SAP - Industry4Now WhitePaper - June2021

INDUSTRY 4.0

Blueprint for Efficiency

SAP INDUSTRY 4.0

INDUSTRY 4.0:

Excellence in Industrial Productivity Industry 4.0 enables enterprises to face supply chain disruptions directly and the new normal for manufacturing and production, says Dominik Metzger, the lead on SAP’s Industry 4.0 programme

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n a period of unrivalled disruption, an organisation's supply chain has become either its strongest or weakest facet. Those businesses with agile and resilient supply chains have succeeded throughout the events of the past 18 months, while those that have been slow to adapt to digital transformation struggled and, in some cases, face falling further behind in the years to come.

It is uncertain what the future holds, but it is clear that transparency and resiliency will be key to navigating localised threats to productivity, such as the Suez Canal blockage, and the unforeseen global disasters highlighted by the unprecedented and pernicious impact of the COVID-19 pandemic. At the same time, enterprises are faced with increasing customer expectations in product cost, quality, excellence and experience.

Industry 4.0 offers a holistic approach to both these long-term and short-term obstacles to growth and productivity, says Dominik Metzger, Head of Product Management, Manufacturing and Industrial 2

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IOT at SAP, and the lead on SAP’s Industry 4.0 programme. “The main philosophy we at SAP follow with Industry 4.0 is to bring productivity increases into supply chains so that organisations of all sizes and industrial sectors are more resilient to disruptions.”

This process of connecting all core business operations revolves around the transformation of four often disparate but integral pillars across manufacturing, design operations, and employees: Intelligent Factories, Intelligent Products, Intelligent Assets and Empowered People.

“Often you find that too many companies focus on what happens within the four walls of a factory, but with our strategy for Industry 4.0, the real value creation goes far beyond that by connecting these four strategic pillars into end-to-end business processes,” Metzger says. “You can truly achieve a tremendous productivity increase if you connect your entire industrial processes not only the factory - but where products are being engineered and designed, where

FORESIGHT

The main philosophy we at SAP follow with Industry 4.0 is to bring productivity increases into supply chains so that organisations […] are more resilient to disruptions DOMINIK METZGER

recipes are formulated, materials are supplied to production, machines and assets are maintained and serviced, all the way through to the shop-floor, from end-to-end. Supply chains are constantly encountering disruption, and Industry 4.0 is all about equipping users at the right point in time with valuable insights to make the right decision and resolve such a disruption.”

Connecting business applications end to end through Industry 4.0 repositions businesses to be more resilient and increase productivity. But there are a multitude of other benefits, including increasing manufacturing quality and, as customers continue to raise the

bar in terms of service expectations, significantly increase customer experience and satisfaction.

“Industry 4.0 can really be a differentiator to your customer service levels,” Metzger says. "An example that we find fascinating is allowing companies to move towards service offerings and away from classic product offerings. If you consider discrete manufacturers, rather than selling machines, automation equipment or other assets as their primary business model, Industry 4.0 allows them to offer output-based service models. In this way you guarantee the outcome of an industrial asset, and sell this as the primary service to your customers, rather than the sap.com

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SAP INDUSTRY 4.0

Dominik Metzger from SAP talks about Industrial Productivity

physical asset itself. This allows businesses to diversify their product offering against international competition.”

SAP has been at the forefront of Industry 4.0 strategy since its inception more than a decade ago. As the global leader in enterprise business applications, SAP has guided many companies to successfully adopt Industry 4.0 and make it work for them.

“This is one of our biggest strengths,” says Metzger. “Our ability to deeply embed the wealth of machine, sensor and device data, in other words Industrial Internet of Things (IOT) data into business applications, from engineering to logistics and manufacturing to maintenance and service, thereby significantly improving end-to-end business processes.” SAP even offers a hyperscaler agnostic approach to leverage industrial IOT data. Cloud computing allows 4

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a tremendous scalability for Industry 4.0 strategies, while Edge computing ensures robustness of even the most mission critical manufacturing operations.

The second strength is SAP’s leadership on defining and developing initiatives for pan-industry adoption. The company is highly engaged in standardisation bodies and industry consortiums, and continues to drive the conversation forward.

“SAP was one of the founding members of consortias, such as the Platform Industrie 4.0 and the Open Industry 4.0 Alliance which are among the leading institutions driving standardisation and execution for Industry 4.0. The main obstacle for many customers has been TCO, the total cost of operations, the cost of ownership, and of manually integrating the worlds of hardware and software, IT and OT while making it scalable,” says

FORESIGHT

Metzger. "I think this is where we have seen a huge leap forward in the past 10 years.

That’s why standardising is key, and we are involved in this process at every level.”

The third strength of SAP is its unparalleled ecosystem of partners.

Moving from ‘egosystems’ to ecosystems is the new normal in successfully bringing productivity increase with Industry 4.0 from concept to reality. SAP has partnerships with leaders, such as Microsoft for Cloud and Edge computing technologies as well as Siemens for Engineering and Design

SAP was one of the founding members of Platform Industry 4.0, which is still one of the leading institutions driving standardisation for Industry 4.0 applications, to name a few. The strong partnerships expand into many other areas such as System Integrators and Machine and Equipment Makers.

