Sustainable Supply Chain

Kuka And SAP Partnering In Supply Chain - A Chat With Quirin Goerz, And Georg Kube

September 09, 2022 Tom Raftery / Quirin Goerz / Georg Kube Season 1 Episode 252
Sustainable Supply Chain
Kuka And SAP Partnering In Supply Chain - A Chat With Quirin Goerz, And Georg Kube
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Show Notes Transcript

We have featured the partnership between Kuka and SAP in previous episodes of this podcast.

As a follow-up to our joint showcase at the Hannover Fair just before the summer, I invited Kuka's Quirin Goerz, and SAP's Georg Kube to come on the podcast to update us.

We had a fascinating conversation covering our joint showcase at Hannover Fair, the strategic themes that came out of that event, and the rise of business networks like Catena-X, and Gaia-X.

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Georg Kube:

If you are just part of a supply chain, and you're basically asked by your higher tier whatever, systems aggregator or the OEM to deliver your data so that they become more efficient, and effective, then the incentive is much lower. And SMEs are in both areas, but they're in many cases, they are in this, "I'm just part of a supply chain" type area. And what we need to figure out here is not their technical ability to digest all this innovation, but what's their business incentive

Tom Raftery:

Good morning, good afternoon, or good evening, wherever you are in the world. This is the digital supply chain podcast. The number one podcast, focusing on the digitization of supply chain. And I'm your host global vice-president at SAP Tom Raftery. Hi, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftrery with SAP and with me on the show today, I have my two special guests Quirin and Georg. Quirin and Georg would you like to introduce yourselves with maybe Quirin going first?

Quirin Goerz:

Yeah, thank you very much. Um, My name is Quirin, Quirin Goerz. I'm at the group CIO of Kuka. Kuka is, yeah, one of the major players in producing industrial robots and, also building production lines globally. And, yeah, part of Kuka is also Swisslog, providing, logistics, automation, solutions, hardware, and software, therefore huge portfolio of different products and services that we provide to our customers. And yeah, I'm responsible for the group IT so for anything related to CRM ERP infrastructure. Everything you can imagine in IT.

Tom Raftery:

Cool. And Kuka are the ones with the big orange robots, right? That's kind of your, almost your logo at this point.

Quirin Goerz:

Mm-hmm Mm-hmm right. Yeah.

Tom Raftery:

Fantastic.

Quirin Goerz:

Beautiful orange there that you can see everywhere.

Tom Raftery:

Very, very unique, very on brand and Georg?

Georg Kube:

Well, hi everyone, Georg Kube, I'm at SAP and responsible for industrial manufacturing industry business. So basically that means I have to make sure that the solutions that we make at SAP, the stuff that we produce, meet the requirements of the market. For example, customers like Kuka. Kuka is one of our marque clients in that segment. And, happy to be here today.

Tom Raftery:

Fantastic. Fantastic. And we've already had a couple of episodes of the podcast over the last several months, talking to SAP and Kuka about various aspects of this partnership that we're after developing. And so we talked in the last episode about the fact that we were going to be presenting together at the Hanover fair. So now we'll have a bit of a follow up and maybe you can tell us how went the Hanover fair.

Georg Kube:

Maybe I'll kick it off from an SAP perspective. I would say it went exceptionally well, as you may know, the Hanover Fair was reduced in size after two years of being virtual. That was the first time coming up, back physical. And the, on an overall scale, the fair was scaling down by 60 some percent, right? Smaller, fewer halls, fewer peoples. And so on. However, on the SAP booth, we were able to almost triple our attendance. So that was awesome. And I think we were able to do this because we just had great content like what we do with Kuka. And so from my perspective, Hanover was a success. Quirin, what do you think?

