The Advantages Of Digital Supply Chains: A Podcast With Johannes Drooghaag

Tom Raftery

Welcome to episode 17 of the “Digital Supply Chain” podcast. In this episode, I interview Dr. Johannes Drooghaag (also known simply as JD and @DRJDrooghaag on Twitter).

We had a wide-ranging conversation on digital supply chains, covering many aspects including manufacturing, Industry 4.0, and cybersecurity.

Check out the podcast and the transcript below.

TR: Good morning, good afternoon, or good evening, wherever you are in the world. This is the Digital Supply Chain podcast, and I am your host, Tom Raftery.

TR: Hey everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP, and my special guest on the show today is JD. JD, would you like to introduce yourself?

JD: Well, thank you, Tom. First, first of all, thank you for having me on your podcast. I really appreciate this opportunity. My name is Johannes Drooghaag, but it’s shortened to JD because that’s much easier and it doesn’t hurt so much to pronounce. I started my career in industrial automation, the classical way, putting a lot of robots and a lot of sensors and a lot of PLCs in a factory. And through time, I learned that there are other options and that we can do a lot more with the data we are collecting and turn it into information – or what I prefer, actionable information. After some 25 years in corporate roles, I decided to start my own consulting company, and I’m focusing on those two fields: on the one hand and the organizational side, human beings that are working with the information. And on the other side, the technology that is creating the data out of which we can create that actionable information. I’m 30 years on the road now, and I keep learning every day. And that’s one of the reasons why I’m with you today, Tom, to keep learning from you, as well.

TR: Oh dear. No, no pressure on me. So no. Okay. So I typically start the show asking the guests on the show to give me their personal definition of what a digital supply chain is. Because you know, everyone has a kind of a slightly different approach to it. It’s a broad topic. So how do you define digital supply chain, JD?

JD: Well, for me, the digital supply chain is basically the digital twin, so to speak, of the classical supply chain, which as we all know it with all the parts moving and the orders. And the digital supply chain is the digital twin in which we can do two things. We can constantly respond to what is happening because we need to respond much faster than we used to do in the past. In the past, we had mass production, we had large batches, we had orders which were sent out months before we start producing.

Nowadays we have much more dynamics. Orders are changed, we have smaller volumes, we have smaller production batches. We even want to avoid production batches. We want to create single-piece flows in our factories. And the second thing we can do is we can start simulating in our digital supply chain. We can do real scenarios without actually having to touch the process. So we can start looking for opportunities and for optimization items. We can also look back to the past and see what failed, what it didn’t do, what we were expecting that it would be doing, and how can we prevent it, and what can we learn from that. And that, for me, is the digital supply chain. The information that we, on the one hand, get from the existing supply chains, which are much more complicated than they were in the past. And on the other end, the learnings, the organizational handling of that digital supply chain.

TR: Excellent. Excellent. Very good. Very good. You started off saying that there were kind of two aspects to looking at digital supply chain. One was the human side and the other was the actionable items. You know, I’ve often said that, in these kind of scenarios, that the technology is generally very straightforward. It’s getting people to change because the hard part is is that your inkling as well as technology is generally straightforward. People are hard.

JD: Well, we can make the technology as complicated as we want, but that doesn’t lead to anything, right? So if we start with a straightforward concept, and then make sure that the people who we expect to work with it also actually understand what we are expecting from them, which kind of responses we want, then we see that there is an enormous gap because most people are already pretty much loaded with their actual work. And we need them to, first of all, have the mindset then that when the system is telling them something, they should take it serious. And now, on the other hand, they need to understand what the difference is between some kind of general status update and an urgent item that they actually need to respond to.

Now, having three decades of experience, I have learned a couple of things. First of all, people do not really trust the system because there’s always something which is not right. If we take a closer look, that means we can learn and we can say, okay, we found something in the system, which is not correct. Let’s improve it. Yeah. But the human behavior is to use that as an excuse almost to also ignore all the other things that they see in the system. And the second thing that I’ve learned is when you’re busy going from A to B and somebody is telling you there’s a smarter way you could go through C and then to B, okay. You were focused on going to B, so you’re not paying attention to that additional information. And that’s an enormous challenge on top of the normal change management and organizational challenges we already have.

