Lecture 2: From History to Current Trends and Developments PDF

Industry X.0 and Supply Chain Management Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management Lecture 2 From history to current trends and developments Lecture 2: Form history to current trends and developments...

Industry X.0 and Supply Chain Management Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management Lecture 2 From history to current trends and developments Lecture 2: Form history to current trends and developments Speaker general specific Collaboration Sensors Supply chain Information transparency Robotics Requirements strategy & dynamics Excursus: Start-ups and apps Supply chain processes Decentralised decisions Principles Augmented reality Technologies IT-Systems ? Supply chain planning 5.0 4.0 Intelligent end-to-end supply network Internal supply chain Internal supply chain Internal supply chain Internal supply chain 3.0 2.0 1.0 Sustainable Industry X.0 Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 2 Learning objectives Speaker After finishing this lecture you will have achieved the following learning objectives: You will be able to describe the development of logistics and supply chain management from industry 1.0 to 3.0. You will be able to explain the target of digital transformation. You will be able to explain the different waves and stages of Industry 4.0. You will be able to interpret different case studies regarding the digital transformation process. You will be able to classify elements into the key components of digital ecosystems. Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 3 01 History of logistics & SCM 02 History of digitalization Merging digitalization and 03 supply chain management  The road to digital ecosystems Flexible, integrated business networks with collaboration as a key value driver. Speaker 1784 1870 1870 First mechanical weaving First assembly line First programmable logic loom control system Industry 1.0 Industry 2.0 Industry 3.0 Industry 4.0 Digital ecosystems 1800 1900 1970s 2015+ 2030+ Invention of mechanical Mass production, with Electronics, IT and Digital supply chain, Flexible and integrated production powered by machines powered by industrial robotics for including smart value chain networks water and steam electricitiy and advanced automation or manufacturing, digital combustion engines production processes products, services and Virtualized processes and business models customer interface Introduction of Electronics and IT and the assembly lines internet constitute the Data analytics and action Industry collaboration as beginning of the as a core competency a key value driver imformation age Sources: Deloitte (2015); strategy& (2016) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 5 Industry 1.0 – mechanization Formation of industrial cities through steam engine and mechanical production. Speaker Invention of steam engine in England Substitution of animal or human labor by mechanical labor Improvement of productivity in the production of basic supplies (e.g. farming) Emergence of industrial cities through divison of labor, and centralized and partly mechanized production (e.g. iron, steel, textiles, tools, etc.) Locations close to sources of energy supply (coal fields, waterfalls) and connected to regional transportation network First steam-powered intralogistics solutions (e.g. cranes) Growing divergence between industrializing and non-industrial economies Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 6 Industry 2.0 – mass production Formation of industrial regions through electricity and division of labor. Speaker Mass production along assembly lines, scaling up manufacturing output Higher coordination between labor, tasks, processes and machines Deepening of the level of specialization and interdependence of manufacturing Further development of industrial regions (manufacturing belts) Electrification supporting the emergence of telecommunication systems (telegraphs, radios, telephones) Development of massified forms of long-distance transport such as rails and steamship Expansion of market reach of manufacturing Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 7 Industry 3.0 - automation Formation of global production networks through electronics and information technologies. Speaker Machines repeating tasks under relatively well-defined parameters and minimal supervision Globalization as an outcome of trade liberalization and lower transport costs (in part through containerization) Imbalances in labor costs as a driver for globalization Development of global production networks to reduce input costs Logistics and transport to bridge the spatial separation of production and consumption Developing countries (e.g. in East Asia) quickly catching up with the level of economic development of advanced economies Paradoxical development, as lower-cost labor in developing countries was an alternative to automation Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 8  Development of the role of logistics and SCM (1) From pure transport of goods to multinational, cross-company