this bundle of emerging technologies to the supply chain. IDC projects that by 2021, at least 25% of Forbes Global 2000 (G2000) companies will use blockchain services as a foundation for digital trust at scale; 30% of top global manufacturers and retailers will do so by 2020. IDC also predicts that by 2020, up to 10% of pilot and production blockchain-distributed ledgers will incorporate data from IoT sensors.

Despite IDC’s optimism, though, the biggest barrier to adoption is the early stage level of enterprise use cases, particularly around blockchain. Currently, the sole significant enterprise blockchain production system is the virtual currency Bitcoin, which has unfortunately been tainted by its associations with speculation, dubious financial transactions, and the so-called dark web.

The technology is still in a sufficiently early stage that there’s significant uncertainty about its ability to handle the massive amounts of data a global enterprise supply chain generates daily. Never mind that it’s completely unregulated, with no global standard. There’s also a critical global shortage of experts who can explain emerging technologies like blockchain, the IoT, and machine learning to nontechnology industries and educate organizations in how the technologies can improve their supply chain processes. Finally, there is concern about how blockchain’s complex algorithms gobble computing power—and electricity (see “Blockchain Blackouts”).

Blockchain Blackouts

Blockchain is a power glutton. Can technology mediate the issue?

A major concern today is the enormous carbon footprint of the networks creating and solving the algorithmic problems that keep blockchains secure. Although virtual currency enthusiasts claim the problem is overstated, Michael Reed, head of blockchain technology for Intel, has been widely quoted as saying that the energy demands of blockchains are a significant drain on the world’s electricity resources.

Indeed, Wired magazine has estimated that by July 2019, the Bitcoin network alone will require more energy than the entire United States currently uses and that by February 2020 it will use as much electricity as the entire world does today.

Still, computing power is becoming more energy efficient by the day and sticking with paperwork will become too slow, so experts—Intel’s Reed among them—consider this a solvable problem.

“We don’t know yet what the market will adopt. In a decade, it might be status quo or best practice, or it could be the next Betamax, a great technology for which there was no demand,” Lonser says. “Even highly regulated industries that need greater transparency in the entire supply chain are moving fairly slowly.”

Blockchain will require acceptance by a critical mass of companies, governments, and other organizations before it displaces paper documentation. It’s a chicken-and-egg issue: multiple companies need to adopt these technologies at the same time so they can build a blockchain to exchange information, yet getting multiple companies to do anything simultaneously is a challenge. Some early initiatives are already underway, though:

  • A London-based startup called Everledger is using blockchain and IoT technology to track the provenance, ownership, and lifecycles of valuable assets. The company began by tracking diamonds from mine to jewelry using roughly 200 different characteristics, with a goal of stopping both the demand for and the supply of “conflict diamonds”—diamonds mined in war zones and sold to finance insurgencies. It has since expanded to cover wine, artwork, and other high-value items to prevent fraud and verify authenticity.
  • In September 2017, SAP announced the creation of its SAP Leonardo Blockchain Co-Innovation program, a group of 27 enterprise customers interested in co-innovating around blockchain and creating business buy-in. The diverse group of participants includes management and technology services companies Capgemini and Deloitte, cosmetics company Natura Cosméticos S.A., and Moog Inc., a manufacturer of precision motion control systems.
  • Two of Europe’s largest shipping ports—Rotterdam and Antwerp—are working on blockchain projects to streamline interaction with port customers. The Antwerp terminal authority says eliminating paperwork could cut the costs of container transport by as much as 50%.
  • The Chinese online shopping behemoth Alibaba is experimenting with blockchain to verify the authenticity of food products and catch counterfeits before they endanger people’s health and lives.
  • Technology and transportation executives have teamed up to create the Blockchain in Transport Alliance (BiTA), a forum for developing blockchain standards and education for the freight industry.

It’s likely that the first blockchain-based enterprise supply chain use case will emerge in the next year among companies that see it as an opportunity to bolster their legal compliance and improve business processes. Once that happens, expect others to follow.

Customers Will Expect Change

It’s only a matter of time before the supply chain becomes a competitive driver. The question for today’s enterprises is how to prepare for the shift. Customers are going to expect constant, granular visibility into their transactions and faster, more customized service every step of the way. Organizations will need to be ready to meet those expectations.

If organizations have manual business processes that could never be automated before, now is the time to see if it’s possible. Organizations that have made initial investments in emerging technologies are looking at how their pilot projects are paying off and where they might extend to the supply chain. They are starting to think creatively about how to combine technologies to offer a product, service, or business model not possible before.

A manufacturer will load a self-driving truck with a 3D printer capable of creating a customer’s ordered item en route to delivering it. A vendor will capture the market for a socially responsible product by allowing its customers to track the product’s production and verify that none of its subcontractors use slave labor. And a supermarket chain will win over customers by persuading them that their choice of supermarket is also a choice between being certain of what’s in their food and simply hoping that what’s on the label matches what’s inside.

