Lns enablinga smartconnectedsupplychain

1. ENABLING A
SMART CONNECTED
SUPPLY CHAIN
A Manufacturer’s Guide to Leveraging
Modern Technologies Throughout the Enterprise
lnsresearch.com

2. ENABLING A SMART CONNECTED SUPPLY CHAIN
A Manufacturer’s Guide to Leveraging Modern Technologies
Throughout the Enterprise
lnsresearch.com
TABLE OF CONTENTS
Section 1: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2: What Is the Cloud and Why Should We Go There? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3: Modern Business Processes: Digital Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4: Seven Steps to a Smart Connected Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5: Summary & Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3. SECTION 1
Introduction

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The manufacturing industry has entered a completely new techno-
logical realm that did not even exist five years ago. Three industrial
revolutions forever changed manufacturing—and the world—and
the fourth is now underway. Factories have had to adapt rapidly with
the advent of advanced automation and robotics as well as software
to manage processes and control. The onset of digital manufacturing
accelerates the need for new approaches. While consumers typically
embrace disruptive technology with enthusiasm, manufacturers in-
evitably approach new technology with caution, carefully evaluating
how it can improve their businesses. Eventually, however, caution
must be replaced with innovation to ensure survival. Those orga-
nizations that find themselves on the wrong side of the technology
curve today will face increasing challenges to remain competitive as
time marches forward.
Introduction
From Industry 1.0 to Industry 4.0
1800 1900 2000 Today
FIRST
Industrial Revolution
Through the introduction of mechanical
production facilities with the help of
water and steam power
SECOND
Industrial Revolution
Through the introduction of a division
of labor and mass production with
the help of electrical energy
THIRD
Industrial Revolution
Through the use of
electronic and IT systems that
further automate production
FOURTH
Industrial Revolution
Through the use of
cyber-physical systems
First mechanical loom, 1784 First assembly line, Cincinnati
slaughter houses, 1870
First programmable
logic controller (PLC),
Modicon 084, 1969
DEGREE OF
COMPLEXITY
© DFKI, 2011

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This report discusses the benefits of moving to the cloud and of
adopting the Industrial Internet of Things (IIoT) Platform, and con-
siders some of the ways that manufacturers can embark on the route
to realizing value from these new technologies. In particular, we
highlight the Smart Connected Supply Chain (SCSC) as an example
of modern business processes using leading technologies. Manufac-
turers will learn how they can adopt business processes like SCSC
by getting started with the cloud and driving first-class customer
iteration through business processes beyond the enterprise walls.
We begin by defining the Smart Connected Supply Chain. At its
simplest it should be:
CONNECTED: within the enterprise, therefore linking all business
systems and people. This includes manufacturing beyond the enter-
prise to the extended supply chain of suppliers, customers, and other
stakeholders, as well as to the products and parts that compose the
entirety of that manufacturer’s operations.
SMART: making use of information available from sensors and con-
trollers in the plant, in business systems, and in the extended supply
chain. In time this will encompass learning systems, augmented
reality, and other emerging technologies allowing more capability
with less effort, improving productivity, quality, and customer satis-
faction in the process.
SEAMLESS DIGITAL COMMUNICATION: first and foremost, the SCSC
allows those involved in running the supply chain the ability to do a
better job by being better informed, more responsive, and productive.
Introduction (Cont.)
MATERIALS
AND
SUPPLIERS
SUPPLY CHAIN MOM
ERPERP
PRODUCTS
AND
CUSTOMERS
Plant
Controls
Sensors &
Machines
Manufacturing Operations Management

6. SECTION 2
What Is the Cloud and
Why Should We Go There?

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Cloud computing uses a network of remote servers hosted on the In-
ternet to store, manage, and process data, rather than a local server
or a personal computer.
In LNS Research’s 2015-2016 Metrics that Matter research project,
conducted jointly with MESA International, we asked our 250+
survey respondents about actual and planned ERP deployment
models. To nobody’s surprise, 64% of current ERP deployments are
on premise. However, two-thirds of planned new deployments will
be cloud-based.
Cloud: Today and Tomorrow
On-premise
Public cloud hosted
by software vendor
Private cloud
Public cloud hosted
by third party
0% 10% 20% 30% 40% 50% 60% 70%
Which best describes your current
and planned ERP deployment model?
34%
25%
30%
11%
25%
7%
4%
64%
Planned
Current
CLOUD NOW: 36%
CLOUD PLANNED: 66%

