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Supply Chain
Digitization

Digitizing the supply chain – everything integrated perfectly. How companies become digital champions through smart networking: Amazon & Co. show us how – better, faster, more products and often even cheaper thanks to an entirely interconnected supply chain!

Planning, forecasting, suppliers, service providers, customers, procurement, inventories, replenishment...all integrated into one single data flow. Perfectly plannable, transparent, with the greatest possible speed and flexibility – that is the goal of supply chain digitization!

But what has to be done? How do you turn Excel tables, Access and SQL databases into a fully networked world of digital data? Come with us on a fascinating journey to the new world of perfect digitization!

1/6How do you become a digital champion?
Digitization and Integration!

How does Amazon succeed – as the world's biggest mail-order company – in managing so much more inventory than other providers? Why is Amazon so fast? Because Amazon has integrated all its partners and suppliers perfectly! Because thanks to the data it has, Amazon knows what you are going to order, before you do. Because the warehouse locations are chosen perfectly, because the network planning is finely tuned and because the planning algorithms structure the inventories perfectly! "Total" and "digitization" are magic words!

But there are also other suppliers apart from Amazon that have digitized their supply chain, making them better, faster and less expensive than the competition. Because these digital champions have realized that the success of many products is no longer built solely on the products themselves! Speed of part replacement, small batches, attractive prices, etc. are at least as important.

Wolfgang Schürholz, Managing Partner & Logistik-Experte 500x

iHub was an impressive start for Nokia Networks on the road to total digitization!

Wolfgang Schürholz, supply chain expert and winner of the Wirtschaftswoche "Best of Consulting" award with the iHub project

First of all, you have to identify or define the things that make a buyer decide in favor of a given product, or what the success factors of a company or product are. Then you have to optimize the entire supply chain by intelligently interconnecting all the data flows in it, from the product development phase to purchasing the raw materials, all the way down to the point of sale. Why? Because if part of an x-ray machine is broken, a hospital can't wait for days and cancel all its operations until a replacement part arrives; it needs that part within hours. Here, speed and reliability are the key factors for success!

If an agricultural machine suddenly breaks down on the day of the harvest and then a little while later a summer rain shower begins, the harvest and all the work and time that has gone into it might well be ruined. That customer will look for a dealer that can procure and install the required part within just a few hours because it has a modern ordering service and a perfectly digitized supply chain.

Of course, this only works if all aspects of the entire process chain are fine-tuned to each other: smart inventory management, professional S&OP and an optimal interplay of forecasting, procurement and the best possible use of production. Manufacture and delivery are on demand – always right where the product is needed, exactly when it is needed. The partners, suppliers and customers are all entirely integrated into a comprehensive process chain, with the goal of accelerating the flow of information and creating the maximum of control options. The required transport routes are turned into additional storage locations, mobile and flexible, and the system knows exactly what goods are where along the route.

Digitization and perfect integration offer fantastic opportunities here! Identification technologies and information systems generate transparency about inventories and help to process the enormous volume of information and make the right decisions at the right time!

But: How and where do you bring these data together? In a Supply Chain Cockpit, a Control Tower or in an iHub, for which Barkawi received an award in 2014 in a competition run by the business magazine Wirtschaftswoche!

2/6Supply Chain Cockpit,
Control Tower, iHub

The network equipment maker Nokia Siemens Networks (NSN) wanted to offer its clients – mobile telephony operators – even better service. The goal was to increase the deliverability of components while at the same time reducing inventories. Barkawi introduced an "iHub", in which the planning, requirement forecasts, ordering by the production sites and all delivery processes are brought together in digital form. The project was a huge success for all involved, and Barkawi was named "Best of Consulting" by Wirtschaftswoche magazine for it

In innumerable other projects, Barkawi uses the Supply Chain Cockpit, an innovative proprietary software platform. Its modular structure enables fast and individually customized implementation, while open-source systems like Apache make it inexpensive to use. In Qlikview, the best provider of big data evaluations, we have found the perfect partner for the performance of the Supply Chain Cockpit. This also encompasses leading-edge database technology components for data integration, so that all numbers, data and facts find a home.