The following series of white papers explores the four pillars of SAP’s Industry 4.0 strategy in depth. Discover expert insight into how to begin or supercharge your Intelligent Factory transformation journey, how to reduce downtime and overheads with Intelligent Assets, and realign your business to take advantage of the challenges and opportunities of today and tomorrow.

DOMINIK METZGER TITLE: GLOBAL VP – HEAD OF PRODUCT MANAGEMENT | MANUFACTURING AND INDUSTRIAL IOT Dominik Metzger is part of the SAP product engineering organization for Digital Supply Chain and works as Head of Product Management for Manufacturing & Industrial IOT. A key cornerstone of SAPs Digital Supply Chain strategy is to bring significant productivity increase and cost reduction to customers with the capabilities of Industry 4.0. SAPs Industry 4.0 strategy is called Industry 4.Now with a high focus on Intelligent Products, Intelligent Factories/Plants, Intelligent Assets and Empowered People based on technology enablers with the Industrial IOT. With around 14 years of experience in the SAP Digital Supply Chain space Dominik has a deep background in consulting and go-to-market responsibilities. Dominik was based out of New York City for the past 4 years where he was a Managing Director for the implementation partner Westernacher Consulting.

Prior to his time in the US, Dominik worked as a Solution Architect for Digital Supply Chain solutions in Singapore (for 4 years) and Germany. He delivered numerous successful implementation projects across Europe and Asia within different industries including Automotive, Chemicals, Consumer Products, Logistics Service Providers, IM&C and Retail.

INDUSTRY 4.0

Intelligent Products Report

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Consumers now expect every product they buy to be delivered their way: in their colours and with their chosen combination of capabilities KEITH ZOBOTT

GLOBAL VICE PRESIDENT OF DIGITAL PRODUCTS AND PROJECTS

INTELLIGENT PRODUCTS REPORT

INTRODUCTION

Intelligent Products Intelligent Products take many forms and are redefining the relationship between manufacturers and end users

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ntelligent Products take many forms and are tough to define. A custom t-shirt in colours chosen by a consumer and shipped to their door is an Intelligent Product. So is an industrial machining unit using sensors and IoT to collect data and inform operators of maintenance issues or how processes could be more efficient. A mobile device is both of these things: aesthetically distinct and operationally customised by the user.

The only truly consistent characteristic is that demand is growing, and manufacturers unable to adapt and deliver will fall behind the curve.

Intelligent Products is one of the four pillars of SAP’s Industry 4.0 initiative, alongside Intelligent Factories, Intelligent Assets and Empowered People. Keith Zobott, Global Vice President of Digital Products and Projects, describes Intelligent Products as “very complex devices, whether they're aircraft or machinery, but with some common threads in all of them”.

Here he explores how both consumers and enterprises stand to benefit from the wider adoption of these connected and customised smart products, from greater customer satisfaction, to cost savings and fundamental improvements in the way businesses design, manufacture and deliver.

The IoT in manufacturing market size is projected to grow to

$45bn+ by 2022 marketresearch.com

SAP INDUSTRY 4.0

EXECUTIVE INTERVIEW

Custom Products for the Connected Customer Keith Zobott, Global Vice President of Digital Products and Projects at SAP explores the fundamentals of Intelligent Products, and the benefits for both consumers and manufacturers

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ou’ve probably used an Intelligent Product, whether you realised it or not.

Cars which use sensors to remind drivers to refuel, or cameras to assist their parking, are Intelligent Products.

The custom case protecting your mobile device is an intelligent product, too. They all share fundamental characteristics, including the ability to adapt to their environment or how they're being used, the ability to minimise maintenance costs, or maximise performance, and the ability to be personalised by customers.

But the concept is far reaching and can broadly be divided into two categories: aesthetic customisation and performance optimisation.

“At SAP we’re tackling both of those things,” says Keith Zobott, Global Vice President of Digital Products and 10

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KEITH ZOBOTT

Projects at SAP. Zobott uses a pair of exercise shoes as an example of how a product can be both, simultaneously. A runner may buy a pair of smart shoes to help improve their performance. The footwear can track their movements, distance travelled, the locations they visited and other common data points that wearables on the market can already measure. But they can also pinpoint specifics such as foot positioning while taking a stride, or which part of the foot is taking most of the pressure.

On the other side of the equation, a consumer may simply want a shoe that looks great. “We know that consumers now expect every product they buy to be delivered their way: in their colours and with their chosen combination of capabilities,” Zobott explains. “So SAP is building an ecosystem that allows manufacturers to provide products that

FEATURE HEADER SAP: WHITE PAPER

are unique to consumer needs, but in a way that is quick and efficient.”

INTELLIGENT PRODUCTS IN BUSINESS The positives Intelligent Products bring to end users are obvious, but manufacturers also stand to reap their own benefits as they gain traction.

“We already see the need for Intelligent Products in a lot of machinery today, whether it's industrial machinery, or aircraft and automotive machinery,” says Zobott. “I would say that’s rooted in the fact that OEMs want to reduce the total cost of ownership of this equipment. And manufacturers can take advantage of this flexibility to optimise both the non-recurring costs related to the cost of developing an asset or a product, as well as the recurring costs that are built into a product.

“Others are benefiting by leveraging a product platforming strategy, which enables them to drive reuse significantly within their particular product families,” Zobott adds. “We're gathering all this

SAP has integrated design solutions connecting the data that allow manufacturers to provide unique products for consumer needs

really interesting data, but if we don't find a way to reconstitute that data in an efficient way in the next design, what good is it? These are just some of the ways it adds value.”