At that point, a smart supply chain won’t just be a competitive edge. It will become a competitive necessity. D!


About the Authors

Gil Perez is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Tom Raftery is Global Vice President, Futurist, and Internet of Things Evangelist, at SAP.

Hans Thalbauer is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Dan Wellers is Global Lead, Digital Futures, at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

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Four Retail Technology Trends To Take Off In 2018

Shaily Kumar

Over the past few years, technology has seen a significant shift from cyclical, invention-led spending on point solutions to investments targeting customer-driven, end-to-end value. The next wave of disruption and productivity improvements is here, which means a huge opportunity for digital-focused enterprises – if you are following the right roadmap.

Technology trends have significant potential over the next few years. Establishing a digital platform will not only set the stage for business innovation to provide competitive advantage, but it will also create new business models that will change the way we do business. Technology trends in 2018 will lay the foundation for the maturity of innovative technologies like artificial intelligence and machine learning and will prepare both businesses and shoppers to be ready for their consumption.

Like any other industry, retail is being disrupted. It is no longer enough to simply stock racks with alluring products and wait for customers to rush through the door. Technological innovation is changing the way we shop. Customers can find the lowest price for any product with just a few screen touches. They can read online reviews, have products sent to their home, try them, and return anything they don’t want – all for little or nothing out of pocket. If there are problems, they can use social networks to call out brands that come up short.

Retailers are making their products accessible from websites and mobile applications, with many running effective Internet business operations rather than brick-and-mortar stores. They convey merchandise to the customer’s front entry and are set up with web-based networking media if things turn out badly.

Smart retailers are striving to fulfill changing customer needs and working to guarantee top customer service regardless of how their customer interacts with them.

2017 saw the development of some progressive technology in retail, and 2018 will be another energizing year for the retail industry. Today’s informed customers expect a more engaging shopping experience, with a consistent mix of both online and in-store recommendations. The retail experience is poised to prosper throughout next couple of years – for retailers that are prepared to embrace technology.

Here are four areas of retail technology I predict will take off in 2018:

In-store GPS-driven shopping trolleys

Supermarkets like Tesco and Sainsbury’s now enable their customers to scan and pay for products using a mobile app instead of waiting in a checkout line. The next phase of this involves intelligent shopping trolleys, or grocery store GPS: Customers use a touch screen to load shopping lists, and the system helps them find the items in the store. Customers can then check off and pay for items as they go, directly on-screen. These shopping trolleys will make their way into stores around the last quarter of 2018.

Electronic rack edge names

Electronic rack edge names are not yet broadly utilized, but this could change in 2018 as more retailers adopt this technology. Currently, retail workers must physically select and update printed labels to reflect changes in price, promotions, etc. This technology makes the process more efficient by handling such changes electronically.

Reference point technology

Despite the fact that it’s been around since 2013, reference point technology hasn’t yet been utilized to its fullest potential. In the last few years, however, it’s started to pick up in industries like retail. It’s now being used by a few retailers for area-based promotions.

Some interesting uses I’ve observed: Retailers can send messages to customers when they’re nearby a store location, and in-store mannequins can offer information about the clothing and accessories they’re wearing. I anticipate that this innovation will take off throughout 2018 and into 2019.

Machine intelligence

The technological innovations describe above will also provide retailers with new data streams. These data sources, when merged with existing customer data, online, and ERP data, will lead to new opportunities. Recently Walmart announced it would begin utilizing rack examining robots to help review its stores. The machines will check stock, prices, and even help settle lost inventory. It will also help retailers learn more about changing customer behavior in real time, which will boost engagement.

Clearly, technology and digital transformation in retail have changed the way we live and shop. 2018 will see emerging technologies like machine learning and artificial intelligence using structured and unstructured data to deliver innovation. As technology develops, it will continue to transform and enhance the retail experience.

For more insight on e-commerce, see Cognitive Commerce In The Digital World: Enhancing The Customer Journey.

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Shaily Kumar

About Shaily Kumar

Shailendra has been on a quest to help organisations make money out of data and has generated an incremental value of over one billion dollars through analytics and cognitive processes. With a global experience of more than two decades, Shailendra has worked with a myriad of Corporations, Consulting Services and Software Companies in various industries like Retail, Telecommunications, Financial Services and Travel - to help them realise incremental value hidden in zettabytes of data. He has published multiple articles in international journals about Analytics and Cognitive Solutions; and recently published “Making Money out of Data” which showcases five business stories from various industries on how successful companies make millions of dollars in incremental value using analytics. Prior to joining SAP, Shailendra was Partner / Analytics & Cognitive Leader, Asia at IBM where he drove the cognitive business across Asia. Before joining IBM, he was the Managing Director and Analytics Lead at Accenture delivering value to its clients across Australia and New Zealand. Coming from the industry, Shailendra held key Executive positions driving analytics at Woolworths and Coles in the past.