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Learning by Doing Digitally
Kadir Dindar, CEO Siemens Digital Logistics
Do we still need offices? Are business trips necessary? I’ve witnessed a profound change of heart in my recent conversations with customers and business partners. As we all adopt new ways of working amid the coronavirus outbreak, we’re discovering: “This actually works!” In many cases, it actually works better than ever before. Instead of sitting in traffic, we’re working on our projects. Meetings actually stay within the allotted time. The pandemic is becoming a game-changer. And working from home is accelerating our acceptance of digital technology. Stay-at-home orders? We’ll meet in the cloud! After just a few weeks, we were working normally in our virtual spaces – and just as efficiently as in our pre-pandemic business environments.
Easily transcending time, space, and self-isolation
Who could’ve imagined this? The debate over whether and how the digital revolution can succeed, the reluctance to embrace an issue long fraught with skepticism in the logistics industry – all this has given way to “learning by doing” in the digital sphere. We’re simply doing it, because there’s no other way. No one right now is feeling the pain of a long-overdue process of change. No one in these unusual times can afford to continue endless debates. The digital revolution is happening here and now – basta!
The global pandemic has forced our hand and catapulted us into real-time mode. Even those who were still on the fence now recognize the new reality – a reality much richer than the vague foreboding they felt before. The crisis has shown businesses how modern IT solutions help their teams easily overcome the limitations of time, space, and stay-at-home orders.
Digital technology has become our saving grace in a crisis. It provides the infrastructure for our economy and for an industry that the public has suddenly recognized as essential. Germany’s “Council of Logistics Experts,” drawing on a recent survey, believes that the digital transformation of the logistics industry will accelerate after the crisis. But most respondents planned to take a break from pushing ahead with such efforts in the current situation, the Council reports.
Putting aside doubts
Take a break? After the crisis? I would like to encourage my fellow logistics professionals to seize the valuable momentum that is helping us through the current situation and apply it to the digitization of logistics processes – and to put aside the pre-programmed doubts that have held up innovation in the past. Because when you get right down to it, collaborating in the supply chain with existing IT solutions is just as easy as collaborating on projects using Microsoft Teams, Skype, or Asana.
Three reasons why now is the perfect time to push forward full throttle with digital logistics:
1. Everything is already in place
Digital supply chain management solutions and services already have a long and successful track record – and are now ready to go with the click of a mouse. This includes cloud-based platforms and tools for integrating service partners, managing orders, and achieving end-to-end visibility of supply chain processes. State-of-the-art APIs make it quick and easy to integrate existing systems.
2. There’s zero risk
Logistics lives from constantly recurring, comparable processes and scenarios. We’ve studied this in thousands of projects and used our insights to develop software and consulting tools that fit any scenario. The “digital twin” consulting tool that we use at Siemens Digital Logistics makes it possible to fully simulate logistical concepts based on actual conditions and real-time data – while taking into account all conceivable contributing factors. This eliminates the risk of long implementation phases and expensive learning curves.
3. Ecosystems ensure growth
Standalone solutions leave you standing alone. They make it harder for you to adapt your logistics networks to new customers and new challenges. Today’s ecosystems provide the IT infrastructure for dynamic, flexible growth in all directions. They offer innovative IT solutions that are continually evolving. They make it possible to utilize and share data, make more informed decisions, and streamline processes.
Germany’s KfW development bank believes that the coronavirus crisis will unleash a digital boom in the small and medium-sized business sector. “Corona is forcing smaller companies to up their game,” the banking giant observes. I wouldn’t see this as something forced. I see it as an opportunity to set aside skepticism and finally implement long-deferred digital upgrades.
New top decision-maker in logistics
Jürgen Schulz, VP Consulting , Siemens Digital Logistics
Supply chains are sensitive. They are vulnerable to strikes, weather disasters, pandemics. The larger the network of suppliers and production partners, the more influencing factors determine the performance of the supply quality. How can reliable decisions be made at all on the basis of this permanent volatility? How can supply chain managers reliably evaluate the effects of failures or deviations on subsequent events?
Anyone who makes decisions of great importance for the supply of his customers and the development of the company from the gut risks more than an upset stomach. At best, the gut evaluates the situation as it presents itself – on the basis of key data and empirical values, but not on the basis of dynamically developing parameters.
Entrepreneurial foresight is now supported by data. A picture that reflects the current operational status emerges from a mass of validated, project-related data. But what happens when the lines and contours of this picture shift, when colours and shapes change?
With the Digital Twin you can sketch exactly that. The IT tool is used to create a virtual image of the real logistics network down to the last detail, which relates the complex, interdependent things and conditions in logistics networks to one another.
Mit dem Digital Twin lässt sich genau das skizzieren. Bis ins Detail wird mithilfe des IT-Instrumentes ein virtuelles Abbild des realen Logistiknetzwerks erzeugt, das die komplexen, voneinander abhängigen Dinge und Zustände in logistischen Netzwerken in Beziehung zueinander setzt.
Deficits can also be brought to light with the Digital Twin
In this phase of decision-making, logistics experts can playfully try out how different concepts and ideas affect practice before they are implemented in reality. They can simulate how events and changes – including unpredictable ones – affect the supply chain. This makes the Digital Twin a classic Decision Support System.
Even existing deficits can be brought to light with the Digital Twin. In projects for food companies, for example, we have been able to use Digital Twin to find out that a certain product group generates large volume flows but only generates a very small contribution margin. At the same time, we were able to show how costs and margins develop with changing volumes.
Is the customer important for me?
Those who consult the Digital Twin have no problem breaking down the total cost of their logistics to a single customer order in order to get a clear picture of elementary issues: Is this customer important for me? Do I still achieve a positive margin with the customer? Do I want to keep him supplied? What would I have to do to get a better deal at the end of the day? And how would individual measures and marketing campaigns affect business development with the customer?
