Digitized supply chains generate rapid payback

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Across the globe, customers, regulators and the public at large are placing greater demands on manufacturers regarding product quality and their ability to track and trace product shipments. In turn, manufacturers are responding with a variety of strategies to both drive efficiencies and to help maximize their ability to respond to these customers’ demands.  Schneider Electric has responded to these requirements by transforming our supply chain through a process we call the Tailored, Sustainable, and Connected 4.0 transformation. Our transformation process involves not only improvements to our own supply chain, but we are driving the solutions we develop to our customers so that they, too, can experience the digitization benefits of rapid return on investment and streamlined operations.

Our initiative involves the application of lean digitization to global factories and distribution centers to create the Smart Supply Chain program.  I thought I would share with you some of the results that we are seeing to help others seeking to improve their own processes.

Over the last two years, we saw our smart supply chain digitization investments bear fruit in the form of increased productivity and efficiency numbers. In our Sydney, Australia, smart distribution center, for example, we saved 9% in labor productivity and reduced our energy consumption by 5%. We also generated a 4% improvement in the Overall Equipment Efficiency (OEE) of our critical assets. In addition, 30% of our shop floor process issues are being addressed at a much faster rate.  In our Shanghai, China distribution center, we demonstrated a 10% reduction in energy consumption and a 26% improvement in mean time to repair (MTTR) on conveyors that are running our critical operations.

In order to better understand these results and the applicability of our digital transformation efforts to the global supply chains of our enterprise customers, let’s take a closer look at how our technology and our people helped us to reinvent the way work gets done across our smart factories and smart distribution centers.

Focus on customer needs drives the high-level strategy

Our smart distribution center initiative consists of three key pillars, all of which are reflected in the name of our global supply chain process, the Tailored, Sustainable, and Connected 4.0 transformation:

  • Tailored – We recognized that digital transformation investments had to address the needs and expectations of our customers. The “one size fits all” supply chain approach does not work for our varied customer segments. We needed to be flexible enough to accommodate different customer demands by aligning not to our business needs, but to their business needs. By closely analyzing customer business requirements, we were focused on designing our supply chain facilities in a completely different and more tailored manner. Implementing this new approach meant introducing sophisticated QR code and serialization technologies that enabled end-to-end visibility and traceability.

For example, our distributor customers are looking for rapid pallet in/pallet out efficiency, a high level of traceability, and simplicity in handling the material that we are delivering to them. Our OEMs, on the other hand, require delivery of a solution that packages PLCs with contactors and pushbuttons under one order. When our shipment arrives in their facility, we enable them to quickly associate that shipment to the right project and machine assembly area.

  • Sustainable – In order to lower our carbon emissions, and to help our suppliers and customers to lower theirs, we developed best practices through high performance power monitoring. We are also moving forward with providing our customers with sustainable offers. This means providing them with information as to whether renewable energies have been used to create and manufacture our source products and whether our products are built from recycled materials.
  • Connected – We decided to use an open and dynamic approach for digitizing our facility operations. We rely on EcoStruxure for Industry, a fully open and interoperable platform that allows us to connect devices from a wide assortment of third-party manufacturers. For example, in our distribution centers, we were able to easily integrate third-party warehouse software and OEM material handling automation solutions. These connected solutions provide us with the level of visibility we needed to drive efficiencies and to perform predictive analytics.

Benefits of the lean digitization concept

Our own supply chain digitization initiatives have taught us that success relies on a non-invasive approach to modernization, one that we call lean digitization. As opposed to traditional rip and replace methods, lean digitization offers a measured approach that starts small, but that grows step-by-step as the level of confidence builds. A huge, unexpected benefit that we encountered when rolling out this initiative centered around the level of employee enthusiasm and acceptance.  From site-to-site, as our shop floor employees discovered the power of digitization, they immediately began to generate new ideas and to invent new ways of driving additional productivity and efficiency–approaches that were never even initially considered.

Once our people achieved a certain level of confidence, our performance numbers began to rapidly accelerate.  Within three years we were able to digitize 60 factories and 20 distribution centers. We also attained a systematic payback of between 2 to 2.5 years across those facilities.

Learn more about how your organization can leverage supply chain digitization to generate rapid return on investment here.

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