Cover Story: Internet of Things Its Everywhere
Using Internet of Things Gaining Operational Efficiency
____ Short Term Measures to reduce Supply Chain Costs
Opsession December Issue This is the seventh issue from Volume two of Opsession, the monthly newsletter of X-Ops. The newsletter was introduced last year by X-Ops with the intention of covering all the activities and events that took place during the span of a month.
Around the World with Operations Management
Xavier Institute of Management, Bhubaneswar Volume#2
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Around the World with Operations Management Demand for Indian Warehouse Boosting Demand from online shoppers’ is pressing the need to expand India's US$110 billion logistics and warehousing sector. Firms like Dutch pension fund manager APG and US buyout group Warburg Pincus are looking for cashing in on the demand for modern and efficient storage space from booming online retailers. Warehouses with low-rise sheds with poor ventilation are too dingy and cramped for firms like Amazon.com and Flipkart. Whereas, e-tailers need facilities to move goods around swiftly with minimal damage together with fire sprinkler systems, climate control, levelled loading bays and paved roads to warehouses. All these add up the rent by 20%. The E-commerce market in India, is booming: the market is expected to grow to US$220 billion in terms of value of goods sold by 2025. Amazon India which has leased 20 fulfilment centers – warehouses where it stores goods and packs and sorts orders ,is still in need of bigger, modern spaces closer to customers; the average size it leases today is 200,000 square ft. The sector has attracted more than US$1.5 billion in private equity funds
since 2011. To combat basic challenge of ownership and get quick cash, developers like Assetz are betting on buying larger existing warehouses and refitting them, rather than building from scratch. Sampat Padhi and Anuja Verma
Apple decides to cut its supply chain Having overestimated its sales due to wrong forecast, Apple is has decided to reduce output of its latest iPhone models by around 30% in the January-March quarter. This will be a major blow to Japanese and South Korean parts companies. The U.S. company had initially asked parts makers to keep production of the iPhone 6s and 6s Plus for the quarter at the same level as with their predecessors - the iPhone 6 and 6 Plus - a year earlier. But inventories of these models have stacked up at retailers in markets ranging from China and Japan to Europe and the U.S. owing to its lackluster sales. Customers saw no value addition to its performance over the previous generations, and dollar appreciation led to sharp price hikes in emerging markets. Output will be scaled back to allow dealers to adjust their inventories.
Production is expected to return to normal in the April-June quarter. Apple’s products and brand have not lost their appeal, and older models have continued to sell. Companies likely to see a drop in shipments include liquid crystal display panel manufacturers Japan Display, Sharp and LG Display, as well as image sensor supplier Sony and electronic parts makers TDK, Alps Electric and Kyocera. Businesses need to prepare for a potential year-on-year decline in iPhone output for 2016 as a whole. Apple also slashed iPhone production in 2013, forcing Apple-dependent parts suppliers to find ways to cope. They cultivated business with Huawei Technologies and other manufacturers in China, which had become a global smartphone supply base.
Singapore Myanmar Investco and Japan’s Senko form logistics Joint Venture Singapore Myanmar Investco (SMI), a diversified business group focused on Myanmar, has entered into an equallyheld joint venture with Tokyo-listed logistics services company Senko Co. Together, they will set up and run a Singapore company, SMI-Senko Logistics Pvt. Ltd, to provide logistics and warehousing services in Myanmar. According to the Logistics Performance Index by the World Bank, Myanmar is ranked 145 out of 160 in 2014. However, the strong economic growth outlook and further easing of sanctions will likely fuel the growth and development of Myanmar's logistics sector, SMI said, adding that it has local knowledge and a support network, while Senko has indepth logistics expertise. This is not expected to have any material impact on SMI's consolidated net tangible assets per share and earnings per share for the current financial year ending March 31, 2016.
