Supply chain optimization: New logistics strategies due to the corona pandemic, including with digital twins

Konrad Wolfenstein

3 years ago

New logistics strategies, including digital twins and artificial intelligence (machine learning) – Image: Xpert.Digital / KeyFame|Shutterstock.com

In 2011, “stress test” was chosen as the word of the year by the Society for the German Language (GfdS). It refers to a test that measures resilience and the associated and increasing stress of a physical or psychological nature in response to an event. It gained greater notoriety through the media in relation to the stress tests of nuclear power plants, interim storage facilities, but also at banks and the Stuttgart 21 railway project.

A crisis plan for the economy?

What is interesting here is that a so-called national pandemic plan for Germany was first published in 2005 and was last updated in March 2017. It was the response to the 2002/2003 SARS pandemic and the global spread of H5N1. In addition to the measures against the spread of a pandemic pathogen, the country's infrastructure should also be maintained.

With regard to influenza, the World Health Organization (WHO) stipulated in its guidelines on Pandemic Influenza Risk Management, last revised in May 2017, that the Director General of the WHO declares a pandemic - i.e. the transition from an epidemic to a pandemic.

However, possible scenarios for a collapse of global supply chains and an international catalog of measures aimed at reducing and bridging global consequences have not yet been identified. The corona pandemic stopped the supposedly golden age of globalization that was being pushed forward with the ostrich tactic. Even ecologically contradictory aspects were pushed into the background. Any objective stress test would have highlighted the sensitive supply chains and their ecological weak points.

With growing ecological awareness (reducing greenhouse gas emissions) and the outbreak of the corona pandemic, it is now clear to everyone that things cannot continue like this. While some people still hoped that the pandemic would resolve itself quickly like an annual flu wave, we are now already in the second year of the pandemic and looking beyond the third year, a possible way out is still not in sight.

Example steel and aluminum

Even if the supply chains were temporarily broken here and there and raw materials for further processing were missing, national and international logistics have so far mastered the crisis quite well. However, this was also reflected in the prices. Many goods and raw materials have become expensive or are taking a long time to arrive. For example, B. steel and aluminum prices rose, which, among other things, also had a negative impact on the expansion of renewable energies. In September 2021, the aluminum price reached its highest level in the eight-year observation period.

The steel industry has always been one of the most important key industries on which many industries depend. Steel is therefore an important indicator of economic and economic developments. Even if prices are moving downwards at the moment, further developments and the effects of the Omicron variant of the corona pandemic are still unclear.

A strategy and planning security look different. In short, the pandemic is exposing our fragile global supply chain. It is becoming increasingly obvious that the weakest link in globalization and the global economy is supply chains and we need to consider new logistics strategies. You failed the acute stress test.

Take advantage of the opportunity now and bring the supply chain back to Europe

Ok, production and labor costs are lower in China than in Germany. And that products consist of many individual parts and work steps such as: It is obvious, for example, that smartphones cannot currently be produced competitively in Germany. But what use is this advantage to me if, as is currently the case, transport costs with container ships are skyrocketing and then the goods can either be delivered late or are currently not available?

By the time the 400 meter long and 59 meter wide freighter “Ever Given” wrecked in the Suez Canal in March 2021, it had to be clear to everyone that there was a sensitive point in the global supply chain. So basically an error or bug in the system. The after-effects, before such a global supply chain management gets rolling again or functions to some extent again, will take weeks. However, during the Corona pandemic, disruptions in the global supply chain increased, forcing supply chain management to adapt to the circumstances and react flexibly accordingly.

On the other hand, possible risks of a “disruption in the supply chain” were not entirely unknown. The “Risk & Resilience” study (by DHL) for resilient logistics . A possible pandemic was not mentioned, but there was talk of cyber attacks, protectionism or political escalations, which represent an additional and real disruptive potential to the same or greater extent than the current corona pandemic.

Around 12% of global cargo and approximately 30% of the world's containers pass through the Suez Canal. The Suez Canal is the most important waterway in the world, ahead of the Panama Canal.

