Lns enablinga smartconnectedsupplychain
- 1. ENABLING A SMART CONNECTED SUPPLY CHAIN A Manufacturer’s Guide to Leveraging Modern Technologies Throughout the Enterprise lnsresearch.com
- 2. ENABLING A SMART CONNECTED SUPPLY CHAIN A Manufacturer’s Guide to Leveraging Modern Technologies Throughout the Enterprise lnsresearch.com TABLE OF CONTENTS Section 1: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2: What Is the Cloud and Why Should We Go There? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 3: Modern Business Processes: Digital Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 4: Seven Steps to a Smart Connected Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5: Summary & Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
- 4. 4 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 The manufacturing industry has entered a completely new techno- logical realm that did not even exist five years ago. Three industrial revolutions forever changed manufacturing—and the world—and the fourth is now underway. Factories have had to adapt rapidly with the advent of advanced automation and robotics as well as software to manage processes and control. The onset of digital manufacturing accelerates the need for new approaches. While consumers typically embrace disruptive technology with enthusiasm, manufacturers in- evitably approach new technology with caution, carefully evaluating how it can improve their businesses. Eventually, however, caution must be replaced with innovation to ensure survival. Those orga- nizations that find themselves on the wrong side of the technology curve today will face increasing challenges to remain competitive as time marches forward. Introduction From Industry 1.0 to Industry 4.0 1800 1900 2000 Today FIRST Industrial Revolution Through the introduction of mechanical production facilities with the help of water and steam power SECOND Industrial Revolution Through the introduction of a division of labor and mass production with the help of electrical energy THIRD Industrial Revolution Through the use of electronic and IT systems that further automate production FOURTH Industrial Revolution Through the use of cyber-physical systems First mechanical loom, 1784 First assembly line, Cincinnati slaughter houses, 1870 First programmable logic controller (PLC), Modicon 084, 1969 DEGREE OF COMPLEXITY © DFKI, 2011
- 5. 5 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 This report discusses the benefits of moving to the cloud and of adopting the Industrial Internet of Things (IIoT) Platform, and con- siders some of the ways that manufacturers can embark on the route to realizing value from these new technologies. In particular, we highlight the Smart Connected Supply Chain (SCSC) as an example of modern business processes using leading technologies. Manufac- turers will learn how they can adopt business processes like SCSC by getting started with the cloud and driving first-class customer iteration through business processes beyond the enterprise walls. We begin by defining the Smart Connected Supply Chain. At its simplest it should be: CONNECTED: within the enterprise, therefore linking all business systems and people. This includes manufacturing beyond the enter- prise to the extended supply chain of suppliers, customers, and other stakeholders, as well as to the products and parts that compose the entirety of that manufacturer’s operations. SMART: making use of information available from sensors and con- trollers in the plant, in business systems, and in the extended supply chain. In time this will encompass learning systems, augmented reality, and other emerging technologies allowing more capability with less effort, improving productivity, quality, and customer satis- faction in the process. SEAMLESS DIGITAL COMMUNICATION: first and foremost, the SCSC allows those involved in running the supply chain the ability to do a better job by being better informed, more responsive, and productive. Introduction (Cont.) MATERIALS AND SUPPLIERS SUPPLY CHAIN MOM ERPERP PRODUCTS AND CUSTOMERS Plant Controls Sensors & Machines Manufacturing Operations Management
- 6. SECTION 2 What Is the Cloud and Why Should We Go There?
