From the Smart Factory to the Smart Supply Chain

Smart Factory V1
Georg Stawowy, Board Innovation & Technology

Georg Stawowy, Board Innovation & Technology

Factories are going digital and are self-managing. But the Smart Factory alone is not enough. More important is the digitalization of the entire supply chain. Only by networking manufacturers, suppliers, dealers and customers can efficiency gains and benefits be achieved for all. But how can this integrated and automated collaboration across company boundaries succeed if the individual company is already struggling with the internal networking of machines, systems and processes? LAPP is taking up the challenge and has learned a lot in the process.

Smart Factory - a term that holds promise: In the future, factories will be highly automated and self-organizing, always on the lookout for the optimum in productivity and quality. Smart Factory is right and important - LAPP has also been represented with joining technology and a production module in the modular demo factory of the research project of the same name since 2013. But in the meantime I think: Smart Factory is not enough. The term implies that this is a factory without exchange with the environment. I know: In the context of all the efforts surrounding Industry 4.0, logistics between factories has always played a role, including at the German Research Institute for Artificial Intelligence, which initiated the Smart Factory project. Nevertheless, I think that the topic of networked supply chains is still not being discussed as comprehensively in specialist circles as it should be.


Perhaps this is due to the different interests of different industries. In the automotive industry, for example, there are few vehicle manufacturers and a manageable number of suppliers who build their factories directly in front of their customers' factory gates, especially abroad. In this context, too, the supply chain is certainly anything but trivial, but if you only have to move the brake system or the dashboard to the other side of the road, just-in-time delivery is no magic bullet. For manufacturers who serve many industries with a large number of customers and a huge number of product variants, including LAPP, the starting situation is different: The supply chain is a complex core process - its digitalization and the idea of networking are central to more effective production.

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LAPP offers around 40,000 standard products, which we ship all over the world, to dealers or directly to many thousands of customers. Even though cabling usually accounts for only a small proportion of the costs, very few machines and systems function without it. This applies both to quality and reliable delivery. Especially the ability to deliver is an important argument in favour of LAPP for our customers. This is where we want to improve permanently, and that's where networking comes into play. In Ludwigsburg, LAPP operates a highly modern and largely automated warehouse. But it is not always sensible to send goods from there. Perhaps a customer in Hamburg urgently needs a plug that one of our trading partners in Hamburg has in stock. If we know this, we can forward an order that comes in via our online shop to this dealer. This saves time and relieves the environment. Or perhaps the part is not in stock anywhere and has to be produced again. This should then be done automatically in the factory where the required machines are located and have free capacity. The whole thing resembles a marketplace for capacities, where supply and demand organize themselves, thus achieving the most efficient result for the customer.

Amazon proves that this is possible a thousand times every day. If you order five things there, they usually don't all come from one warehouse, but are retrieved from different locations. This is how I imagine the supply chain for LAPP too. But that's easier said than done. Because it requires that the ERP systems of all plants, warehouses and dealers are networked. Anyone who has ever tried to introduce a new SAP system in a globally networked company knows what a challenge this presents. If this is already so difficult in a company, how is it supposed to work across entire supply chains from suppliers to dealers? This project will keep us busy for many years to come. But there is no way around it.

The ideal would be a uniform ERP network across the entire supply chain. But the reality is different: Our suppliers, trading partners and customers will not simply discard their software just because LAPP wants them to. They themselves have a multitude of relationships with other suppliers and their customers, who in turn operate other systems. Our goal is therefore to unify ERP, MES and shop floor management systems internally, at least for LAPP, and to integrate the players outside LAPP into the ERP via simple interfaces.

The internal standardization alone is difficult enough. If we take the wrong path here, it can be expensive and set us back years. That is why we have decided to proceed step by step, test options and only decide on a path when we are sure it is the right one. One example: We want to introduce smart shop floor management in our plants. To this end, we have tested two different systems at two production sites in Forbach, France, and Shanghai, China. This not only taught us which system is better suited to our needs, but also what we need in the first place.

We are currently having an aha-experience with the selection of an MES system that we want to introduce in all plants. There are about 1000 systems on the market. In order to find the right one, the German MES umbrella organisation offers an online selection tool, but in our case it still recommended 50 suppliers. An external consultant helped us to reduce the selection to three systems. From this selection process and from the tests in France and China, we learned exactly what we need to realize the vision of a networked supply chain outlined above.

The best thing is: The employees in the two plants in Forbach and Shanghai are extremely committed and have really gotten hungry for more digitalization, and the other plants are also waiting impatiently for it. The fear that new ideas would be rejected for the time being has not been fulfilled. I am optimistic that this will continue to be the case in the plant whose system will not be used after the final selection, and of course in all our other production sites where the new shop floor management system will be introduced.

So digitalization and networking is by no means only a technical challenge, but also an organizational one. And you have to take the people with you. If everything works out as we expect it to, LAPP's supply chain will be fully digitalized and highly networked - and we will get the Smart Factory as a bonus. But there's no question that this will cost us a lot of effort and will take several more years.