Now the prices of containers have risen sharply, in some cases by 500% or more compared to the previous year. The demand for container deliveries has shot through the roof because there is no longer any passenger air traffic, which was used to transport some of the goods. It is assumed that air freight transport options will not recover any time soon.

This in turn leads to traffic jams in front of American and European ports. In November, 400 to 500 container ships were anchored at their destination, which can only be processed slowly due to the high demand for containers and the lack of port staff capacity. This in turn means that the containers used are needed for longer and thus the container prices have also risen. In short: there is a shortage of containers.

German companies want to change supply chains. 68% of affected companies have already taken appropriate measures to get the situation under control as quickly as possible:

47% are looking for new or additional suppliers
41% want to increase storage capacity
22% distribute suppliers to several countries
12% are working on shortening delivery routes
11% plan to relocate production in-house

Source: DIHK, Going Global 2021

World logistics – resilient logistics

Resilient Logistics – Akintevs & Vit-Mar | Shutterstock.com

A March 2020 survey of 2,900 senior management respondents found the following:

52% of respondents said changes are being made to global supply chains as a result of global events.
40% plan to reassess
and only 8% see no need for change.
Almost 40% of companies surveyed also said they were planning changes to their workforce.
36% are planning a further approach to automation,
41% are considering revising the current speed of their automation.

Industry 4.0 technologies will significantly change the supply chain

The current changes and adjustments to supply chains are based on the ability to deliver. Anyone who cannot deliver is currently not competitive. The price plays a secondary role.

When the market stabilizes again, costs will be the focus again. The consideration then becomes whether to accept the next disruption in the global supply chain or to have switched to a flexible supply chain in good time (see also above under “ World Logistics – Resilient Logistics ”).

In order to make this sustainable and competitive, it is important to seize the opportunity and promote the expansion of Industry 4.0 technologies:

Internet of Things (IoT) – The new 5G mobile communications standard makes the IoT possible. It opens up new perspectives for companies and investors, especially in the smart factory sector

Internet of Things – Endless possibilities

Competitive by reducing costs with automation and networking of storage systems

Smart Factory: With effective intralogistics to Industry 4.0

Electricity self-consumption optimization through to autonomous power supply

Robotics & automation in industry and logistics are already bringing supply chains back to important regional locations. This also includes buffer warehouses, local warehouses, decentralized logistics centers such as micro-hubs.

Use of digital twins

Use of digital twins in industry – Image: Xpert.Digital / EPStudio20|Shutterstock.com

Another important form of the Industry 4.0 world is the use of digital twins.

A digital twin is part of process automation (and belongs to the broader and emerging category of “hyperautomation”).

The digital twin is changing the entire product lifecycle management, from design to manufacturing to service and operations. Product lifecycle management is very time-consuming in terms of efficiency, manufacturing, intelligence, service phases and sustainability in product design. A digital twin can bring together the physical and virtual space of the product and extremely shorten the time required.

The digital twin enables companies to create a digital footprint of all their products, from design to development and throughout the product lifecycle.

In the manufacturing process, the digital twin is a virtual replica of real-time processes in the factory. Thousands of sensors are placed throughout the physical manufacturing process, all collecting data from different dimensions, such as: B. Environmental conditions, behavioral characteristics of the machine and work carried out. All of this data is continuously transmitted and collected by the digital twin. Thanks to the Internet of Things, digital twins have become more affordable and could determine the future of manufacturing.

As a result, digital twins offer great business potential as they predict the future instead of analyzing the past of the manufacturing process.

Another example comes from the healthcare industry: “Healthy” used to be considered the absence of signs of illness. With a digital twin, “healthy” patients can be compared to the rest of the population to define truly healthy.

3-D visualization: Digital Twin – Digital Twin – Image: Xpert.Digital / Chesky|Shutterstock.com

Suitable for:

Digital Twin – Digital Twin: 3D visualization and digital supply chain management

Digital Transformation - Figures from Italy

The question was formulated as follows: “If you look at all areas of your company, in which of the following innovative digital projects have you already invested in 2019 / will you invest in 2020?”

