Restarting the supply chain with IoT

03.06.2020 by Daniel Kunz
Businessman manager using tablet check and control

Transparency is crucial when getting a supply chain going again after a production stop. Fortunately, networked trackers and the Internet of Things can help.

A massive problem starts rather small: A minor foundry in Spain has to halt production because management failed to secure enough manufacturing materials before employees go on a planned strike. The consequence? A European chain reaction. The company’s main customer, a large German automotive supplier, depends on housing components from Spain. The supplier, in turn, provides its customers – automotive industry OEMs – with working assemblies finished just-in-time. These deliveries are now at risk because the supplier’s warehouses with the necessary housings quickly empty as stock from Spain dwindles. The fact that the supplier has opted for single sourcing for these components, i.e. procuring parts from only one manufacturer, now becomes a major problem: the firm cannot find a replacement on such short notice.

So it has to cut back production as several shifts are cancelled. The supplier now also faces drastic penalties if it cannot fulfill its contractual obligations. The automotive companies meanwhile face total standstill of their production lines – potentially resulting in millions in losses.

A Central Place to Collect Information

What might be an exceptional situation for one automobile manufacturer and its suppliers is a familiar scenario for Hanselmann & Compagnie: The consulting firm from Stuttgart optimizes business, production and development processes for companies. One important focus is crisis and recovery management. In this particular case, it meant getting the carmaker’s supply chain back on track. At the supplier in Germany, Hanselmann installed an expert control center where all the information from the supply chain converges – including reports from logistics on quantities of goods and production completion times, final inspections, loading and departures. Plus, the arrival of trucks at the loading dock, as well as receiving goods at the warehouse and production station. Every single position in the flow of goods is recorded by the control center: Which goods are delivered when, in what quantity and to where? The goal is to increase the transparency of all material and information flows.

Express Delivery by Helicopter

Hanselmann had to prevent the looming production standstill at the OEM at all costs. The solution? As soon as an assembly was finished, it was flown by helicopter to the manufacturer. This saved time and was still less expensive than the imminent financial losses in the event of a production stoppage. In addition, the supplier boosted production shifts from two to three shifts, and the conveyor belts kept rolling on the weekends, too. Many of the 200 suppliers for the approximately 80 components also had to increase their production by 20 to 30 percent. As a precautionary measure, Hanselmann checked all inventories and the delivery records of the commissioned companies to be able to guarantee the necessary increase in production. This was an extreme situation for all the companies involved, involving considerable effort and expense. But the result justified the means: After two months, the production backlog caused by the delivery bottlenecks had been cleared.

Track and Trace for Transparency During Transport

In order to achieve digital transparency in future supply chains, Hanselmann has launched a partnership with Deutsche Telekom utilizing the Internet of Things (IoT). The consulting firm is currently using, among other things, asset trackers from Deutsche Telekom to outfit metal mesh boxes or pallets for a transport monitoring pilot project. The trackers regularly send their position via GPS, mobile wireless or WiFi to Telekom's IoT Cloud. Equipped with the appropriate sensors, intelligent tracking modules also monitor the condition of the goods in transit, measuring variables such as temperature or humidity. The recovery managers in the control center can use a web dashboard to track the shipment within the facility and along the entire transport route – down to the very minute and meter.

The trucks are also equipped with GPS, so their positions can be tracked. But the advantage of product tracking is that every single shipment is always in view, even when it is loaded onto another means of transport. Thanks to digitalization with networked trackers, its location can then be monitored in real time – and the company can adjust production down to the minute. “If I know that the urgently needed goods will be at the gate in a quarter of an hour, I can have the truck processed with priority,” says Sebastian Mank, Senior Project Manager at Hanselmann. “Incoming goods can give priority to the truck, intralogistics is ready and production knows that in half an hour things can resume.”