TR: Yeah, indeed. And how do you overcome that?

JD: Well, the first thing that I always do with my clients is start with the people and look at what their routines are and look at what kind of information they would need instead of the information that they have. Because what I see in my experience is that most service providers make the mistake of just sending more information to the already available information. And a production manager or a scheduler or a planner doesn’t need a new report on top of all the reports they need to report or an information overview that tells them what to do and where they should respond. So, I start by filtering. I start by asking them, “if you have 20 reports and I take 10 away, which one would that be?” Yeah. And the interesting thing is that most of the time when I ask for 10, they give me 18 because they’re going to use me.

TR: Yeah. There’s a professor of journalism in New York whose name is Clay Shirky and he’s got this great quote that I love. He says, “there’s no such thing as information overload. There’s only filter failure.”

JD: Exactly. I love that. Yeah, yeah, yeah, yeah. No, that’s great. That’s great.

TR: You, you talked as well not just about the people aspect, but of the actionable items. What do you mean by that?

JD: Well, an actionable item. I always take the example of the SCADA world where I’ve spent five years all over the world. If you look at the SCADA system, you will always have a state-to-screen where the operator can see the entire refinery or the entire pipeline or any other utilization of that SCADA. But, as soon as the operator is expected to take action, that is automatically put in focus. So, at the moment that the operator is expected to take action, the operator sees that action item, and that can be a small decision; that can be a big decision. But the system automatically focuses the attention of that operator on that particular item where an action is needed. Okay.

Providers of SCADA systems have learned over the years that if you keep that action item in the entire status screen of the refinery, the operator won’t notice it because it’s just one little thing, and sometimes they have up to a thousand different, aggregated devices in the overview and an actionable item. And an actionable piece of information means that first of all, the person who shoots take action is informed in the proper way without any kind of distractions. And second, the person has a couple of options or has supporting information to make that decision. Now, if I then compare it to what I see, especially in production facilities, that there’s an operator overloaded with a lot of status written information, which that person should not respond to, and hidden in that stream is that one item where the person should respond to, well then I cannot blame him for not seeing it or ignoring it or pressing the standard button. So the popup goes away.

Actionable information means to me, “I see it when I need it.” I get the information I need to take a decision, or that actionable information informs me that something is not the way we wanted it to be, and I need to do some optimizing, or it means I need to get some additional resources.

TR: Right. A lot of that sounds like its design-led issues potentially are maybe not maybe issues … but properly designed screens and user interfaces should do away with a lot of these issues.

JD: Exactly. And then it’s also a system thing because if you look at a supply chain, then it’s not just a screen on a machine. It is a whole stream of information. And if I have somewhere in my supply chain the change, which was not part of the current planned activities, I cannot wait until that arrives at my facility. I need to respond to that with the appropriate lead time. And if that means a changeover in the production planning, and that means that I need to schedule some additional machine changeover, I need to know that in the proper appropriate time. So, we also need to add some intelligence to it. We need to add which timeframes we need. We need to add which kind of materials we need. And if we start figuring that out at the moment that it has already happened, well we are too late, especially when our supply chain is a bit more complicated then the local grocery shop.

TR: Okay. And so you, we have some customers with some very, very complex supply chains. So yeah, tying all those disparate pieces of data together can prove challenging.

JD: Exactly. I always use this lovely example from my own automotive experience. If we look at the classical … car, we have up to 40,000 components. If we look at an electrical vehicle, your favorite topic, we still have about 10,000 components for just one car. Yeah. Now if we make one change, just one change, we might have to reschedule a couple of those components in the assembly. Now, the further we go down the line in that supply chain and we make that significant change, well, the more others will have to respond to that. So supply chains are complicated and supply chains are no longer single or dual parties. The same car with 40,000 components has up to 1,500 suppliers of those components. And that needs to be managed and it needs to be managed very actively.