Digital transformation projects carried out by companies in Italy in 2019 – by area

Digital transformation projects carried out by companies in Italy in 2019 – Image: Xpert.Digital

In 2019, 40 percent of companies surveyed in Italy implemented digital marketing or social media campaigns, while 35 percent of companies launched projects using big data technologies. Virtual and augmented reality still seem to be a niche area for Italian companies, as only seven percent of them implement projects in this area.

Have you carried out projects in any of the following areas in the past year?

Digital marketing/social media / Digital marketing/social media – 40%
Big data technologies / Big Data technologies – 35%
Cloud Computing (SaaS) / Cloud Computing (SaaS) – 33%
Software development innovation (Agile, DevOps) / Software dev innovation (Agile, DevOps) – 31%
Cloud Computing (IaaS, PaaS) / Cloud Computing (IaaS, PaaS) – 28%
Artificial Intelligence / Machine Learning / Artificial Intelligence / Machine Learning – 26%
Multichannel customer loyalty / multichannel customer engagement – 21%
Advanced / Predictive Analytics – 18%
RPA (Robotic Process Automation) / RPA (Robotic Proces Automation) – 18%
Internet of Things (IoT, M2M) / Internet of Things (IoT, M2M) – 17%
Enterprise AppStore, MDM, MAM / Enterprise AppStore, MDM, MAM – 15%
Blockchain / Blockchain – 11%
Wearable Technology / Wearable Tech – 8%
Augmented / Virtual Reality / Augmented / Virtual Reality – 7%
Digital Twin / Digital Twin – 3%

Companies implementing digital transformation processes in Italy 2020 – by area

Companies implementing digital transformation processes in Italy 2020 – Image: Xpert.Digital

According to a 2019 survey, 32 percent of companies surveyed will undertake software development innovation projects in 2020. Digital marketing and big data appear to be more attractive areas, with 50 and 36 percent of companies planning projects in these areas, respectively. Finally, 39 percent of Italian companies planned to invest resources in cloud computing.

Will you be doing projects in any of the following areas this year?

Digital marketing / social media / digital marketing/social media – 50%
Big data technologies / Big Data technologies – 36%
Cloud Computing (SaaS) / Cloud Computing (SaaS) – 39%
Software development innovation (Agile, DevOps) / Software dev innovation (Agile, DevOps) – 32%
Cloud Computing (IaaS, PaaS) / Cloud Computing (IaaS, PaaS) – 31%
Artificial Intelligence / Machine Learning / Artificial Intelligence/Machine Learning – 44%
Multichannel customer loyalty / multichannel customer engagement – 30%
Advanced/predictive analytics – 29%
RPA (Robotic Process Automation) / RPA (Robotic Proces Automation) – 25%
Internet of Things (IoT, M2M) / Internet of Things (IoT, M2M) – 27%
Enterprise AppStore, MDM, MAM / Enterprise AppStore, MDM, MAM – 17%
Blockchain / Blockchain – 18%
Wearable Technology / Wearable Tech – 8%
Augmented/virtual reality/augmented/virtual reality – 12%
Digital Twin / Digital Twin – 7%

Smart Factory - Implementation in German companies

How far is your company on the way to becoming a smart factory? – Image: Xpert.Digital

In 2019, 48 percent of the companies surveyed, which are predominantly active in mechanical and plant engineering as well as in the electrical and automotive industries, stated that they were pursuing individual operational projects related to Industry 4.0. Four years earlier it was 31 percent.

Around 70 percent of the companies surveyed are in the mechanical and plant engineering, electrical and automotive industries.

2015: How far is your company on the way to becoming a “Smart Factory”?

