Cyber-automation, Augmented Intelligence and Digital Twins Contribute to a Continuous Enterprise Process Innovation

How is digital transformation progressing , what is Logistics 4.0, what are the current trends in digitalization and automation and what can enterprises expect in the near future in terms of operational processes and with regard to global and local disrupting factors. These are several of the topics that the ATP Journal discussed with our colleague, smart industry solution designer Peter Bílik.

Recent years have been marked by significant changes caused by the coronavirus pandemic, and now the military conflict in Ukraine fuels more challenges to enterprises. In this respect, what was the impact on industrial production and the related logistics and supply chains?

At the start, the pandemic proved to many enterprises how important it is to have accurate, precise, and timely data. The data is necessary primarily for qualified decision-making, but of course also for meaningful crisis management.

However, this extraordinary situation has revealed a number of shortcomings and reserves in enterprise processes. Many of them could have been avoided if more emphasis had been placed on digital transformation before the pandemic outbreak. At the same time, the coronavirus pandemic is not the sole crisis factor that would have a direct impact on manufacturing and global supply chains.

We live in a turbulent and rapidly shifting world. After all, during the pandemic, the so-called chip shortage also occurred, supply chains were significantly affected by extreme climatic conditions, and the shortage of skilled labor workforce threatened companies in various industries.

From the point of view of today's days, when the situation is changing dramatically as a result of the ongoing military conflict, we can no longer speak of a peaceful period at all. In such a dynamic environment, the ability to react quickly and agile becomes essential. At all levels - from manufacturing equipment through labor to complex enterprise processes and strategic planning.

The concept of Industry 4.0 has been long discussed with emerging technologies driving digitalization, optimization, and automation in order to increase efficiency and safety of manufacturing, as well as achieving more agile reactions to a customer and market demands and preferences. Can we also talk about a logistics equivalent - Logistics 4.0? What is its essence?

The concept of Industry 4.0, or the Fourth Industrial Revolution, is, like in the previous three revolutions, it is powered by a specific disruptive technology - in this case, the Internet. The ability to interconnect all objects entering the production process with data and communication brings radically different and new possibilities for manufacturing operations.

And while the Industry 4.0 concept seems to be primarily focused on manufacturing and production companies, the concept itself and related technologies can apply just as well to supply chains and logistics.

Thanks to the digitalization and applied interoperability of elements involved in logistics processes, an unprecedented increase in the speed of information flow can be achieved. If the market and other factors push for an acceleration of material flow, then companies cannot do without a rapid exchange of information.

That is why I can see that the benefits that these new technological solutions can provide are even more important in logistics and supply chains. From this point of view, of course, we can talk about Logistics 4.0 or also smart supply chains.

Its essence is precisely the principles known from the concept of Industry 4.0, such as predictive management, data-driven decision-making together with process automation, and their dynamic management in real time.

Already today, the necessary technological infrastructure and application support can be provided by solutions based on intelligent warehouse management with an advanced WMS system - WES (Warehouse Execution System). WES system offers functionality including real-time tracking and control of material flow, integration of material handling equipment management, dynamic inventory slotting, coordination and synchronization of consecutive logistics processes, autonomous management and scheduling of labor, inventory, orders, and much more.

Transport and logistics processes are challenging regarding the acquisition and processing of a vast amount of data that is associated with each item or order. Not only do they need to be processed accurately and reliably, but it is also necessary to mine "invisible" information that can be utilized to optimize processes and decision-making at various levels. How can data from these processes be collected and processed?

Data collection, processing, and evaluation is the basic prerequisite for a successful digital transformation, that can bring an added value to each company. Depending on the type of project, its scope, and the required functionality, there are several ways to ensure efficient data collection.

Fortunately, the relevant technologies are becoming more accessible and accurate, whether they are mobile scanners for reading barcodes or QR codes, RFID technologies, different types of real-time locating systems, or various sensors.

At the same time, however, it is necessary to ensure fast and ergonomic interaction of operators with the implemented management information system. This is a necessary precondition if the company wants to successfully manage the transfer from pen-and-paper to the digitally controlled flow of information.

The next phase in building a company's digital ecosystem is vertical and horizontal integration across the company and its organizational structures. This represents process interconnection and coordination, but also data integration across silos.

It is no longer enough to ensure just the data connection, it is also necessary to ensure the ability of the systems in question to "communicate" with each other, i.e. compatibility of enterprise systems. Only this step will allow achieving added value since the information is properly interconnected, the information gets properly ordered in time, and simply put into relevant context.

Data analysis and the search for context in the collected data will thus reach a completely different level. It is only necessary to have an already established position as a data analyst, who will provide managers with information important for suitable and correct decisions.

For more extensive logistics and warehousing systems, various cloud solutions are coming to the market, which undoubtedly brings several benefits, but also demands in terms of IT infrastructure or data protection and security. When is it worth transferring data to the cloud or using various applications in the cloud?