cooperation. Speaker Farm to market Era 1 Around 1900s – only transportation and disribution Military and business Era 2 During WW2 – transportation, warehousing, inventory and physical distribution Integration of functions Era 3 Around 1960 – shift from focus on individual to total system´s performance Customer focus Era 4 Around 1970 – main focus is customer service and satisfaction Logistics strategy Era 5 During the 1980s – logistics strategy is considered a crucial component of the company´s strategy Integrated supply chain management Era 6 During the 1990s – extension of logistics processes to the companies involved in the supply chain International supply chain management Era 7 Around 2000 – supply chain management crosses countries´ borders Source: Anca (2019) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 9 Development of the role of logistics and SCM (2) Changing goal of logistics – development of the concept of supply chain management. Speaker Performance Customer success Value-added services Promotion of sales Support of production 2005 1950 1970 1995 Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 10  Objective grounds of SCM development Customer-orientation, market globalization, and information society as key drivers for supply chain management. Speaker Customer-orientation Market globalization Information society Change in competitive strategies Individual product Emerging markets Internet Flexibility Outsourcing IT systems Transportation Reaction speed New business concepts increase Supply Chain Management Source: Ivanov and Sokolov (2010) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 11  Interfaces of supply chain management Supply chain management as a multi-disciplinary framework. Speaker Organization, strategy, planning, control Management problems Strategic, process, and operations decision making levels Technological problems Engineering Informatics Marketing Strategic management Logistics Supply chain management Operations management Production Management Information systems Source: Ivanov and Sokolov (2010) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 12 01 History of logistics & SCM 02 History of digitalization Merging digitalization and 03 supply chain management  Terms related to digitalization The terms digitization, digitalization and digital transformation may not be used synonymously and must be distinguished from each other. Speaker Digitization Digitization is the process of changing from analog to digital form, also known as digital enablement. Said another way, digitization takes an analog process and changes it to a digital form without any different-in- kind changes to the process itself. – Gartner (2021a) THE DIFFERENCE BETWEEN DIGITIZATION, DIGITALIZATION, Digitalization AND DIGITAL TRANSFORMATION Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business. – Gartner (2021b) Digital Transformation Digital transformation can refer to anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models. The term is widely used in public-sector organizations to refer to modest initiatives such as putting services online or legacy modernization. Thus, the term is more like “digitization” than “digital business transformation. – Gartner (2021c) Sources: Gartner (2021a); Gartner (2021b); Gartner (2021c) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 14  History of digital transformation (1) Beginning in 1940 with an ongoing conversion of analog technology into a digital format. Speaker The article A Mathematical Theory of Communication by Claude Shannon is 1940s published, paving the way for modern digital communication and information The microchip and semiconductor transistor are 1950s invented, enabling analog computing to go digital The first message is sent over ARPANET, the Moore´s law (computing power doubles every year) guides innovation 1960s foundation of today’s internet that increase the scope and reach of digitization Space invaders ushered in age of Data entry jobs for data 1970s Home computers are introduced digital arcade video games conversion have been created The world wide web is invented and computers Automation begins to 1980s achieve semi-ubiquity in developed nations enter the workforce The world wide web becomes The 1990 world cup is the first The 2G network is introduced and digital 1990s publically accessible public, digital HDTV broadcast cell phones are sold commercially Over half of American households own a personal The digital revolutions spreads to the 2000s computer and the internet populations tops 1 billion rest of the developing world Source: The network effect (2019) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 15  History of digital transformation (2) Digital transformation as a cross-departmental development to drive new business and revenues (people, processes, and programs). Speaker Pioneering digital transformation Understanding of digital transformation shifts form on-off 2014 projects start to show success infrastructure projects to a technology-first strategic approach MIT and Deloitte stated that strategy, not