Once implemented, the model perpetuates a cycle of self improvement. “Every process, every tool, and every set of data feeds back at every stage to continually learn and improve,” Zobott continues. “So businesses can understand more about the engineering assumptions that were made early in the design process, and either validate or invalidate them.

“From a business standpoint, what we're really talking about here is the future of changing the whole experience, instead of just changing the product or service you're selling.

The most expensive things for an airline operator, for example, are delays and cancellations. So there is tremendous sap.com

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Keith Zobott from SAP talks about digital products in Supply Chain

value in reducing those by just a fraction through gaining more insights into the performance of an engine or any aircraft system. Using this data, you can maybe tweak maintenance intervals to avoid any unwanted delays and cancellations.

The benefits to customer satisfaction and other costs can be dramatic.”

What we're really talking about here is the future of changing the whole experience instead...

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THE KEY IS GETTING STARTED A digital transformation journey of this magnitude can rapidly become “overwhelming”, Zobott admits. The initial and most common hurdle to overcome is often organisational: how siloed a company’s departments are and how much data they share, from procurement and supply chain, to engineering and manufacturing.

The COVID-19 pandemic exasperated this issue. Organisations that were once only partially disconnected have become more fragmented and siloed.

“It really validated the need for improved collaboration capabilities, to be more connected and have resilient processes,” Zobott says. “Many companies are now looking at Intelligent Products and how

INTELLIGENT PRODUCTS REPORT

SAP can help them reach their business goals. They are especially interested in our digital thread concept. That’s not simply connecting the dots, but connecting processes and actually breaking down those organisational barriers so that businesses can begin to get visibility upstream and downstream in these processes. That's a key part of our design operation strategy.”

Here SAP is leveraging its vast wealth of expertise, data and integrated platforms to guide businesses of all sizes through their digital transformation. “These are expensive investments, they are hard projects to successfully accomplish, and they can

Our digital thread concept is not simply connecting the dots, but helps break down organisational barriers take anywhere from 18 months to five years depending on how comprehensive they are. At SAP we’re delivering packages that allow customers to access rapid start capabilities. That can be in product lifecycle costing, or maybe in manufacturing through the cloud. We’re creating those on-ramps to make it easy for our customer to try out these capabilities and see if it works for them, and then build on it. The key thing is getting started.”

KEITH ZOBOTT TITLE: GLOBAL VICE PRESIDENT OF DIGITAL PRODUCTS AND PROJECTS Keith's background includes over 30 years of experience with product development, discrete manufacturing, Product Lifecycle Management (PLM), advanced analysis tools, and portfolio & program management. Keith led initiatives in large, complex, global organizations to reduce time to profitability, drive increased customer value, and increase cross-functional process integration. Currently, leading SAP’s Digital Product & Projects solution management organization where our customers’ digital twin begins and initiates our design to operate digital transformation journey toward becoming an Intelligent Enterprise.

Industry 4.0 technologies, including Product Lifecycle Management (PLM), are leading to significant disruption across manufacturing industries.

Before joining SAP, he held various global leadership roles including developing strategic plans for Enterprise Product Lifecycle Management (PLM) and other product development enabling technologies for multi-billion-dollar global businesses.

SAP INDUSTRY 4.0

INTELLIGENT PRODUCTS BY THE NUMBERS

36% vs 33%

Profit margin of smart products compared to other goods, on average

1 in 3 sales are generated by products

with embedded smart devices or intelligence

67%

of manufacturers produce finished products with embedded smart devices or intelligence

46%

of manufacturers are focused on embedding smart devices into products...

45%

…Yet of manufacturers face challenges accessing the required technologies

34%

face challenges finding suppliers capable of delivering high quality smart devices 14

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29%

still struggle to clearly define the customer needs or where smart products can add value Source: MPI/SAP

FEATURE HEADER INTELLIGENT PRODUCTS REPORT

Types of Industry 4.0 products created by percentage of manufacturers Our company’s finished products with embedded smart devices and/or intelligence

27%

Parts/components for other manufactures' products with embedded smart devices and/or intelligence

31%

Industry 4.0 software for manufactures' products

42% 40%

23% Some products

42%

Many products

Financial impact of the application of Industry 4.0 products in past year by percentage of manufacturers

Increase more than 10 percent

17% 16% 43% 42%

Increase 6-10 percent

27% 28%

Increase 1-5 percent

Branding and market awareness

Differentiating products in the market

Source: MPI/SAP

42%

37%

26%

Fluids/substances for other manufactures' products with embedded smart devices and/or intelligence

Customer support

39%

27%

Materials devices for other manufactures' products with embedded smart devices and/or intelligence

by percentage of manufacturers reporting “significant improvement”

41%

28%

Smart devices for other manufactures' products

Biggest areas of improvement through Industry 4.0 products

30%

8% 9%

No change Decrease No Industry 4.0 currently or planned

0% 1% 5% 5%

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INDUSTRY 4.0

Intelligent Factories Report

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All of our customers have initiatives that are looking at how they're going to change for the future MIKE LACKEY

GLOBAL HEAD OF SOLUTION MANAGEMENT FOR DIGITAL MANUFACTURING

INTELLIGENT FACTORIES REPORT

INTRODUCTION

Intelligent Factories Intelligent Factories are meeting the demands of today and defining the future of manufacturing through SAP’s Industry 4.0 initiative

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he manufacturing sector has pioneered global shifts in commerce and trade since the first industrial revolution brought affordable consumer products to the masses. Automation, a commonplace feature in factories and production plants for generations, increased efficiency, delivered better value to stakeholders and customers alike, and placed safety at the forefront of the workplace. Today, assailed on all sides by the global disruption of a prevailing pandemic, regionalised geopolitical complexity including Brexit or trade wars, and customer demands that can shift with the wind, manufacturers stand on the digital transformation of Industry 4.0, the next seismic shift.