- 7. 7 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 Cloud computing uses a network of remote servers hosted on the In- ternet to store, manage, and process data, rather than a local server or a personal computer. In LNS Research’s 2015-2016 Metrics that Matter research project, conducted jointly with MESA International, we asked our 250+ survey respondents about actual and planned ERP deployment models. To nobody’s surprise, 64% of current ERP deployments are on premise. However, two-thirds of planned new deployments will be cloud-based. Cloud: Today and Tomorrow On-premise Public cloud hosted by software vendor Private cloud Public cloud hosted by third party 0% 10% 20% 30% 40% 50% 60% 70% Which best describes your current and planned ERP deployment model? 34% 25% 30% 11% 25% 7% 4% 64% Planned Current CLOUD NOW: 36% CLOUD PLANNED: 66%
- 8. 8 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 In our Metrics that Matter survey we asked: “What are the top impacts you think cloud-based solutions are/will be having toward helping you improve your manufacturing performance?” The results speak for themselves: lowering the total cost of own- ership will always appear near the top of the list. Unburdening the IT department from having to run infrastructure usually ranks high. The top responses all tie back to enabling agility: • Better mobility • Making multi-plant improvements • Manufacturing flexibility increase • Data analytics across the enterprise • Scalability It is important to note that cloud not only facilitates better internal collaboration and communication—that benefit extends outside the enterprise as well. Every company that wants to grow needs to continuously nurture its supplier and customer relationships; business processes such as SCSC will support that effort. So, we come to the simple conclusion about “why cloud?” If companies do not have a cloud strategy, they risk falling behind their competitors, wasting money, losing agility, and ultimately having un- happier customers and suppliers—not an optimal situation. The Cloud and Agility What are the top impacts you think cloud-based solutions are/will be having toward helping you improve your manufacturing performance? Don’t know Lower the total cost of ownership for implementing |manufacturing performance software Unburden IT from having to maintain servers and software updates Speed the time it takes to implement manufacturing performance software Make it easier to compare performance information across multiple plants / facilities Make it easier to implement performance improvement across multiple plants / facilities Increase manufacturing flexibility Enable performance information on mobile devices Give better access to manufacturing information to customers Improve and / or reduce cost of corporate security Other Give better access to manufac- turing information to suppliers 0% 10% 20% 30% 40% 42% 25% 20% 19% 12% 11% 11% 10% 7% 6% 6% 4% “We only focus on what differentiates us from our competition, and running an IT function is not one of them.” –JEFF IMMELT, CEO, GE
- 9. SECTION 3 Modern Business Processes: Digital Transformation
- 10. 10 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 Digital Transformation Framework The journey to digital and distributed business processes, while not straightforward, is essential in maintaining successful operations as technology adoption grows across industries. LNS Research has developed a Digital Transformation Framework to help manufactur- ers plan their route from idea to world-class manufacturing. While neither explicitly prescriptive nor linear, it provides guidance to manufacturers on how they can change their business processes to make the most of new technologies that are disrupting industry, such as cloud, the IoT, and big data analytics. Below, the process is split into five main stages, though the starting point may differ depending on the individual journey and circumstanc- es. The most important aspect to realize is that Digital Transformation is an iterative process requiring constant feedback, adjustment, and improvement. Trial and error—followed by course-correction—should be embraced as a necessary component of a continuous improvement process, even though it flies in the face of many manufacturers’ risk- averse technology strategies. These steps include: STRATEGIC OBJECTIVES This could be a vision on how Industry 4.0, Smart Connected Op- erations, or Digital Manufacturing will increase the effectiveness of your business. Companies must work through the process and iterate the objectives to define, improve, and focus the team on these objectives. They also must define at a high level the business processes to be transformed. In our example, businesses would define the existing supply chain processes and the expected SCSC outcomes. Executive sponsorship should be signed off before com- pleting this process. SOLUTION SELECTION BUSINESS CASE DEVELOPMENT OPERATIONAL ARCHITECTURE OPERATIONAL EXCELLENCE SMART CONNECTED OPERATIONS Eliminating Bias and Finding Long Term Partners Evaluation Team Research Pilot RFP DISCOVERY PLANNING BUSINESS CASE SELECTION Project Charter Defining Immediate and Long Term ROI Managing IT-OT Convergence and Next- Gen IIoT Technology Realigning People, Process, and Technology Reimagining Business Process and Service Delivery COSTS TOTAL YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 HARDWARE SOFTWARE LICENSING