technology, is Media, telecommunication and consumer financial services 2015 the driving force behind digital transformation followed by retail and technology are the most disruptive industries Forrester´s digital transformation forum describes digital 2016 Companies upskill and form agile transformation teams transformation as a never-ending quest for improvement Digital budgets increase and Businesses transform operational processes and close consumer experience 2017 software solutions soar gaps between web, mobile apps, and offline engagement Digital transformation continues to dominate business Initiatives are build on the third platform which is formed from mobile 2018 strategy and is key growth driver for many organizations technology, social media, cloud computing, big data and IoT devices Source: The network effect (2019) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 16  Digital transformation target Data utilization for adding customer value as a driver for profitability. Speaker Profitability Data which Added could be value utilized Digital transformation target Source: Schallmo and Williams (2018) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 17  Development of IT systems From isolated, production-focused planning to cross-company coordination. Speaker Bill of material Material resource Advanced planning processor planning II and scheduling 1960 today Material resource Enterprise resource planning management Source: Li (2014) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 19  Excursus: waves of innovation and change Three waves from industrial revolution to the industrial internet. Speaker Innovation Wave 3 Wave 2 Industrial Wave 1 Internet internet revolution Industrial revolution Machine-based Machines and factories Computing power and analytics, physics-based, that power economies rise of distributed deep domain expertise, of scale and scope information networks automated, predictive Time Source: Evans and Annunziata (2012) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 20  Stages in the evolution of Industry 4.0 From data collection and processing to autonomous processes. Speaker How can it work autonomously? What will happen? Why is it happening? What is happening? Stage 4 Adapt autonomously – Stage 3 from wisdom to (re)action / from Stage 2 Prepare – from forecast to proaction Stage 1 knowledge to wisdom Understand – from to forecast Artifical intelligence, information to machine learning, See - from data to knowledge Digital twin, information advanced artifical Analytics, artifical intelligence IoT integration intelligence (machines, networks, processes) Evolution Sources: Infosys (2019); i-scoop (2020) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 21  Smart factory as the core of the industry 4.0 environment Interfaces with other smart infrastructures are of central importance for industry 4.0. Speaker Internet of things Industry 4.0 Internet of data Cyber-physical production systems Smart mobility v buildings Smart Smart grid Smart homes Smart factory Smart logistics Social web Internet of services Internet of people Business web Source: Deloitte (2015) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 22  Business transformation towards Industry 4.0 Blueprint for digital success – step-by-step roadmap for Industry 4.0. Speaker 1 2 3 4 5 6 Map out your Create Define the Build advanced Transform Actively plan a industry 4.0 initial pilot capabilities knowledge in into a digital ecosystem strategy projects needed data analytics enterprise approach Source: pwc (2016) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 23  Digital ecosystems (1) Vision, benefits and focus topics of connected and autonomous supply chain ecosystems. Speaker Supply chains will be connected and self-orchestrated ecosystems Learn more > 80 % of Digital Champions have a supply chain focus on external about it in the integration or end-to-end orchestration. guest lecture Investment into supply chain excellence pays off Digital champions achieved savings of 6.8 % annually in supply chain costs, along with a 7.7 % revenue increase. Source: pwc (2020) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 24  Digital ecosystems (2) Autonomy, interoperability, and sustainability as key components for shaping digital ecosystems globally. Speaker Autonomy Safety and security Digital infrastructure Technological development Interoperability Interoperability Sustainability Regulatory framework Decent work and education Decentralized systems and artificial Climate change mitigation and circular economy intelligence Standards and integration Social participation Source: Platform Industry 4.0 (2019) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 25  Digital ecosystems (3) Mindsets and actions for successful digital ecosystems. Speaker Clear and specific Shared outcomes should be defined, giving all parties confidence in their return on investment and lead to an equal 1 focus commitment. Successful ideas should be scaled quickly after pilot phase. Customer Starting with a customer challenge or frustration, think about how you can improve the customer’s experience. 