Positioned at the centre of this industry shift is the Intelligent Factory, a self-optimising, data-driven strategy that will define the future of manufacturing and production. Agile enough to overcome unforeseen disruption and prescriptive enough to drive and shape the direction of consumer habits and expectations, Intelligent Factories

promise to revolutionise the quality, customisation and speed of delivery in everything from specialist medical equipment to consumer running shoes.

The result is an industry that realises change is a necessity rather than a means to a competitive edge. “All of our customers have initiatives that are looking at how they're going to change for the future,” says Mike Lackey, Global Head of Solution Management for Digital Manufacturing at SAP. Lackey is at the forefront of SAP’s Intelligent Factory initiative, driving agility, efficiency and resilience, to deliver on the customer demands of today.

Here he explores the Geopolitical benefits this model upheaval brings to efficiency, can fluctuate resilience, and agility, demand between and outlines how SAP is guiding businesses through their digital transformation journey to future growth and innovation.

400% 50%

capacity down to

capacity

SAP INDUSTRY 4.0

EXECUTIVE INTERVIEW

The Intelligent Future of Manufacturing

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SAP’s Mike Lackey explores the benefits Intelligent Factories bring to efficiency, resilience, and agility, and how SAP is guiding businesses through their digital transformation journey to future growth and innovation

n light of global disruption and shifting customer demand, the manufacturing sector finds itself faced with too many questions and not enough answers. The solution is Intelligent Factories, says Mike Lackey, Global Head of Solution Management for Digital Manufacturing at SAP. Rather than promising a one-sizefits-all solution, the model is infinitely configurable and as varied as the business cases and disruptions it aims to solve.

Lackey describes the system as “self optimising”. Driven by data, the Intelligent Factory can react to immediate issues, as well as improving over time to minimise disruption and boost efficiency in the long term.

“As the factory is producing more intelligent products, and as it incorporates more intelligent assets, you’re able to collect more data than ever before,” Lackey explains. “But it’s not just about more data, it’s about 20

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looking at the real data that impacts the business and acting upon it. To bring cost, customer, and supplier data all down to the shop floor, that’s what we mean by the Intelligent Factory.”

MIKE LACKEY

INTELLIGENCE IN THE PANDEMIC ERA The COVID-19 pandemic has been an eye-opening experience for business leaders, accelerating the rate of change across all industries.

Though the global outbreak is the most extreme circumstance, manufacturers are all too familiar with the disruption of global events beyond their control.

Geopolitical upheaval such as Brexit and global trade wars brought their own set of complications to the sector in 2020, while earthquakes, tsunamis and other natural disasters can be equally damaging, as evidenced in the ongoing shortage of semiconductor chips.

In these situations, demand can fluctuate between 400% capacity down

INTELLIGENT FACTORIES REPORT

to 50% capacity, or more. With Industry 4.0, businesses are able to consolidate their entire global operation, shifting production on a global-level.

“Wherever operations are based, whether Asia, Europe or North America, businesses cannot look at each plant as a single silo. They must look at all plants in their global operation, and how best to leverage those to deliver on all their customer demand. By building standardisation and intelligence into those plants, they can understand where to move production. They can see the impact on their business.”

Lackey considers the prevailing congestion in global ocean freight and shipping, and whether flying goods could be a suitable alternative.

“That adds an exponential cost, but by bringing all of that data together, professionals can clearly assess what the impact will be on the business, on profitability, and on the actual ability to

To bring cost, customer and supplier data all down to the shop floor to aid decision making that's what we mean by the Intelligent Factory deliver. All that data together gives them the ability to make the decisions to best support their customers.

RISE OF THE INTELLIGENT CONSUMER With more information at their fingertips than ever before, the intelligent consumer is another major forcing factor for manufacturing. Demand for more personalised products is growing at both an enterprise and consumer level, alongside expectations that they are produced from sustainably sourced materials, and delivered in a time frame of their choosing. Responding to that demand will be critical for growth, says Lackey: “They’re willing to pay for that level of customisation,” Lackey says. “And the companies that are offering that level of customer service, that are customer driven and are making decisions based on data-driven information, are the ones that are going to succeed. When you start going from mass production to mass customisation, though, you still have to hit volumes. There’s still a production plan to adhere to, and high sap.com

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Mike Lackey from SAP talks about Supply Chain

quality standards - all of which must be delivered with the resources on hand.

Bringing intelligence to the process allows manufacturers to respond faster and achieve these outcomes.”

Here Intelligent Factories come into their own. Quality control at every step of the process creates a virtuous feedback loop, empowering

All that data together gives them the ability to make the decisions to best support their customers 22

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employees and leveraging data to eradicate missteps sooner, rather than as a reactionary step. AI and ML technologies which “can see more than the human eye” can automate this process, freeing humans to spend time on value-add tasks.