THIRD PARTY SOFTWARE APPLICATION SOFTWARE DOCUMENTATION & TRAINING MAINTENANCE INSTALLATION INTEGRATION LEGACY DATA LOADING PROJECT MANAGEMENT SUPPORT TOTAL: CONNECTIVITY SMART CONNECTED ENTERPRISE APPLICATION DEVELOPMENT CLOUD BIG DATA ANALYTICS IoT Enabled Business SystemsL4 Smart Connected Operations - IIoT Enabled Production, Quality, Inventory, MaintenanceL3 L2 L1 L0 IIoT Enabled Next-Gen Systems L5 IoT Enabled Governance and Planning Systems Smart Connected Assets - IIoT Enabled Sensors, Instrumentation, Controls, Assets, and Materials APMEHS ENERGY QUALITY OPERATIONS People – Process – Technology Operational Excellence Platform OPERATIONAL EXCELLENCE SUPPORT Fall short on any pillar and your OpEx platform becomes tippy Fall short on two or more pillars and your OpEx platform becomes totally unstable DIGITAL TRANSFORMATION FRAMEWORK
- 11. 11 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 Digital Transformation Framework (Cont.) OPERATIONAL EXCELLENCE This takes a deeper look at how things are done and how they can be improved. There are maturity models for this built around people, process, technology, metrics, practices, and innovation processes that help to incorporate Digital Transformation into existing programs such as Lean and Six Sigma. In SCSC, companies define the sub-processes, the communications with people inside and outside the enterprise, and the technology to be used. OPERATIONAL ARCHITECTURE: Enterprise Architecture is traditionally IT-centric, focused around the structured data contained in systems like Product Lifecycle Manage- ment (PLM), Enterprise Resource Planning (ERP), and Supply Chain Management (SCM). Operational Architecture includes the connection to sensor data and the technical architecture of everything in the plant. The SCSC business process extends down into the plant and beyond the Enterprise Architecture to customers and suppliers—the extended architecture will be defined at this stage. BUSINESS CASE This is the supporting master business case and transformative business case journey that leads from the current as-is state to a future state delivering against strategic objectives and using the Operational Architecture defined in the previous steps. It should be forward-looking on industry trends and incorporate a disruptive approach to business as appropriate. SOLUTION SELECTION This provides methodologies to assemble and charter selection teams, determine best fit requirements, and evaluate and select technology. People - Process - Technology OPERATIONAL EXCELLENCE PLATFORM Fall short on any pillar and your OpEx platform becomes fragile Fall short on two or more pillars and your OpEx platform becomes totally unstable APMEHS ENERGY QUALITY OPERATIONS People – Process – Technology Operational Excellence Platform OPERATIONAL EXCELLENCE SUPPORT Fall short on any pillar and your OpEx platform becomes tippy Fall short on two or more pillars and your OpEx platform becomes totally unstable
- 12. 12 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 Digital Transformation and Operational Excellence The supply chain takes the pillars in each enterprise and defines the people, processes, and technology required to bridge the enterprises. In the supply chain we can imagine a bridge between the company and the customer. Just as a suspension bridge is held up by cables, which are in turn made up of more cables and, ultimately, wires, so too is a supply chain a means of communication, not just via technology but also by helping to bring people from customer and company to- gether and to allow business processes to cross the divide. Many business processes will ultimately connect companies to their customers and suppliers. The first and most vital cable is the supply chain cable. Getting started requires building important smaller wires covering technology, process, and people. We will take a quick look at each: TECHNOLOGY is a key to success. As we have established, it is nec- essary to choose a cloud platform. A key to achieving success in a Smart Connected Supply Chain is access to business and manu- facturing information, both from inside the enterprise and, where necessary, from outside. Another given in most cloud platforms is mobility. Modern platforms are often designed from the bottom up to include a user interface layer that is accessible from anywhere. Without a flexible mobile platform, many of the benefits that can be delivered by SCSC will not materialize. PROCESS can be complex in the supply chain. Keeping it simple and concentrating on the individual processes (the wires described above) will lead to success in initial projects. However, when defin- ing the strategic objectives, the larger goals must also be defined to ensure that the choices of platform, solutions, and partners (custom- ers, suppliers, software vendors, etc.) will allow future expansion/ evolution and roll out to be achieved. PEOPLE should be at the center of relationships between businesses and their customers. An SCSC pilot is a great way to build relation- ships with key people in a customer base. It is also an opportunity for manufacturers to demonstrate the esteem in which they hold their employees. Staff attraction and retention is vital in today’s cutthroat employment world. Working with modern systems using technology with which young engineers and business people feel at home will greatly enhance the chances of hiring and retaining the best talent.
