For a stronger supply chain, just add a digital data thread

If the Covid-19 pan­dem­ic, geopo­lit­i­cal ten­sions and sup­ply chain dis­rup­tions have taught man­u­fac­tur­ers one thing, it’s to pre­pare for the unex­pect­ed. So, could cloud com­put­ing hold the key to resilience?

“The events of the past cou­ple of years have put con­sid­er­able pres­sure on the man­u­fac­tur­ing sec­tor to main­tain pro­duc­tion and keep sup­ply chains and economies mov­ing,” says Dr Phani Sis­tu, inter­net of things solu­tions lead at Hitachi Van­tara, which offers stor­age solu­tions for busi­ness­es. “At the same time, man­u­fac­tur­ers have had to deal with work­force chal­lenges and sup­ply and demand fluc­tu­a­tions.”

In pre-pan­dem­ic man­u­fac­tur­ing con­di­tions, just-in-time was the default mod­el: a work­flow sys­tem where parts are sourced as close to pro­duc­tion as pos­si­ble in order to meet cus­tomer demand with­out hold­ing excess inven­to­ry.

Some for­tu­nate man­u­fac­tur­ers with the nec­es­sary capac­i­ty were then able to piv­ot to a just-in-case mod­el, in which they build a buffer of inven­to­ry to fall back on in the event of sup­ply chain delays.

This can work well in a sec­tor such as the auto­mo­tive indus­try, where mar­gins are gen­er­al­ly rel­a­tive­ly healthy. How­ev­er, in an indus­try like health­care, which runs on thin prof­it mar­gins, man­u­fac­tur­ers aren’t usu­al­ly in a posi­tion where they can afford to hold inven­to­ry.

But the pan­dem­ic has also high­light­ed the vul­ner­a­bil­i­ties of health­care rely­ing on a just-in-time mod­el. Hos­pi­tals strug­gled to get their hands on ven­ti­la­tors for Covid-19 patients, for exam­ple.

Even with the worst of the pan­dem­ic now seem­ing­ly over, com­pa­nies still face chal­lenges. In the med­ical device sec­tor, for instance, the ongo­ing semi­con­duc­tor short­age has meant low­er lev­els of pro­duc­tion. These man­u­fac­tur­ers also find that they’re com­pet­ing with many oth­er indus­tries for a lim­it­ed sup­ply of inven­to­ry.

Mean­while, man­u­fac­tur­ers that can get their hands on chips are like­ly pay­ing more because of the sharp rise in prices of raw mate­ri­als, as well as ris­ing ship­ping costs. On  top of this, the medtech sec­tor is fac­ing a staffing short­age, accord­ing to mar­ket research from Infor­ma.

If a just-in-time mod­el is to be effec­tive in the future for an indus­try like health­care, then, every process in that sup­ply chain needs to be joined up and syn­chro­nised. That’s where the cloud comes in: help­ing to  build those con­nec­tions.

By adopt­ing cloud-enabled tech­nolo­gies, med­ical device man­u­fac­tur­ers could keep on top of chal­lenges result­ing from staff and sup­ply short­ages, espe­cial­ly when it comes to dis­tri­b­u­tion and inven­to­ry man­age­ment.

Man­u­fac­tur­ers should con­sid­er mov­ing sup­ply chain oper­a­tions to the cloud as it enables them “to use real-time data to cre­ate con­tin­gen­cies”, says Pierre Liau­taud, an mem­ber exec­u­tive coun­cil at Aim10x, a  group of busi­ness lead­ers encour­ag­ing dig­i­tal trans­for­ma­tion in sup­ply chains.

The cloud can bring togeth­er data from an array of tech­nolo­gies “that sup­port man­u­fac­tur­ing readi­ness and resilien­cy”, Sis­tu adds. These include, but are not lim­it­ed to, dig­i­tal twins, process mod­el­ling and pro­duc­tion sched­ul­ing.

“Mov­ing to the cloud allows for bet­ter inter­op­er­abil­i­ty between dif­fer­ent busi­ness units by dis­solv­ing data silos,” Liau­taud con­tin­ues. “This offers on-demand scal­a­bil­i­ty, which should then improve busi­ness­es’ deci­sion-mak­ing, as man­u­fac­tur­ers are able to react more quick­ly to any unex­pect­ed changes.”

Accord­ing to an Accen­ture report pub­lished in June, sup­ply chain exec­u­tives cred­it the cloud with dri­ving a 5% growth in rev­enue on aver­age, a 16% decrease in oper­at­ing costs, and a 26% improve­ment in demand fore­cast­ing accu­ra­cy.

Despite the per­ceived ben­e­fits, only 52% of the 1,050 sup­ply chain exec­u­tives sur­veyed said mov­ing to the cloud had helped them to be more resilient, while just 41% achieved increased vis­i­bil­i­ty as a result of their cloud invest­ment.

While there should be no doubt that the cloud can play a piv­otal role in help­ing man­u­fac­tur­ers get the insights required to become more resilient, says Sis­tu, it can only real­ly be realised if “archi­tect­ed as part of [an] edge cloud con­tin­u­um”.

Edge com­put­ing – where data is no longer con­fined to data cen­tres and is processed as close to the orig­i­nal source of data as pos­si­ble – can help by reduc­ing the laten­cy between two points of a net­work. The prob­lem, then, is that “manufacturing’s lega­cy sys­tems can be a hin­drance to the seam­less data inte­gra­tion from edge to cloud”. This is thwart­ing some man­u­fac­tur­ers’ efforts to trans­form them­selves dig­i­tal­ly, Sis­tu argues.

With mul­ti­ple stake­hold­ers in any sin­gle sup­ply chain, the edge should ide­al­ly be deployed by all par­ties, whether upstream or down­stream. Cre­at­ing dig­i­tal data threads would enable data to flow seam­less­ly between stake­hold­ers, Sis­tu adds.

The Accen­ture research found that one in five of the sup­ply chain exec­u­tives sur­veyed had deployed cloud-enabled capa­bil­i­ties across their entire sup­ply chain. Of these exec­u­tives, 97% had at least three-quar­ters of their entire sup­ply chains run­ning in the cloud.

How­ev­er, beyond the sup­ply chain exec­u­tives, over­all two out of three respon­dents had less than half of their sup­ply chain con­nect­ed to the cloud. Com­pa­nies that haven’t yet moved their sup­ply chains to the cloud need to pick up the pace if they want to make them­selves more resilient in the face of future dis­rup­tions, Accen­ture con­clud­ed.

“Ulti­mate­ly, the biggest ben­e­fit of the cloud is that it can be the sin­gle source of truth, pro­vid­ing con­tin­u­ous glob­al vis­i­bil­i­ty into resources and sup­ply chains,” says Sis­tu. “With this glob­al vis­i­bil­i­ty, man­u­fac­tur­ers can fore­cast more effec­tive­ly, opti­mise their pro­duc­tion and dri­ve work­force readi­ness. This puts them in a stronger posi­tion to be able to meet fluc­tu­a­tions in glob­al sup­ply and demand.”

And in a world where a small dis­rup­tion on one side of the world can cause mas­sive shock­waves and chaos on the oth­er side, it’s worth doing what­ev­er it takes to rein­force your sup­ply chain.