But you can even go a step further than that with the iHub and Supply Chain Cockpit, and set up a "War Room" that would make NASA go green with envy! We installed a Control Tower at a major international provider of mobile phones. Here, all key data converge, short decision-making channels minimize reaction times, and all data from the Supply Chain Cockpit come together. Systems like Kinaxis form the basis, while "what-if" simulation tools enable the supply chain to be controlled proactively: what discrepancies in your supply chain are critical and which partner interfaces are so important that they should be monitored 24/7? What are the options? How fast are the reaction times?

Digital champions answer questions like these and many more in their IT system: The company Airbus, for instance, runs a Control Tower in the form of its modern, digital customer support center, and can get a malfunctioning A380 back into the air in no time flat.

Supply Chain Digitization with Control Tower

The key to the iHub, Supply Chain Cockpit and Control Tower lies in reducing the large volumes of data down to the right parameters. The objective has to be to filter out the right KPIs from an abundance of data by means of "right-sizing", in order to be able to effectively manage the supply chain, and form relevant ratios that honestly and reliably show how the supply chain is performing. Important indicators for companies here are, for instance, service level/fill rate, available-to-promise (ATP), turnaround time (TAT), order to cash, on-time delivery (OTD/OTDR/OTDC), etc. We are experts at optimizing these key figures and many other things besides!

3/6Partner Ecosystem,
Connectivity & Collaboration:

Modern companies with smart logistics and supply chain management not only link together all the individual process steps, they also collaborate closely with their completely integrated service providers. Here, the distinctions between companies, suppliers, service providers, etc. fade, for example when the service provider runs the warehouse and the customer replaces the spare parts on the shelf as soon as one is sold.

This happens not only in the process, but also with the data. In enterprises with modern and professional supply chain management, data are increasingly being pooled and all parties involved connected up to each other, often in the cloud, so that the supplier can, for instance, see the products being sold and immediately delivery the replacements "just in time". Parallel to this, the transport company, also connected up, is ready to roll, because it can also see when and where goods are needed. Everyone pulls in the same direction and they all have the same objective: perfect logistics. Because the competition is tough!

Setting up and connecting a "partner ecosystem", connectivity and collaboration are important terms that describe the modern supply chain universe.

In logistics and supply chain management, much is about making sure that the right amounts of the right things are at the right place at the right time. So the "right" inventory is a key variable at the start of a chain of actions. Vendor managed inventory and replenishment and "inventory health" play a decisive role here. For some time now, companies have been managing their inventories with fully integrated partners.

In digitized companies, inventories, material and goods are kept track of digitally along the supply chain, with smart concepts like Merge-in-Transit, Crossdocking, Hub & Spoke, PUDO, FSL, etc. All the partners involved are linked and fully integrated into a massive flow of data. Connectivity ensures the data-related integration, collaboration, and smooth interaction of all the companies, partners, service providers and other players involved in the process! Both of these aspects together perfect the digitization!

Supply Chain Connectivity & Collaboration

4/6Predictive Maintenance:
Stop the stoppage before anything stops

Downtimes of plant and machinery are becoming ever more expensive and ever less accepted. Customers increasingly want replacement parts everywhere and without delay. If a high-tech agricultural machine worth €480,000 is out of commission on the day of the harvest, and if it then starts raining, not only the harvest is lost. Dealers with modern order-management and a perfectly digitized supply chain that can procure and install the required replacement part within hours have a big lead on their competitors!


And the inner workings of digitized products have long been a step ahead of that: sensors in many expensive devices recognize an impending defect before it occurs and raise the alarm before the machine comes to a standstill. Digitization makes what is known as "predictive maintenance" possible! Downtimes are not only expensive because the machine needs fixing, they are even more expensive if the machine stoppage causes production as a whole to come to a standstill.

For this reason, many innovative companies have been using predictive maintenance for some time now already: Thyssen Krupp Elevators, for instance, offers far more than the mere remote monitoring of elevators with its "MAX - Predictive Elevator Maintenance" system. The digitization prevents standstills before the lifts grind to a halt, i.e. before the damage arises. This is a huge leap in terms of service quality! How does it work?

Multiple interconnected sensors permanently supply data on the service life of the elevator system and its components, with the goal of maximizing machine operability and guaranteeing safety. The status of the lift system and the remaining working life of parts, etc. are analyzed in real time and the service team is constantly provided with information on what will have to be done next. And that before the breakdown occurs – predictively and preventively!

But not only sensors make exact predictions possible, mathematically optimized forecasting models enable perfect projections, for example of which spare parts the customer will need today: Upon arriving at work in the morning, 700 dealers of an agricultural machine world-market leader find in their "Amazon shopping basket" the replacements for the parts that will definitely break down at their customers that day and be ordered.

