I recently got together with Ronald Van Loon, CEO and Principal Analyst at Intelligent World and we had an excellent conversation around the role of platforms, cloud, and data in Industry 4.0.
We had a wide-ranging conversation kicking off with the current disruptions affecting manufacturing and supply chains, the role of cloud in manufacturing, and the different technologies and platforms that are coming to the fore. I learned loads, I hope you do too...
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tons of possibilities if you start combining these technologies, and that's the great thing is, once you have your technology platform, right, you can start combining it if you have all different kinds of silos with different data, and with with different technologies, you can't start combining all these great technologies.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 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 my special guest, Ronald. Ronald, would you like to introduce yourself?Ronald Van Loon:
Of course, thank you for having me, Tom. It's a real pleasure. I'm Ronald Van Loon. I'm the CEO and Principal Analyst at Intelligent World. And I'm also a big data course advisor at Simplilearn.Tom Raftery:
Okay, Ronald, thank you for joining us today. We are going to be talking today about industry 4.0. In you know, for the most part, can you start off though, let's let's walk us through it and talk about some of the challenges that you see in supply chains and manufacturing currently, with the kind of disruption we're seeing.Ronald Van Loon:
Yeah, if we look to the supply chain, and maybe we look back, the last 18, let's say 2020 months, we see a disruption. And the real disrupter that we have seen, that impacted the supply chain is the pandemic, unfortunately, but on the other hand, I think it brought a lot of good things as well. And if we look related to this pandemic, and if we look back this this 1820 months, we see that the way of working changed a lot, which was a challenge. So employees started working remotely. And they had to change their their working procedures, they had to focus on other things often, which was a challenge, not only for the supply chain, not only for the manufacturing, but basically for for everybody who was working, and especially, we needed to work remotely. But we see all different kinds of other challenges. Well, we saw, for example, the last 18 months, raw material shortages, which was the pandemic, which was the boat in the Suez Canal, which all kinds of let's say supply chains has been been disrupted. And what we see as well is that what this brings up right now is that not many people are not many people, not all people have the right tools and have the right technology, to bring them the visibility into the entire end to end supply chain, which is, I think, crucial. If you want to adapt your supply chain, if it's stable, it's of course, you do your better work, and it's going forward. But if it's changing, you need to have this end to end supply chain variability. That's, I think, one one big issue. Another challenge that appeared due to this was the pressure on legacy, legacy IT and legacy operation technology, the OT these type of infrastructures, they are limiting the supply chain capabilities, and especially if it's stable, and everything runs, everything goes well. But once you start changing, it's it becomes a challenge, and especially companies that wanted to change their infrastructure to an industry 4.0 type of infrastructure. Yeah, they had challenges with this legacy infrastructures and had to change it. What I also saw, for example, is companies that didn't create this, this industry 4.0 type of infrastructure, so supply chains that didn't implement in 4.0 solutions before the pandemic, they had really hard times in making the change in their supply chain, an effect of this. So for example, for some of the industries, the demand to decrease, and then decrease in demand often means and the pressure on your cash flow. So if you don't have cash, it becomes a challenge again, okay, no cash, what are we going to do? That's good, all kinds of investment as well. Related to this again, what we see as well is if you need to change and you see that the pressure was so high to change to the same more stable technology platform and industry 4.0 type of solution, you need to scale to do to make this change. So in general, there was already I think, a lack of skills and knowledge and understanding of the technology, the processes and the operational strategies to move to a 4.0 type of environment. With this pressure, even became became more one one more thing what what we saw as well is security. So the lack of cybersecurity capabilities that protect your data that protect your systems. I just saw a tweet today that every 11 seconds there is a data system or an infrastructure system hacked. So security is really crucial and you need have the capabilities and the systems as well, to manage your cybersecurity and also your let's say internal knowledge and understanding, because it's not only the systems, you can still click on the wrong, wrong thing. So what we see in general is supply chain, they were complex, they became even more complex, they become more volatile, and it becomes harder, it became harder to manage risk and controlling your data access became quite a quite a challenge and to balancing the unknown one and delivering the right new services to your clients on the other hand, and then being resilient and being flexible. On the other end, you have to manage your costs and your efficiency. This is, I think, a quite quite a big challenge. And then of course, there are plenty of different challenges within the different industries.Tom Raftery:
Yeah, I was gonna ask you were there any industries impacted more than the other?Ronald Van Loon:
Yeah, I think every industry was impacted. And then some are more than than the others, if we take a couple of industries that that everybody knows, and everybody can imagine is airlines, or aerospace, we had a really demand suppression during the, during the pandemic, if we look at energy, demand prices initially decreased, and now increase, at least here in Europe, the prices are going sky high 80%, higher gas prices, last last couple of months. So we see a lot of fluctuation in the energy market. If we look to to the medical market, for example, everybody can imagine there was tremendous increase in demand, everything was related to the pandemic, all the supplies, and the hospitals to have to change their processes to help the difference, they still had to traditional care, traditional care came back. And now it's basically we see levels of pandemic, unfortunately, going up again, so they need to manage the flow all the time, which is a different type of challenge, I think then than other ones. And we see that companies that that have implemented this industry 4.0 type of solutions, like automotive, you can think about think travel transport logistics, they are doing better, some even doing quite quite well, in managing on one hand, the visibility, the managing their data integration, and better better manage the amount of supply and either reduce their supply if the demand is decreasing. So the companies that were prepared are really we're already working in the industry wide on industry 4.0 solutions, I think, in general, they did much better than industries that were not.Tom Raftery:
Okay. And what about things like Cloud? Because in the manufacturing space, particularly organizations are more conservative about moving to cloud?Ronald Van Loon:
Yeah. So clouds, I think is is next to let's say, your technology platform in general cloud is just a way of delivering it, you can have it on premise moving to cloud, what we see now more is moving to hybrid. So depending on the type of data deployment, depending on the type of services, it's in the cloud, it's on premise, it's on the edge. So you need to be flexible from a platform perspective, to to manage your your infrastructure where it is required. And Cloud is definitely a driver. And what we see as well is, I think, moving what you hear a lot moving or migrating to the cloud. It's not, let's say a one time event, it's more a journey and this journey you do to to make your platform ready to scale. So it's a journey with all different kinds of challenges that you see whether it's infrastructure constraints that companies have to scale, sometimes it's compute capacity, sometimes it's storage, and the core of moving data to the cloud, you can call it or moving to a technology platform, or moving to hybrid cloud. I think it all starts with building an IT strategy that connects with your business strategy. And this has to be defined by sea level. So sea level one and define the strategy. And then with your teams, you can define use cases, and especially use cases with with quick wins something where you can start quickly built on the successes that you have. And then it's the big question you want to scale. So if you want to scale, you need to have a solid technology platform where you are capable in managing this, this scaling. And you can think about let's say all different kinds of cases whether you're in retail or on gas or in banking or in other industries, if you look for example, in in retail, retail organizations, they focus a lot on for example, inventory optimization, and especially with this pandemic much some products stopped running as you had to close your physical stores, and some went digital Only and they had to sell totally different product supply chains had to be adopted adopted very quickly. And what you see as well with retail is that they had to change their products and services development very quickly and adapted to that and being having, let's say, the possibility to either run it in the cloud or run it on premise, this was a very important part. But also if you look to oil and gas, and you had a parameter optimization, for example, or automated forecasting, and especially what I was mentioning, over here in Europe, gas prices are going up. Now, there's there's much more demand industries are starting to use a guess a lot, a lot more as we move after the pandemic. So they want to forecast this this as well. If we look in banking, banking have a lot of pressure from from social media platforms that start delivering banking services, banking products, as well. So you see that these banks have to deliver much more personalized services, personalized digital advertising, or personalized type type of recommendations. And moving to the