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In our Metrics that Matter survey we asked: “What are the top
impacts you think cloud-based solutions are/will be having toward
helping you improve your manufacturing performance?”
The results speak for themselves: lowering the total cost of own-
ership will always appear near the top of the list. Unburdening the IT
department from having to run infrastructure usually ranks high. The
top responses all tie back to enabling agility:
• Better mobility
• Making multi-plant improvements
• Manufacturing flexibility increase
• Data analytics across the enterprise
• Scalability
It is important to note that cloud not only facilitates better internal
collaboration and communication—that benefit extends outside the
enterprise as well.
Every company that wants to grow needs to continuously nurture
its supplier and customer relationships; business processes such as
SCSC will support that effort.
So, we come to the simple conclusion about “why cloud?” If
companies do not have a cloud strategy, they risk falling behind their
competitors, wasting money, losing agility, and ultimately having un-
happier customers and suppliers—not an optimal situation.
The Cloud and Agility
What are the top impacts you think cloud-based solutions are/will be
having toward helping you improve your manufacturing performance?
Don’t know
Lower the total cost of ownership for implementing
|manufacturing performance software
Unburden IT from having to maintain servers
and software updates
Speed the time it takes to implement
manufacturing performance software
Make it easier to compare performance
information across multiple plants / facilities
Make it easier to implement performance improvement
across multiple plants / facilities
Increase manufacturing flexibility
Enable performance information
on mobile devices
Give better access to manufacturing
information to customers
Improve and / or reduce cost
of corporate security
Other
Give better access to manufac-
turing information to suppliers
0% 10% 20% 30% 40%
42%
25%
20%
19%
12%
11%
11%
10%
7%
6%
6%
4%
“We only focus on what differentiates us from our competition, and
running an IT function is not one of them.”
–JEFF IMMELT, CEO, GE

9. SECTION 3
Modern Business Processes:
Digital Transformation

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Digital Transformation Framework
The journey to digital and distributed business processes, while not
straightforward, is essential in maintaining successful operations as
technology adoption grows across industries. LNS Research has
developed a Digital Transformation Framework to help manufactur-
ers plan their route from idea to world-class manufacturing. While
neither explicitly prescriptive nor linear, it provides guidance to
manufacturers on how they can change their business processes
to make the most of new technologies that are disrupting industry,
such as cloud, the IoT, and big data analytics.
Below, the process is split into five main stages, though the starting
point may differ depending on the individual journey and circumstanc-
es. The most important aspect to realize is that Digital Transformation
is an iterative process requiring constant feedback, adjustment, and
improvement. Trial and error—followed by course-correction—should
be embraced as a necessary component of a continuous improvement
process, even though it flies in the face of many manufacturers’ risk-
averse technology strategies. These steps include:
STRATEGIC OBJECTIVES
This could be a vision on how Industry 4.0, Smart Connected Op-
erations, or Digital Manufacturing will increase the effectiveness
of your business. Companies must work through the process and
iterate the objectives to define, improve, and focus the team on
these objectives. They also must define at a high level the business
processes to be transformed. In our example, businesses would
define the existing supply chain processes and the expected SCSC
outcomes. Executive sponsorship should be signed off before com-
pleting this process.
SOLUTION SELECTION
BUSINESS CASE DEVELOPMENT
OPERATIONAL ARCHITECTURE
OPERATIONAL EXCELLENCE
SMART CONNECTED OPERATIONS
Eliminating Bias and
Finding Long Term Partners
Evaluation
Team
Research
Pilot
RFP
DISCOVERY
PLANNING
BUSINESS CASE
SELECTION
Project
Charter
Defining Immediate
and Long Term ROI
Managing IT-OT
Convergence and Next-
Gen IIoT Technology
Realigning People,
Process, and Technology
Reimagining Business
Process and Service Delivery
COSTS TOTAL YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
HARDWARE
SOFTWARE LICENSING
THIRD PARTY SOFTWARE
APPLICATION SOFTWARE
DOCUMENTATION & TRAINING
MAINTENANCE
INSTALLATION
INTEGRATION
LEGACY DATA LOADING
PROJECT MANAGEMENT
SUPPORT
TOTAL:
CONNECTIVITY
SMART CONNECTED ENTERPRISE
APPLICATION
DEVELOPMENT
CLOUD
BIG DATA ANALYTICS
IoT Enabled Business SystemsL4
Smart Connected Operations - IIoT Enabled
Production, Quality, Inventory, MaintenanceL3
L2 L1 L0
IIoT Enabled
Next-Gen
Systems
L5 IoT Enabled Governance and Planning Systems
Smart Connected Assets -
IIoT Enabled Sensors, Instrumentation, Controls,
Assets, and Materials
APMEHS
ENERGY QUALITY OPERATIONS
People – Process – Technology
Operational Excellence Platform
OPERATIONAL
EXCELLENCE SUPPORT
Fall short on any pillar and your
OpEx platform becomes tippy
Fall short on two or more pillars and your
OpEx platform becomes totally unstable
DIGITAL TRANSFORMATION FRAMEWORK

