“Industry 4.0 is the German industry’s vital question which has to be considered from a global perspective”, Joe Kaeser, CEO of Siemens AG, said to “Bild am Sonntag” in the run-up to the Hannover Trade Fair 2015. It is about maintaining the technological and thought leadership in industrial production. “Industry 4.0 is a revolution which will determine the 2020’s. It will change entire business models and industry worldwide.” Germany has tremendous opportunities “to further develop the intelligent production and logistics, described as Industry 4.0”, the federal government states in its digital agenda. Meanwhile the revolutionary development has also been established under the term “Logistics 4.0” in the Germany’s third-largest sector. This paper describes which challenges logistics is facing today, what will change with Industry 4.0 and how logistics providers can position themselves in a future-proof way with the solutions discussed under the term Logistics 4.0. The paper not only handles easy to realize quick-wins but also long-term trends.
1. CHALLENGES IN LOGISTICS – TIGHTENED UP BY INDUSTRY 4.0 Today’s challenges in logistics Nowadays IT has a critical role in logistics as a driver of change, digitalization and innovation. This can be observed in many action fields in logistics, especially in the fast-growing eCommerce sector. The volume of parcels has dramatically increased in the past few years and this trend has been reinforced by the development of eCommerce to the so-called “mCommerce” by using mobile channels. Since online platforms have made the trade with goods on the internet so easy, the demand for globally organized procurement and distribution structures grows not only on the industry side. Even in consumer markets perfectly networked supply chains, connecting production and sales markets, constitute the backbone of shipping processes in which factors like time and space are losing their relevance. The basis for this are transport processes which consider customer demand for shorter transit times, availability of goods and delivery quality. Here it is essential to consider various modes of transportation as part of the transport management concept. For example, while urgently needed spare parts for production sites require air freight express delivery in the main carriage, pre-carriage and on-carriage are typically performed using road transport. Less urgent consumer goods are shipped from China to Europe using timeconsuming sea routes. And those who want to move large amounts of goods will consider using rail transport in their supply chain. Increasing complexity due to diversity of requirements Agility is vital for all these supply chains and depending on the recipient they need optimized planning, transport management and visibility along the entire process. B2B and B2C supply chains intermingle and at some point even overlap. The complexity of transport handling increases, which leads to splitting supply chains into optimized partial legs with different requirements, different modes of transportation and different service providers. Central tasks need to be considered: Is it about time or cost optimization or is it about lower CO2 output? In addition to the growing complexity supply chain risk management has also gained importance: Political crises or natural disasters require a constant adaption of potential alternative scenarios which often lead to changing service provider on a short notice. The logistics sector has been dealing with these topics for quite some time now. The resulting solutions are IT-driven and can be found in new applications and platforms. Industry 4.0 is intensifying recent trends The strategic initiative Industry 4.0, which was first publicly announced at the Hannover Trade Fair 2011, describes the connection and synchronization of physical production with the digital data exchange. It is based on the communication abilities of sensors to exchange data with other software systems. On the one hand it allows for monitoring management and almost real-time optimization of processes. On the other hand it leads to decentralization of decision-making – it is not only the whole production facility which is being optimized, but rather the sum of all the individual products and sub processes which are being optimized step by step The first article by VDI-News (VDI-Nachrichten) in April 2011 emphasized on the significance of logistics: “The vertical networking of embedded systems with business software offers, besides completely new business models, considerable optimization potential in logistics and production.”
