Digital supply networks (DSN) are growing fast, delivering a wide range of benefits to manufacturers as well as the extended supply chain as a whole. However, even as awareness grows, there are a variety of challenges yet to be overcome…
The supply chain has never been under greater pressure to deliver, and that relentless pressure has caused a metamorphosis in the structure and operation of the traditional supply chain model. Originally a linear progression from design to plan, source, make, and finally deliver product, the traditional supply chain has begun to transform into a much more dynamic, interconnected system that is inherently flexible, enabling ecosystem growth and evolution into the future. This evolution is of course data driven, but vitally is powered by Industrial Internet of Things (IioT) visibility throughout the supply chain, enabling the creation of agile, adaptable supply chains that can react rapidly to changing conditions.
This data-driven virtualisation of real-world operating conditions might sound like science fiction, or a vision of the future, but the fact is that many enterprises are further down the road to the realisation of a digital supply network (DSN) environment than might be at first apparent. Indeed, according to a study (“Embracing a digital future: How manufacturers can unlock the transformative benefits of digital supply networks,”) conducted by Deloitte and the Manufacturers Alliance for Productivity and Innovation (MAPI), 28% of manufacturing organizations have started implementing DSN solutions, while 51% of respondents believe their DSN maturity is at least “above average” compared to competitors. A massive 56% stated they believe a DSN will provide a significant benefit to the business.
The road to gaining end-to-end visibility
The principle of adding digital intelligence to a traditional linear supply chain is not a new one, and the aim of achieving end-to-end supply chain transparency as a result has been a focus for many manufacturers for some years. This is because even minor delays, errors or inefficiencies at each step can have an exponential impact on the overall efficiency of the supply chain. This has been described as the ‘bullwhip’ (or Forrester) effect, as initially small fluctuations in demand travel upstream through the supply chain, becoming much larger and less predictable as they go. Being able to react and adjust to those minor changes – in as near real-time as possible – enables each stakeholder in the chain to mitigate at least some of that impact.
DSN delivers connectivity, efficiency
It is in solving this linear segmentation that the transformation to a DSN begins to gather pace, as each node or process centre in a traditional supply chain becomes interconnected in a lattice, enabling data to be shared with the whole ecosystem almost immediately. This enables traditionally separate components, such as delivery and design and planning, to be deeply connected, rather than relying on traditional periodic forecasts and outdated plans that are inherently not dynamic or responsive. This allows a DSN to minimize the latency, risk, and waste that blights linear supply chains, as well as open the door to entirely new operational efficiency models that can drive increased revenue.
Near-term DSN challenges are substantial
While the ongoing shift to smart manufacturing and Industry 4.0 strategies is driving the development of DSN structures, there are key challenges that need to be surmounted in each ecosystem in order for a DSN to function successfully. Reducing these challenges down reveals two strands – firstly to deploy the technical solutions themselves, and secondly to have the operationally secure and trustworthy structures in place to share that data with the rest of the network.
Of the two, data sharing is often the biggest barrier, as early adopters of smart manufacturing and IIoT technology did not always prepare for such an eventuality, leading to data privacy concerns. In addition, the dangers of sharing confidential customer data from the other end of the supply chain are significant, potentially contravening well-publicised regulations such as GDPR. In addition, customer preference data that can be used for targeting purposes can be enormously valuable to all stakeholders, making those customer-facing retailers and digital aggregators that own it reticent to accidentally give away their ‘crown jewels’.
In addition, the specialist skills required to operate within a DSN are not necessarily present in the manufacturing industry, with the Deloitte study respondents identifying the two greatest challenges facing DSN development as being recruiting the right talent (30%) and training up staff (30%).
Success stories begin to emerge
However, even bearing these challenges in mind, there are success stories beginning to emerge. One quoted by Deloitte is GE Aviation, which has changed its business model almost entirely, from making and selling engines to selling services measured by flight hours. Due to the nature of modern aviation, managing assets in use was enormously time consuming before the advent of IIoT, meaning that simple service intervals were the only method of allowing performance management of the engine. By adding sensors to its aircraft engines that collected and transmitted data, GE Aviation closed time and geography gaps, and now uses predictive analytics to reduce downtime and maintenance costs at the same time.
Sustainability a key adoption driver
While the adoption of DSN structures is undoubtedly accelerating for many of the efficiency-related reasons already mentioned, there are other factors at play that make DSN adoption even more essential. Without highly-connected DSN-style supply chains, the requirements of a zero-waste, environmentally sustainable supply chain will be highly challenging to meet. However, with the power of a DSN and crucial elements such as IIoT-trackable reusable packaging, reaching optimum efficiency and enabling maximum recycling and minimum wastage across the entire supply chain should prove possible. Even into the medium term, the question is not whether DSN adoption is desirable, but how ready your business is to handle the transition…
About the author:
Martin Keenan is the Director of Technical Development at Avnet Abacus, which assists and informs design engineers in the latest technological challenges, including designing for Industry 4.0 and Industrial IoT manufacturing.