cloud, as you mentioned it moving to a digital platform, I think it's important and it's important to reduce your IT risks, and especially as well with the reduced the security type of risk and breaches and hacks. But also, you want to be able to scale and to move to the cloud when needed to move on premise when needed. And if you move forwards, and you start using all different kinds of applications, you start to you start seeing the need for using API's, if you create new type of products, or well, you want to build this product fast, you can do it all yourself. Or you can say, hey, there are a great API's out of the books available, which works perfectly. And therefore you need need a solid platform. But also one of the items, which you see with quick changes, is adapting your workflows and adapting your automation. So you want to be able to adapt your workflows quite quickly, and even be able to automate your workflows and preferably that the end users don't even notice with just with QA type of forms, where the UI guides the end user where they think, hey, this system has helped me a lot and it's always adapting to me, or sometimes they don't even they don't even even notice it. And the core, I think, why organizations need to do this is they need to innovate, and you need to be much more innovative, I think then, than all the years before, as this AI storm, thunderstorm is there. So you need to be able to create new services, you need to be able to improve your your services, you need to be able to improve your customer experience. And to do that, you have to think Delta culture and literacy of technology in in your organization. But also think about the people which people have to implement it. And do we need to rescale them? Do we need to upskill them? Do we need to hire new new people. And if we automate more items, what are elements where these very valuable people can bring even more value and start doing less in the repetitive type of work, what we see is what we can automate quite easily with industry 4.0 type of solutions. And that's where I think the people like it, well, if they can move away the type of repetitive task, and they can do much more with client interaction with with product development, that's where the real value is. and the foundation for this is data, data analytics. And with the use of of analytics, and creating the insights, start predicting predicting maintenance, for example. And from there, you can start using all kinds of AI applications. So that's maybe long story. But it's it's I think that's how I see how companies start moving to the cloud. And as you said, it's a different different terminology. Moving to the cloud, moving to a business technology platform, there's different types of technology of terminology that you can can use for this.Tom Raftery:
Yeah. And I mean, you mentioned AI and Analytics as well. These technologies are coming to the fore, but they're coming to the fore. Now, not for technology's sake, but because it's good business reasons to put them out there. I mean, we talk about, you know, predictive analytics, and it's been it's been used now increasingly, in planning for example, have you seen an uptick in that as well? Yeah.Ronald Van Loon:
Especially now, changing a supply chain planning is crucial and not planning just let's say from from one department, global planning, demand planning, supply, planning is crucial. And I did some research where A nice statement from from McKinsey, they say, effectively implemented Supply Chain Management Planning allows organizations to enhance logistic cost efficiency by 15%. inventory levels by 35%. And the service levels eaten by 65%. Compared to to all their competitors. So you can see the impact of an end to end supply chain visibility and end to end supply chain planning. And their, let's say, predictive planning is the foundation. As you know, supply chains are quite, or maybe even very complex, and a company wide synchronized predictive planning, that's helping organizations really to, to manage and to optimize the supply chain network to improve from one end to resilience, on the other end to continuity, and by optimizing your end to end supply chain operations, you can improve your your demand planning, you can improve your real time inventory management, but also, for example, you can start using different type of digital digital twins. And the results are quite quite remarkable. They are on one end about improving the transparency in your supply chain management. Forecast into your pricing, you can make forecasts into your demand. And if you can better your Metro supply and demand, especially if it's changing a lot. That's that's a world of difference between maybe even survive or going going bankrupt. So that's, that's how important planning is and then using, you can also use it for example for for your procurement for optimizing your your material users. So there's, there's different type of uses. And once you have this data, for your predictive planning, you can even go a couple of steps further by using AI applications on top of this, where you can use AI to automatically enhance your data quality or to optimize your your processes, or even to to start executing plans automatically. And then it really, really brings up a lot of value. Super super.Tom Raftery:
