Imagine you’re at the grocery buying cooking supplies for the coming week. You see that tomatoes are on sale if you buy them in quantities of ten. Hoping to make use of the savings, you do some quick calculations in your head: the ripe tomatoes will remain fresh for about a week; you cook roughly one meal a day; your favorite dish requires two tomatoes. You determine that you could easily utilize ten tomatoes before they go bad, but you would have to commit to making the same dish five nights out of seven, and you might not be in the mood for it later in the week.
Imagine for a moment that your company is in the businesses of manufacturing parts for both conventional and hybrid vehicles. Based on the demand from your customers over the past year or multiple years, you develop a plan for allocating resources and person-hours to produce the right proportion of hybrid parts to conventional parts based on expected demand. Unexpectedly, a sharp increase in worldwide oil prices triggers a shift in demand away from hybrids and toward conventional automobiles that rely on gasoline. How will your production plans cope with the sudden change? Will your factory floors continue to produce a surplus of hybrid parts while orders for conventional parts go un-filled, or do you have the necessary planning agility to shift production to align with new demand paradigms?
Hopefully, you are in a position to safely assume the latter. But for many complex businesses, rapidly adjusting to demand is a perilously involved tasked, requiring the ability to assess and respond to new circumstances virtually instantaneously. One of the keys to building this level of agility into production processes is the integration of real-time and production planning.
Machines are nothing new to the manufacturing industry - in fact, to say that is quite an understatement. Since the Industrial Revolution, the production facility floor has ground zero for how manufacturing companies incorporate non-human elements or intervention into how goods are produced and distributed. Fast-forward to today’s manufacturing landscape and the introduction and proliferation of modern machine-based aspects such as robotics or artificial intelligence to streamline production processes and increase production efficiency is perhaps the most pressing, pertinent issue in modern production processes.
But what’s slowly gaining more and more prominence in the manufacturing industry is machine learning outside of the actual production space and the ways in which a digitized manufacturing platform can enhance both the production and logistics side of global supply chain management. Understanding machine learning in this context — a holistic reimagination of how this technology can be a disruptive force in a cross-organizational way from sales and procurement to transport logistics — puts machine learning on a grander stage in terms of shaping the future of the automotive supply chain. In addition, machine learning can provide planners and managers with a critical competitive advantage in a somewhat uncertain, variant-rich manufacturing space.
Modern day supply chain management is often about finding reductions in costs, expenditures, wasted resources, or misallocations in how raw materials are spread across complex manufacturing networks and value chains. But this worldview often neglects or places little value on the fact that supply chains in and of themselves can be a key driver in affecting growth, increasing revenue, creating business moments, and forging new partner networks or footprint expansion.
But, as with almost anything in modern SCM (supply chain management), such achievements are often more easily discussed than realized. However, that doesn’t mean manufacturing companies don’t have the tools necessary to transform their supply streams from merely a vessel of procurement and product distribution into an important vehicle for engineering long-term, sustainable growth and productivity. Forward-thinking planners and managers can, with relatively minor adjustments to their SCM strategy, create a supply stream with the power to not only drive growth and innovation, but also the capacity to generate real revenue for companies in an increasingly competitive marketplace.
Every year, today’s manufacturing companies dedicate time, resources, and personnel to devising planning and production strategies designed to reduce the likelihood of disruptions across each touch point of the value chain. Whether we’re discussing integrated planning platforms, intelligent production sequences, or transport logistics, the ability to react and correct disruptions at the production, inventory, or transportation level depends largely on understanding the kinds of disruptions and how at-risk a manufacturing company is to experiencing each type. Given the interconnected nature of today’s global supply chain and expansive network of production facilities, warehouses, and transportation hubs, there is more opportunity than ever before for manufacturing companies to encounter disruptions or breakdowns at more touch points across their supply network.
However, this also means there is more information available for companies than ever before about the different breeds of supply chain disruptions and the methods companies can pursue to reduce the risk of these disruptions.
It sounds simple, but how well a manufacturing company moves products from the shop floor to the customer’s front door is not only a sign of a healthy supply chain, but also a critical indicator as to how efficiently planners and managers mitigate several aspects of global supply chain management. But in one of the more interesting paradoxes in today’s manufacturing landscape, integrated transport logistics, while extremely valuable, is one of the more overlooked elements of how manufacturing companies work their production cycles.
We’ve talked in a great length on this blog about the elements of effective global supply chain management and the implications thereof. But while these are important discussions to have as manufacturing companies work to expand their footprint and growth their customer base, at the end of the day the developments in supply chain management only really matter insofar as they add business value for these manufacturing companies. Advancements in procurement, production planning, job allocation, and transportation management must equal enhanced business value for each partner stage in a production network or else these aspects are simply window dressing designed to give the appearance of lean production principles.
One of the most valuable assets manufacturing companies can utilize to increase business value is the idea of sales and operations execution (S&OE). Though something of a recent concept in global supply chain logistics, S&OE is a powerful piece of planning capability planners and managers can deploy to increase the efficacy of their planning and production programs, as well as enhance a number of other critical functions across the value stream such as resource and material procurement, optimized inventory management, and even job shop scheduling and job allocation.
It’s a big concept both in terms of importance and how many elements of global supply chain management under which it encompasses. We’re talking about risk and the factors manufacturing companies must address and combat to ensure stability and reduce the amount of uncertainty in a globally-competitive, variant-rich landscape. No matter how diligently planners and managers work to curtail this uncertainty, risk in a variety of forms can plague companies across the entire value chain, everything from planning and procurement to production and transport logistics.
All this being said, there are a number of strategies, solutions, and principles manufacturing companies can deploy and integrate to reduce the level of risk in a cross-organizational manner that also helps to increase productivity and enhance efficiencies.
Today’s blog entry features a fascinating conversation with flexis AG Vice President of Manufacturing and Logistics Robert Recknagel. As a thought-leader in the supply chain landscape with more than 10 years of experience in operational supply chain management, software concepts and optimization design, Recknagel provided us a glimpse into the key conversations, discussions, and concerns manufacturing companies are addressing in today’s global manufacturing landscape. Recknagel’s work with flexis has largely focussed on helping companies administer their supply networks as efficiently and productivity as possible, which uniquely positions him to shed light on the challenges and opportunities today’s manufacturers see each and every day.
Nick Ostdick: There’s a lot of information in today’s supply chain about Industry 4.0. Can you clarify a little bit about what Industry 4.0 means for the manufacturing supply chain and how companies should be looking to implement this technology platform?