“The result is more quality throughout the entire system,” Lackey says. “You’re demanding more quality from your suppliers, more quality from the design phase, and you have better visibility into your planning.

That makes everything that comes together on the shop floor even stronger, and the quality level goes up exponentially.”

INTELLIGENCE POWERED BY SAP Intelligent Factories is, in many ways, the culmination of SAP’s industry

INTELLIGENT FACTORIES REPORT

defining Industry 4.0 initiative: operated by Empowered People, leveraging Intelligent Assets, to produce Intelligent Products.

“We’re tying everything in to digital supply chain, how assets are managed, the OEB, and keeping machines running at 99.9% uptime and efficiency. SAP is also bringing in the environmental and sustainability concerns, ensuring we know if the materials are sustainably sourced and processed, the carbon footprint of the factory, and what that means to corporate compliance reporting. And then there’s

The innovation that we're delivering can take our customers through that entire journey, fully integrated throughout the supply chain health and safety, guaranteeing workers are operating safely. And SAP brings that all together.

“The innovation that we're delivering can take our customers through that entire journey, fully integrated through end-toend business processes,” Lackey says.

"We're delivering value with all the assets and the innovation and the applications you need for digital transformation that is connected through your supply chain.

And that's a big win for our customers when they have the agility and resilience to respond to changing customer demand eliminating waste and complexity.”

MIKE LACKEY TITLE: GLOBAL VICE PRESIDENT OF SOLUTION MANAGEMENT, DIGITAL MANUFACTURING Mike Lackey joined SAP in 2008 through the acquisition of Visiprise and is the Global Head of Solution Management, Digital Manufacturing. With previous roles at Visiprise, NetVendor and Teradyne Manufacturing Software Group, Mr. Lackey has a unique set of knowledge that covers both manufacturing software and design collaboration along with over 30 years of experience in the manufacturing sector. Early in his career, he started as a manufacturing engineer with DCA/ Attachmate, which provided him with invaluable first-hand knowledge and understanding of how SAP customers can use SAP’s Digital Manufacturing Solution Portfolio to improve their global operations. Mr. Lackey earned a Bachelor of Science degree in Industrial Engineering from Georgia Institute of Technology and an MA in Business Administration from Mercer University with dual concentrations in International Business and Marketing.

SAP INDUSTRY 4.0

INTELLIGENT FACTORIES BY THE NUMBERS

$210 billion

Investment in Industry 4.0 is expected by 2026 Source: Facts & Factors

8 10

70%

in manufacturers agree intelligent automation will help their business improve results

of manufacturers in “pilot purgatory”, unable to scale smart factory innovations

Source: 2020 IBM Institute for Business Value

Source: McKinsey

59% 88%

of manufacturers say Industry 4.0 will have “significant impact” on the industry in next five years

of manufacturers forecast an increase in smart devices and embedded intelligence in their production processes within two years…

46%

…despite this just of company executive have full access to the data access they need for Industry 4.0 analytics and planning Areas of biggest performance improvements from Industry 4.0

85%

Machine reliability and uptime 24

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84% Product quality

83% Customer Satisfaction

Source: MPI/SAP

FEATURE HEADER INTELLIGENT FACTORIES REPORT

Top challenges of Industry 4.0 Network capacity to handle Industry 4.0

18% Network capabilities to handle Industry 4.0

Adapting existing technologies

Impact of Industry 4.0 in next 5 years 4%

Limited impact

6%

33% Some imapct

No impact

24%

19% 19%

20%

Assembly

28%

Warehousing

Welding

37% 40%

29%

Packaging

37% 39%

27% 26%

33% 39%

26%

38%

25% 24%

Fabrication/ Stamping

22%

Additive Manufacturing

22%

Some application

Source: MPI/SAP

30%

Document Management

Heat-treating

39%

30%

Shipping/Logitistics/ Transportation

Maintenance

Significant imapct

Incorporating smart devices and embedded intelligence

Processes where smart devices and embedded intelligence has been applied

Plating or Painting

56%

Identifying opportunities and benefits

33% 43% 38%

Significant application

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INDUSTRY 4.0

Intelligent Assets Report

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INTELLIGENT ASSETS REPORT

INTRODUCTION

Intelligent Assets Intelligent Assets reduce downtime, increase efficiency and empower employees to secure greater resiliency throughout the supply chain

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cting as the backbone of any Industry 4.0 organisation is the Intelligent Asset. Gathering and analysing data from connected equipment and machinery gives employees greater control over how to increase efficiency, remove unplanned downtime, and reduce overheads by eliminating the need for unnecessary maintenance.

Intelligent Assets is one of the four pillars of SAP’s Industry 4.0 initiative, alongside Intelligent Factories, Intelligent Products and Empowered People. Rachel Romanoski, Solutions Manager, Digital Assets, SAP, says: “Intelligent Assets allow businesses to ensure that they have a resilient supply chain, by making sure that the products are where they need to be when they need to be there, regardless of who the end consumer, user, operator, or service provider might be.”

Here she explains what an Intelligent Asset is and how it can influence all facets of an organisation’s operation, from design and manufacturing, to delivery.