2 experience Choose the best partners for goal achievement. Creativeness and Establish an open culture led from the top, whereby the workforce is encouraged to be innovative and take risks. 3 open culture Enable employees to network externally, and develop processes to absorb knowledge within the organization. Core knowledge Openness is a key point for successful digital ecosystems. Knowledge sharing and cooperation should thereby go in 4 protection line with the protection of the company´s competitive essence. Operation model Business processes and operation models should be modified while focusing on long term success. Thereby, 5 modification building and participating in ecosystems should go in line with keeping up-to-date with new technologies. Collaboration As security of digital platforms is limited, organizations should choose collaboration platforms with the different 6 platform phases of work in mind. Sensitive parts and deal-making processes should be made more directly. Source: Berthon et al. (2016) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 26  Digital ecosystems (4) Archetypes of supply chain ecosystem models. Speaker Source: McKinsey (2019) Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 27 Assessment of training success Speaker You should be able to answer the following questions after completing this lecture... › Name five key characteristics of industry 2.0. › What is the target of digital transformation? › What are the four stages of industry 4.0, and how are they defined? › Briefly explain the step-by-step approach for digital transformation of companies. › What are mindsets and actions for successful digital ecosystems? Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 28  References (1) › Anca, Vacar (2019): Logistics and supply chain management: an overview, in: Studies in business and economics. › Berthon, Jusserand, Medland (2019): Digital ecosystems – six steps to build a digital ecosystem for innovation and growth [Online]. Online at: https://www.accenture.com/t00010101T000000Z__w__/de- de/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/About-Accenture/PDF/3/Accenture-Digital_Ecosystems_POV_final.pdf › Deloitte (2019): Industry 4.0 – Challenges and solutions for the digital transformation and use of exponential technologies [Online]. Online at: https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/manufacturing/ch-en-manufacturing-industry-4-0-24102014.pdf › Evans, Annunziata (2012): Industrial Internet: Pushing the boundaries of minds and machines. › Gartner (2021a): Digitization [Online]. Online at: https://www.gartner.com/en/information-technology/glossary/digitization › Gartner (2021b): Digitalization [Online]. Online at: https://www.gartner.com/en/information-technology/glossary/digitalization › Gartner (2021c): Digital Transformation [Online]. Online at: https://www.gartner.com/en/information-technology/glossary/digital-transformation › Infosys (2019): Industry 4.0 as an evolution, not a revolution [Online]. Online at: https://www.infosys.com/about/knowledge-institute/insights/documents/industry-4.0-evolution.pdf › I-Scoop (2020): Industry 4.0: the fourth industrial revolution – guide to Industrie 4.0 [Online]. Online at: https://www.i-scoop.eu/industry-4-0/ › Ivanov, Dmitry; Sokolov, Boris (2010): Evolution of supply chain management (SCM), in: Adaptive supply chain management › Li, Ling (2014): Managing supply chain and logistics, competitive strategy for a sustainable future. › McKinsey (2019): How do companies create value form digital ecosystems? [Online]. Online at: https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/How%20do%20companies%20create%20value%20from%20digital%20ecosystems/How-do- companies-create-value-from-digital-ecosystems-vF.pdf › Plattform Industrie 4.0: 2030 Vision for industry 4.0, shaping digital ecosystems globally [Online]. Online at: https://www.plattform-i40.de/PI40/Redaktion/EN/Downloads/Publikation/Vision-2030-for-Industrie- 4.0.pdf?__blob=publicationFile&v=9 › Pwc (2016): Industry 4.0, building the digital enterprise [Online]. Online at: https://www.pwc.de/de/digitale-transformation/industry-4-0-building-your-digital-enterprise.pdf › PwC (2020): Connected and autonomous supply chain ecosystems 2025 [Online]. Online at: https://www.pwc.de/de/digitale-transformation/connected-and-autonomous-supply-chain-ecosystems-2025-web.pdf Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 29  References (2) › Schallmo, Williams (2018): Digital transformation now!, in: SpringerBriefs in Business. › Strategy& (2016): Industry 4.0 – how digitization makes the supply chain more efficient, agile, and customer-focused [Online]. Online at: https://www.strategyand.pwc.com/gx/en/insights/2016/industry-4- digitization/industry40.pdf › The network effect (2019): A brief history of digital transformation [Online]. Online at: https://supplychainbeyond.com/a-brief-history-of-digital-transformation/ Prof. Dr.-Ing. Evi Hartmann, Chair of Supply Chain Management 30 Thanks for your attention!