Another area that we're seeing big growth in in the last five years at least, is the Internet of Things, IoT and sensors. Increasingly, more and more devices are arriving with sensors built into them. So, you know, this is opening up use cases that weren't viable years ago. What are the kind of areas that businesses should be looking at around embedding IoT into supply chain,Ronald Van Loon:
you mentioned already, it opens up a ton of use cases. So we can go through through hundreds of use cases on one end. But to give a little bit of an idea of the impact of IoT, the centers is once you can measure it, and if you can measure it, you can get the insights and you can start improving it and you can start changing business models with it. So the impact is not only connect every device connect every element connect every machine, every element of a machine is really having, let's say bottom line impact in how you do business. So that's that's one of the impact and, and you can see it from the investments that companies do, they invested around 725 billion in 2019. And this will grow to 1.1 trillion in 2023. So the number of use cases are substantial. If you have use cases, I think it's important to see a one and how you can scale and not directly looking to the to the type of use cases that bring directly the best results. But if you look, let's say two cases, areas of production and logistics in your assembly, for example, where you can start connecting each product can track each each product in your logistics process. If you can track it, especially for example, if there are with food, if there's temperature fluctuations, and it cannot be under a certain temperature, you can track it during the whole logistic process. And if it's been under or above a certain temperature, the food can maybe not be good anymore. There can be all kinds of quality checks that you have from from machines that you check where you check all anomalies in the machine. And depending on this anomalies, you can define whether it maybe goes out of order so you can start predicting machines that go out of order and start to prevent the maintenance. So there's so many different cases where you can use sensors and IoT, and even having a change in business models. And then the nice nice example I think is the compressor story where you initially this manufacturer delivered compressors, now they can start measuring the air that they transport, and if you can measure it, you can basically do generate insights, if you have insights, you can start calculating on it, then you can say, hey, I'm not delivering a compressor anymore. I'm delivering now that the movement of air so I can deliver you a certain number of cubic meters of air. And that's what you need to pay for. So you become really a service model on air as a service model. And that's, that's the impact that IoT sensors really can have on on your organization, totally change your organization, totally change your business model and start competing in totally different industries asTom Raftery:
well. And what about things like 5g then as well? Yeah. SoRonald Van Loon:
now you started adding up all the technology. And if you start combining these, these technologies, it becomes really a nice play. So for the ones who are not maybe very technology driven, 5g is 10 times as fast as 4g, and it has a very low latency, which means that if you want to, if you take an action, you don't have to be cabled anymore. But you can still transfer this action very quickly. And then a clear example of self driving cars, you cannot wait for half a second to transfer data to a certain system to take an action because that's the moment matters sometimes even of life and death. So if we now start combining 5g, and IoT, they are going to digitize and to automate supply chains. And then you can think about warehouses, fully automated warehouses, fully automated factories, trans fully automated, not maybe fully automated transportation, we're still let's say, apart away from that, but that's more this this last 2% that self driving cars have to solve, but automate your transportation much further, that's definitely for sure possible. And then providing consistent and fast and uninterrupted type of of connections help you in automating these defectors, these warehouses, you can automate a lot of processes, which you normally had to do manually. There are some other example, which I liked a lot is people that doing some kinds of dangerous work and mind work as for example, if you combine five 5g with the IoT type type of devices and processing at the edge, they can be alerted much quicker, if something is going on. If there's a hazardous situation in the vicinity at their location, they can be taken immediate action as they can, this data can can be processed, and there can be a matter of seconds, sometimes to bring added value. But there's many, many more cases, asset management, like global tracking and condition monitoring what I was mentioning already, if you have in logistics, and you transporting on one end, goods that are sensitive for for temperature fluctuations, it can be very helpful. Other one is, for example, in learning AR or augmented reality, virtual reality, mixed reality applications, where you using your camera and geo positioning, and where you can help people that work that need to do maintenance, but they don't have the skills in repairing or solving solving certain type of items, they can have these VR glasses, or they just can use their phone and direct ads, the machine that needs to repair and somebody on distance can help them and guide them or even can provide visual instructions for what they need to do. So you have tons of possibilities if you start combining these technologies, and that's the great thing is, once you have your technology platform, right, you can start combining it if you have all different kinds of silos with different data. And with different technologies, you can start combining all these great technologies.Tom Raftery:
Yeah, yeah. I mean, that brings me to, you know, coming towards the end of the podcast, that brings me to the question, how do you build the right foundation for industry 4.0 projects to support the supply chain?Ronald Van Loon:
It's a crucial question. I think. It's, it's an important question. And there's not a black and white route, I would say. But I think there's a couple of things to get the right industry 4.0 Foundation, you need and want and you want to be flexible and agile, in order to meet all the different kinds of expectations from your customers and from the changing environmental conditions that we have in the supply chain. I think it needs to be data driven and digital, that's especially what we see now everything is moving digital. Even let's say that the physical type of distribution is partly replaced by the digital type of distribution. If you have your data well prepared, you have a very well foundation for it for your analytics and build it on build with on with this analytics towards AI type type of applications. IoT, you need to be able to connect sensors and start to go Collecting, let's say from every device that's, that's relevant for you, for every product that's relevant for you to collect data from, you need to be able to collect it, you need to be able to connect it to 5g to transfer the data at rapid speeds. To make benefit of this great use case that we have, you can run it in the cloud, you can run it on premise, you can run it on the edge, or from edge to cloud, from cloud to edge. It really depends on the use case where you think, okay, what is the best use case, what is in line with our data governance, and based upon this, you can define where to run it, where to analyze it. And I think it's very important, if you have the right foundation, you can use AI to automatically analyze data start predicting to start automated actions across your supply chain. And, and all of this, you have to have, it's running on this modern technology platform to connect your sales, your distribution, your engineering, your you're planning your production, your logistics, and your services in one platform, because then you can reuse the data from all your different departments and can really start benefiting and adapting based on change demand based on change supply, you can start adapting your your organization. And that's the foundation for future modern type of organizations in manufacturing and that have changing supply chains. Very good. Very good.Tom Raftery:
We're coming towards the end of the podcast. Now, as I said, Ronald, is there any question that I have not asked you that you wish I had, or any topic we've not addressed? That you think it's important for people to be aware of,Ronald Van Loon:
I think we can talk for for a couple of more hours and more advanced technologies like like deep deep learning or starting a autonomous system? So let's say the more the once you have your foundation ready, once you have your data available, it becomes becomes much more intelligent. I think that's that's something Yeah, it's it's something we haven't discussed. But maybe for for next podcast, where we can really dive into the the future of supply chains and using these, these type of technologies. Super,Tom Raftery:
super, Ronald, if people want to know more about yourself, or about technology platforms, or any of the things we talked about today in the podcast, where would you have me direct them?Ronald Van Loon:
If you go to Google, and you Google my name, or almost alone, you will definitely find my social media channels, whether it's on LinkedIn, on YouTube, Twitter, or Facebook, or Instagram, I'm basically everywhere. But in the coming weeks, I'm going to launch a new platform and a platform where if you want to educate yourself about new technologies, and you can think about data analytics, ai, 5g IoT supply chain, different type of technology, if you if you want to educate yourself, I'm launching a new platform. It's available at intelligent world.org. And there, you can educate yourself, you can build your own curriculum, and you can stay up to date from everything what's going on in the technology world.Tom Raftery:
Right. Perfect. Ronald that's been great. Thanks a million for coming on the podcast today.Ronald Van Loon:
You're welcome.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 sa p.com/digitalsupplychainorsimplydropmeanemailtotomrafteryatsap.comifyouliketheshowplease. Don't forget to subscribe to it and 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 shoe. Thanks. catch you all next time.