- 13. SECTION 4 Seven Steps to a Smart Connected Supply Chain
- 14. 14 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 WORK THROUGH STRATEGIC OBJECTIVES: Gain C-level spon- sorship, define team, and outline goals. The team is vital; make sure you include main stakeholders, gain necessary buy-in, and agree to the goals. These goals should include the various gates that need to be passed to ensure success and a clear definition of success and failure criteria. Incremental failure is not a major issue but it must be recognized as early as possible so that suitable alter- natives can be planned and executed without undue delay to the project. Failing fast is fine; failing when it is too late is not. ENGAGE CUSTOMERS/SUPPLIERS: Select and on-board a small number of key customers, suppliers, and products for early steps. Augment the team with individuals from custom- er and supplier companies and make a clear definition of project responsibilities and touch points for your technology, people, and business processes. Define success and the initial and long- term benefits for your partner(s)—shared risk works as long as the expectations for shared benefits are clear. 1. 2. Companies will need to adopt cloud and IoT-based solutions to ensure that their supply chains achieve connectivity, agility, and responsiveness in the future. So how do companies get started on this path? Normally straightforward apps are the place to start, often with analytics that bring new and unexpected insights. Beyond that, one of the key promises of the IIoT is to build business processes in the extended enterprise. Our example is the SCSC business process. If we visualize the supply chain as a suspension bridge with the de- tailed processes, technologies, and people as the individual cables that hold the bridge up, then success will only be achieved if we manage to make every wire work as planned. The following are steps for pursuing this path. Executive spon- sorship and planning represent the two keys to any successful pilot where people, technology, and processes are going to be signifi- cantly affected. Keeping in mind the Digital Transformation Frame- work earlier in this report, the seven steps to a SCSC are: Seven Steps to a Smart Connected Supply Chain
- 15. 15 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 ENSURE YOUR ERP IS UP TO THE TASK: ERP in the cloud is an advantage: you need to have access to necessary infor- mation. Easy access to data will be a big advantage for new pro- cesses on the cloud. While you may or may not already run ERP in the cloud, the pilot will require minimum ERP functionality as well as connectivity to your plant so that necessary supply chain information can be collated and shared with your customer. This pilot is intended to go beyond ordinary supply chain, allowing customer visibility into the production schedule and actual order progress. This will lead to quick order change capability and opti- mization of resources across many customers and plants: a truly Smart Connected Supply Chain. DEFINE SCSC SCOPE: The meaning and functionality of supply chain varies considerably depending on the type of operation. Outsourced manufacturers may focus on supplier collaboration while an OEM that depends on a large number of suppliers to deliver components may want to focus on short- term planning and scheduling. 3. 4. Scheduling in many manufacturers is done almost off-line. Busi- ness systems that handle planning often pass a “schedule” to a plant or line that is then executed; feedback comes at the end of the order. The SCSC scheduling app will give up-to-the-minute reporting on planned and actual orders, taking into account current, rather than assumed, manufacturing performance and capacity. Manufacturers that make very complex products that will become connected once delivered might choose to start with design and product data definition. The SCSC will enable a complete end-to- end solution from raw materials to delivered product, whereas in pilots specific business processes must be chosen and addressed. Whatever the choice, when defining the pilot, specify all the busi- ness functions that you and your customer or supplier might want and then choose those that will be used. This will allow everyone to work towards a goal that will improve processes and help people. Scope creep is a potential hazard to any complex project like implementing the SCSC. Having defined initial business processes, the list should not be expanded as it is always easy to add new func- tionality later. This is a key role played by sponsoring executives both within your enterprise and within partner organization—they must ensure goals remain focused, though change can still be allowed in subsequent phases if it is seen as beneficial. Modern technology architectures allow flexibility, fast change, and experi- mentation; these potential benefits should not morph into anarchic change for its own sake.
