Sustainable Supply Chain

How Covid and Industry 4.0 are shaping the post-covid manufacturing world - a chat with Mike Lackey

February 08, 2021 Tom Raftery / Mike Lackey Season 1 Episode 105
Sustainable Supply Chain
How Covid and Industry 4.0 are shaping the post-covid manufacturing world - a chat with Mike Lackey
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Show Notes Transcript

The Covid pandemic has had seismic repercussions on all aspects of supply chains.

To get a flavour of how the manufacturing world has been impacted, and what the future of manufacturing will look like, I invited Mike Lackey back onto the podcast.

Mike is SAP's Global VP of Solution Management for Manufacturing, and so is uniquely positioned to comment on this. We had a fascinating conversation.

As you will see listening to this, we had a great time making this episode. I hope you enjoy listening to it. 

If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

To learn more about how Industry 4.0 technologies can help your organisation read the 2020 global research study 'The Power of change from Industry 4.0 in manufacturing' (https://www.sap.com/cmp/dg/industry4-manufacturing/index.html)

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

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Mike Lackey:

Companies have got to become digital, they have to become more responsive or is not just about remaining problem. I think it means are you going to survive if you're not investing?

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 focussing on the digitisation of Supply chain. And I'm your host, Global vice president of SAP, Tom Raftery. Hi, everyone. Welcome to the digital Supply chain podcast, My name is Tom Raftery with SAP. And with me on the show today, I have Mike. Mike, welcome back. Would you like to introduce yourself for anyone who hasn't come across you on the show before that?

Mike Lackey:

Tom, great. Thanks for having me there, guys. My name is Mike Lackey. I'm the global head of solution management for digital manufacturing here at as SAP and a big pivotal pillar in our Industry 4.0 strategy.

Tom Raftery:

Superb. Now, Mike, we've we've all heard the word unprecedented, an unprecedented number of times in the last 12 months. Things have changed a lot, consequently, because of the pandemic. And let's let's talk a little bit about that first. Have things changed or what have you seen changed in the manufacturing space?

Mike Lackey:

Yeah, I mean, you know, over the last nine months, 10 months, companies had to reinvent themselves. They had to determine what is their biggest business going to look like in the future. You know, before the pandemic, companies that was their business was 80 percent commercial, which means they delivered and shipped in bulk. And today it's 70 percent residential, which means, you know, they're delivering more you know, more goods and services to the grocery stores. That's a big change on your process. So I think the biggest change that I've seen is companies are just now starting to figure out what is their business going to look like as we start coming out of this this pandemic? And then, you know, once you once you understand what your your business is going to look like and you're in different demand, then, you know, you can start going down this digital transformation to getting your processes in line with what the new what the future of your company is going to look like. And I think that's been the biggest challenges. If I look back on 2020, it was it was a year of planning logistics. And we didn't close down plants because we couldn't get people in there and keep a and keep them open. We shut them down because we couldn't get material there. You know, there was no material to run. Supply chains were single threaded. And you're seeing that changed to multi dimensional supply chains. You know, more of a network type approach than a linear. And, you know, when you start looking at that, yeah, it just it really changed the way, you know, companies were doing business. I know this is funny, I've been talking to a lot of our customers, they said this pandemic, they know what they do really, really well and they know what to do really, really bad. So it's been an eye opener for a lot of our customers. But you know what? We all evolve. Our customers are some of the best in the world and they're going to come out of this thing stronger in the end. And SAP's going to be there with them all the all the way, every step of the way. And we're going to help companies reinvent themselves for the next generation.

Tom Raftery:

OK, so access to supplies was an issue. Changing markets was an issue. Physical distancing as well, I'm assuming for some of our customers, at least in manufacturing sites, was an issue. Were there any other big issues or is that primarily it?