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Digital Transformation Framework (Cont.)
OPERATIONAL EXCELLENCE
This takes a deeper look at how things are done and how they can
be improved. There are maturity models for this built around people,
process, technology, metrics, practices, and innovation processes that
help to incorporate Digital Transformation into existing programs such
as Lean and Six Sigma. In SCSC, companies define the sub-processes,
the communications with people inside and outside the enterprise,
and the technology to be used.
OPERATIONAL ARCHITECTURE:
Enterprise Architecture is traditionally IT-centric, focused around the
structured data contained in systems like Product Lifecycle Manage-
ment (PLM), Enterprise Resource Planning (ERP), and Supply Chain
Management (SCM). Operational Architecture includes the connection
to sensor data and the technical architecture of everything in the plant.
The SCSC business process extends down into the plant and beyond
the Enterprise Architecture to customers and suppliers—the extended
architecture will be defined at this stage.
BUSINESS CASE
This is the supporting master business case and transformative
business case journey that leads from the current as-is state to a
future state delivering against strategic objectives and using the
Operational Architecture defined in the previous steps. It should
be forward-looking on industry trends and incorporate a disruptive
approach to business as appropriate.
SOLUTION SELECTION
This provides methodologies to assemble and charter selection teams,
determine best fit requirements, and evaluate and select technology.
People - Process - Technology
OPERATIONAL EXCELLENCE PLATFORM
Fall short on any pillar and your OpEx platform becomes fragile
Fall short on two or more pillars and your OpEx platform
becomes totally unstable
APMEHS
ENERGY QUALITY OPERATIONS
People – Process – Technology
Operational Excellence Platform
OPERATIONAL
EXCELLENCE SUPPORT
Fall short on any pillar and your
OpEx platform becomes tippy
Fall short on two or more pillars and your
OpEx platform becomes totally unstable

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Digital Transformation and Operational Excellence
The supply chain takes the pillars in each enterprise and defines the
people, processes, and technology required to bridge the enterprises.
In the supply chain we can imagine a bridge between the company
and the customer. Just as a suspension bridge is held up by cables,
which are in turn made up of more cables and, ultimately, wires, so too
is a supply chain a means of communication, not just via technology
but also by helping to bring people from customer and company to-
gether and to allow business processes to cross the divide.
Many business processes will ultimately connect companies to
their customers and suppliers. The first and most vital cable is the
supply chain cable. Getting started requires building important
smaller wires covering technology, process, and people. We will take
a quick look at each:
TECHNOLOGY is a key to success. As we have established, it is nec-
essary to choose a cloud platform. A key to achieving success in a
Smart Connected Supply Chain is access to business and manu-
facturing information, both from inside the enterprise and, where
necessary, from outside. Another given in most cloud platforms is
mobility. Modern platforms are often designed from the bottom up
to include a user interface layer that is accessible from anywhere.
Without a flexible mobile platform, many of the benefits that can
be delivered by SCSC will not materialize.
PROCESS can be complex in the supply chain. Keeping it simple
and concentrating on the individual processes (the wires described
above) will lead to success in initial projects. However, when defin-
ing the strategic objectives, the larger goals must also be defined to
ensure that the choices of platform, solutions, and partners (custom-
ers, suppliers, software vendors, etc.) will allow future expansion/
evolution and roll out to be achieved.
PEOPLE should be at the center of relationships between businesses
and their customers. An SCSC pilot is a great way to build relation-
ships with key people in a customer base. It is also an opportunity for
manufacturers to demonstrate the esteem in which they hold their
employees. Staff attraction and retention is vital in today’s cutthroat
employment world. Working with modern systems using technology
with which young engineers and business people feel at home will
greatly enhance the chances of hiring and retaining the best talent.