“Lot size one” which has been frequently quoted as one of the core elements of Industry 4.0 underlines the challenges for logistics. Highly individualized products will no longer be produced according to standard long-term planned procedures but rather in short-term self-optimized processes which require an agile supply chain for the procurement of possibly specific raw materials for the customized product as well as for the delivery to the end customer. Gabler-Wirtschafslexikon defines Industry 4.0, also known as the fourth industrial revolution, as follows: “The so-called fourth industrial revolution is characterized by individualization (even in serial production) resp. hybridization of products (linking of production and service) and the integration of customers and business partners with business operations and value added processes.” Transferring the requirements in production to logistics The immediate delivery of products which in this context is meanwhile an expectation by the end customer (culminating in one-hour-delivery by Amazon in Prime Now) affects all parts of the supply chain. Production needs to adapt to this and at the same time it must fulfill economic requirements resulting from low warehouse stock and the demand for a cost-effective logistics. The dynamics resulting from the production process in this context is being passed on to logistics. Given the heterogeneous supplier and service provider structures supply chain complexity experiences disproportionately brisk growth. 2. INTRODUCTION THE BASIS FOR REDUCING COMPLEXITY – A CLOUD PLATFORM One global optimum instead of selective improvements “A cloud solution where companies are collaboration as a community is the solution for the reduction of complexity in logistics”, said Professor Dr. Dr.h.c. Werner Delfmann of the University of Cologne at the 13. Praxis Forum Logistics hosted by AXIT GmbH in Frankenthal, Germany. With this statement he hits the core of challenges in logistics and at the same time the solution approach of so-called Logistics 4.0. Strictly speaking Logistics 4.0 can be described as a concept of hyper connected processes, data and systems of all the companies along the supply chain, from the manufacturer through 3PLs up to the end customers. Only collaboration between those various participants allows for an optimum of the entire supply chain – instead of, as is the rule today, individual local optimums where every company strives to achieve for itself.However, not only supply chains become more international, but also does the competition among them. 3PLs worldwide with very different cost structures compete for the same orders and thus intensify the competition. For the success of the above mentioned “divided supply chains” it is the global network’s optimum that counts, not the sum of all the local optimums of the individual stakeholders. The essential prerequisite for this is a simple yet secure exchange of data among them, realized through a central cloud platform. It was logistics platforms like AX4 which enabled partner networks So the technological foundation of supply chain networks are collaboration platforms in the cloud such as the AX4 platform, powered by AXIT. Each supply chain network partner is given access to the data they need. Each and every partner is always up-to-date and has access to the same “version” of the data due to the real-time communication without time delays “Industry 4.0 requires absolute transparency in the entire value chain, only then can processes be accelerated”, confirms Matthias Berg, Manager Sections/Professional Groups with Bundesverband Materialwirtschaft, Einkauf, Logistik (BME). Logistics partners aiming at establishing reliable working relationships along the supply chain with the highest standards of quality and information management can only achieve this with an IT platform which maps all the aspects of cross-company collaboration.
No matter whether it is via web or mobile apps AX4 involves easy and fast all the business partners in the exchange of information. By scanning QR codes even not registered users are able to provide information to the platform, relevant for the entire supply chain. Another advantage of a cloud platform like AX4 lies in the unlimited configuration possibilities. Following the principle of logistics 4.0 corresponding level of agility in the supply chain expected in the real world is required for the digital processes mapped with the IT solution. A nice side effect: The ability of all business partners to access centrally available data and provide information which is relevant for the entire network leads to a significant data quality improvement. Currently still a central topic in supply chain management, validation of data in a cloud platform is performed automatically which leads to data quality improvement. Whenever manual data entry errors occur, the chance is much higher that other partners along the supply chain will identify and correct these soon enough
3. THE VISION OF LOGISTICS 4.0 – MACHINES COMMUNICATING WITH PEOPLE AND WITH EACH OTHER Effects of functional areas of Industry 4.0 to Logistics 4.0 A cloud platform like AX4 is the necessary basis for network optimization in logistics. The growing challenges faced by the industry inevitably affect logistics and therefore such platforms are the backbone for establishing futureproof solution approaches in terms of logistics 4.0. The Federal Ministry for Economic Affairs and Energy (BMWi) lists the following five functional areas in the study “Exploring the potential for the implementation of Industry 4.0 in small and mid-sized enterprises”*: 1. Data entry and processing