We know what those parts will be in advance! Hocus pocus? No; intelligent forecasting models combined with big data, lots of clever math, weather reports, etc.

That keeps inventories down, shelf warmers that gather dust in the warehouse become a thing of the past, the bound capital is freed up for better things and there is finally the "right" inventory in the storeroom!

The measurable success: At our agricultural machine dealerships, 20% less capital is tied up and the number of machines waiting for parts has been cut in half. And not only that: in addition to the improved service at lower costs, the dealers are reporting an 8% increase in spare parts sales!

Predictive maintenance with our innovative cloud platform ClearOps makes it possible!

5/6 Digitizing the supply chain:
How do you go about it?

The supply chain of most companies is much more complex today than it was in the past. There are many reasons for this, but first and foremost is that digital champions are setting the standards. If same-day delivery is the norm in the industry, the competitors have to adapt, otherwise it won't be long before they are no longer competitors to be taken seriously! In many areas the market has transformed from a push to a pull market. Enterprises with a strong supply chain adapt to that.

The supply chain of most companies is much more complex today than it was in the past. There are many reasons for this, but first and foremost is that digital champions are setting the standards. If same-day delivery is the norm in the industry, the competitors have to adapt, otherwise it won't be long before they are no longer competitors to be taken seriously! In many areas the market has transformed from a push to a pull market. Enterprises with a strong supply chain adapt to that.

Digitizing the entire delivery chain is then the next step. In a modern, high-performance supply chain, innumerable partners, suppliers and data sources are integrated and have to be managed – from the purchase of the raw materials all the way through to the point of sale! The "partner ecosystem" encompasses 3PL-, 4PL service providers, dealer-managed inventory, inventory management, sales data, planning and forecasting, data from predictive maintenance and much more. You can't do these things with an Excel table anymore!

The bad news is that there is no comprehensive end-to-end solution that you can install in one go and your digitization is complete! Digital transformation refers to an all-encompassing, successive, step-by-step conversion. Process chains and their data that cover the entire range of an OEM's activities have to be connected with each other entirely and digitally mapped. And that goes far beyond the limits of the company itself, because the external partners mentioned above are also part of this data integration!

The good news is that using new technologies, software and systems like Kinaxis, e2open, Servicemax, PTC, FIELDFORCE, SAP, Synchron, etc. and linking them to existing systems leads to more efficient systems and more relevant information! The data integration and digitization along the supply chain enables

  • Costs and risks to be reduced,
  • The clearest possible transparency to be gained over the entire supply chain,
  • Capacities and goods flows to be planned perfectly in line with the expected requirements,
  • The greatest speed and flexibility to be ensured,
  • Maximum freedoms and minimal complexity

The following Top 6 steps have repeatedly proven their worth in digitization projects:

1. Identifying the success factors: What constitutes the success of a company?

A company's success factors, such as its speed, ability to deliver, extremely broad product range, price or cost leadership, etc., have to be clearly identified and defined in advance.

2. Segmenting and prioritizing the customers: Who and when?
Segmenting the customer base in an ABC analysis provides the basis for prioritizing the order in which the digital linking is to take place. A-customers are often integrated first because they account for most of the sales, while the "long tail" of C customers are not!

3. Calculating the business case for A-customers: For whom and how does this make sense?
Analyzing the costs and feasibility for sample A-customers, in order to assess the cost-benefit ratio, feasibility, etc.

4. Developing a road map: What and how fast?
Compiling a "road map" for the order of taking care of the digital steps, in line with their temporal, financial and organizational feasibility in the company. Often it is neither plausible nor does it make sense to realize the entire digitization in one giant development leap. A gradual digitization is generally more realistic, less expensive and better!

5. Selecting software: Which IT providers are the right ones?
Defining the requirements, assessing and selecting a software product or supplier that meets the demands of the success factors such as perfect inventory management for complex product ranges, etc.

6. Implementation: Who actually does it?
For implementing software, connecting up interfaces of the predefined customers, suppliers, partners, etc., Barkawi Management Consultants offers a specialist team of software experts who have successfully accompanied this process many times already. Barkawi is a certified implementation partner to the best suppliers in the world:

Barkawi Partner-Übersicht

Digitizing the Supply Chain – everything integrated perfectly: How companies become digital champions through smart networking. Come with us on a fascinating journey to the new world of perfect digitization!