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Internet of Things is everywhere Internet of Everything also known as IoT is an environment where objects, animals or people are provided with unique identifiers and are able to interact over network without human-to-human or human-to-computer interaction. IoT is convergence of wireless technologies, micro-electromechanical systems (MEMS) and the Internet. Today computers and the Internet are almost wholly dependent on human beings for information .People, with limited attention span and accuracy, are not very good at continuously capturing data about things in the real world. IoT enables machines to do this job on a continual basis leading to reduction in waste and losses in different application areas. Such machines can convey useful information like when things needed replacement and whether they were fresh or past their best (in case of groceries).Experts say that the logistics industry will unlock greater operational efficiency with IoT devices connecting in real time and facilitating millions of shipment movements and tracking each day. Industrial Internet of Things (IIoT), also known as the Industrial Internet subsumes machine learning and big data technology, the sensor data, machineto-machine (M2M) communication and automation technologies. The driving force of IIoT is that smart machines beat
humans at accuracy, consistent data capturing and communication. This data can help companies to detect inefficiencies and problems faster, and to support business intelligence efforts, while saving time and money. In manufacturing, IIoT holds greater potential for quality control green practices and sustainable, and overall supply chain efficiency. From virtually any device, from any place in the world with internet connection allows access to IIoT data and supporting applications. Functional managers can check on specific machines, schedules, inventories, whenever and wherever they want etc. They can dig into study situations and analyze performance. More importantly, perhaps, IIoT with Internet connectivity can provide handson visibility and control capabilities for remote locations, subcontracted manufacturing plants or suppliers' factories. Although much intra-factory communications takes place over an Ethernet network, and may not support Internet. But there is doubt whether they all have to be replaced by fully Internetenabled IIoT devices or will they be compatible. Implementing IIoT must align with a company's goals and concerns. This
strategy requires the most attention to security and access control and the most vigilance on a continuing basis. It's possible that some of the existing equipment can be upgraded or modified to fit in with an IIoT implementation and not have to be replaced. The IIoT movement is, at par in growth and expansion as the Internet of Things (IoT) in the outside world because smart devices and connected sensors are growing exponentially in the plant as well. But the transition from M2M and plant networking to full IIoT throws plenty of interesting challenges to manufacturers and must be addressed before the technology goes wayward and threatens sustainability. The nonprofit Industrial Internet Consortium, founded in 2014, focuses on creating standards that promote open interoperability and the development of common architectures. As we see manufacturing operations are running more efficiently than ever due to the installation of smart machinery and sensors on connected factory floors. There is lesser machine downtime, better asset utilization and faster time to market. Industry 4.0 is well underway, but more education can help increase IoT adoption in the manufacturing space.
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Using Internet of Things to Gain Operational Efficiencies The board rooms of manufacturing conglomerates have been buzzing about Internet of things for a while now. IOT has been proven a developing trend and an innovative technology. It has not only enabled manufacturers to improve efficiency but also reduce waste and the profits have drastically increased. With the ecosystem of connected devices growing, more corporations adopting its technologies which can be a factor that gives competitive advantage, this is the appropriate time to reap IOT’s benefits. The growing network of systems and IP addresses that communicate with each other has created a revolution in manufacturing. Courtesy IoT, General Electric has anticipated profit worth trillions of dollars and projected cost savings over the next decade. According to Stefan Ferber, Vice President, Bosch, “the internet of things allows for a new way of organizing industry production by connecting machines, warehousing systems and goods, we can create smart production systems that basically control each other without requiring any manual intervention”.
How IoT is manufacturers?
benefitting
According to American Society for Quality, manufacturing companies that have digitized their processes have increased their efficiency by 82%, product defects have gone down by 49% and customer satisfaction has increased by 45%. Now manufacturers are able to conserve resources, reduce overheads, and optimize operational efficiencies and increase profits by connecting manufacturing devices and aggregating data created. Inventory control and supply chain management are major determinants of company’s efficiency
and IoT has helped in optimizing these aspects. But the greatest contribution that has been made possible is energy management.
Benchmarking: Hidden operational inefficiencies and wastage of energy are uncovered by benchmarking similar pieces of equipment.
How manufacturers are optimizing energy efficiency through IoT?
Predictive Maintenance: For service, manufacturers get alerts as and when it is needed based on unusual usage patterns of energy. This is done during elimination of resource-intensive preventive maintenance and transition to databacked predictive maintenance. This avoids the high costs equipment downtime.
Manufacturers often consider energy as of the largest and ambiguous expense. According to a recent survey conducted by Panoramic Power, close to 77% of the companies have reported to obtain data for energy consumption, partially from monthly utility bills or tools monitoring energy with limited data points.