Intelligent Assets allow businesses to ensure that they have a resilient supply chain

More than half of maintenance leaders report that their companies have strategies to implement Industry 4.0 into plants and processes

Source: The Power of Industry 4.0 in Asset Management report / MPI Group

SAP INDUSTRY 4.0

EXECUTIVE INTERVIEW

The building blocks of intelligent business Rachel Romanoski, Solutions Manager, Digital Assets, SAP, shares insight on the fundamentals of Intelligent Assets, and how to mitigate risk, downtime and supply chain volatility

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business’ most “You can do a lot with just a little valuable assets intelligence,” Rachel Romanoski, are those that Solutions Manager, Digital go relatively Assets, SAP says. “Oftentimes unnoticed day to people think Intelligent day. When a machine on a Assets need to be the latest shop floor is fully lubricated, and greatest cutting-edge running at optimum technology. They can be super temperature and pumping advanced, such as leveraging out its required units per hour, it physics-based engineering requires no intervention or conscious simulations to forecast potential thought. The same can be said for the failures, and help mitigate them. But it employee that has all the necessary could be as simple as a temperature information at their fingertips to reading. You can pull a lot of simple RACHEL complete their tasks and dedicate their ROMANOSKI information from most equipment, and time to improvements. by enhancing that data through ancillary The harsh reality is often more solutions and digital capabilities, you complicated. Machines break down, they can create that Intelligent Asset.” must undergo routine maintenance and they can quickly become a disruption CUTTING THE COST OF POOR to productivity and a costly hit to an ASSET MANAGEMENT organisation’s bottom line. Through the Intelligent Assets provide two power of Industry 4.0, Intelligent Assets fundamental benefits for business, promises to change that.

Romanoski explains. "First and foremost, 30

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INTELLIGENT ASSETS REPORT

Intelligent Assets can help mitigate and eliminate unplanned downtime - those catastrophic events that can have major impacts on your supply chain and cost in general.”

Allowing companies to take a more proactive approach to routine maintenance and critical repair instantly improves risk mitigation. Traditional asset management is an inexact science, at best, often informed by OEM recommendations, time-based best practices or, in some instances, the heuristic gut instinct of individual engineers and operators.

Take the equipment used in an oil field. In this high pressure, technical environment, traditional asset management would usually dictate that maintenance on a centrifugal pump is informed by time-based metrics.

Blanket assumptions such as these,

Intelligent Assets allow you to be more lean in using materials for repairs or maintenance however, do not account for a wide variety of variables such as uptime or operating conditions.

“With a simple vibration sensor integrated into that pump, operators are able to change the way they look at maintenance, pull information and data, plot trends and analyse that accordingly,” Romanoski says.

“The result is a more dynamic and prescriptive understanding of exactly when a pump needs lubricating, for example. The true power of the Intelligent Asset is in changing the basic, reactive emergency work or timebased, planned maintenance and being more prescriptive and tailored to that specific asset and use case. Ultimately, you can reduce the unplanned events that often carry a big price tag.”

Intelligent Assets can also alleviate cost leakage. Unnecessary maintenance not only means machines are unproductive and idle when they could be serving customers, it carries hidden costs in the form of labour and the use of expensive spare parts.

“Intelligent Assets allow you to be more lean in using materials for repairs or maintenance,” Romanoski says.

“Because you have a full understanding sap.com

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SAP INDUSTRY 4.0

Rachel Romanoski talks about predictive maintenance

of what will be needed and when, you’re able to significantly reduce overhead costs. If we further look at the costs from an overhead perspective, Intelligent Assets also allow businesses to better sweat their assets. Maybe you can consider the lifecycle of the asset and understand whether you can push it a little bit further.”

Intelligent Assets are the building blocks of the Intelligent Factory and Industry 4.0 32

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EMPOWERING PEOPLE FOR RESILIENT SUPPLY CHAINS The second major opportunity Intelligent Assets provide is in empowering employees to build more resilient and more efficient supply chains. A more informed worker is, after all, a more productive worker.

“Not every asset is going to be applying this more prescriptive maintenance strategy,” Romanoski says. "It might be that the best course of action for a low cost item is to run it to failure. Having this information that we collect over time empowers those people to make those better decisions, but also has a trickle down effect to building resiliency and efficiency into the entire supply chain.”

At SAP, Intelligent Assets represents the “through line” that connects the four

INTELLIGENT ASSETS REPORT

pillars of its Industry 4.0 approach. The company has a rich heritage in plant maintenance and operation solutions, with decades of data, best practice and market stewardship to draw from.

“If we consider Intelligent Products, being able to leverage the information that we get from the assets themselves can actually have an impact on things like quality in that particular product that's being manufactured or produced,” Romanoski says. “This

People think Intelligent Assets need to be the latest and greatest cutting-edge technology […] But it could be as simple as a temperature reading allows organisations to start to correlate trends based on how a machine might be performing to what's the actual appropriate yield you might be getting out of that product, for example.

“Intelligent Assets are the building blocks of the Intelligent Factory and Industry 4.0, and then ultimately, with Empowered People, it’s about bringing the people, the assets, the processes all together to really drive a resilient supply chain, no matter which of the pillars you’re looking to implement from Industry 4.0”.