How Telekom supports the recovery management of Hanselmann & Compagnie:

  • Coupling IoT devices and sensors with components from the Manufacturing Execution System (MES)
  • Machine-to-machine connection (M2M)
  • Track and trace for parts and components
  • Predictive maintenance
  • Automated control
  • Integration of mobile devices
  • Logistics solutions

If production comes to a standstill at one point in the supply chain, there is a time lag before problems spread through the entire chain – from small businesses to large manufacturers. The reason can be, as in the example above, a strike or mismanagement or, as is currently the case, a global crisis. The breakdown in the production chain can also start at the top: If large OEMs have to shut down or even stop their production, orders to suppliers will simply fail to materialize. They then have to cut back their own production. If there are signs of an improvement at some point, the OEM asks the suppliers at an early stage to resume delivery capability. The suppliers, in turn, can only send their employees back to the assembly lines once they have received concrete orders. The challenge for a consulting firm like Hanselmann is to create as much transparency as possible when it comes to communications and logistics.

Seeing a Challenge as an Opportunity

“A crisis like this also presents a great opportunity,” says project manager Mank. “Companies could now position themselves much better for the long-term by looking at the individual links in their supply chain: Which one is the weakest?” This refers both to the processes within their own company and to the suppliers along the supply chain: “Whether compatible systems for home offices, optimal production capacity utilization with a small number of employees or multiple, more regional sourcing strategies – there is a great deal of potential for improvement that the crisis has brought to our attention. It is important to find not only immediate but also sustainable solutions to avoid the current problems during future crises.” Because speedy action is required when restoring the supply chain and production after a standstill: “If you are fast, you can even gain an advantage over the competition,” says Mank.

Hanselmann restores a faltering supply chain by following a multi-stage plan. After all, components are useless if they aren’t available in the right quantity, in the right order and at the right place. Otherwise, nothing will run smoothly. The heart of any rescue plan? The tracking data – this provides all the information upon which all subsequent steps are based:

  • Determine and evaluate the situation of the suppliers
  • Check customer requirements
  • Monitor logistics and the supply chain  
  • Plan production ramp-up
  • Reduce backlog of deliveries

Ecosystem of Technology Partners

To offer its customers everything from a single source, Hanselmann relies on a digital ecosystem of experienced technology partners enabling precisely tailored specific solutions. The goal is to create a well thought-out, customized transfer from the business process to the digitalization solution. This helps maintain a relative competitive edge. The partners include specialists for business process, content and enterprise information management, as well as IT service providers. “With Deutsche Telekom, we have found a partner highly regarded by companies in Germany and Europe,” says Bernhard Braun, head of the digital business unit at Hanselmann and responsible for the technology partners’ ecosystem. “There is trust there, especially when it comes to data protection. We also benefit from the knowhow and speedy support of Telekom experts during ongoing operations, as well as from the fast response times that tracking and tracing enables us to provide.” Deutsche Telekom in turn benefits from the close customer relationships that Hanselmann maintains as a consulting service provider and trusted advisor.

The effects of a production stop are widely felt. After all, every major OEM has dozens of suppliers with hundreds of individual companies, all of whom are more or less severely affected by production distortions. During such a crisis, all parties involved must work hand in hand. The foundation for this requires complete transparency – in manufacturing, supply chain and logistics. The cooperation between Hanselmann and Deutsche Telekom creates this necessary transparency, ensures a faster response time and in doing so adds value for all the companies involved in the supply chain. Once the crisis has been overcome, customers can adopt tools and methodologies to their regular operations. Thanks to this transfer of skills, production and transport run more effectively and are more stable in the long-term. At the same time, solutions like track and trace – which quickly demonstrate the advantages of the Internet of Things – can open the door to the digitalization of the entire logistics and production process.


 

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Daniel Kunz
Daniel Kunz

Expert Digital Marketing

Digitization and the Internet of Things are among the favourite topics of Daniel Kunz. He has been with Deutsche Telekom since 2017 and regularly writes about technology trends and many exciting topics, especially for the retail trade and the logistics industry.