Approximately two weeks after the billing cycle, monthly utility bills are delivered. The energy used for entire factories are often reported. Although this information may help the finance team, it plays little role in reducing waste.
How IoT helped? With the connectivity among devices, manufacturers are able to track consumption packets of energy. The executives get close visibility into this consumption by tracking every piece of machinery, as well as they are able to take actions about waste inefficiencies, equipment failures etc. Resource Utilization: Manufacturers can detect off-hours consumption, identify anomalies, and grab opportunities for savings. They are also able to optimize manufacturing production schedules.
Efficient Production: Optimization of manufacturing processes and the systems that run the plants in order to create the same or greater outputs with better efficient energy usage are a result of the technological and organizational changes Behavioral Changes: Managers can be armed with energy consumption data so that they can diminish the wasteful habits in their respective teams and thus instill a behavioral change in the culture. Management Models: Now energy management programs can be tracked and their ROI can be verified by aligning with corporate social responsibility goals and management models like lean manufacturing, Six Sigma etc. Operational Efficiency and profitability: IOT has made the certain operational efficiencies possible and has immediately affected the bottom line for manufacturers. If we examine only the predictive maintenance programs, over a preventive maintenance schedule manufacturers can now save significantly by eliminating machinery failure (which is costly) as well as the downtime associated with it. .
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Short Term Measures to reduce Supply Chain Costs This article talks about a dilemma that every supply chain manager must have faced at some point of time. The problem is that of excessive costs related to a company’s supply chain. In some cases these costs may even escalate to unsustainable levels requiring immediate attention and coming up with stop gap solutions. While going for complete overhaul of the supply chain/ supply chain optimization would be an ideal long term strategic measure, short term measures are required to contain or reduce these costs in the immediate future. Two such solutions are covered in this article- negotiating with suppliers and controlling inventory levels in the supply chain. A key component of controlling supply chain costs lies in controlling cost of goods sold. This cost can be reduced in the short term by directly negotiating with suppliers. The first step in this direction should focus on dealing exclusively with existing suppliers. The negotiations should be conducted with the aim of creating a win win solution for both the parties. The best way to achieve this is to introduce clauses in the agreement wherein the supplier gets the assurance of either long term or large volume contract with the company in return for supplying at lower costs. But in some cases the company rules may
This article talks about a dilemma that every supply chain manager must have faced at some point of time. The problem is that of excessive costs related to a company’s supply chain.
forbid managers from entering into long term and high volume contracts with suppliers. This may be due to frequent product modifications, very short product life cycles, seasonal demand or uncertainties related to foreign exchange rates in case of imported components and raw materials. Such restriction can be dealt with by contacting new suppliers through RFQ (request for quotation). The RFQ route can be taken to get a feel of commonly prevailing prices in the market. The number of suppliers to be contacted can be decided by the manager. The RFQ route must measure each supplier on a common playing field and therefore the specifications related to quantity, timing, quality and technical specifications must be same for each supplier. In case of well-respected companies new suppliers can be targeted because they are generally more willing to reduce prices in order to establish
relations with a reputed firm. Also, the news of RFQ being sent out in the market may stir the incumbent suppliers to drive down prices in order to maintain trade relations with the firm. Excess inventory is often a culprit when it comes to high supply chain costs. The first step towards solving this problem is to conduct a thorough physical inventory check to ascertain the types and quantity of inventory that one has. Next, conduct a lead time analysis to determine how long it takes for the supplier to ship the goods and for the firm to ship the finished products to its customers. This gives an idea of how much inventory the firm should hold at any point of time. The final step is to wastage and pilferage in the warehouse. Configuring the warehouse and automating certain processes can save time and reduce wastage, damage and pilferage. These stop gap solutions will prove helpful to managers in the short term. However, long terms measures are necessary to optimize the supply chain and to gain a competitive advantage through supply chain management. A complete review and overhaul can be done in association with specialist supply chain designers either within the firm or from external operation consultancies.
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Editorial Board: EDITOR:
ABINASH MALLICK
CO-EDITOR:
DIVYA PRAKASH
DESIGN:
PUNYASLOK GURU
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Opsession Monthly
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