We pursue individual operational projects related to Industry 4.0 – 31%
The topic is in the observation and analysis phase for us – 36%
The topic is in the planning and testing phase for us – 5%
We haven’t looked into it specifically yet – 19%
Industry 4.0 is implemented comprehensively operationally at our company – 4%
No answer – 5%

2017: How far is your company on the way to becoming a “Smart Factory”?

We pursue individual operational projects related to Industry 4.0 – 41%
The topic is in the observation and analysis phase for us – 24%
The topic is in the planning and testing phase for us – 14%
We haven’t looked into it specifically yet – 8%
Industry 4.0 is implemented comprehensively operationally at our company – 7%
No answer – 6%

2019: How far is your company on the way to becoming a “Smart Factory”?

We pursue individual operational projects related to Industry 4.0 – 48%
The topic is in the observation and analysis phase for us – 21%
The topic is in the planning and testing phase for us – 11%
We haven’t looked into it specifically yet – 9%
Industry 4.0 is implemented comprehensively operationally at our company – 8%
No answer – 3%

Smart Factory - Execution of processes worldwide

Are you already pursuing smart factory initiatives? – Image: Xpert.Digital

In 2019, 68 percent of manufacturing companies surveyed worldwide said they were ready to implement a smart factory initiative. Two years earlier it was 43 percent. Survey of manufacturing companies from 13 countries worldwide.

2019: Are you already pursuing smart factory initiatives?

Yes, smart factory initiatives are already underway – 68%
No, but the introduction is planned for next year – 6%
No, not yet – 26%

2017: Are you already pursuing smart factory initiatives?

Yes, smart factory initiatives are already underway – 43%
No, but the introduction is planned for next year – 33%
No, not yet – 24%

Have you already introduced smart factory processes in your company?

Have you already introduced smart factory processes in your company? – Image: Xpert.Digital

The graphic shows the results of a global survey conducted in 2017 on processes in the area of intelligent factories. 67 percent of respondents from the industrial manufacturing sector stated that they had already introduced processes in the area of intelligent factories.

Smart Factory – Processes introduced worldwide by industry

Industrial manufacturing – 67%
Aviation and Defense – 62%
Automation and Transportation – 50%
Energy and utilities – 42%
Consumer Goods – 40%
Life sciences, biotech industry, pharmaceuticals – 37%

According to the source, the survey was conducted in eight countries (US, UK, France, Germany, Italy, Sweden, China and India).

What are the biggest challenges in smart factory strategy planning?

What are the biggest challenges in smart factory strategy planning? – Image: Xpert.Digital

The graphic shows the results of a global survey conducted in 2017 on the biggest challenges in strategic planning in the area of intelligent factories. 32 percent of respondents said the lack of coordination between different organizational units was the biggest challenge in smart factory strategy planning.

Smart Factory – Biggest challenges in strategy planning

Lack of coordination between different organizational units – 32%
Lack of unity within the leadership team – 28%
Lack of clarity on business cases – 28%
Lack of ownership – 23%
Lack of imagination – 21%

What are the biggest challenges in implementing smart factory strategies?

Smart Factory – Biggest challenges when introducing strategies – Graphic: Xpert.Digital

The graphic shows the results of a global survey conducted in 2017 on the biggest challenges in introducing strategies in the area of smart factories. 29 percent of respondents said lack of investment was the biggest challenge in adopting smart factory strategies.

Smart Factory – Biggest challenges when introducing strategies

Lack of investment – 29%
Lack of maturity in automated manufacturing processes – 22%
Organizational inertia – 21%
Challenges in identifying and prioritizing opportunities – 21%
Missing strategies – 20%

Which of the following predictive maintenance applications do you already use?

Smart Factory – Use of Predictive Maintenance Applications in Germany – Image: Xpert.Digital

In 2019, 37 percent of the companies surveyed, which are predominantly active in mechanical and plant engineering as well as in the electrical and automotive industries, stated that they use automated tracking and display of the due dates of regular maintenance work. Around 70 percent of the companies surveyed are in the mechanical and plant engineering, electrical and automotive industries.