- 16. 16 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 THE SUPPLY CHAIN CABLE PROCESS PEOPLE TECHNOLOGY FORECASTING PLANNING SCHEDULING PRODUCTION PLANNING PRODUCTION EXECUTION DEMAND MANAGEMENT VISIBILITY CONNECTIVITY DATA MANAGEMENT ANALYTICS CULTURE EMPOWERMENT TRAINING SELECT SOFTWARE: Although we include software selec- tion as a separate item here, the choices that you make will gradually coalesce as you go through the initial phases of the SCSC project. Studying software capabilities of potential IIoT vendors and those of your existing solution providers should be a continuous thread of your project. We need to remember that the majority of your smart supply chain exists only in smaller business processes today. Working with vendors to bring the required busi- ness processes into the IIoT and to enable custom processes to be built through small apps running on the IIoT Platform will start to deliver the promise of the digital manufacturing world. DESIGN AND IMPLEMENT YOUR PILOT ON A CLOUD PLAT- FORM, INTEGRATE AND CONNECT: Project implementation will inevitability deviate from the plan on occasion, but having clear goals and gates to pass and a committed, multi-disciplined team will lead to success. Again, you should use your software vendors as much as possible; it is very much in their interest that you successfully deploy apps that meet your initial goals. Once live, work with your customer to measure success; have the goals been met? Which technology helped people the most? Which technology drove the most financial benefit and where could the biggest improvements be made? Which business pro- cesses worked between supplier and customer and how did the relationships between the people in the organizations develop? IMPROVE AND DEFINE ROLL-OUT: Go to Step 1 and set new goals, either rolling out to more customers and suppliers or adding new functionality and business processes. The SCSC will become an ever-growing set of agile processes driven by technol- ogy for the benefit of the people in the extended supply chain. It will bring together people who today are not connected at all (like tier 2 suppliers and beyond, and end user consumers) with the goal of improving everyone’s competitiveness. The SCSC will be a large consumer of data gathered across an IIoT Platform and, more importantly, it will be a generator of new and valuable data that is sure to become part of a new big data analytics program. 5. 7. 6.
- 18. 18 ENABLINGA SMARTCONNECTED SUPPLYCHAIN SECTION TABLE OF CONTENTS PAGE 1 2 3 4 5 Summary and Recommendations Presented by:Author: © 2016 LNS Research. The Smart Connected Supply Chain is a fantastic way of showing the true value of cloud computing and the Industrial Internet of Things beyond the usual benefits of saving IT money. When manufacturers think beyond traditional business processes and consider process improvements across their entire supply chain ecosystem, real change can start. However, it is not the IIoT that will drive change but the people and enterprises across the supply chain whose needs are evolving rapidly in the highly competitive digital world. Business processes such as those implemented in the SCSC will demonstrate how the IoT brings together technology, people, and processes to transform the way that we do business. Connectivity, from the lowest level in the plant to the top of the business hierarchy and beyond to customers and suppliers, enables these business processes. Leading manufacturers are already embarking on this journey from traditional to distributed business processes. Every manufacturer that wants to keep up needs to start the journey now; there is little to lose and much to win. lnsresearch.com Connect: Andrew Hughes, Principal Analyst andrew.hughes@lnsresearch.com