Volume 3 Issue 4 April 2021
In this Issue
Welcome to Industree 4.0 for April 2021, exclusively sponsored by SAP. We might say we speak of ships and strings and sealing wax this month. This is followed by regular columnists Pat Dixon and Jim Thompson. We'll wrap with other perspectives from around the industry.
By Richard Howells

SAP Supply Chain Expert
How One Ship Can Affect the Global Supply Chain
In the past few weeks, if you asked, “Who is the most hated person in the world at the moment?,” the captain of the ship blocking the Suez Canal would be near the top of the list. As a vital channel linking the manufacturers and suppliers of Asia to the major consumer markets in Europe, the International Chamber of Shipping estimates that $3 billion worth of cargo passes through the Suez Canal every day.

So, when Taiwan operated 224,000-ton mega tanker, the Ever Given, one of the world’s largest container ships collided with the banks of the canal in mid-March, blocking the channel completely for over a week, it caused a major disruption.  

The Butterfly Effect on Global Business

As we sometimes hear in the poetic notion, the butterfly wings’ flapping and fluttering in Brazil can result in hurricane force winds hitting Mexico. This “butterfly effect” (part of the chaos theory portfolio) is certainly relevant in this situation. In this case, it was strong winds and a sandstorm, but you get the picture.

And it’s not just the cargo in the estimated 20,000 metal boxes that is affected. It’s the hundreds of cargo vessels that are stranded mid-trip either side of the vessel. And if you drill down a level on what is being carried on one these vessels, and how long the wait or a re-route of the shipment will take, additional challenges emerge.

Let’s say we have a time sensitive shipment of electronics from Asia that are scheduled to arrive in Europe to coincide with a launch of a new product line. A reroute around Africa’s Cape of Good Hope can add 6,000 miles and 10 to 15 days to their voyages. The alternative of flying a new shipment would have significant cost implications.

Obviously, there is no magic answer to the problem. It was an unforeseen, and highly unpredictable event. 

In this case the key is what companies can do to minimize the impact to their planned manufacturing and sales campaigns.
Here are a few examples:

Visibility through all tiers of your business network

In a global and complex supply chain, the need for visibility is critical. As all times, and especially in a crisis you need to be able to see:

  • Which materials and goods are at risk?
  • What are my alternate sources of supply for key resources?
  • Where is my inventory?
  • Which shipments are affected?
  • What are the knock on effects to production scheduled, customer orders and ongoing campaigns?

Agility to sense, predict and respond to change

Once you have identified a risk, you must assess the best course of action and act in short order. Examples include:

  • Can I redirect shipments in transit?  
  • How can I Identify and switch to alternate suppliers?
  • Are there alternate logistics modes and routes available?
  • How can I collaborate with trading partners to secure alternate materials, products and logistics capacity?
  • Do I have the ability to adjust manufacturing to respond to unavailable materials?

Resiliency to minimize and mitigate risk

It is also critical to design your supply chain to withstand disruptions and respond to business opportunities. This requires having processes and plans in place to:

  • Develop and implement supply chain risk management and business continuity strategies
  • Diversify supply chains, from a geographic perspective, to reduce the supply-side risks of a single country or region
  • Multisource valuable commodities or strategic components to lessen reliance on one supplier
  • Identify alternate modes of transport in case of disruption
  • Adopt an inventory optimization strategy across the business network to buffer against disruptive events
  • Balance of-shoring, near-shoring, and on-shoring manufacturing strategies

Without a doubt, unexpected disruptions will continue to occur. The cause of disruption will vary depending on the event, such as pandemics, geopolitical or trade conflicts, natural disasters, limited natural resources availability, and now, blocked canals.

Now more than ever, supply chains need to be resilient and agile to survive in the current global environment, while demonstrating the predictive intelligence and visibility to thrive in the new normal.

To learn more about how supply chain leaders minimize risk and maximize opportunities with resilient supply chains, download a recent Oxford Economics study.
Why does production rate matter?
By Pat Dixon, PE, PMP

President of 
www.DPAS-INC.com, offering project management and engineering for industrial automation projects.

This will be somewhat of a departure from previous articles in two ways:

  • It is primarily directed at students and young professionals in the industry
  • It is tangentially related to Industry 4.0

Early in my career I worked on advanced controls to automatically calculate and maximize production rate. I clearly understood the engineering effort, but the economic benefit was not entirely obvious to me. In my simple mind, I thought that the facility sold a bunch of orders for the grades they made and put the finished product in the shipping warehouse. Filling the shipping warehouse faster and growing inventory didn’t make sense to me.  

I also noticed that there were times when the production rate exceeded the theoretical maximum. Process flow sheets would show maximum flows and speeds lower than the actual process. If there were equipment failures or quality control problems, these may have been attributed to running a process beyond its effective limits.  

Years later, I found that the benefits of maximum production are found in the sales and maintenance areas, which a young engineer may not be very familiar with.