13. SECTION 4
Seven Steps to a Smart
Connected Supply Chain

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WORK THROUGH STRATEGIC OBJECTIVES: Gain C-level spon-
sorship, define team, and outline goals. The team is vital;
make sure you include main stakeholders, gain necessary buy-in,
and agree to the goals. These goals should include the various gates
that need to be passed to ensure success and a clear definition of
success and failure criteria. Incremental failure is not a major issue
but it must be recognized as early as possible so that suitable alter-
natives can be planned and executed without undue delay to the
project. Failing fast is fine; failing when it is too late is not.
ENGAGE CUSTOMERS/SUPPLIERS: Select and on-board a
small number of key customers, suppliers, and products
for early steps. Augment the team with individuals from custom-
er and supplier companies and make a clear definition of project
responsibilities and touch points for your technology, people,
and business processes. Define success and the initial and long-
term benefits for your partner(s)—shared risk works as long as
the expectations for shared benefits are clear.
1.
2.
Companies will need to adopt cloud and IoT-based solutions to
ensure that their supply chains achieve connectivity, agility, and
responsiveness in the future. So how do companies get started on
this path? Normally straightforward apps are the place to start, often
with analytics that bring new and unexpected insights. Beyond that,
one of the key promises of the IIoT is to build business processes in
the extended enterprise. Our example is the SCSC business process.
If we visualize the supply chain as a suspension bridge with the de-
tailed processes, technologies, and people as the individual cables
that hold the bridge up, then success will only be achieved if we
manage to make every wire work as planned.
The following are steps for pursuing this path. Executive spon-
sorship and planning represent the two keys to any successful pilot
where people, technology, and processes are going to be signifi-
cantly affected. Keeping in mind the Digital Transformation Frame-
work earlier in this report, the seven steps to a SCSC are:
Seven Steps to a Smart Connected Supply Chain

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ENSURE YOUR ERP IS UP TO THE TASK: ERP in the cloud is
an advantage: you need to have access to necessary infor-
mation. Easy access to data will be a big advantage for new pro-
cesses on the cloud. While you may or may not already run ERP
in the cloud, the pilot will require minimum ERP functionality as
well as connectivity to your plant so that necessary supply chain
information can be collated and shared with your customer. This
pilot is intended to go beyond ordinary supply chain, allowing
customer visibility into the production schedule and actual order
progress. This will lead to quick order change capability and opti-
mization of resources across many customers and plants: a truly
Smart Connected Supply Chain.
DEFINE SCSC SCOPE: The meaning and functionality of
supply chain varies considerably depending on the type
of operation. Outsourced manufacturers may focus on supplier
collaboration while an OEM that depends on a large number of
suppliers to deliver components may want to focus on short-
term planning and scheduling.
3.
4.
Scheduling in many manufacturers is done almost off-line. Busi-
ness systems that handle planning often pass a “schedule” to a plant
or line that is then executed; feedback comes at the end of the order.
The SCSC scheduling app will give up-to-the-minute reporting on
planned and actual orders, taking into account current, rather than
assumed, manufacturing performance and capacity.
Manufacturers that make very complex products that will become
connected once delivered might choose to start with design and
product data definition. The SCSC will enable a complete end-to-
end solution from raw materials to delivered product, whereas in
pilots specific business processes must be chosen and addressed.
Whatever the choice, when defining the pilot, specify all the busi-
ness functions that you and your customer or supplier might want
and then choose those that will be used. This will allow everyone to
work towards a goal that will improve processes and help people.
Scope creep is a potential hazard to any complex project like
implementing the SCSC. Having defined initial business processes,
the list should not be expanded as it is always easy to add new func-
tionality later. This is a key role played by sponsoring executives
both within your enterprise and within partner organization—they
must ensure goals remain focused, though change can still be
allowed in subsequent phases if it is seen as beneficial. Modern
technology architectures allow flexibility, fast change, and experi-
mentation; these potential benefits should not morph into anarchic
change for its own sake.