Smart Factory – Use of predictive maintenance applications in Germany

Automated tracking and display of regular maintenance due dates – 37%
Targeted optimization of the quality of manufactured products – 28%
Detect wear in a timely and automated manner (predictive maintenance) – 28%
Optimize setup processes – 25%
Avoid incorrect operation – 25%
Recognize poor machining processes – 23%
Show setup errors – 13%
We do not use predictive maintenance applications – 38%

Use of connectivity technologies and analytics in manufacturing 2017-2022

Use of connectivity technologies and analytics in production – Image: Xpert.Digital

In 2017, the most used connectivity and analytics technology in manufacturing was data-driven resource optimization. It was predicted that this technology will also be the most used technology by 2022. However, the fastest growing technology between 2017 and 2022 will be predictive maintenance. It is predicted that by 2022, approximately 66 percent of manufacturers will have implemented predictive maintenance in their operations.

Use of connectivity technologies and analytics by manufacturers in 2017

Data-enabled resource optimization – 77%
Integrated planning – 61%
Big data-driven process and quality optimization – 65%
Modular production systems / modular production assets – 36%
Networked factory / Connected factory – 60%
Predictive maintenance – 66%
Process visualization/automation / Process visualization/ automation – 62%
Digital twin of the product / Digital twin of the product – 43%
Digital twin of the factory / Digital twin of the factory – 44%
Digital twin of the production plant / Digital twin of the production asset – 39%
Flexible production methods / Flexible production methods – 34%
Autonomous intra-plant logistics / Autonomous intra-plant logistics – 35%
Transfer of production parameters – 32%
Fully autonomous digital factory – 11%

Use of connectivity technologies and analytics by manufacturers in 2022

Data-enabled resource optimization – 52%
Integrated planning – 32%
Big data-driven process and quality optimization – 30%
Modular production systems / modular production assets – 29%
Networked factory / Connected factory – 29%
Predictive maintenance – 28%
Process visualization/automation / Process visualization/ automation – 28%
Digital twin of the product / Digital twin of the product – 23%
Digital twin of the factory / Digital twin of the factory – 19%
Digital twin of the production plant / Digital twin of the production asset – 18%
Flexible production methods / Flexible production methods – 18%
Autonomous intra-plant logistics / Autonomous intra-plant logistics – 17%
Transfer of production parameters – 16%
Fully autonomous digital factory – 5%

Where will business-to-business (B2B) technology buyers spend more or less in 2021?

B2B technology spending in 2021 – Image: Xpert.Digital

The majority of business-to-business (B2B) technology buyers surveyed believe that spending on web and video conferencing, online collaboration and project management will increase in 2021. As the coronavirus (COVID-19) pandemic continues into the new year and vaccines are slow to roll out, remote working will remain the norm for the foreseeable future.

Forecasting B2B technology spending in 2021, by product and service

Additional expenses for:

Web and video conferences / web & video conferencing – 64%
Online collaboration and project management / Online collaboration & project management – 53%
Marketing / Marketing – 41%
Business intelligence / business intelligence – 38%
Customer service / customer support – 36%
Network solutions / Network solutions – 33%
Sales / Sales – 33%
Database management / database management – 32%
Product development and management / Product development & management – 29%
Other IT / Other IT – 27%
Other hardware / Other hardware – 23%
Professional services / Professional services – 21%
Routers and switches / Routers and switches – 20%
Finance and accounting – 18%
Human resources / Human resources – 18%
Vertical industry / Vertical industry – 14%

Expenses remain the same

Web and video conferences / web & video conferencing – 26%
Online collaboration and project management / Online collaboration & project management – 35%
Marketing / Marketing – 40%
Business intelligence / business intelligence – 43%
Customer service / customer support – 45%
Network solutions / Network solutions – 45%
Sales / Sales – 42%
Database management / database management – 52%
Product development and management / Product development & management – 48%
Other IT / Other IT – 46%
Other hardware / Other hardware – 43%
Professional services / Professional services – 50%
Routers and switches / Routers and switches – 46%
Finance and accounting – 62%
Human resources / Human resources – 55%
Vertical industry / Vertical industry – 40%