On the sales side, you can only sell up to your capacity. You cannot promise delivery of product on a due date without knowing you have the production capacity to take that order and deliver. Failure to deliver on time can cause economic and logistical hardship for your customer and result in no further orders from them. This can be avoided with production rates higher than the sales demand. A problem with this approach is the cost of storing unsold production, which could require construction of additional warehouse space as inventory grows. Another problem is that you do not know if the grade you are currently making is in higher demand, or if you should be growing inventory in another grade. Gaining production capacity without the capital expense of new machinery and warehouse space means you can grow sales and market share by delivering on promises that your competitors cannot keep. Maximizing production rate allows sales to make delivery promises they can keep and generate revenue at a higher rate.  Increased productivity adds the most value to a business when the operation can reliably operate at the higher rate. Reliability is essential for a business to confidently increase sales rate while meeting customer expectations of on-time delivery of quality products.

If you do not grow your sales, is there still benefit in maximizing production rate? The answer is yes. If you fill all your orders and then shutdown production, you can perform maintenance that might not be possible during operation. This maintenance may allow you to keep equipment operational when needed instead of letting them run to failure. The capital cost of replacing that equipment may be avoided, but more importantly the unplanned failure that causes an unplanned outage can be very costly. Additionally, fixes and upgrades that otherwise might not be possible due to limited durations on planned outages might be possible. Getting the most work done during outage opportunities can deliver big benefits. Lastly, the maintenance departments at many mills are quite thin. Electrical and instrumentation (E&I) technicians are commonly overworked. A typical mill has thousands of instruments and final control elements that require routine testing and calibration. In Industry 4.0, you are no less reliant on your instrumentation to give you a true representation of your process and allow you to control it. If you have to double your workforce to get all the work done during a narrow outage window it can be costly. If the outages are too seldom, you may not get the opportunity to perform maintenance while there is live steam or process fluid in a pipe, and the required maintenance may not happen until a sensor has gone out of calibration or equipment has failed.

Industry 4.0 can have a big influence in both of these areas. Having realtime connectivity from the plant floor throughout the enterprise allows sales to know production capacity and delivery dates in realtime. If sales is unable to drive a higher rate of orders, Industry 4.0 can provide realtime planning for maintenance and prioritize the maintenance items based on connectivity to equipment usage and performance.

Maximizing production rate has always been a driving force in industry. The realtime connectivity of Industry 4.0 is now a driving force in sales and maintenance that will maximize their impact on profitability.  

Choices in the Margin
How many SKUs (Stock Keeping Units) do you have? One mill, when asked this question said the answer was 75. When they went through the excruciating exercise and manually found them all, they had over 950!

When we talk about Industry 4.0 we often gravitate to process control or logistics knowledge.

Industry 4.0 data gathering can also help us reduce SKUs and hence reduce waste and improve our margins. When the mill in the example finished their SKU purge, they had less than 50 and not one customer noticed the difference. Well, maybe there was one who ordered small quantities of a colored product every 3 months or so, a product which contaminated the mill's white water system for days. The mill decided that business was not worth keeping at any price.

This same facility had many different coating formulations. There was a considerable amount of waste as they changed recipes and sewered the ends of batches. After analysis, they moved to making only their highest quality coating all the time. No more wasted batches, and many customers noticed the improvements in quality. Cost of production went down, margins went up.

All of these changes were made before anyone ever heard of Industry 4.0, but they were dependent on a single dedicated new mill manager to drive the change. Now, with Industry 4.0, these kinds of issues can be discovered by routine analysis of the cornucopia of data available.

Another reason for you to push Industry 4.0 implementation.
What is Process Monitoring?
By Genevieve Diesing
As energy becomes more expensive and sustainability more prized, manufacturers are under the gun to reduce energy consumption. Process monitoring, which standardizes and optimizes manufacturing processes— helps to make this possible in the age of Industry 4.0.
How Artificial Intelligence is Being Used to Streamline Training
By David Miller
Maintaining a skilled workforce is vital to the success of Industry 4.0. Despite the fact that continuously updated skills training is a well-recognized facet of the digital transformation, many industry observers see the current situation as dire.
How to build resilience into your IoT architecture
By Philip Hooker

An IoT architecture built without incorporating the non-functional requirements, like performance, robustness, and scalability, is just like building a house on sand. Inevitably cracks will appear, temporary repairs can be made, but ultimately it will need a stronger foundation.
How Industry 4.0 and IIoT Work Together for Industry
By Caitlyn Caggia
With manufacturing, energy, utilities, and supply chain applications rapidly adopting the industrial internet of things (IIoT), a new reality for these industries is on the way. IIoT provides the type of data enterprises need to manage thousands of moving parts and reduce risk to human life. Having embraced IIoT, what does Industry 4.0 bring to the table?
Industree 4.0 is exclusively sponsored by SAP