The trend in IT architecture is decentralized and distributed information systems and overall service-oriented architecture (SOA). This means using a number of dedicated micro-applications to provide a wide range of different services.

Such an information infrastructure is significantly better scalable in terms of performance, more flexible in case of changes, and more resilient to outages. The traditional hierarchically arranged classification of information systems into clearly defined layers is transformed into groupings, resp. networks of interconnected services.

This is also supported by business models offering software as a service (SaaS). This clearly leads to the increasing use of cloud solutions. Of course, the issue of cybersecurity is also very important in these cases, so a specific solution needs to be adequately assessed and implemented.

One of the latest trends is an innovative concept - an adaptive demand-driven enterprise. What is its essence? How can a "normal enterprise" transform into a "demand-driven adaptive enterprise"?

The concept of demand-driven adaptive enterprise arose in response to the growing volatility of global supply chains. It foreshadows the global tendency to transition from the so-called push supply chain strategy to the pull supply chain strategy, which can be effectively adopted and rolled out due to digital technologies.

In principle, this concept represents management and operational model in which the flow of information in the form of demand goes against the stream of material flow. This, of course, places increased demands on the accuracy and timeliness of the company's and supply chain´s material flow, coordinated resource management, and the widest possible automation of planning and decision-making activities.

In order for an enterprise to have adaptive operating models, it must begin the transformation to demand-driven production planning and scheduling and related demand-driven manufacturing logistics (intralogistics). From the perspective of digital technology implementation, it means:

• increasing data transparency,
• data integration across departments,
• real-time material flow monitoring,
• predictive analytics,
• and data analysis to identify non-conformity, downtimes, bottlenecks, and errors.

If manufacturing companies want to remain competitive in a rapidly changing market environment with even faster shifting habits and demands of consumers, they must be able to respond flexibly to new requirements and adapt their processes accordingly. Can omnichannel logistics be a solution to this challenge?

Omnichannel logistics had been primarily deployed in the e-commerce industry, respectively at companies that have started to unite different sales channels into a hybrid sales model (integration of offline and online sales). The new order fulfillment affected the logistics processes and the organization of the warehouse, both of which had to be adapted to this multi-channel setting. In addition, the management of reverse flows, complaints, and returns is also a part of omnichannel logistics.

Adapting inventory management and warehouse logistics to a multiple sales channel model already requires a comprehensive and integrated intelligent logistics solution. These solutions require efficient processing of larger volumes of a large variety of orders, shortening picking cycles, and maximizing the efficiency of fulfillment processes.

However, omnichannel logistics is no longer exclusively related to the e-commerce industry. As we have already seen during the coronavirus pandemic, companies that until then served solely the B2B segment were able to quickly revamp - thanks to digital technologies - or expand its business activities towards end-users (adding the sales segment of B2C).

This D2C distribution concept (direct-to-consumer) has the potential to expand into the manufacturing industry (e.g. for example emerging manufacturing start-ups) and can also be part of a hybrid sales and distribution strategy.

There is a lot of room for improvement and optimization of logistics processes in the company's warehouses and inventory management. They often do not work efficiently, pickers spend a lot of time "traveling" around the warehouse and doing activities lacking added value. What opportunities for improvement do you see in this area particularly?

In conventional warehouses, order picking generates approximately 50-60% of operating costs. And as part of this process, warehouse operators spend up to two-thirds of their time traveling around the warehouse. There are basically two ways to eliminate these costs.

First of all, it is automation and robotization. Depending on the breadth of the range and the nature of customer orders, they use the principle of goods-to-person or orders-to-person order fulfillment technology. In both cases, automated technologies ensure the transfer of orders around the warehouse without the need for human intervention.

On the other hand, the optimization of warehouse process management, especially order fulfillment and inventory slotting, is possible through intelligent management systems. At present, there are effective solutions in the form of the already mentioned Warehouse Execution Systems (WES). In addition to the functionality of WMS (Warehouse Management System), these systems combine also the functionality of WCS (Warehouse Control System), that have been usually used for the management of warehouse technologies and material handling equipment.

The intelligent digital technologies involved in these systems bring two key features into enterprise processes - predictive management and dynamic parallelism. This means, specifically in warehouse operations, that the company can achieve better inventory slotting thanks to the dynamic intelligent allocation of storage positions for items at the moment of put-away or synchronization and coordination of subsequent warehouse and order fulfillment processes, which is necessary for successful implementation of sequential order picking.

To put it simply, digitalization and deploying of intelligent algorithms enable improvement of decision-making that leads to a significant reduction of operations without added value such as inventory relocation, warehouse navigation, or inventory movement registration.

The best manufacturing companies are starting to connect their production and logistics processes and material flows more and more closely, not only physically but also data-wise. What does such a strategy bring in terms of optimization and performance of processes or enterprise economics?

