The metals industry is at a crossroads. It faces decreasing global demand, trade flow disruptions, widening workforce skill gaps, and declining resource quality. These challenges have hurt profits and reduced capital investments. The metals industry is ripe for change – and digital transformation is leading the way.
Stefan Koch, global lead for metals in the mill products industry business unit at SAP, recently spoke about the future of the metals industry on the S.M.A.C. Talk Technology Podcast. Koch addressed the three major ways digitization will change the industry. Machine learning will simplify production processes and streamline operations. Virtual reality (VR) will enable virtual plant operations, creating new business models. Blockchain will enable verified material tracking for purchases like green (recycled) steel. Together, these technologies can disrupt everything from extraction to production to sales.
1. Machine learning simplifies production processes, predicts quality outcomes
“Smart machines” are not a new addition to the metals industry. The industry already relies on sensor data to monitor machine performance and maximize uptime. For most companies, however, that’s the current extent of this data utility.
“It’s still very often that you see this island of information,” says Stefan Koch on the S.M.A.C. Talk Technology Podcast. “Somebody thinks of production. Another one thinks of, “Oh yeah, that’s my customers, that’s my sales.” In the future, everything will need to go together and work together in an integrated way.”
Machine learning will allow companies to do more with their data, optimizing everything from materials sourcing to process adjustments. For example, a company could link systems across multiple operations and operators. This company could then use machine learning to either eliminate or automate redundant processes like invoicing.
Koch predicts that machine learning will also enable more advanced metal production capabilities that are cost-effective and high-value for the end customer. Presently, identical production processes may still yield slightly different finished products. These differences are due to naturally occurring material variances. Machine learning will allow companies to “look into the future” and predict quality outcomes down to the slightest variation. Producers could then pre-assign products to specific customers, delivering greater value and increasing customer satisfaction.
2. Virtual reality enables remote plant operations and value chain control
Will metal companies of the future still own physical deposits? Perhaps not, says Koch. On the S.M.A.C. Talk Technology Podcast, Koch notes that some metal companies are already moving away from asset ownership. These companies are “contracting production, resources, logistics, and materials” in a bid to control the value chain.
Consider, for example, a company that shares tasks with suppliers in other countries. This company could use virtual reality contacts to enable repair and control. The company could also use virtual reality to exchange or integrate data, boosting collaboration across the value chain.
Koch predicts that virtual reality will play an important role in streamlining remote plant operation. “These are concepts we see already picking up.”
3. Blockchain guarantees supply chain validity and authenticity
A blockchain is a tamper-proof distributed ledger that maintains a historical record of all data. Since this record is independent of a central authority, it is inherently resilient. Algorithms enable continuous verification and validity calibration. Data can be signed, timestamped, and immutably recorded in the blockchain. Blockchain can then provide essential transaction validation and purity verification, guaranteeing authenticity.
Koch predicts the metal industry will use blockchain to “provide faster and more rapid ways to authenticate materials.” In the recycling industry, for example, not all parties involved communicate with one another every day. The lack of a closed loop supply chain creates authentication challenges. In fact, Koch characterizes the current metal recycling supply chain as “a pretty random list of partners who interact on a long timeframe.” Blockchain solves this challenge by providing an immutable authenticity guarantee at each step.
Why the future of metals depends on digital transformation
Digitization is more than using predictive maintenance to maximize machine uptime. It’s about disrupting outdated processes and creating new business models.
The World Economic Forum predicts that, by 2025, digital transformation will create more than $425 billion of value for the mining and metals industry. Companies that embrace digital transformation will be best positioned to capitalize on this value creation.
To learn more about how digital transformation is disrupting the metals industry, listen to the S.M.A.C. Talk Technology Podcast with Stefan Koch. Learn how to bring new technologies and services together to power digital transformation by downloading The IoT Imperative for Energy and Natural Resource Companies.