Quirin Goerz:

I think in total it was really success as well. Yeah. What we experienced was really the first day, that was a little bit tricky. Yeah. So not too many visitors. Yeah. So actually there have been only the people from the different booth, talking to each other. But on the second day it really kicked off and plenty of people started visiting the diferent exhibitions, different stands yeah. Really people that were actually also interested into the different things. Yeah. Now with specific questions and, yeah, I think that's something quite new now. Yeah. But you don't have only the people that, are wandering around just to be at the fair, So you have much more informed people at the fairs and they really come with specific questions and specific needs, and problems they want to solve. And I think that makes it much more interesting also for the people being there. Yeah. Presenting the products. Cause, it's really people that are interested in your services and products and, and I think that was also quite visible at Hanover Fair.

Tom Raftery:

It's it's interesting. You say that I was there myself for Monday and Tuesday, the first two days of the fair and very much I agree. I, I, I saw as well that Monday was a quieter day and Tuesday, there was a lot more people there. And I talked to one of our executives, Mike Lackey, and he said very much what you were saying as well. He said that a lot of the attendees were seemed to him to be higher level and were asking more probing questions. So that's a,, a fascinating observation. And what did you make of the themes that emerged from Hanover fair this year? What, What themes did you see emerging?

Quirin Goerz:

Yeah. What we see on most the fairs right now from a robotics point of view, is that really increasing number of companies that build cobots so the topic, easy to use, easy to implement human robot collaboration robotics for everyone also for SMEs. I think that was visible at Hanover fair and also on Automatica in Munich, for example. Yeah. Some weeks later, where really can see now this trend that many startups are now there with cobots, from robotics perspective and that also digitization is much more an important topic. Yeah. Actually Kuka didn't have their own booth at Hanover fair, but, we joined up with Microsoft and SAP, especially with SAP. So I think is really also a sign that we find more software companies on Hanover Messe in instead of really the hardware suppliers and that also the customers are more, more interested in software products, related to automation technology.

Georg Kube:

That's a really good point. I think it, it is about software and hardware converging and creating new type of solutions. And when you ask, what do these solutions ultimately address? What are customers looking for then at least from my perspective. This year's fair was very much under the impression of the global disruptions that we're seeing through the wars, through COVID through climate. You know, it, basically everybody asks the question, how can I make my company more resilient? You know, how can I make myself more independent from a shortage down my supply chain? Be it energy, be it a raw material, something like this. At the same time, how can I become more sustainable, because we all understand if we keep doing what we're doing. It's not gonna take long and everything will be overheated and it's just gonna end badly. So that was another big thing, sustainability. And then obviously the third one, we still gotta make money with it. So how can we transform the business in a way that even though we may be hammered by all these conflicts and things, and we need to be more sustainable. We still need to make money and better, make it in a profitable way. So we saw these three things as the main themes. And then of course the solution to this would be a combination of better hardware, better software more efficient, more transparent processes.

Tom Raftery:

Okay. Cool. And we see very much people talking there about industry 4.0 is industry 4.0, I mean, we've been talking about it for 10 years now, almost 11 years, I think at this point, how, how far along does journey are we, does everyone have industry 4.0 rolled out and completed now? Or are we very much at the start of this journey? Or, where are we on that spectrum?

Quirin Goerz:

That's quite interesting. Yeah. So I think it really depends on where you're looking at. Yeah. So if you look for example, at the small and medium sized companies, I think most of them are still more in the beginning. Yeah. For them. They struggle how to implement what are the benefits? How can I have really economic effects out of it? Yeah. So I, I think with the topics Georg mentioned with sustainability efficiency, being more resilient, also they now have more pressure to put efforts into industry 4.0. Yeah. On the other hand if you look at the bigger companies, at the OEMs, they are a little bit much, more ahead of the topic already. Yeah, they are already discussing. Okay. How can we connect? Not only our, our devices in our shop floor. And combine this with our enterprise IT. They already think of how can we connect the different companies and how can we have a really smooth data flow between the different industries and suppliers and customers. So that, we really have an integrated supply chain. Yeah. So, I think where they are looking at the moment, especially in the automotive industry, it's quite usable already. Yeah. Because they have also the biggest pressure in terms of transforming their business models with electrical vehicles on the one hand side being more sustainable, more flexible production now suffering a lot from the different crisis. So the diesel scandal with which hit us first, then COVID, with really huge decrease in production numbers in the automotive industry. And now with supply chain issues, they are facing really big challenges right now. And I think for them, it's no longer, only about optimizing their own production. It's really about optimizing their whole production networks and supply networks. And therefore, I think that's a trend that we can see ,also already. Yeah. And they have made their homework. So actually one of our bigger OEM customers connected most of their robots already with our IOT platform, for example. Yeah. So that's one dimension. The other dimension that we see from a different angle is really, if you look at IOT, Then we realize that there is also kind of a movement now there. So we have now the first customers that we call wave two customers, that now move away from their first IOT platforms towards second generation IOT platform. That is, and there, the demand is really more about flexibility being more scalable with the IT platform. So. Plenty of them started with a proprietory IOT platforms first. Yeah. And now realizing that costs are too high, platforms are not flexible enough, not scalable enough. Therefore they're looking up for alternatives and that also shows that this topic is getting more, more mature.

Tom Raftery:

Cool. Cool. And bit of a left field question, I guess, based on what you were saying there. If you see these small and medium companies are just really kicking off and the more mature companies are further along, does this mean we're getting a bit of a digital divide between the smaller and the larger companies.

Quirin Goerz:

Yes and no. I think the smaller ones, they are usually faster and catching up. Yeah. Because when they taken a decision, then they usually execute quite fast. And they can take decisions much faster than the big ones. And then there's usually also more commitment behind the decisions. Yeah. So that's why I think they can catch up and they will catch up to some degree. Yeah. On the other end of course, there's much more money in the big corporation sale that they can spend on digitization and stuff like industry 4.0 and now thinking about new topics and stuff like that. So I think there, maybe you can see that investments are shifted. So the SMEs will now catch up. Yeah. By investing into industry 4.0 in their environments optimizing their own production, but they also need to be part of for example, Catena X. That's one of the major purposes of Catena X to integrate them really from a data flow perspective in this data ecosystem of the big automotives. So they have two challenges right now. Yeah. They need to catch up. Yeah. With industry 4.0 on the one hand side, and some are still struggling because they're not cloud ready and still have some concerns with IT and cyber security of course that's where they usually are not so strong. And now you have the need or the demand from the big ones that are asking for, Hey, give me your data, please. Yeah. So that will be really a challenging situation for some of them and others really they, I think started quite early already and are challenging, maybe also the big corporations already.

Georg Kube:

One thing I would like to bring in as a point of differentiation for the SMEs it's the size is one thing, but it's also their position in the value chain. If you are a smaller or a medium sized company who has their own offering in the market who are directly serving customers end customers, if you will, then there is a much, much higher incentive to digitize and to use data, to optimize the offering. If you are just part of a supply chain, and you're basically asked by your higher tier whatever, you know, systems aggregator or the OEM to deliver your data so that they become more efficient, and effective. Then the incentive is much lower and SMEs are in both areas, but they're in many cases, they are in this. I'm just part of a supply chain type area. And what we need to figure out here is not their technical ability to digest all this innovation, but what's their business incentive. Because it's a multi-sided marketplace and everybody has to have a benefit if I just have to given my data and there's no return, then why would I want to invest the money and the effort and what have you, and, you know, and then even give my data away, which in many cases is the IP. So that really is for me, the crux right now, how can we make it attractive for everybody that is participating in network like this to actually give the data so that the network as a whole become more successful. Right. That's really the thing. And I think

Quirin Goerz:

That's really a big challenge. Yeah. Because, for some of them, they, yeah. When they provide their data. Then they can be easily exchanged by other suppliers. Okay. Because then you are so transparent that the customer can say, okay, I get almost the same product, maybe from a different supplier that can deliver much faster, much easier or has maybe something on stock already. That's not transparent today. So I think that's where they sometimes can hide yeah. A little bit in their comfort zone. And, this kind of transparency now. That will put another pressure on them now. So they don't have real incentive to, to provide their data and to be more transparent, because then they get exchangeable and with other ones, so that.

