Reshaping Manufacturing Logistics for the Digital Age

By Rafael Díaz

Manufacturing is entering a new era of automation driven by digital technologies. But before this digital revolution can gather pace, business rules that are rooted in traditional operations need to be redefined. The Zaragoza Logistics Center, in Zaragoza, Spain, and the Fraunhofer Institute IML, in Dortmund, Germany, are collaborating on a research project to help companies develop business rules for the digital age in a key area: manufacturing logistics.

Manufacturers orchestrate flows of materials and resources to meet ever-changing market demand. This is especially important for well-established production systems such as just-in-time and make-to-order.
The next phase in manufacturing’s evolution will harness digital technologies to automate these processes. Often called Industry 4.0 or the fourth industrial revolution, this wave of innovation exploits technological advances such as IoT and cloud computing to create “smart factories.”

Industry 4.0 manufacturers will take the synchronization of materials and resource flows with market demand to a higher level. Production systems will use a much wider array of real-time data sources as well as automated decision making capabilities to meld physical and digital processes together seamlessly.

Manufacturing logistics is at the heart of these changes. If the fourth industrial revolution is to succeed, materials, parts, and/or finished inventory must be delivered on time and in the right quantity to production facilities with unerring accuracy. Traditional just-in-time and make-to-order models have the same goals, but the environment in which they operate is vastly different, and less demanding. In addition to more advanced automation and the real-time exchange of information across supply chains, Industry 4.0 factories must compete in an increasingly volatile, global commercial environment.

An example of the challenges that the ZLC/Fraunhofer research team is exploring is how production sequencing methods can be re-engineered for smart factories. Conventional methods do not capture the complexities of Industry 4.0 operations. For example, the data sources are more limited, and many productivity-oriented performance metrics including throughput, cycle times and WIP (work in progress), are ill-suited to digital manufacturing. Practices such as first-come-first-served – a relatively simple algorithm used to schedule production flows in plants – are not designed for the large volumes of real-time data associated with Industry 4.0 manufacturing.

The Fraunhofer Institute is creating prototypes of smart production systems that extend various production philosophies. WIP prototypes that employ real-time demand information can make material retrieval processes and other production activities much more flexible and resilient. The benefits include the elimination of unnecessary stock, reduced risk and improved customer service.

The information systems and technology required to achieve these improvements are available; how business rules should be changed and the impact on manufacturing processes are among the issues that require further research. The team also is exploring the implications for flexibility, resilience and productivity, as manufacturing systems undergo a broad shift away from centralized planning in favour of decentralized approaches.

These changes will intensify the level of horizontal and vertical communications between objects, systems, and human operators in manufacturing supply chains. The cross-flows of information will underpin decision-making processes. Yet several studies show that industry lags in its efforts to introduce innovative solutions that accommodate these changes. Autonomous systems are needed, that capture and process large volumes of complex data in real-time, while supporting normative models that consider these complexities and interactions in an intricate, multipart competitive environment.

Another obstacle is that companies are still cautious about investing in IoT-enabled manufacturing systems. In January of this year, management consultants McKinsey surveyed 300 experts from companies in Germany, Japan, and the United States, for the firm’s Industry 4.0 Expert Survey. McKinsey found that although optimism about the transition to Industry 4.0 prevails, “many [companies] are still struggling to even get started.” The main implementation barriers were problems coordinating actions across organizational units; cybersecurity and data ownership issues when dealing with third-party providers; lack of courage to push radical reforms; and a lack of talent.

The ZLC/Fraunhofer research team aims to identify some of the manufacturing logistics barriers to Industry 4.0, thereby helping companies to address these issues and make the transition to a new era in manufacturing.