RACHEL ROMANOSKI TITLE: SOLUTIONS MANAGER, DIGITAL ASSETS Rachel is part of Digital Asset Solution Management, globally responsible for strategy, direction, go-to-market and customer adoption across SAP’s Maintenance & Service solution portfolio. Rachel specializes in business processes across the entire asset lifecycle with a focus on mobile, geospatial, predictive and maintenance management solutions.

Rachel has been with SAP for 8 years and while her background and education are in Biomedical Engineering from Texas A&M University, she has spent her career primarily focused on operational excellence within Oil & Gas, Chemical and other asset intensive industries.

SAP INDUSTRY 4.0

INTELLIGENT ASSETS BY THE NUMBERS

Up to

30%

of OEM-recommended maintenance activities happen too frequently Source: IBM

40%

Research suggests up to of all preventive maintenance costs provide only minor improvement in uptime Source: IBM

58%

of maintenance leaders believe Industry 4.0 is a competitive differentiator…

…A further

39% Two thirds

say it will continue to be in the near future

Inability to share equipment information with professionals and applications is seen as the biggest challenge, with

62% of maintenance leaders reporting machine-to-enterprise IT systems communications need improving (4% need an entire network overhaul)

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of maintenance leaders report their companies invested more than 5% of sales into Industry 4.0 strategy implementation in plants and processes in 2019…

95%

… say that figure will increase in the next two years, with 10% expecting a more than 20% rise Source: The Power of Industry 4.0 in Asset Management report / MPI Group

INTELLIGENT ASSETS REPORT

Process in which smart devices/ embedded intelligence have been applied Shipping/Logitistics/ Transportation

1%

27%

42%

30%

Maintenance

0%

28%

43%

29%

26%

41%

28%

5%

Assemby

Packaging

1%

27%

43%

28%

Document Management

1%

25%

46%

28%

by percentage of manufacturers N/A

No application

Some application

Significant application

Impact of Industry 4.0 to plants and processes on productivity and profitability over next 5 years 33%

Increase more than 10 percent

34% 49%

Increase 6-10 percent

41% 14%

Increase 1-5 percent

No change

Decrease

No Industry 4.0 currently or planned

19% 0% 3% 0% 0% 4% 3% by percentage of manufacturers Productivity

Profitability

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INDUSTRY 4.0

Empowered People Report

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EMPOWERED PEOPLE REPORT

INTRODUCTION

Empowered People Empowering a business’ most valuable asset, people, is critical to success in Industry 4.0

N

o amount of automation, AI or ML will supplant the ingenuity of the human mind. From the C-suite to the shop floor, people will always be central to any organisation. Better informed people make better business decisions, and by breaking down barriers, companies can achieve more.

Empowered People is one of the four pillars of SAP’s Industry 4.0 initiative, alongside Intelligent Factories, Intelligent Products and Intelligent Assets. Andy Hancock, Global Vice President, Centre of Excellence at SAP Digital Supply Chain, says: “We're never going to replace the people, or take the human out of the process. But the key thing is, if we can automate predictable tasks and mitigate risk through technology, those highly skilled workers can move to high value, complex decision-making tasks that are further up that chain.”

Here he explores how empowering people comes to life in an organisation, how each individual can achieve more and, ultimately, how businesses can remain competitive and innovative in the era of Industry 4.0.

We're never going to replace the people, or take the human out of the process

Accessing Industry 4.0 data remains a major challenge for employees.

Company executives believe only

50%

of manufacturers currently provide access to all who need it Source: MPI Group

SAP INDUSTRY 4.0

EXECUTIVE INTERVIEW

Empowering people, improving business Andy Hancock, Global Vice President, Centre of Excellence at SAP Digital Supply Chain on empowering people for better business

B

ehind the platforms, IoT sensors and connected assets in digital transformation sits the humble human, without which the entire system comes to a crashing halt.

Employees can be a business’ most valuable asset, but they can also be the most costly if left behind in the revolution of Industry 4.0. Ultimately the goal should be to elevate an individual’s role within an organisation, remove dead weight from their desk and aid them in reaching their full potential.

“The people will always be the centre,” says Andy Hancock, Global Vice President, Centre of Excellence at SAP Digital Supply Chain. “It doesn't matter how much automation that you adopt or how much you increase AI integration, there will always be tasks 40

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ANDY HANCOCK

that only a human can actually execute on. In fact, as we do more automation, there’s an even higher complexity of decision-making required that only a human can do.”

SAP envisions a reality of Empowered People as a critical pillar in its approach to Industry 4.0. “What we mean by Empowered People is empowering individuals to be agile in the moment,” Hancock says. “The whole concept and ethos surrounds organising data, whether that comes internally or externally, to make it insightful and, most importantly, actionable.”

BREAKING DOWN BARRIERS A real world example that made headlines earlier this year is the Suez Canal crisis. In the operation to rescue the Ever Given container ship wedged across the narrow channel, hundreds

SAP: WHITE PAPER

of experts worked in collaboration.

Excavators worked around the clock to dig the bulbous bow of the container ship out of the sand. Dredgers were called upon, who understood the crosssectional area of the Suez canal, and exactly where to dig to help refloat the vessel. And there were the pilots on board who understood that an approaching high tide would give an extra two metres of lift. In essence, this was a microcosm of modern business, where siloed departments use their expertise to help a business reach its objectives.

