A friend of mine once told me he wouldn’t eat in any restaurant where he couldn’t see into the kitchen. What he was getting at is that you never know what’s going on behind closed doors, and he doesn’t want to eat anything he can’t see being prepared. Now imagine your supply chain is that restaurant kitchen, do you know what’s going on behind the closed doors of your manufacturing, business, and logistics processes? Visibility into the end-to-end supply chain is something that every production planner and logistics manager wants, yet few seem to achieve. And like that restaurant kitchen, what’s lurking behind the scenes can impact your customer’s satisfaction and therefore your bottom line.
Are you ready for a digital supply chain? Industry 4.0 is revolutionizing the manufacturing end, while its offshoot Logistics 4.0 is doing the same for the shipping end of the chain. But what about all the connecting pieces in the middle? Is your company ready to adopt the technologies and techniques that will fully digitize your end-to-end supply chain, or are you still using pen and paper to track your warehouse inventory? With the continued adoption of these technologies, the future of the supply chain is going digital, and there are a number of reasons digital will rule. Already, we’re seeing major inroads on the part of IoT sensors, RFID tags, smart pallets and GPS tracking leading the charge. Is your company ready to adopt and adapt? Or will you find yourself left behind as your competitors step into the digital gap?
If you could see the future, what would you do? Well, first off you would probably buy a bunch of winning lottery tickets—but you might also attempt to optimize your day to a certain extent. Instead of being taken off guard and having to scramble to make arrangements when you get an unexpected call from school that your kid is sick, for instance, you’re already on the road, having made arrangements to work from home for the day so you can tend to him or her. On the way home, you know that your child’s going to want their favorite comfort food, so you’ve already called in a pizza order.
Today we’re dusting off our supply chain crystal ball and are going to give you a glimpse of what inventory management may very well look like ten years from now given the advancements made in just the last five years or so. Logistics 4.0 is combining with Industry 4.0 to lead to massive disruptions in how the manufacturing value chain is run. IoT sensors, RFID tags, and AI are allowing for more automation, and advanced analytics are giving planners unparalleled transparency into the supply chain. This combination is potent in its ability to allow for more accurate forecasting and planning adjustments down to the day or even hour. In the future, these practices will eventually reach even wider adoption, becoming ubiquitous across sectors and allowing inventory management to ditch the pen and spreadsheet once and for all.
Let’s say you’re a homebrewer, and you’ve just finished drafting your recipe for a dry-hopped pale ale that you plan to brew in the coming weeks. If you’re like most people, you go to a homebrew supply site and order your hops, malt, and yeast all at once, plus some clean bottles for your brew to wind up in. This strategy works perfectly well, but as you go, you find that it leaves something to be desired. While your beer is fermenting, you have a bunch of bottles taking up unnecessary space on your floor; and by the time you’re ready to dry-hop (which involves adding more hops during the fermentation period), the ones you bought from the homebrew site are a little stale.
One of the most common metaphors you hear for forecasting in supply chain management is that it’s like the rear-view mirror in your car: you need to understand what’s happening behind you, but it’s not necessarily enough information to keep you slamming into the car in front of you. As the supply chain has evolved, however, forecasting has evolved along with it. So, for that matter, have cars: in the modern supply chain, forecasting can encompass not just the rear-view mirror, but the back-up camera, and even the smart sensors that alert you when you’re getting too close to another car.
These new processes that move beyond the scope of the rear view mirror use technology to take in additional information, and then spit out new insights for the driver to use—from immediate course-correct notifications to more granular data about when you’re going to hit the curb while parallel parking. In each case, digitization has played a big role in giving you a more comprehensive overview of events that are about to take place. In an industrial context, we might think of these digital enhancements as things like IoT (internet of things) devices and other smart sensors that provide live information to planners. In this way, forecasting becomes more thoroughly integrated into the way that businesses make decisions and optimize their supply chain management. And it’s lucky for us that it does so, because accurate forecasts are becoming more important than ever in the world of supply chain planning.
Why does your company exist? This isn’t a metaphysical question, like “why are we here,” it’s purely practical. We hope the answer you thought of was, “to keep our customers happy,” because if not, the rest of what we have to say today might not make as much sense. Customers are the reason manufacturers make things. If there were no customers, you would have no reason to make products, and therefore you’d have nothing to ship, right? As a production planner, you’re likely already relying on S&OP workflows and software solutions as a key piece of your strategy to keep your customers happy. Especially in today’s world of next-day shipping, S&OP remains necessary to keep up with these demands and delivery expectations.
The automotive industry is no stranger to technology. It’s also no stranger to the rapid pace of change that’s overtaken global manufacturing in the early 21st-century. And when it comes to planning and organizing your entire automotive supply chain, advanced planning and scheduling (APS) is the key that will unlock increased ROI and decreased lag times. APS represents a sea change from traditional methods that looked at materials and production capacity as separate things, a view that often led to incompatible plans. Adoption rates of APS in the automotive sector are on the rise, paralleling the rise of make-to-order and additive manufacturing; and the increasing complexity of the automotive manufacturing world as a whole. And it’s that last factor that we’re going to focus on today, the increasing complexity of the automotive world and how APS can help. Whether by assisting with inventory leveling or by helping planners better schedule materials deliveries, APS can be a boon at every stage of the automotive manufacturing supply chain.
Let’s says you’re playing chess. Traditionally, a chess player looks at the whole board and comes up with an overarching strategy, which she can then adjust as needed when new conditions (i.e. her opponent's strategies and maneuvers) emerge. For this game, however, you decide to do something different: you have a series of different plans, one for the pawns, one for the bishops, one for the queen, etc. with no obvious connections or interplay between them. As situations arise in which multi-step, cross-functional movements would be helpful, you stay in your lane and stick to the separate plans for each function. At the end of the game, your rooks have performed admirably, and everything went according to plan for your pawns, but you still found yourself in checkmate.
Supply and demand are the first two concepts that most people learn about with regard to economics—and they’re also two of the most crucial elements of any manufacturing supply chain. In order to effectively meet customer demand, you need to ensure that you have enough supply on hand; and in order to profit by that demand, you have to make sure that your supply doesn’t wildly exceed your needs. As with so many things in manufacturing, this is easier said than done.