2. Networking and integration
3. Decentralization and service orientation
4. Assistance systems 5
. Self-organization and autonomy
* Order of appearance as it is in the original study has been changed Applied to logistics the following is revealed: 1. Data entry and processing While today’s supply chains are provided with mere status reports through web entry or EDI interfaces, in the future Industry 4.0 will result in huge amounts of data from vehicles, warehouses, production facilities captured by sensors and other technologies which will automatically flow into the software systems and will be applied for the purposes of logistics. 2. Networking and integration With networking integration the whole information is available for all the participants. In the next step it is about building meaningful subsets of relevant information out of the core date set under consideration of the data protection principles. A customer service orientation leads in the next step to supplying every supply chain participant with the exact set of information that they need. 3. Decentralization and service orientation With networking integration the whole information is available for all the participants. In the next step it is about building meaningful subsets of relevant information out of the core date set under consideration of the data protection principles. A customer service orientation leads in the next step to supplying every supply chain participant with the exact set of information that they need. 4. Assistance systems While the first points essentially focus on software and platforms, this is where the combination of hardware and software comes into play. Assistance systems support users and relieve them in many ways so that they can focus on the core competencies which the processes require from them. In logistics you can find many pilot projects and prototypes in use. Among the assistance systems being tested are applications with augmented and virtual reality, the so-called exoskeletons which support human beings with hard physical activities in production or in the warehouse or 3D printers for parts that can be manufactured quickly in a decentralized way, especially spare parts. Another example for modern assistance systems comes from Siemens Postal, Parcel & Airport Logistics: The Siemens subsidiary equips data glasses with special software and thus supports in commissioning parcels for dispatch or even in loading and unloading delivery vehicles. This facilitates and accelerates the work of the delivery personnel. 5. Self-organization and autonomy Finally we will consider self-management and regulation mechanisms. Following the principle of decentralized parts and machines that have been enhanced by sensors and regulating mechanisms and they are able to self manage and communicate with each other. This perfectly applies to logistics in autonomous forklift trucks, delivery robots, drones or autonomous trucks resp. vehicles. Automated flexibilization – the way from the machine to the software and back While the virtual world as replication of the real world of production and logistics in various information systems can help to better understand processes and to get a status overview, a backward integration of the virtual world into the real one makes for another productivity leap. Devices report collected information from production and logistics chains in real time to software systems, which in turn by processing this data allow for the realization of additional optimization. As a result the detected improvement potential can be exploited by reconfiguring the machines in order to achieve optimization which will be beneficial for the entire supply chain. Like this sorting algorithms and product planning systems can adapt almost immediately to new circumstances and prioritisations and by doing so the flexibilisation approach of industry 4.0 is applied to logistics.
4. ABOUT THE INTEGRATION OF VERTICAL PRODUCTION WITH THE HORIZONTAL SUPPLY CHAIN – THE LINKING OF INDUSTRY 4.0 & LOGISTICS 4.0 Transshipment in isolated logistics centers is highly automated and optimized Many logistics centers, especially highly-automated and efficient international airfreight centers, are even now highly optimized with the use of software. A production planning system in an airfreight center know upcoming flights (arrivals and departures), capacities and the goods that are currently at the warehouse with related information such as destination, size, weight and dangerous goods classification. Based on this data the loading of flights – be it cargo capacity on passenger flights or cargo aircraft – is planned, triggered and executed today. While this way the transshipment processes in a logistics hub are highly automated, there is still a lack of integration with regards to data from the supply chain, e.g. information on goods en route to the hub. This often results in high offload quota, which means that a large number of the goods loaded on an aircraft need to be unloaded again before the departure. The reason: Shortly before the departure more urgent shipments arrive which are supposed to be transported instead of the low-priority goods that have already been loaded. Siemens Postal, Parcel & Airport Logistics and AXIT integrate logistics hub and supply chain Following Logistics 4.0 approach the information on the supply chain is now connected to the information from the Planning, Prediction and Control Systems (PPC) of an airfreight center through a cloud platform like AX4. Due to the integration of both applications it can be calculated which trucks