“What happened in the Suez is that these dredgers, excavators, tug boats and pilots all pooled their information together and realised that they can actually refloat this ship in five days and let it sail,” Hancock says. "Go back 20 or even 10 years and this information would have been in people’s heads, in different places, and instead the situation would’ve taken weeks and required the costly job of removing containers. That’s a good illustration of where Industry 4.0

What we mean by Empowered People is empowering individuals to be agile in the moment

brings all of these technology enablers to empower people to make those informed decisions.”

EMPOWERING THE WORKPLACE In less extraordinary circumstances, Empowered People is realised through a layering of information that filters throughout an organisation.

“Start with the operator who has maybe one or two pieces of equipment to run. To empower that operator to do his job efficiently, he needs to know if it’s running correctly, if it’s going out of bounds, does he need an indicator to do something in order to avoid a failure? That’s the basic level,” Hancock says. “We then lift it up to the next layer, moving from operational execution to areas of financial core values. The plant manager can collate the information from each of the production lines, assess the KPI, form a plan, and measure that against their actuals.” sap.com

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SAP INDUSTRY 4.0

Andy Hancock from SAP talks about Industry 4.0

Beyond the four walls of the siloed plant, SAP enables businesses to stack further data from external suppliers, their wider network and begin to derive true value. In the boardroom, executive

Where this empowerment truly comes into effect is in the time it takes to make decisions and implement them 42

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leadership, now fully informed by this aggregated data, are able to deliver to their shareholders.

“The CEO or CFO have their core values that they need to meet, whether that’s sustainability goals, P&L, or something else,” Hancock says. "Where this empowerment truly comes into effect is in the time it takes to make decisions and implement them. We can now actually bring the data all the way down the individual steps to the operator, because it's all connected.

Decisions made at the top can be actioned incredibly fast throughout the business. That's a very simple example, but it shows how this layered approach works in a lot of our businesses that we see.”

EMPOWERED PEOPLE REPORT

Empowered People are the culmination of SAP’s Industry 4.0 strategy, and a company value that it wears on its sleeve.

"The key thing when we talk about industry 4.0, is that SAP cannot do it on its own,” Hancock says. "We need our partner ecosystem, hardware vendors and integrators, and consultancies to understand these big shifts like digital transformation. And we also contribute to those discussions.

It doesn't matter how much automation that you adopt […] there will always be tasks that only a human can actually execute on “The first step is always the hardest in any project. It requires an amount of energy that some organisations may start but never finish and continually transform. And so what SAP has done is to make the entry point very low, so businesses can come and see the best course of action in our industry hubs.

We have SAP services to support the maturity assessment, the evaluation of where they are on that journey. And then we have our partner ecosystem to help them move in the right direction.”

ANDY HANCOCK TITLE: GLOBAL VICE PRESIDENT, CENTRE OF EXCELLENCE Andy Hancock is a Global Vice President of the Center of Excellence, SAP Digital Supply Chain.

Using his background in Human Computer Interaction, Enterprise Mobility and Industry Expertise, Andy merges a strong technical foundation, a passion for solving problems and real world situations he has encountered during his 14 years tenure at SAP to fulfill his role as trusted advisor for leading global brands.

He understands how to quickly undercover the root of the problem and articulate a clear path to the right business outcome. Having worked in more than 40 countries and experienced a vast array of cultures he knows the importance of operating efficiently at the point of performance and put simply, getting the Right Information at the Right Time to make that informed decision.

SAP INDUSTRY 4.0

EMPOWERED PEOPLE BY THE NUMBERS

74%

of EMEA industrial product leaders believe training and developing their workforce with new skills is a priority for Industry 4.0 realisation Source: Deloitte

People are at the core of Industry 4.0 initiatives, with three quarters of organisations saying training and development of their workforce is a priority, and 28% focusing on attracting and retain talent Source: Deloitte

Demand for physical and manual skills in repeatable, predictable tasks is expected to shrink by nearly 30% over the next decade…

Industry 4.0 is expected to increase employment prospects for workers with IT skills, 50% of automakers report…

…25%

Source: BCG

expect to need more employees with logistics and planning expertise to derive true value from the insights provided

by Industry 4.0 strategies

…Demand for technological skills, and acumen in interacting with technology is predicted to grow by more than

50%

Greater automation and digitalisation also worries workforces. Cultural adaptation and acceptance of Industry 4.0 is a challenge for

27%

of manufacturers…

…Meanwhile around

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a fifth

of manufacturers struggle with redefining the roles of their employees Source: MPI Group

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Source: McKinsey

EMPOWERED PEOPLE REPORT

Impact of Industry 4.0 in next five years 1% 1%

29%

On Industry

69%

2% 3% On their business

30%

65%

by percentage of manufacturers

No impact

Limited impact

Some impact

Significant impact

10 biggest challenges with Industry 4.0 adoption

47%

Identifying opportunities/benefits of Industry 4.0

45%

Adapting existing technologies

38%

Security of corporate devices, network, and data

37%

Network capabilities to handle Industry 4.0 Incorporating smart devices/ embedded intelligence

35%

Necessary skills/talent to leverage data/intelligence

35% 32%

Network capacity to handle Industry 4.0 Leadership support for Industry 4.0

27%

Cultural adaptation/acceptance of Industry 4.0

27%

Changing business processes and workflows to accommodate Industry 4.0

26% by percentage of manufacturers

Source: MPI Group

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