TR: Yeah. Yeah. If I needed them or delayed getting parts to you. Maybe there’s a coronavirus outbreak, and they can’t get their workers to their factories, and they have to hold production. It throws everything out.

JD: Exactly, and if you do that in a smart way, and this is what I really enjoy about the digital supply chain because the coronavirus is an example. We have a crisis that might impact our supply chain. Now if we have a properly built and properly designed digital edition of our actual supply chain, that’s the moment where we are capable to say, okay, what happens if we, for example, slow down this line of supply, and what does that mean for the other parts? Can we make changes in the capacity, or can we increase some … from another supplier and decrease some folio with this supplier and navigate around that crisis, and that crisis never establishes the way we thought. So we can then the next day update again, and we can really start looking forward instead of what most people in the supply chain business always tell me. We are managing the past. With a digital supply chain, we are capable of learning how to manage the future.

TR: It’s an amazing change, isn’t it? In going from older, more analog technologies where, as you write these, say people ran delays in the past, to the digital, where we’re analytes in the future. It’s… I don’t know how to phrase that exactly, but it’s a huge, huge change in the way people are now able to do business.

JD: It’s an amazing change and it’s, there’s the simple, in English, we have a wonderful, in German, it’s almost as wonderful in English, we can say, it makes the difference between reacting and acting in the classical analog supply chain management, UI reacting. You’re always reacting to things that have already happened in a digital supply tent. You can act based on the things that you know will happen because that’s the information you receive. And that’s how you can build your scenarios.

TR: Yeah, that’s it. Exactly. JD. looking forward the next five, 10 years, where do you see the biggest potential for change. Where do you see the biggest changes that are going to happen? How will they impact?

JD: Well, the biggest changes that I will see, there’s one thing that we are not yet aware of – the up to 80% of the production facilities we currently have are built in the previous century classical, uh, built for big batches, built to produce a lot of the same. And companies are starting to learn that you can still use those Industry 4.0 and the IoT and the smart supply chain solutions. You just have to be a bit more creative about how to implement them for those classical old things. So, one of the things that I am already seeing and it’s developing, fortunately, that companies are moving forward with their infrastructure, which is in some cases they still plan to use it for the next 20 years. So people stop. I’m believing that all those technologies are only available when they build something new or a greenfield facility or to purchase new machinery. We see that rolling out into the existing infrastructure and that, I believe, is a wonderful change.

TR: Yeah, yeah, yeah. We, we had an example, I mean we have a bunch of examples with different customers, but there was one that really kind of blew my mind, and it was with Harley Davidson. It used to take them 21 days to create a custom motorbike, and when they shifted over to digital manufacturing, they brought the time of manufacture from 21 days down to six hours. Just incredible.

JD: That’s incredible. But that’s possible. Yeah. Yeah. it’s going back to what you were mentioning, going from facilities which are built to just build lots of one type of thing. And then when you try and do custom, in this case, motorbikes, it takes a lot more work and takes 21 days. When you switch to a facility which is built to be completely customizable, and your lines could be completely fluid, then you can do mass customization and then kind of lot sizes of one, and you can drop the time to manufacture again, in this case of bikes, down to as six hours for a custom Harley.

TR: It’s really impressive.

JD: That is really impressive. But it also demonstrates what is possible if you move away from the classical patterns. In some cases, that will mean that you actually need to invest in your existing machinery, in some cases will mean that you must reduce some capacity for mass production, which you don’t need anyway anymore. And in some cases, it means that you actually discover that your equipment is capable of doing much more than you thought it could. You just have to sit down and, with concepts like design thinking, most of it is logical thinking. You need to be able to investigate, to explore, to do some testing, and discover how flexible you can become. Because that’s also what Industry 4.0 is about. And that is what a smart supply chain is about. It’s not just about more data and more technology, it’s especially about becoming more flexible so you can respond to what happens on the market. Right?