Spend less on:

Web and video conferences / web & video conferencing – 7%
Online collaboration and project management / Online collaboration & project management – 8%
Marketing / Marketing – 15%
Business intelligence / business intelligence – 12%
Customer service / customer support – 14%
Network solutions / Network solutions – 14%
Sales / Sales – 14%
Database management / database management – 11%
Product development and management / Product development & management – 13%
Other IT / Other IT – 18%
Other hardware / Other hardware – 25%
Professional services / Professional services – 22%
Routers and switches / Routers and switches – 22%
Finance and accounting – 15%
Human resources / Human resources – 20%
Vertical industry / Vertical industry – 22%

Not specified)

Web and video conferences / web & video conferencing – 3%
Online collaboration and project management / Online collaboration & project management – 3%
Marketing / Marketing – 4%
Business intelligence / business intelligence – 7%
Customer service / customer support – 6%
Network solutions / Network solutions – 6%
Sales / Sales – 11%
Database management / database management – 6%
Product development and management / Product development & management – 9%
Other IT / Other IT – 9%
Other hardware / Other hardware – 10%
Professional services / Professional services – 6%
Routers and switches / Routers and switches – 12%
Finance and accounting – 5%
Human resources / Human resources – 7%
Vertical industry / Vertical industry – 23%

If you think about the next few years, in which areas do you expect the shipping industry to receive the most stimulus from increasing digitalization in the next few years?

Areas in the shipping industry affected by digitalization – Image: Xpert.Digital

In 2021, the suppliers, shipowners, ship operators and shipyards surveyed expect that the areas of maintenance and fleet management will be most affected by increasing digitalization in the shipping industry. While 28 percent of suppliers and 27 percent of shipyards believe that digitalization will impact the use of remotely controlled unmanned ships, shipowners and ship operators are more skeptical.

Areas affected by digitalization in the shipping industry 2021

Providers – Suppliers

Maintenance/remote monitoring / Maintenance/remote survey – 54%
Fleet management/performance / Fleet management/performance – 49%
Assistance systems for optimized ship operation – 45%
Communication (e.g. crew, logistics chain) / Communication (eg crew, logistics chain) – 33%
Navigation/bridge management / Navigation/bridge management – 33%
Use of unmanned ships (remote controlled) – 28%
Use of unmanned ships (completely autonomous) – 18%
Digital twin / digital twin – 13%
Other areas / Other areas – 2%
Don’t know / Don’t know – 14%

Shipowners/ship operators – Shipowners/ship operators

Maintenance/remote monitoring / maintenance/remote survey – 56%
Fleet management/performance / Fleet management/performance – 63%
Assistance systems for optimized ship operation – 57%
Communication (e.g. crew, logistics chain) / Communication (eg crew, logistics chain) – 49%
Navigation/bridge management / Navigation/bridge management – 40%
Use of unmanned ships (remote controlled) – 7%
Use of unmanned ships (completely autonomous) – 7%
Digital twin / digital twin – 8%
Other areas / Other areas – 1%
Don’t know / Don’t know – 6%

Shipyards – Shipyards

Maintenance/remote monitoring / maintenance/remote survey – 49%
Fleet management/performance / Fleet management/performance – 43%
Assistance systems for optimized ship operation – 55%
Communication (e.g. crew, logistics chain) / Communication (eg crew, logistics chain) – 39%
Navigation/bridge management / Navigation/bridge management – 33%
Use of unmanned ships (remote controlled) – 27%
Use of unmanned ships (completely autonomous) – 16%
Digital twin / digital twin – 10%
Other areas / Other areas – 2%
Don’t know / Don’t know – 14%

Are you looking for technical and strategic advice for supply chain optimization or warehouse optimization ? Xpert.Digital supports you!

Konrad Wolfenstein

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