Mike Lackey:

I think that's primarily it other than their demand changed. Right. But we were able to get people into the factories and I tell you what, our our customers were resilient in this. Even, you know, even before we were able to put we looked at putting sensors on employees and knowing where they were in the building, who they came in contact with or keeping them send an alarm if they get within that six foot space. Right. But, you know, our company in the early days since the pandemic hit, you know, I had customers that were you know, they were going two shifts and shift, one could not come in contact with shift two and that shifts were going instead of an eight hour shift for 10 hour shift, they were going about six and a half. And what they would do is shut down and just wipe down the whole plant. So if you were an engineer or a maintenance guy or a planner, you're either on the first shift, their second shift, you could not come in contact with someone on that other shift just to reduce the liability of having a broad pandemic or shutting down the whole plant. So, you know, companies figured out how to how to keep the plants open once they figured out what their demand was and once they figured out what material was required in what quantities based on these dynamic changing customer demands.

Tom Raftery:

All right. So that's that's a lot of completely new challenges. I mean, if you can't do a physical handover with a clipboard, I assume it has to go digital. If you if you if you're going six and a half hours instead of eight hours or eight and a half instead of 12 or whatever it is, how how I mean, that requires an enormous amount of agility that on all of the other challenges, how do companies, how to manufacturing sites, how do they deal with that kind of level of agility that they've never had to encounter before?

Mike Lackey:

Yeah, you know, Tom its funny. If you're handing over from shift to shift with the clipboard, that's your problem number one, right? All this should be digital to begin with. You know, look, there's a lot of studies out there right now. They're showing the companies that were down that path and the Industry 4.0 or digital transformation, smart factory, intelligent factory, digital factory, whatever the initiative they had, if you were down that path, companies that were digital are showing that they are surviving and thriving, actually. In this pandemic, so the biggest challenge they have is is not only keeping one plan up, but is being able to move production from five across five plants, 10 plants, 40 plants, and taking those 40 plants and looking them is just one global operations to deliver on customer demand, wherever that is. And now companies are going, you know, I have three divisions and we've looked at my 40 plants of this one division, but I have another 20 plants in Division two in another 18, Division three. I want to look at all of those. All seventy eight plants as one operation to move move production based on where my demand is. This is interesting because everybody got a pass with the pandemic in the boards are looking at the VP of Ops and say, OK, this came out of nowhere. We kind of got hurt with the trade wars. But I'm going to give us a pass here because the pandemic, it came out of nowhere. But you need to build resiliency and you need to build agility in your processes so that whatever comes at us next, we're able to handle it. And so companies are really rethinking and reinventing themselves. The good thing about manufacturing is that we reinvent ourselves every day writing a new piece of equipment. You know, you better train your employees, you move a production line, you change the process flow. So continuous improvement, reinventing ourselves, always been a part of manufacturing. But now all of a sudden, the scale at which companies are looking at reinventing themselves for the future is pretty phenomenal. It's and it's just accelerated. Every you know, Industry 4.0 is a journey. Every customer is on a different stage of that journey. And, you know, and it's our job to help them on that journey and support them and give them the business systems and bring business context, operational data and vice versa so that they know the impact on their business and have that agility at the manufacturing level.

Tom Raftery:

Sure, sure. And what what happens next? I mean, we are now in a scenario where vaccines are being rolled out, albeit slowly. But, you know, in the next few months to half a year or more, we'll have a lot of people vaccinated and things will start to reverse. I don't want to say to the way it was before, because I don't think it's ever going to go back to the way it was before. So new normal that people are talking about how how. Yeah. What's next.

Mike Lackey:

You know, Tom, the funny thing is I say, listen, I know here where I'm in the United States and, you know, my governor stands up and he goes, guys, you need to understand something. I get I receive thirty thousand doses of the vaccine, OK? They are distributed to the sites within an hour. I can't distribute what I don't have. Right. So it's funny that everybody is learning about supply and demand right now. So it's a good thing. You know, it started out I know my wife is trying to get on the list to get the vaccination and you had to go all these individual sites that all of a sudden you go to one site that ties into five or six other sites and finds you, you know, available time. So, you know, it all evolves. It gets better. But IT. Post covid-19, I see the tsunami coming. The foot's on the... the foot's on the gas man where we're going from, you know, NASCAR to Formula One here on digital transformation in manufacturing. Our processes are going get digital systems are going to be integrated, interactive. We're going to solve end-to-end business problems. Companies are getting smarter where they're investing. And, you know, you're going to see changes. I agree with you. I don't think business will be the same. I mean, when's the last time you went to a retail store? Mm hmm. I mean seriously, I mean, when's the last time we went to a retail store and really just went in to look and see what I need. Its became you know, it's become look at it. This is what do I need? You know, I know what I need to order only what I need. So I think even on the that side of the house, you don't see a lot more digital marketing coming out that's going to drive digital demand. And, you know, the manufacturing facilities have to have to be able to respond, not knowing. I mean, I grew up in manufacturing. We had a two channel process. We went to a distribution channel that went to the customer. So we need distributors would buy X and they kind of was a buffer. Now, that's all gone away, right? We're selling direct. And so I've got to take the order direct and I got to be able to manufacture it to whatever that customer wants. And I got to turn it around in a time frame that is that meets their needs. And I get delivered at a cost at the quality they expect. So as these lot sizes get smaller, they may not be down to one, but as they get smaller, our manufacturing processes have to be the response. That's why I think we're at the tip of the sword or the tsunami or you know, I just like to say it's this has put the gas foot on the gas and let's go here. Companies have got to become digital. They have to become more responsive or is not just about remaining profitable. I think it means are you going to survive if you're not investing?

Tom Raftery:

Sure. And to your point about retail, does this mean that we're going to have a significant increase of direct to consumer?

Mike Lackey:

I think you think that that's that's pretty plain. I think that is that is the norm. Right. You know, even even I'd say the older generation or people who didn't shop online have had to learn how to do it. And I don't know what's going to happen to the brick and mortar, but I think they'll always be there. I don't think they'll be at the scale that they once were. But, you know, it sure would be good to get out of my house. And, you know, if I had to go buy a pair of socks, let's just sit here at this computer. I'll be there for the last 12 hours in order to pay right? Just to get some fresh air. But so I look, I think it will come to a happy medium norm here, but it still puts pressure on he another sense of complexity that I have to manufacture in bulk to go to commercial. You know, then I have to manufacture for the residential, the individual. My processes have to be set up to handle both. So there's a lot of unknowns. But, you know, if we plan right and our systems are talking to each other, integration, understanding what a you know, what a demand signal means to my manufacturing operations and processes, we can get through this and we can come out of this other side much stronger and better. And that's that's what's most exciting right now, seeing how companies, you know what we as people. So we're going to beat this pandemic. And I see my customers and they're going to beat it as well. They're going to change their business models are going to change coming down from the board. They're innovating at a level on their plants like never before. And it's I think customers are going to win, whether you're no human customer or your consumer customer, in the end, you're going to win.

Tom Raftery:

OK, and how will the Industry 4.0 Technologies help companies to win?

Mike Lackey:

Well, you know, one of the things that we're doing, Tom, is we're utilising a lot around machine learning and artificial intelligence. You know, a thing like digital inspection where you have a camera and it can look at what's coming out, whether it's a car. What was interesting was a potato chips. Right. You know, by the size of the bag is the size of the potato chip and where you would have kind of have humans sitting there and kind of debating, you know, this camera can pick it up so much faster and things immediately where it needs to go. And it's learning. You know, it can see as if you identify a mistake, it learns from that. So it continues inspecting the paint job on an automobile. You know, that camera can pick up some many more pixels than the human eye can. And the funny thing is you sit it there with humans and in watches and it sees what they marks and then it can. That up and then it learns and it learns, it becomes more and more intelligence, so that's reduced. The air is out of your manufacturing processes, give you much more response to non performances. You know, there's nonconformist is going to happen. The problem is if they happen and you have a quality escape and it leaves your facility. And so I see a lot of that is their cloud. Oh, my God, cloud deployments. I had one of my big customers just put all in the cloud. They said, Mike, I can't wait three years. To deploy across forty nine plants because I need them there the next nine months. So the cloud, you know, the cloud is not just the cost of hosting is the cost of which you can roll innovation out, because one of the keys here, Tom, is having standardisations across all your plants. You are not going to have the same equipment. But, you know, if you standardise your processes and you know, each player's capability, then you have that ability, that agility to move production in. And then, you know, that's the big thing here in the cloud gives you that gives you the cadence of how each factory is running, you know, gives you if there's an unforeseen downtime, what's the impact? What's the impact on not just the order on the piece of equipment on the plant, but my customers? Oh, wow. So this is my biggest customer. Let's move production to the next line. You know, I'm willing to bet that would be delayed, but this is my most important customer. I got to get it out. All these decisions can happen automatically. Right. And give guidance to the worker or what's the right way to handle that unforeseen downtime or that that non performance that you were not planning for. So I love the fact that the cloud gives us the ability to deliver innovation at a rate that our customers have never seen before. And they're actually being asked with time. They're demanding that. So all of that piece of it, I love the machine learning equipment. I mean, basically today, when you buy a piece of equipment for the plant, you're buying a computer. They're all intelligent now. They get sensors are picking up data like never before. I'll tell you this in the military. You're taught to collect three pieces of data, make a decision, then three more, make a decision three more and make a decision because the human mind can only process so much. OK, you know, with machine learning, it's in its infinity is infinite how much data you can collect, analyse and know the impact. And so that's just going to drive out inefficiencies. It's going to drive out, you know, cost is going to drive out improve quality. It's just a whole part of what every manufacturing plant manager every VP of OPs wants to do. And it's going to come at a rate so much faster that you're going to have some of the most efficient plants in the world. It's going to be really hard to determine who goes to Davos for, you know, the plant of the future or of lighthouse manufacturing plant, because all our plants are just going to become so efficient with these new technology.

Tom Raftery:

Amazing. And what about sustainability? That's increasingly becoming part of a focus for organisations, particularly now from the board level down with the whole focus on ESG it can Industry 4.0 help with that?

Mike Lackey:

Yeah, Tom, I mean, there's two levels of sustainability, right? There's what's what's best for the environment. And then there is what is repeatable. You know, do I have access to the levels or quantities of that material that I need. You know, through my channels, so this first is take sustainability from the standpoint of of of the environment, right. Carbon footprint. Every company today, this is the Fortune, two thousand reports, their carbon footprint in their annual report. And I was down with Coca-Cola and here in Atlanta and their thing was we have every one of our plants have to report their carbon footprint monthly. Right. Wow. So the controlling the carbon and really they collect it daily, but they have to report it up, you know, but they're collecting the data and they're monitoring that energy management, you know. You know, we realised that if I if I if I take out all the inefficiency in my plant, do I save costs? Well, you know, you got the energy energy management out here. You have a piece of equipment that you leave on twenty four seven. Why? OK, well, it takes it takes 20 minutes for it to crank up and whatever. But if you're not using it for eight hours overnight, why keep it on. That's cost savings. Because in energy you don't really control the cost because during the summer the energy companies cause you a little bit to charge a little bit more because there's more demand, things like that, air conditioning. So just monitoring the energy out there can go a long way. And then, you know, reusable, reusable components. You know why if I'm an OEM I want my suppliers to send packaging that comes into me that I can use in my plants and then repurpose those. Why can't they come in to me, I mean, manufacturer, we had these it was a high tech and a big tower. Well, we had the towers come in in the same shipping containers that we were going to reuse to shift our customers after we configured the towers. You know, there was something came in, we turned toward the packaging all through the trash, you know, we had to keep it and save it because that's the same material that we're going to ship out ours to. You know, it's a simple simplify, the supply chain and reusable. And so I think we all have to have a conscious to to to the environment and what it means from a compliance standpoint and really from a worker safety. The other side of that is the sustainability is the materials I'm using was their impact. But is it repeatable? Can I always get access to to those quantities that I need? And what multiple channels is it going to take to make that happen?

Tom Raftery:

Cool, we're coming up on the 20 minute mark now, Mike. So we're going to start winding the podcast down. Is there any question I haven't asked you that you wish I had any topic that we've not brought up that you think it's important for people to be aware of?