TR: Yeah, that’s true. That’s true. And in the case of Harley, it wasn’t that they did it in the same facility, so they kind of, I won’t say they cheated, but it took a kind of a hybrid approach. They built a second facility beside their existing facility, and then they transferred all of their staff and all their machinery into the new facility. But it was two-thirds the size of their existing facility. And yet, because it was completely digitized, they were able to then, as I say, bring the lot times down from days to hours.

JD: Yeah. But, this will happen in many cases, and sometimes you have the luxury to say, okay, I’ve got a second production facility, and I can basically redesign my existing process with a single-piece-flow concept in mind instead of batches and long production. In other cases, you will have to do that. And we did it at one major automotive supplier, which unfortunately I cannot mention by name. We did it. We did the same thing we did in the existing facility. We started with machine number one and, and eliminated all the batch containers and the batch flow and created a single-piece-flow structure around that, and then took it to the next level. And it was very fortunate that we had a very good tie-in of the ERP system from SAP at that moment. So, we could get all the production data, we could get all the settings, the proper product identifications from the system. And we were capable of building a single-piece flow throughout the production facility. It took two years because we had to do it step by step, and we could not go from the old school to the new school by just closing down the factory. But one of the results is that we decreased the capital on hand to time, which was around 18 days. We’ve decreased that to two days. So, from purchasing the material to shipping it to the next facility was reduced by more than 80%. That is serious money.

TR: That’s a lot, yeah. That’s impressive. That’s really impressive. Yeah. That’s amazing. Okay. Look JD. We’re coming towards the end of the podcast, and typically at this time of the podcast, I’ll ask people is there any question that I haven’t asked you that you wish I had?

JD: Um, one question, Tom, and that’s my second-favorite topic: cybersecurity. So if you ask me, “JD, what would be your top priority in digital supply chain? Besides all the technical opportunities we have and the organizational opportunities we have?” I would say cybersecurity has to be the top priority, because the more digitized we get, the more risk we have that something bad happens to the digitized world. So cybersecurity, big picture approach, make sure that it is by design and not by coincidence.

TR: Very good, very good. Very good. Yeah, hugely important. As we are opening up our manufacturing facilities and our logistics and everything, as we’re opening them up to the internet, we are massively increasing the threat landscape. So yeah, absolutely. Very, very important to consider cybersecurity from, as you say, from the design phase, right through … it can’t be something that you kind of cobble on afterwards, dead right?

TR: So JD, if people want to know more about yourself, what’s the best place they can go to find information about JD?

JD: Well, they can visit me always on my LinkedIn profile or on my website, JohannesDrooghaag.com. Unfortunately, jd.com was already taken. I am on Twitter. I am on Facebook, Instagram. Twitter is my main social media exposure. Otherwise, drop me a note at my website, and I will reply as soon as possible.

TR: Super, super JD. I will put those links in the description of the podcast when I publish it so everyone can have access to them. Thanks a million for taking time and joining me on the show today.

JD: Well, thank you for having me, Tom. It was a great discussion.

TR: Okay, we’ve come to the end of the show. Thanks, everyone, for listening. If you’d like to know more about digital supply chains, head on over to sap.com/digital supply chain, or simply drop me an email to tom.raftery@sap.com.

If you like the show, please don’t forget to subscribe to it in your podcast application to get new episodes right away as soon as they’re published. And, also, please don’t forget to rate and review the podcast. It really does help new people find the show. Thanks. Catch you all next time.

This episode was originally published on the “Digital Supply Chain” podcast.


Tom Raftery

About Tom Raftery

Tom Raftery is Vice President and Global Evangelist for the Internet of Things at SAP. Previously, Tom worked as an independent analyst focusing on the Internet of Things, energy, and clean technology. Tom has a very strong background in social media, is the former co-founder of a software firm, and is co-founder and director of hyper energy-efficient data center Cork Internet eXchange. More recently, Tom worked as an industry analyst for RedMonk, leading the GreenMonk practice for seven years.