Tom Raftery:

Interesting.

Quirin Goerz:

That's a very good point what are really the benefits. How can we create win-win situations between the big corporations, the OEMs and their supply chain partners that is especially the SMEs that are heavily dependent on their customer relationship with the big OEMs.

Tom Raftery:

Fascinating. And. Industry 4.0 great. Are we going to get an industry? 5.0 and 6.0, and where's all that kinda stop?

Georg Kube:

What I'm seeing is, I mean, industry for all was a government funded initiative if you will. Right. It was a German initiative to basically bolster our manufacturing industry in the international marketplace. And so if we look at what happens on that level, you know, the platform industry 4.0, they're not talking about industry five, but what they are talking about now is Gaia X and Catena X and these kind of things. So like Quirin was saying earlier, I believe the next level will be to take what has been done on the individual company level and bring it into a network level. And then basically harvest the same type of results and the same type of benefits not just within the company, but within the network. But independent of that, I mean, some companies talk about industry X or industry something. I personally think that's not gonna go through. It will rather be the Gaia X kind of induced networks that are going to take the place.

Tom Raftery:

I mean, we've mentioned in passing Catena X and Gaia X, but for people who might not know what we're talking about, could you maybe explain what those are?

Georg Kube:

I could give it a try. So, let's start with Catena X, right? Catena X is an automotive initiative. If you look at a car and this is a couple of 10,000, a hundred thousand parts all coming together to form that car. So these parts are coming out of multiple supply chains. There are alternative suppliers. These supply chains are global in nature. Now imagine. That you need to identify the total carbon footprint of that car, or you have a quality problem. And you need to know exactly where that issue is and who supplied that part for that specific model, if there was alternative supplier and so on. So this is a huge problem. And today this is solved if it occurs by simply picking up the phone, calling people, going through the different contracts that exist. Now, Catena X is trying to put this on a network where everybody contributes the data about their contribution to that car and everybody who has a problem like this can look into it and find the answer in that data. Now, the thing about Catena X is it does that in a way that people only give away the data that they want to show and they only give it away for a certain purpose. Right. That is what Gaia X in there. The data sovereignty piece that, that allows everybody to retain ownership of the data, even though they are provided for a certain use case to answer a question for the better good, right. That's technically, well, let's say from a use case perspective, that's what it is. And then you can solve questions about, carbon footprint about supply traceability, about quality management and what have you. And now based on that example, you can easily imagine that a similar thing makes sense for high tech or for the chemical industry or for the manufacturing industry. And that's what happens right now, right? This is where the government and the industry players are going. They're thinking like, how can I leverage what we've just done into other industries and then how it could it come together? Because you can imagine that if BASF is supplying into the automotive value chain into the chemical value chain, obviously into high tech. You know, many companies are in many value chains, and of course they only want to be part of one network. So that's where that is playing right now.

Tom Raftery:

Fascinating Quirin, anything to add to that?

Quirin Goerz:

Well, I think another important aspect is really this topic of data sovereignty. Yeah. So all these networks try to integrate this part of data sovereignty, because as we already discussed there, what's the win-win situation. And if I give away my data yeah. Then I at least want to have control of over my data. And I think that's always very important aspect of catena X Gaia X where they all focus on having this data sovereignty. So whenever you provide some data to someone else, you still have control over your own data. I think that's also one common denominator of all these different initiatives at the moment. And I think this will be also important for the future. When you look at other industries outside of automotive and cloud computing. We can guarantee that you still have to control over your data. Right. I think that's one of the crucial parts, so that we can really have this win win situations, for all parties, participating in network.

Georg Kube:

So, Hmm. Yeah. Well, said..

Tom Raftery:

Okay. Another topic that we didn't talk about, that is enabled very much by this is the kind of outcome based economy or, the servitisation, product as a service, whatever we want to call it is that something that you guys are seeing as well?