Read all about it in our free e-book "Good-bye Excel Chaos!"

Publication Good bye Excel-Chaos!

6/6Digital
business models

We humans perceive our surroundings with our sensory organs. Machines do it with sensors. They constantly receive signals and send them through the network to the control tool, HQ, the digital control tower, etc.. There is an ever-growing number of sensors in modern machines, gathering more and more data of increasingly diverse types. More sensors mean more data – that open up whole new options. And not only that: the triumphant advance of sensor technology is bringing manufacturers much closer to their customers again.

For a long time, makers of, for example a large printing press, would sell it to the end customer and that would be the end of the contact with them. Even if the machine got damaged, independent repairers would often do the repairs for the printing company without the manufacturer being involved. In the worst case, the manufacturer didn't even know its installed base. Nobody had ever heard of things like making money with after-sales business, Service as a Service, predictive maintenance and such like back then anyway.

Digitization brings the customer closer and opens up entirely new options, because the manufacturer and its machine are connected up to each other digitally and constantly exchange data with one another about running times, performance, capacity utilization, breakdown risks or actual defects and so on. With all these data, innovative manufacturers that see their after-sales service as an integral component of their product and don't want to hand that over to the competition can turn it into a high-profit, forward-looking business. But what does that mean in real terms?

Data used to support the product. Today, modern after sales champions say 'Data is the product'. Service-as-a-Service – that is the hig-profit future of after sales!

Oliver Bendig, Partner at Barkawi Management Consultants and after-sales expert

In the old days, a customer that wanted a printing machine had to buy it. Today, more than one major German maker of printing machines have a wholly different business model. The customers of these companies today pay by the page. So instead of owning a machine, they pay for the performance they use.

The packaging machine maker Bobst delivers its machines together with innovative augmented-reality service glasses. Again, the client doesn't buy a machine, but a much cheaper share of the machine's operating time. Included is an also very inexpensive repair subscription, not dissimilar to being a member of the Automobile Association, where service technicians are on remote call 24/7, anywhere in the world to help the customer in real time using augmented-reality glasses.

Manufacturers are more willing to take the risk of offering runtime guarantees, performance commitments, etc. as their digital possibilities increase, because now they have full control over their machine, know the numbers, data and facts and can act quickly and in advance, for example sending in their own highly qualified after-sales service people.

This gives them the certainty that their machines are being maintained and serviced perfectly, thus eliminating the risk of external multi-vendor repairs with no-name replacement parts. Then it is no problem to offer a performance guarantee!

New business models made possibly by the digitization of machines often exhibit the following basic parameters, for example:

  • Pay per use: The customer pays for how much it uses the machine, but no longer has to buy the machine itself

  • Predictive maintenance: A performance guarantee ensures the customer 100% capacity utilization, because if defects threaten, they are recognized in advance by detectors and sensors before the machine comes to a standstill.

  • Cutting costs by optimizing utilization: Data exchange enables the manufacturer to make full use of its installed base of machines. Instead of an expensive machine not being in use, an internet-based service platform brokers out the unused machine capacity to other customers. Everyone involved benefits from the cost savings of this clever solution!

  • New after-sales concepts: Service technicians are on remote call 24/7, anywhere in the world to help the customer in real time using augmented-reality glasses!

  • OPEX not CAPEX: New business models arising thanks to Service-as-a-Service are increasingly becoming transaction based rather than flat rate. They invoice fairly, inexpensively and per use, and capital expenditure is turned into operating expenditure.


CFOs love it when high, often fixed rate CAPEX of underutilized machine fleets turn into low, flexible OPEX that actually meet their needs!

Summary: New business models made possible by Big Data, digitization, interconnected data, collaboration and connectivity bring with them enormous benefits!

Our experts
for digitization

Get in touch:

Andreas Baader
Managing Partner
moc.iwakrab@redaab.saerdna
Tel. +49 89 - 748926 - 712

Mike Landry
President North America
moc.iwakrab@yrdnal.ekim
Tel. +001 - 678 - 213 - 2940

Barkawi Management Consultants
Office Munich
infonotvisible@barkawinotvisible.com
Tel. +49 89 - 749826 - 0

Barkawi Management Consultants
Office Atlanta
usainfonotvisible@barkawinotvisible.com
Tel. +001 - 678 - 213 - 2940