will reach the airfreight center in time before a scheduled departure (more precisely: before the last possible loading of an aircraft). In addition to that detailed information is provided on the goods which are on these trucks – down to batch level. It can be even calculated which units shall be loaded on a given flight. Based on the information available through the logistics platform the planning, prediction and control system (PPC) can adapt its planning in a way that it reserves loading place on the aircraft for Unit Load Devices (ULDs) with goods which will arrive shortly before departure. PPC additionally determines the required resources in terms of cargo handling staff, “truck docks”, etc. PPC makes sure that the respective shipments will fit into the ULDs or on the pallets. Even specific shipment information, e.g. on dangerous goods, is aligned with suitable ULD capacities in this way. The production control system loads the ULD planned by the PPS resp. prepares loading so that goods from the truck arriving just before cut-off can be loaded in the right place in the ULD. Integrated Truck Guidance takes over control of incoming goods When the truck with the load for the next flight approaches the airfreight center Siemens Mobility’s Integrated Truck Guidance is able to use the traffic information which is available in real-time and the position of trucks to notify all involved parties with the trucks’ expected arrival time and guide the vehicles to the airfreight center in the fastest possible way. The arrival information can then be used to prepare resources in the freight center optimally for the expected deliveries. In addition automated traffic strategies can be launched in case of emergencies or disasters to divert trucks and to prioritize certain vehicles at the same time so that these can pass through traffic as fast as possible and reach the freight center’s gate without delay. Dock & Yard Management controls and optimizes on the yard In the background the airfreight center’s Dock & Yard Management (DYM) plans the allocation of gates and the resulting traffic flows on the premises in real time. This way it is ensured that the prioritized truck can dock at a free gate without delay and the unloading process can begin right upon arrival. A forwarder who was originally assigned this dock would automatically be assigned a different slot or dock through slot control. Cameras for automated plate recognition at the premises’ smart gate monitor and control the entry of arriving trucks. If shipment data and the reserved time slot correspond to the information available in DYM the barrier opens automatically and the truck is guided to the available dock through the shortest way either by signals or by a driver-specific app. Once arrived there, the truck will be unloaded by the staff who has already been informed by the PPC. The service provider can then load the last ULD for the aircraft and finish the loading proves on time. In order to stay on schedule every standard time slot for each process step is monitored during the entire loading process in order to ensure that ATC’s departure slot can be met under consideration of all previously required process steps such as entry, unloading, ULD and aircraft loading. 5. OUTLOOK Looking to the future we can differentiate between simple quick-wins and medium-term trends. Simple quick-wins by introducing cloud platforms for collaboration Technically easy to implement today, cloud platforms like AX4 for quick and easy integration of all participants in supply chains need to be used on a much broader scale and more consistently. On the one hand their use helps to achieve quick results for all participants and to increase competitiveness. On the other hand this is just the basis for further development which is required to be able to stay afloat in the market in the future. So as a first step it is necessary to merge available information and processes on one platform in order to quickly generate added value for all supply chain network partners. The collaboration platform established this way then can be used as a basis for integration for other sources of information, especially from Industry 4.0, for which increase of automation and optimization is in the medium-term focus. Big Data and data variety due to Industry 4.0
Industry 4.0 generates large amounts of data which need to be collected, filtered, interpreted and the right conclusions have to be derived from it. Mainly machine data is to be expected which is generated and transferred to applications and databases automatically. What will happen by human activity in the next step remains to be seen. When we talk about machine-to-machine communication production and logistics could optimize autonomously and in a decentralized way without any human interaction. The same seems possible when we think of automatic evaluation of Big Data and concluding optimal production processes, supported by the afore-mentioned reconfiguration of the software running on the machines. But not all processes and specific situations can be mapped in algorithms yet. It is to be expected – not least due to the many exceptions from rules which we see in all our environment – at least in the medium-term that algorithms and software systems suggest possible alternatives to a human decider who, in turn, takes the decision and at the push of a button triggers the execution, i.e. the reconfiguration of the machine software.
Source: Jörg Schiemann COO, AXIT GmbH A Siemens Company; Nachtweideweg 1-7; 67227, Frankenthal at www.axit.de
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