“Supply chains are under stress,” said Thomas Saueressig, member of the SAP executive board and head of its Product Engineering division, at the recent Hanover Fair. The past few years have shown how prone to failure global logistics chains are, and he added this also has far-reaching consequences for the German manufacturing industry. Digital supply chains, therefore, are needed to be more agile, flexible, resilient, and sustainable. “While companies are aware they need to invest in Industry 4.0 and AI to make their supply chain more resilient, many are still in the pilot phase,” Saueressig said, citing discussions with CEOs and results of a study by Oxford Economics.

Earlier this year, analysts asked nearly 1,000 people around the world in management from 15 industries about the digitization of their supply chains. As a result, managers in manufacturing were more inclined than those in other industries to introduce intelligent technologies on a large scale in order to make better predictions. However, only 36% of the companies surveyed would already use forward-looking analyses in one area of ​​their company.

SAP builds AI into its supply-chain solutions

At the fair, SAP announced it would further expand its logistics chain solutions. SAP Digital Manufacturing, for instance, will be expanded with additional AI tools, which, according to a statement, will allow users to gain AI-supported insights and visual inspections in production to ensure that defective parts are discovered early in the production process and appropriate measures are taken quickly, thus reducing the reject rate and producing higher quality products. The number of complaints would also fall as a result, and the condition and maintenance of systems would be optimized, the provider said.

One of the first adopters of AI-enhanced SAP Digital Manufacturing is Smart Press Shop, a joint venture between Porsche and press manufacturer Schuler. Founded in 2019, the company seized its greenfield opportunity to rethink and redesign the press shop as part of a cloud-first development strategy. Hendrik Rothe, the company’s CEO, spoke of completely paperless production and a fully automated process to configure machines in the production line to cut set-up times nearly in half.

The dark factory dream

According to Rothe, there are many advantages to the digitalization of manufacturing based on the principles of Industry 4.0. In addition to self-optimizing production, continuous traceability, and resource-saving production, smaller batch sizes can also be produced economically. This is an important factor, especially in the automotive industry in the switch to electric vehicles because the quantities are smaller.

Rothe dreams of fully automated dark factories, but there’s still a way to go before those become a reality. According to him, operations are currently at 30 to 40% automation, although the potential varies greatly from area to area. While production itself is fully automated—order-controlled from the SAP system—things are different in the warehouse, as manual processes with forklift drivers continue to work more profitably. “Every automation has to pay off,” says Rothe, and automating transport processes in the warehouse is currently not economical.

Also, while the Smart Press Shop can already carry out its production processes completely paperless, many customers still need paper documents in order to process supplied pressed parts.

Open-data space for manufacturing

Initiatives are currently underway to eliminate fractures in the digital supply chains, and SAP wants to have a say in this. “SAP is in charge of many initiatives in the industry,” says Saueressig, specifically naming two examples. Catena-X, an ecosystem and open-data space, is currently being established in the automotive industry and Saueressig expects the first concrete applications in the current year. And Manufacturing-X is a comparable open-data ecosystem, which will be created in the manufacturing industry.

Around its digital manufacturing, SAP has also expanded other solutions with additional functions. For example, the 3D Product Viewer functions of the SAP Enterprise Product Development solution are now integrated to make all processes, from design and production to service and maintenance, more resilient. So employees in production could display 3D product models in their digital manufacturing dashboard and their work environment, thereby optimizing complex assembly processes. In the SAP Service and Asset mobile application manager, with the help of 3D augmented reality views, field service technicians can carry out maintenance on systems more efficiently to reduce downtimes, SAP says.

Better metrics for sustainable manufacturing

In order to operate their own supply chains more sustainably, users could, in the future, integrate company-specific guidelines for sustainable packaging into the SAP Responsible Design and Production solution. Customers would then have the opportunity to control and monitor the design of packaging more precisely to avoid waste.  

Plus, SAP announced it would expand its integration with EcoVadis, a provider of corporate sustainability ratings. As a result, suppliers could receive more precise sustainability indicators and make their rating status visible in the SAP Business Network. SAP assures its customers this will help buyers see how they can better comply with ​​due diligence and report against the background of new ESG laws. New suppliers can then be selected on the basis of key figures in such a way that sustainability goals in their own business, including the associated value chain, are met.

Digital Transformation, Events, Manufacturing Industry, SAP, Supply Chain Management Software, Vendors and Providers

CIO Africa: What is your sense of the current trade landscape in Africa in light of supply chain issues that arose from the pandemic and war in Ukraine?

Typically in supply chains, there are three parameters that are important: cost, reliability, and length of the supply chain, or the time it takes to connect from one market to another. During COVID-19, all three of these were affected quite significantly by air, sea, and land. Trucks were impacted because of increased restrictions; air passenger capacity basically stopped, which included a lot of cargo, causing a lot of disruption; and on the sea front, a lot of capacity was lost in China with the zero COVID-19 policy, in addition to unions in the US going on strike at Long Beach, which is the largest port servicing that market. So it’s been a difficult time. In Africa, the first major impact came from COVID-19 itself via the restrictions that were brought in by countries in terms of movement. The second came from the three modes of transport being impacted by artificial removal of supply, resulting in massive price increases. Third, now with the war in Ukraine, the basic cost of fuel, which was very low during the COVID-19 period, increased significantly. But things are improving. My view is that China is slowly normalising as global demand is falling sharply because of inflation. So even though the supply problem is not getting solved, we’re starting to see a significant normalisation of rates. What isn’t happening still is the reliability and the aspect of timeliness to reach key markets. These are both still challenges.

Many of those issues feel out of the control of African businesses. What can companies on the continent do to fortify themselves against shocks to the system?

What’s been happening is that many of the large companies who own the infrastructure, like KLM, Air France, ships, and large trucking firms, don’t really operate in Africa. They’re constantly looking for the highest value creation, so they tend to go places that either offer extremely good prices or have the capacity to do large volumes and have extremely good infrastructure that improves their efficiency. So the thing we need to do in Africa is to reduce the friction that operates within the chain. When ships come into a port in Mombasa, for instance, we need to streamline the processes so they don’t have to spend a lot of time sorting out basic processes, which is what happens today. And when a plane lands in Cape Town with cargo, how can we reduce the amount of bureaucracy that is needed? If you do that, you’ll start seeing a lot of traffic, and people will start pricing things correctly. 

Mehul Bhatt

Supply Chain, Transportation and Logistics Industry