The Digital Supply Chain: Business Enabler For The Digital Economy

Richard Howells

Part 3 in the three-part series “From Old to New with the Digital Supply Chain

Today we’re in the eye of an innovation storm – the result of two strong fronts coming together.

One front is customer empowerment. Customers today are more demanding because they’re more informed. Customers have the power – and they know it.

The other front is comprised of intelligent technologies. These include the Internet of Things (IoT), artificial intelligence, machine learning, and blockchain.

The result is a perfect storm of innovation – with leading companies using intelligent technologies to transform business processes, develop new delivery models, and create the kinds of experiences that empowered customers expect.

Here are just a few examples of how companies are transforming themselves.

From mass production to mass customization

Customers today seek more individualized products. To accommodate this demand, companies are scrambling to change supply chain processes. From product design to production and delivery, companies need to deliver smaller batches at higher volume to shrinking customer segments.

In many ways, this is what Industry 4.0 and Smart Factory initiatives are all about. Starting with digital designs that can be freely shared with design partners, companies can quickly generate high-quality prototypes using 3D printing or additive manufacturing techniques that dramatically reduce the cost of R&D.

When it comes to manufacturing, organizations are redesigning their plants. They’re moving from continuous production lines that produce only a few products to configurable manufacturing cells that can produce lower volumes of a wide variety of configurations.

These more flexible production cells can be moved to different positions on the production floor. Smart sensors can be used to provide critical status data – and mobile robots can be used to automatically route products to the next cell in the production process. As a result, companies can “mass-customize” products for the “lot size of one.”

For final delivery, the sky is the limit – literally. With delivery by drone, for example, companies may soon be able to bypass city traffic and get goods to customers’ doors faster. In the meantime, companies are already using IoT technology, smart vehicles, and advanced GPS techniques to map the most efficient delivery routes – reducing the speed and cost of last-mile delivery.

From selling products to delivering solutions

The ability to make, sell, and deliver customized products to increasingly small – or even individual – segments is important. But in an economy where customer engagement is key, many organizations are moving away from selling products to delivering services. In this model, the supplier is responsible for maintaining and servicing the product or asset, while the customer uses it as a service.

For example:

  • A construction crew can pay for drills and other equipment based on hours of usage (or, say, the number of holes drilled)
  • Plant operators can pay for industrial pumps based on the volume of water pumped
  • Fleet operators can pay for vehicles based on miles driven

Such models change the customer relationship in substantial ways – not the least of which is the fact that they bring customers and companies into closer and ongoing contact. As a service provider, the company selling the service becomes more of a partner in ensuring the success of the customer’s business.

The onus for ensuring uptime and availability, however, now falls on the service provider. If an industrial HVAC machine for cooling a factory goes down, the company that supplies the cooling service stops making money. This, then, provides an incentive for the service-providing company to design and manufacture the deployed asset in a way that tracks and ensures uptime and availability.

Companies can address this challenge with Internet of Things (IoT) technology. Using embedded sensors, organizations can track asset health and perform maintenance proactively. Mixing this data with advanced analytics and data mining techniques, companies can identify patterns that predict machine failure before it happens. And with machine learning, they can improve this predictive capability over time.

From cost reduction to revenue generation

Predictive maintenance can help asset manufacturers reduce costs. After all, maintenance costs less than repair. This is true for manufacturers – but it’s also true for customers where it concerns downtime. The cost of downtime is a key factor in the value equation for predictive maintenance.

Yet predictive maintenance is only one way to drive value from data. As manufacturers grow more confident with intelligent technologies and the digital supply chain, they’ll find more ways to tap that value. For example:

  • If I leverage blockchain to secure transactions and enable visibility from farm to table, I can promote my produce as sustainable and ethically sourced
  • If I use IoT sensors and GPS technology to gain real-time visibility into logistics, I can ensure on-time delivery and better customer service levels
  • If I sense demand for products through social media and sentiment analysis, or even weather forecasts and local events, I can get the right products to the right place at the right quantity and at the right time
  • If I track the performance of assets using IoT sensors, I can predict failures, reduce maintenance costs, increase uptime, and optimize usage
  • If I use augmented reality tools that assist technicians with the data they need to get the job done, I can increase technician productivity and improve customer satisfaction

These, of course, are just some of the examples of the ways that manufacturers can use data throughout the digital supply chain. As your organization continues down this path, these technologies help you attract new customers – moving your organization from a service provider that minimizes costs to a valued business partner that generates new sources of revenue. This is how the digital supply chain acts as a business enabler for the digital economy.

Join an interactive session featuring Jeff Hojlo, Program Director, Product Innovation Strategies at IDC, and Hans Thalbauer, Senior Vice President, Digital Supply Chain & Industry 4.0 at SAP, to get inspired about how best-in-class companies are reinventing their supply chain. Register here.


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.