Quirin Goerz:

Yes, for sure. Yeah. So I think that's very closely related to the topics mentioned by Georg in the beginning. Maybe look at different trends when it comes to resilience, I think many companies have now worked with the COVID 19 situation, different crisis. We've seen now that flexibility is key. And one solution to create this kind of flexibility, I think is really outcome based business. Right? Very transfer part of the risks, to your supplier and so production as a service or something like that. I think that's pretty much the future for many types of production areas. So we can see it already today in some areas for example, 3d printing, where you have lots of service providers doing industrial 3d printing already so it predicts 3d printing as a service cause for many especially in producing prototypes, however many companies it's not reasonable to buy a 3d printer. Yeah. For several hundred thousands of Euros, maybe. But, it's still reasonable to get a prototype, printed by someone else. And that's also very kind of a production as a service yeah. And I think that will, that kind of business models that will scale up. And especially when we look at Europe. Then we will see that, lots of production will be relocated in the future. We have, many companies that are now reconsidering their supply chains uh, with current supply topics Yeah. That, that we see globally with different conflicts and everything. Yeah. So yeah. This would require huge investments. And I don't think that everyone will be willing to do all these big investments. Yeah. They will look for alternatives. We already discussed that at with different customers, that are reconsidering their supply networks and want to relocate to Europe with their production. How could we help them to keep the investment as low as possible?

Tom Raftery:

Okay, cool. We're coming towards the end of the podcast now guys. Is there any question that I haven't asked you that you wish I had, or any aspect of this, we've not touched on that you think it's important for people to be aware of?

Georg Kube:

Yeah, why don't we quickly talked about what we do together at your factory, Quirin, you know, with your robots and our asset management software. Wouldn't that be something to leave us with?

Tom Raftery:

Nice.

Quirin Goerz:

Yep. So, yeah what we actually do now is really to combine our Kuka assets. Yeah. And our own production facility where with SAP software. So we've done several proof of concepts now showcases to really try, how can we use, for example, SAP asset integration network. And to transfer our asset information, how to track information and then also bring it into digital dashboards, so that we can really, in real time, see the different assets movements the different data exchange data easily related to the asset. So all the documentation and everything related to the assets so that we can in the future also on the one hand side enable outcome based business. Yeah. And on the other hand, really start this kind of data exchange with our own customers. We are already in discussion with several bigger OEM customers, how we could leverage that potential so that they can have easy access on our asset information within the SAP network in the end. That's what we actually do at the moment. Yeah. And hopefully soon in a couple of months, we can do also customer event here in Kuka in Augsburg, where we then would show the different capabilities of our Kuka assets combined with the capabilities of SAP in real life demos, where we then can see our own production and combined with different so set capabilities from SAP.

Georg Kube:

Yeah, assets perform, if you would like to know how they do that, you can see that at Kuka in Augsburg. This is really amazing what we've done there. So I think the invitation or the link to this will be in the show notes, right Tom, so everybody's very welcome to contact us Quirin in and I, and we'll be happy to show you.

Tom Raftery:

Fantastic. Fantastic. And on that, if people do want to know more, is there anywhere, I mean, you'll send me links, I'll put them the show notes. Is there anything apart from that, that you want to make people aware of anything, any links, any social media accounts, anything like that? Any white papers, blog posts or anything?

Georg Kube:

It will be links in the show notes. Otherwise, you know, you can follow us on LinkedIn and we're sure to talk about the latest developments constantly. So if you want to keep stay updated, that's the easiest way to do that.

Tom Raftery:

Perfect. Okay. Superb. Quirin Georg. That's been great. Thanks a million for coming on the podcast today.

Georg Kube:

Thank you for

Quirin Goerz:

having us. Yeah. Thank you very much. That was really great.

Tom Raftery:

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, or simply drop me an email to Tom dot Raftery @sap.com. If you like the show, please, don't forget to subscribe to it in your podcast application at choice to get new episodes, as soon as they are published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks, catch you all next time.

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