Mike Lackey:

You know, Tom, I think the biggest we have to look at is companies need to get started. And I think we need to have the conversations, say that I'm open to talk with any of our customers about this. If you're not on this journey for Industry 4.0, what's keeping you from it and what's it going to take you getting going? And I get asked the question a lot. How do you bite that apple? I said, guys, you've got to dream big. Know, I came from a Start-Up and I learnt and we learnt this. It takes the same amount of effort to raise five million as it does 75 million. So why would you go raise five million? And it's the same that you go through the same process. Right. So if you're going to change your processes, dream big, you know, what do you want to achieve and what's what's going to give you the ability to be successful in the future. So dream big, but then you've got to find a project that's very visible, a pain point, and can be quantitative. And you go out there and you solve it quickly. And when you do, you get the backing of the sea levels, right? You get the CFO, CIO, CEO, COO, they're behind you. And now they're going to say, I'm funding, let's go. But that funding or that political collateral doesn't last forever. So you better have a project plan that is going to accelerate and deliver like you've never delivered before. I mean, I'd have partners lined up and I would, you know, hey, you know, what we're doing at as SAP with Siemens is even simplifying some of this as partners like Siemens. And you get as SAP, OK, then you bring in these partners like Deloitte, Accenture, you know, smaller partners like Fujitsu and MHP. And you get your your ecosystem ready to go because you get that green light. You show the company what what the future could look like. You just have to put your foot on the pedal and let's go. I mean, this is not NASCAR where you put your foot on the pedal and you turn left. You know, I'm just joking for all my sudden brings down here. I love NASCAR and I did, too. But Formula One, you know, you're going to you know, you're going to go at lightning speed down a straight away break down to nothing through the chicane, you know, and then pick up speed again. It's you know, that's the journey we're on. And companies need to be planning and they need to think they need to dream big and execute at a level they've never executed before. And that's what, you know, the companies that are going to come out of this stronger are the ones that are thinking like that. You know, I challenge my team every day. We got to think different. This is not the same where we were, you know, in 2019. We think how we can help our customers differently and how we can help them exponentially. And if we can do that, you know, we're all going to win.

Tom Raftery:

And no clipboards,.

Mike Lackey:

No clipboards, no clipboards. They're a danger. They could fall, you could drop it, could land on your foot, you could knock coffee, out of your hand. And if you set it down and you can't find it, you know, how are you going to know what to produce? That's right no clipboards.

Tom Raftery:

Super. Super Mike, that's been great. If people want to know more about yourself, or about Industry 4.0 or about any of the things we talked about on the podcast today, Mike where would you have me direct them?

Mike Lackey:

I'll tell you right now we've created a great a wonderful virtual experience of Industry 4.0 on our website, www.sap.com. I encourage people, please go take the self tutorial. You go through this, we set it up so you can and have the ability to go through it yourself, whether you're doing designed to operate for discrete, designed to consume for process and then sign up for these digital experiences. It's called Www.sap.com backslash Industry4.now-experience is the landing page. There's videos, there's customer testimonials. There's just a lot out there. That's where I would go. And then I would encourage you to say, you know, I want to sign up for this experience virtually. I want to see this. I want to talk to your domain experts at S&P. And then you can always contact me. You know, my team in here, I love talking with customers, understand where they're going in the future so that we can make sure we're delivering the solutions that take you on that journey. So, you know, mike dot lackey@sap.com, drop me an email, I'll respond. And yeah, that would be my recommendation. Please take time to go out to these these innovation hubs and we can show you what we're doing in industry right now.

Tom Raftery:

Super. Super. Mike, that's been brilliant. Thanks so much for coming on the show today,.

Mike Lackey:

Tom. It's always my pleasure. Thank you for having me.

Tom Raftery:

OK, we've come to the end of the show. Thanks, everyone, for listening. If you'd like to know more about digital supply chain, head on over to SAP dot com slash digital supply chain or or simply drop me an email to Tom Dot Raftery at SAP dot com. If you'd like to show, please don't forget to subscribe to it on your podcast application of choice to get new episodes as soon as they're 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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