But Decision Support goes much further. For example, the development of new services and products can be evaluated in advance. Existing product portfolios and ranges can also be examined from the perspective of whether and how they are profitable for the company.
The changing times in which we live make it clear: It will not become easier for anyone to act with foresight and make the right decisions. It's good to have a top decision-maker like the Digital Twin at your side in this situation.
Just think about the customer: What those of us in logistics can learn from US companies
Jürgen Schulz, VP Consulting, Siemens Digital Logistics
Customer habits can be hard to understand. Sometimes they queue for hours to get their hands on a hot product. Other times they seem not to care about the first-class services and solutions that a company has to offer. Why is this?
If you want to win customers over, you need to understand them. You need to know what motivates them, what they are looking for and how you can meet their needs in an impressive way. That has never been easier than in today's digital world.
If you look for data about how customers come into contact with your company, and if you glean valuable information from this data, you are sure to make progress towards fulfilling your desires. Logistics adopts a central role here as the interface between customers and suppliers.
Valuable knowledge for customer-oriented operations
Knowledge about customers and their requirements and needs starts at the end of the process chain. Which products from a whole range of articles do customers want delivered within just a few hours? What degree of custom finishing do these products require? What added value is used? A look at logistics, which is where the order requirements of customers are ultimately fulfilled, provides valuable information here that enables customer-oriented operations and good ratings.
Consequently, successful business development does not start in production, purchasing or marketing; it starts with a focus on the customer. US groups like Amazon show us how this is done. Solutions such as Amazon Prime, where the company delivers certain goods in just three hours via premium shipping, are the result of a steadfast focus on customers.
A strategic component of digital transformation
Companies acquire the required knowledge for this through the digitalisation of logistics processes. Logistics must therefore be understood as an integral part of business processes, and not as a downstream accessory.
Companies that view logistics as a strategic component of digital transformation will find it easier to quickly and flexibly adjust their business model in line with dynamically changing customer requirements. This requires "translators" that transform data into relevant information and develop business options from this information to enable logistics to become the enabler of sustainably successful business development.
Cloud-based logistics IT platforms act as translators of this kind. This is because they bundle together data from different sources, validate it and make it available for a range of different analysis and management tools. They also link together the complex processes in a logistics network to create a convincing solution that focuses on customers and their requirements.
The digital twin
Jürgen Schulz, VP Consulting, Siemens Digital Logistics
Successful logistics experts are looking to the future. They are constantly developing their portfolio of services, adapting it dynamically to customer requirements and keeping a close eye on possible risks. More and more frequently, they are turning to a virtual consultant whose talent is enabling it to position itself as a rising superstar in the field of logistics: the digital twin.
You may have already come across the digital twin concept in industry, since that is where it got its start. The digital twin has been forging a career for itself for years as an intelligent advice-giver in product development, machine and plant operations, and process optimisation.
Its stage is the virtual world but its script is what happens in real life. In other words, a digital twin gives you a 1:1 preplay of how a wind turbine, combined heat and power station, or logistics process will behave in certain conditions, clarifying when there's a risk of a failure and how you can reduce operating costs by tweaking the settings. It also allows you to simulate conditions and constellations taking all conceivable aspects into account.
Decision-making with a high degree of certainty
The digital twin concept is winning more and more acclaim in the logistics sector. And with good reason: it can help to clarify the cause and effect of events in the supply chain with a level of precision that was previously unknown.
A digital twin provides a detailed virtual copy of the real logistics network and the processes used there. It connects the operational level with the strategic decision level. This means that each turn of a screw in the operational system can be "performed" ahead of time and its effect on the overall process can be evaluated on the basis of real data. A digital twin is therefore the ideal simulation and consulting tool. Its users are able to make tactical and strategic decisions with a high degree of certainty.
"What if..." scenarios can be preplayed to predict all their consequences. For example, what effect would a site relocation have on existing procurement and distribution processes? What consequences would extending the product assortment have on delivery frequency? How can the existing resources in a company be used in the best possible way? With a digital twin, these situations can be depicted, planned, controlled and optimised on the basis of real job and order data along with actual routing rules, all with no operational risk. A digital twin therefore adds reliability to decision-making processes for logistics concepts and cost calculations based on real data.
So it is not surprising that international consulting firms such as Gartner count the digital twin concept among their ten top technology trends. The maturity level of the solution is now so high that it offers a clear competitive advantage for supply chain companies thanks to its usage possibilities. Ongoing process monitoring using a digital twin also allows you to work on the basis of optimum operating parameters and therefore ensures efficient processes at low operating costs, which is key given the fact that supply chain costs are constantly on the rise.
Transparency across the entire supply chain process
If you are considering involving a digital twin in your company, however, you should bear in mind certain influencing factors that are key to ensuring you use your digital consultant in the best way possible. To successfully develop a digital twin approach, a combination of project experience, logistical know-how, and extensive knowledge of data, tools and digital twin technology are vital. Just an advisor (without a tool) or just a tool (without experienced configuration support) is often insufficient, since then the set of goals and interests is not sufficient to create a cross-silo digital twin concept.. In practice, we therefore generally use a mixed team of consultants and software experts. This team helps the solution to progress from strategic planning to tactical planning and then to the actual operation of the simulated solution, creating a high level of transparency across the entire supply chain process.
A digital twin pays off in many ways for logistics experts. For example, increased transparency avoids slack operational processes and ensures that capacities are utilised evenly. In our overall experience, even in logistics systems that have already been optimised, a digital twin solution can yield additional savings to the value of five to eight per cent. This is sure to make the digital twin even more popular in the future.