The next industrial revolution will reinvent supply chains

Image: Oracle

Image: Oracle

Digital mediation platforms and trends such as the circular economy will profoundly change the ways manufacturers operate, believes supply chain expert Jan Godsell. Brent Balinski spoke to the Warwick Manufacturing Group professor about how this could look.

The Industry 4.0 narrative is generally focussed on what takes place within factories. This is a bit of a shame, believes Jan Godsell, professor of operations and supply chain strategy at Warwick Manufacturing Group.

To be fair, she said, the concept emerged following the German government’s rethink of its industry policy post-Global Financial Crisis, and the country’s industrial sector is traditionally factory-heavy.

And then there’s the fact it’s been popularised by German conglomerates including Siemens and Bosch, both of which have a vested interest in technology within factories. Nothing sinister, of course, but when such companies are talking about Industry 4.0, they’re sure to tell you about how it can make plants run better. That’s their business.

“If you actually go back, though, to some of the original Industry 4.0 thinking, it does talk about connectivity beyond the factory,” Godsell told Manufacturers’ Monthly at the recent Future of Manufacturing Forum at UTS Business School.

Godsell’s business is supply chains – the complex interplay that goes on in matching supply with demand – and she believes they’ll be radically reshaped by Industry 4.0. For those who are clever, she added, “We have got a once in a lifetime opportunity”.

“In a way the power is with the person with the machine; that machine can be anywhere, and Industry 4.0 allows those machines to not be connected within a single factory but to create this virtual factory across an entire country or across a continent or across the world,” she explained.

Mediation platforms

Think of it as like Uber for all the milling, bending, moulding and other production machinery existing within a location. With the right digital infrastructure in place to arbitrage and coordinate, fabrication, assembly, and logistics, the effects could be profound.

Though such digital mediation platforms are used every day by consumers, their potential within supply chains for manufacturers is unrealised, and could be revolutionary. (There are companies interested in the concept, but it is a long way from general adoption.)

“If you think about how supply chains have been configured historically, we have an OEM usually at the front end who then will sell via a distribution network to a consumer. And then they’re responsible for coordinating not their supply chain but their supply base: their tier one suppliers, tier two suppliers, tier three suppliers,” explained Godsell. This has often come with emphases on labour cost and economies of scale.

godsell

This will be turned on its head, she said. While the tail end of the industrial revolution wanted cheap locations and big factories, the next revolution – along with drivers like servitisation and the circular economy – will see the means of production distributed, enabled by digital communications.

Supply chains wouldn’t have to be designed from the OEM backwards (the end producer and different tiers of supplier, plus a distribution network.)

“So we would know, maybe, what piece of equipment a person has in their garage, or an SME had in their factory and we could then – when companies had a need for a particular capability – they could post that onto the market mediation platform,” said Godsell with excitement about the possibility.

“The platform could automatically match demand to capability and then the person with the need could look to the person with the capability and decide who they used.”

Consumers – also able to access a rich collection about where and how their custom product was made – would be able to make decisions based on things like how far away the product was made, environmental impact, and lead times.

Supply chain appreciation is lacking

Godsell had decided on a career in manufacturing at age 15, was trained originally as an engineer (she is a member of the Institution of Mechanical Engineers) and went on to work at ICI/Zeneca.

Following that she started as a production engineer at the then-small Dyson, she moved into senior management, and was able to see and learn about the entire supply chain of a company for the first time, an area she has since specialised in as an academic.

Like many specialists when it comes to their own area. Godsell believes the appreciation of supply chains is sadly lacking. In the UK (her home country), by her reckoning, 80 per cent of the population works somewhere in the supply chain industry.

In boardrooms – where supply chain considerations should inform business strategies – the situation is also poor. Only 10 per cent of the top 25 companies on the FTSE had board members with manufacturing or supply chain experience in their resumes, Godsell pointed out. She believes a conventional division between supply chain (focussed on keeping costs minimal) versus sales, marketing and product (as driving profit) is a flawed approach, and favours a holistic view of the supply chain.

Furthermore, if something doesn’t go right with a supply chain, the effect can be dramatic. As the website for Godsell’s research group points out, these are all examples: “The impact of buy-one-get-one-free deals on food waste, automotive industry product recalls, horse meat in ready-meals and queues in accident and emergency departments.”

Considering different business models

Among current trends in the field, the circular economy is one worthy of greater focus.

For reasons such as sustainability (sometimes myopically viewed by manufacturers as a cost) increasing the useful lifespan of products and rethinking business models are important.

Image: www8.hp.com
Image: www8.hp.com

A favourite example for Godsell is the HP Instant Ink program, which exploits connectivity, cuts out the need to go buy new cartridges, and lessens environmental impact. It also shows the servitisation trend in action, and also, importantly, provides printer ink at a cheaper cost to consumers. A series of wins.

Enabled by all the lofty-sounding trends above, there are other ways manufacturers could be rethinking the way they operate in the Industry 4.0 world. Again, the factory is only one part of it.

Consider the UK’s steel industry, added the professor. The year that just passed was one of great difficulties for the sector.

“And part of that is because it’s actually quite expensive to sell UK-based steel at the moment. But just imagine if we didn’t have to sell it – if we leased it,” she offered.

“And just imagine if all of those steel components had a little RFID tag on that maybe was not turned on for the majority of its life but enabled that piece to be tracked.”

Rather than being dumped, a possibility would be to design the steel in a way that made it easily recyclable, she suggested. It could be refurbished for reuse, or recycled in an electric arc mill. Of course, this would also require investing in arc mills. At the end of the steel’s life, its RFID tag could be reactivated and its details used to see the product’s specifications.

“At the moment in the UK we don’t have any or have very few electric arc mills, because we’ve had a traditional steelmaking model around blast furnaces. So we’ve made the investment in electric arc technology, which is suitable for recycled steel, and because we’ve got the RFID tag on it we know what quality of steel it is, so it’s relatively easy to recycle,” said Godsell.

“It helps the automotive industry, it helps make the steel industry more sustainable, but it’s a totally different way of doing business for organisations. And actually it would require investment by the UK at the moment from one steel technology – which I’m not saying we’d phase out totally, it’d still have its uses – but investing in a new type of technology that would actually enable that circular economy to take place.”