Manufacturing companies are connecting and coordinating material flows and warehouse or inventory management (via WMS system) with production lines and work units. The goal of this integration is not only to ensure timely and accurate material feeding for production lines and workplaces. It is also a proper and precise preparation of parts, transfer of components and semi-finished products between individual workplaces, and transport of finished products for dispatching.

Internal logistics thus becomes a critical aspect, sometimes referred to as the "blood circulation", of a company. That is why more and more companies are approaching the dynamic synchronization of material flows not only in particular segments of their supply chain but also in intralogistics.

Just-in-time (JIT) operating procedures are being used in an increasing number of cases. In addition, the integration of logistics and production data is crucial in order to arrive achieve a data-based operational strategy that allows enterprise processes to be managed in real time and flexibly react to arising circumstances.

On the other hand, data analysis can detect any changes in the market or identify changing patterns of customer behavior in a timely manner, and the company can adapt or finetune its operating strategies accordingly. Forecasting upcoming changes give companies a competitive advantage while enhancing enterprise processes with the flexibility they need to respond in a timely and proportionate manner to volatile markets.

The flexibility achieved through data analysis allows the company to reach elasticity in terms of continuous implementation of new trends and tuning of operational processes. Thus making business processes easier to adapt to dynamic environments and various external and internal factors impacting the company.

The concept of circular economics is beginning to gain bigger popularity. Reducing the carbon footprint or reusing materials is on the agenda not only among activists but also at the level of state strategies or economic groups. Transport and logistics play a major role in burdening the environment. Where do you see the potential for improvement in this area? We will soon talk about the green, respectively, circular logistics?

As far as transport is concerned, reverse flows are becoming a hot topic when deploying various recycling initiatives, such as the collection of packaging or the repurchase of used goods. These initiatives are related to the approach to the circular economy. It is linked to setting up environmental initiatives as well as sustainable strategies and logistics processes.

These were also the subject of the COP26 climate summit in Glasgow, which resulted in several commitments to decarbonize and reduce greenhouse gas and methane production. These measures also have a direct impact on supply chains, transport, and logistics.

In this regard, we can expect setting up of new standards for the sustainable operation of supply chains. While until recently the trend was to deploy digital technologies in order to achieve lean operation, nowadays this ambition is extended to green operation as well. Although the very downsizing of logistics brings the basic savings - the very elimination of unnecessary transport of goods.

Technological trends will therefore increasingly move in an eco-friendly direction in the coming period, which will also be reflected in "green warehousing". The most common measures in the transformation of a warehouse into an ecological operation include, in particular, the transition to LED lighting, the use of electrical transport and handling equipment, as well as the use of alternative energy sources such as solar panels.

In addition to the decarbonization of the warehouse, the digitalization of the paper agenda (returns, acceptance, and handover protocols), the reuse of material carriers, and the adjustment of reverse flows for packaging collection are mainly used to reduce waste generation. All these measures are part of the emerging environmental strategies.

If you look at the near future, which disrupting technologies (cloud, vision/camera systems, artificial intelligence, virtual/augmented reality, blockchain, IoT…) do you see as promising for logistics and transportation operations? What will be their added value and how will they improve the logistics, warehousing, or transport processes we know today?

As we can see, the combination of global and local factors will constantly interfere with business operations and continue to create new challenges. That is why companies need to try to prepare their processes, especially sustainability and flexibility, not only to prevent crises and critical situations but to set themselves up for a new operational standard that will be much more volatile.

This means the deployment of new technologies, continuous innovation, transformation into data-driven processes, and the transition to flexible operating models. These technologies, such as cloud computing, artificial intelligence (AI), blockchain, IoT, and digital twins, are an integral part of the transformation processes.

However, not only technology but also its use is crucial. That is why I expect that in the near future, technologies that will lead to closer cooperation and connection between people and equipment will become more and more popular. The result will be the strengthening and expanding of a person's cognitive abilities, something I would call augmented intelligence.

This will create a completely new range of professions, so-called paraprofessionals. They will have knowledge in a specific field and at the same time master the skills of controlling various technological tools and systems.

As for the future of the operations themselves, omnichannel logistics and the related expansion of reverse logistics will increasingly come to the fore. The implementation of environmental strategies will play an important role, not only by the digitalization of the paper agenda in combination with the principles of lean management.

Due to space optimization, there will be an increasing number of robots, such as the deployment of mobile robots (AMR) for logistics, which can better adapt to process and spatial changes.

And, of course, the transition to data-driven business processes will be important. Data access and adequate processing will enable the transformation of supply chains into demand-driven logistics and demand-driven warehouses, which are also part of the transformational shift towards customer-centric business and operational models and customers’ individual requirements and specific preferences. That means a reorientation of business processes so that they are able to sustain a mode of mass personalization in manufacturing and logistics.