Digitizing supply chain – How digital leaders are paving the way

LSG improves flexibility through network management

Dr. Jan Christoph Meyer, Head of Global Supply Management at LSG Group, described how LSG gets its products to their destination in his presentation “Digital network management as a driver for modular, adaptive value added chains”. LSG is a fully owned subsidiary of Lufthansa and primarily responsible for providing catering to a wide range of airlines. With 36,000 employees across over 200 locations in 56 countries, it generates €3.2 billion in annual revenue.

The company faces a variety of challenges: time and cost pressure, growing product variety, highly fluctuating demand, and short product life cycles. One challenge particular to the industry is the high requirements for flexibility. Changes in flight plans and airplane models can very quickly lead to complete product reorganizations. Until recently, LSG was decentrally organized to ensure that everything functioned despite these challenges. Its entire supply chain was reproduced at each airport. One drawback of this arrangement was that LSG could not react flexibly to changes, such as the loss or acquisition of a customer.

For that reason, LSG started to transform their entire operational model in 2014. For example, the production of food items has been bundled in regional production centers, and individual airport locations are now served with flexible supply chains. This network strategy has created centralization effects which have also led to significant financial gains. “From the start, the transformation was consistently tied to a digitization process. In the absence of close monitoring and the ability to react quickly, it would not be possible to sustain the just-in-sequence chain,” said Dr. Jan Christoph Meyer. Today, LSG handles its processes using an integrated network management solution. The company works with machine learning and deep learning approaches and relies on robotic production support, as well as image processing and track-and-trace in monitoring.

Daimler boosts transparency and efficiency

“If someone talks about supply chain these days, they usually think of the path from the supplier to the consumer. People often neglect the fact that for many manufacturers, empty containers have to be returned to suppliers, even though that process accounts for around 40 percent of total transportation costs,” said Andreas Jung, Senior Manager Ladungsträger Operation at Daimler AG, at the start of his presentation entitled “On the road to digital loading unit management”. These costs can be significant, especially for organizations like Daimler – for its Mercedes Benz Cars division alone, its global network handles roughly 350,000 daily loading unit movements. Some 15 million universal loading units and 25 million special loading units circulate within the organization per day. According to Andreas Jung, managing these movements across five continents in cooperation with 25,000 partners requires newer methods and tools than were available even a few years ago. “We have to know where the loading units are, and to do that we need transparency along the entire chain.”

At Daimler, various stand-alone projects dealing with loading units were combined into an overarching concept. This includes a supplier front desk, a loading unit management system complete with app, and a corresponding shared loading unit network which enables loading unit distribution based on demand. A warehouse management system provides the necessary transparency. Drones and RFID-equipped loading units deliver data in real time, which has led to a 15 percent increase in productivity, reductions in throughput times and loading unit inventories, and significantly lower process disruptions.

Volkswagen Konzernlogistik turns to standardization as foundation for smart systems

Matthias Braun, Head of Digitalization and Concept Development at Volkswagen Konzernlogistik, spoke on the topic of “Digitization in the transportation network of the future”. Volkswagen’s logistics division coordinates processes with 8,500 suppliers, 53 component plants and 69 vehicle plants – which together employ over 630,000 workers – for more than 150 key markets worldwide. Furthermore, the organization is responsible for the strategy and synergy-oriented management of the entire corporate group.

Volkswagen Konzernlogistik is also intensively investigating process digitization and the future requirements of transportation networks. Digitization is ubiquitous, according to Matthias Braun – those who do not continue to develop will soon realize they will one day be left behind. “We believe that using track and trace makes us better, but we won’t stop developing there. The world is changing more and more quickly every day.” The primary challenges in today’s industrial environment are process networking, end-to-end transparency, and data availability across the entire process chain.

In order to combine its supply, transportation, and slot management processes, Volkswagen Konzernlogistik created a communication platform which will offer full availability of its process partners’ standardized data. In this way, all relevant information about inbound processes will flow together into a digital transportation record. By connecting this resource to further data sources, the company can create the basis for a variety of new smart solutions and intelligent systems. Matthias Braun is convinced that standardized communication will be the spark that starts a digital chain reaction.

In his view, his organization is well prepared for the future: “We at Volkswagen Konzernlogistik are collaborating with 4flow to investigate the megatrends that will shape the future of transportation networks. We are focusing on new technologies like artificial intelligence, alternative drive systems and autonomous driving, as well as on topics such as supply chain integration, social responsibility, and network management 2.0.”

4flow successfully implements technological innovations

In his presentation entitled “Innovations in supply chain digitization”, Dr. Marc Schleyer, vice president at 4flow, highlighted three technological innovations that may shape the future of supply chain: robotic process automation (RPA), artificial intelligence (AI), and big data analytics. 4flow has successfully implemented all three technologies in collaboration with customers. With RPA – a technological approach in which software robots imitate humans in the execution of repetitive, rule-based processes – automated processes replace those which were previously carried out manually across multiple systems, as in the case of freight management. Previously, a full-time employee would have been fully occupied with such a task. A corresponding software robot can be implemented within three weeks, can complete the task in less than half the time, and has an error rate of zero. The employee can then be reassigned to higher-value tasks.

Because AI can handle a much greater number of inputs in making predictions than a human can, the technology is particularly well suited for supply chain forecasting. This kind of optimized forecasting consequently allows for improved supply chain processes. In one concrete application, 4flow collaborates with a customer in the automotive supplier industry to leverage AI in forecasting significant deviations in shipping volumes (so-called exceptions) arriving at their production plants. The AI algorithm is accurate in 88 percent of cases. In this way, the customer can avoid costs for express shipments, effort for exception handling, and – in the worst case – production stoppages.

Big data analytics is a solution for working with large data volumes in order to facilitate previously unavailable insights. This helps with forecasting and inventory optimization. In one example, 4flow used this technology to optimize a customer’s global aftersales network. By using big data analytics, service levels were increased by 17 percent at existing inventory volume. Furthermore, the technology offers further opportunities such as the assessment of missing master data, process mining to reveal process gaps, transparent representation of material and information flows, and plausibility checks for data.

In all use cases, some processes have to be redesigned while introducing the new technology. “Digitization will radically alter the way in which we work, both operationally and administratively. We must seize the opportunity to design and implement processes in the best way from the very beginning,” said Marc Schleyer.

Digitization expands possibilities for supply chain experts

Andreas Jung and Marc Schleyer took part in the event’s closing panel discussion alongside Christine Mezger-Behan, Vice President Transport Management Worldwide at Robert Bosch, as well as Dirk Lichtmann, Senior Director at MAGNA Powertrain. The panelists all agreed that data is foundational – in the absence of sufficient data quality, any given digitization project is bound to fail. Standards are also helpful, especially in the areas of IT, processes and collaboration. All participating players would benefit from the establishment of a community, and concrete and motivating goals are also necessary. “We are still in the early stages of digitization. It is important that we know where we want to go, as well as to have the courage to try new things,” said Marc Schleyer. At 4flow Logistics Day, it was made clear that on this path to end-to-end supply chain digitization, there are indeed individual projects that have already demonstrated their value through their scalable results.

Digitization also offers supply chain the opportunity to become more relevant within organizations and to play a deciding role when it comes to competitiveness. “Up until now, we supply chain experts have often just carried out things that were decided elsewhere. We should be more involved, and digitization gives us significant leverage to do this,” said Kai Althoff.

Author: SEBASTIAN EHRLICH, Press and media relations