Industrial revolution 4.0: Driving performance in manufacturing & the supply chain

Sept. 30, 2016

The ability for technology to improve productivity and efficiency, diminish the costs of trade, and improve speed to market will change what we think is possible from the value chain.

The world is experiencing the fourth industrial revolution — characterized by a blurring of the physical, digital and biological worlds and evolving at an exponential (rather than linear) pace. The rate at which technological breakthroughs are making their way into our lives is historically unprecedented, and they affect virtually all industries. Tesla Motors founder Elon Musk went so far as to say the rate of technological advancement is so extreme that we are likely to be a computer-generated simulation of a more advanced civilization. While the simulated reality idea is a bit far-fetched for most people, the fourth industrial revolution is here, and it will lead to nothing short of a supply chain miracle. The ability for technology to improve productivity and efficiency, diminish the costs of trade, and improve speed to market will change what we think is possible from the supply chain.

To understand this, let’s take a look at the supply chain evolution within the manufacturing industry, one of the largest and oldest industries in the world. In the past, manufacturers ran on natural resources. The availability of natural resources, along with division of labor, built one of the largest and oldest industries in the world. Today, most competitive manufacturers run their businesses using a different type of resource: the digital one.

How did industry get here? Looking at the history of the hunter/gatherer, agrarian and industrial economies, each succeeding economy retained the previous sector and borrowed from the next.

Consumers are experiencing the byproducts of the industrial economy and borrowing from the information economy in practically every aspect of life. Most products that provide utility have become digitized — think about a cellphone, a car’s navigation system, a FitBit or a home alarm system. Everywhere, technology has enabled connections between the physical and digital worlds to make previously unthinkable things possible.

Technological innovation has also been a critical enabler on the supply side. Manufacturers have leveraged software solutions to reduce costs, improve quality and increase speed to market, all of which have opened new markets and driven unprecedented economic growth.

Nulogy software solutions have enabled these outcomes for contract packaging providers for more than a decade. In the bigger picture, this means these end users handle greater volumes and greater complexities than ever and also are driving more profit.

Manufacturing is the biggest multiplier in the economy; It stimulates the economy more than the financial and retail sectors. For every $1 of manufactured goods, $1.37 of value is produced across the economy. With this in mind, the scope of the overall impact of technology innovation in the manufacturing and supply chain space is easy to imagine.

The three key ways technology in the supply chain industry powers this level of performance and rate of growth in manufacturing are process enablement, network availability and data analytics.

Process enablement

Supply chain technology enables processes by automating supply chain functions. When software solutions are leveraged properly, they can reduce manual labor, improve efficiency and reduce error, all of which drive the bottom line and performance.

Leveraging software for process enablement also frees up human resources to focus on value-added activities and identify strategic growth areas. One case study involves Crescent, a contract packaging provider for major brands like Hershey, Campbell’s and L’Oreal. The company has used two software solutions (PackManager for operational control and QCloud for quality control) for four years.

With 80 percent of its processes on the operational control software and 90 percent on the quality control software, Crescent automated many of its previously manual labor-intensive processes. This automation allowed the company to improve operational efficiency and pass savings to clients. Crescent team members now focus most of their time and efforts on working closely with clients on collaboration and new business opportunities.

Integration availability 

As evolving consumer demands have driven complexities into the supply chain, a greater need for specialization within the supply chain has arisen. With this increased specialization comes the greater need for collaboration between specialized providers. To collaborate in real time, supply chain providers must communicate with each other, creating a big challenge and opportunity for maximizing the integration availability within the supply chain.

Technology now plays a crucial role in driving communication, coordination and control in the supply chain. ARI Packaging, a primary and secondary packaging provider for major food and beverage companies such as Kraft, experienced the difficulties of using an enterprise resource planning (ERP) solution that did not provide the integration availability needed to communicate real-time results with customers. Since the implementation of specialized operational control software, which is now the technology backbone of its operations, it processes hundreds of thousands of electronic documents per year between its systems and clients’ ERPs, with 99.6 percent transmitted without error. By leveraging the proper solution to maximize integration availability, ARI has lowered operational costs, increased responsiveness and improved its clients’ forecasting.

The supply chain & data analytics 

Technology is distinctly effective at processing large amounts of data, analyzing that information to produce trends and helping users identify opportunities to drive performance and growth in their businesses. In the case of the contract packaging industry, profit margins are often low, and identifying areas for improvement may be difficult when businesses are so complex.

Often, the information needed to drive a business’ performance is the hardest to find:

  • Where do inefficiencies exist?
  • Which services are most unprofitable?
  • Who are the most profitable customers?
  • How can financial volatility be reduced?

Supply chain providers need the types of tools that can really help them dig deep into all areas of their businesses to identify areas for improvement and growth. In the case of Accel, a contract packaging provider for some of the world’s top brands, the answers are made readily available to them by the dashboards they access within the operational control software. Accel leverages this software in all aspects of its operations — from quote to ship — and actively uses its dashboards to monitor the real-time performance of all its production lines. It actively stays on top of up to 60 production lines at a time and crunches production data from real-time monitoring to uncover trends and insights to help drive business performance.

Harnessing the power of digital in the manufacturing 4.0 era

The fourth industrial revolution has enabled digitalization in the value chain so that manufacturers can handle greater complexities at lower costs with improved quality and increased speed to market. However, adoption of the technology still lags behind the pace of technology innovation in the industry. In the U.S., 81 percent of manufacturers acknowledge that digital manufacturing is a key element in their future competitiveness, but only 14 percent say they are adequately equipped with digital technologies and related expertise.

The 14 percent have realized their businesses must run on technology that can enable their processes, maximize network availability and provide big data discovery to help them remain competitive in this new landscape. Business survival will come down to the ability to take advantage of this transformation.

Jason Tham is the CEO of Nulogy. He takes a personal approach to corporate development and leadership, whether understanding the evolving landscape of his clients or initiating the next stage of growth for the company he co-founded. Active as a board member and speaker in industry organizations, Tham has gained valuable experience in business development, operations, manufacturing, product development and software engineering with a variety of global companies. At one of Kellogg’s automated production facilities, he worked in its continuous improvement and packaging groups. Earlier in his career at Magna International, Tham worked in the R&D group, responsible for new vehicle prototyping, and working in manufacturing and quality where he applied methods for cost reduction within the supply chain. Tham graduated with a Bachelor of Applied Science degree with a management sciences option from the University
of Waterloo.

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