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THE
SUPPLY CHAIN
CABLE
PROCESS
PEOPLE
TECHNOLOGY
FORECASTING
PLANNING
SCHEDULING
PRODUCTION PLANNING
PRODUCTION EXECUTION
DEMAND MANAGEMENT
VISIBILITY
CONNECTIVITY
DATA MANAGEMENT
ANALYTICS
CULTURE
EMPOWERMENT
TRAINING
SELECT SOFTWARE: Although we include software selec-
tion as a separate item here, the choices that you make
will gradually coalesce as you go through the initial phases of
the SCSC project. Studying software capabilities of potential IIoT
vendors and those of your existing solution providers should be a
continuous thread of your project. We need to remember that the
majority of your smart supply chain exists only in smaller business
processes today. Working with vendors to bring the required busi-
ness processes into the IIoT and to enable custom processes to be
built through small apps running on the IIoT Platform will start to
deliver the promise of the digital manufacturing world.
DESIGN AND IMPLEMENT YOUR PILOT ON A CLOUD PLAT-
FORM, INTEGRATE AND CONNECT: Project implementation
will inevitability deviate from the plan on occasion, but having
clear goals and gates to pass and a committed, multi-disciplined
team will lead to success. Again, you should use your software
vendors as much as possible; it is very much in their interest that
you successfully deploy apps that meet your initial goals. Once
live, work with your customer to measure success; have the
goals been met? Which technology helped people the most?
Which technology drove the most financial benefit and where
could the biggest improvements be made? Which business pro-
cesses worked between supplier and customer and how did the
relationships between the people in the organizations develop?
IMPROVE AND DEFINE ROLL-OUT: Go to Step 1 and set new
goals, either rolling out to more customers and suppliers or
adding new functionality and business processes. The SCSC will
become an ever-growing set of agile processes driven by technol-
ogy for the benefit of the people in the extended supply chain. It
will bring together people who today are not connected at all (like
tier 2 suppliers and beyond, and end user consumers) with the
goal of improving everyone’s competitiveness. The SCSC will be a
large consumer of data gathered across an IIoT Platform and, more
importantly, it will be a generator of new and valuable data that is
sure to become part of a new big data analytics program.
5. 7.
6.

17. SECTION 5
Summary
& Recommendations

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Summary and Recommendations
Presented by:Author:
© 2016 LNS Research.
The Smart Connected Supply Chain is a fantastic way of showing the
true value of cloud computing and the Industrial Internet of Things
beyond the usual benefits of saving IT money. When manufacturers
think beyond traditional business processes and consider process
improvements across their entire supply chain ecosystem, real
change can start. However, it is not the IIoT that will drive change
but the people and enterprises across the supply chain whose needs
are evolving rapidly in the highly competitive digital world. Business
processes such as those implemented in the SCSC will demonstrate
how the IoT brings together technology, people, and processes to
transform the way that we do business. Connectivity, from the lowest
level in the plant to the top of the business hierarchy and beyond to
customers and suppliers, enables these business processes.
Leading manufacturers are already embarking on this journey from
traditional to distributed business processes. Every manufacturer
that wants to keep up needs to start the journey now; there is little to
lose and much to win.
lnsresearch.com
Connect:
Andrew Hughes,
Principal Analyst
andrew.hughes@lnsresearch.com