Prof. Michael Henke, director of Enterprise Logistics at the Fraunhofer Institute for Material Flow and Logistics (IML), talks about Industrie 4.0 and its impacts in logistics.
Prof. Henke, you are calling for a fundamental rethinking in supply chain management, especially given the massive changes in logistics. Are there already innovative IT-based solutions for typical transportation tasks?
Prof. Michael Henke: Yes, there are. An example: A car manufacturer uses an app to direct truck deliveries exactly to the right factory area, the updating of which is synchronized continuously. In this way, logistics is already handling management tasks to some extent. Of course, this has much wider implications if we view logistics as part of supply chain management, as part of the entire value creation network. Logistics is more interdisciplinary than almost any other company segment, which primes it for new IT-based solutions.
Isn't one of logistics' current problems that it is still "in the basement" from a management perspective?
In fact the image of logistics is not yet at the point where we see it. From a user-oriented research perspective, logistics is a management task. Logistics, management and also IT are inextricably linked, which is why logistics is such an exciting subject, not only but especially in the context of Industry 4.0. At the institute we have already developed our own solutions on an IT basis that not only depict this Internet of Things in a visionary manner but also in a very concrete way. This already exists. We already have the so-called cyber-physical system for logistics.
Intelligent Logistics: Innovative technologies are already available
But the container is a very good illustration of the current overlap between logistics and IT. Although during actual transport, its precise location is tracked in real time, are there actually two levels?
There are still a lot of possibilities in that area that are already technically feasible. Many innovative technologies are available. We just have to be ready for them, and also develop management accordingly. One can imagine the container being made even more "intelligent", not just specifying "from point A to B", but also including information about the status of its goods. Using sensors, we are already able to update such information during transport.
We are thinking about including financial information as part of the container: What value is it transporting? What are the payment terms and objectives? Then in a next step, one can imagine containers negotiating with one another or independently deciding whether it would be better for the value-adding process to travel to A or B. Maybe A is threatened by bankruptcy or the payment terms there are more advantageous? We call this financial supply chain management, for which the relevant algorithms will need to be developed.
Doesn't this naturally have a highly disruptive potential?
Yes, of course. These are still hypotheses.We are just at the beginning. But when it happens, I think that many companies will simply have to look for new business models on the basis of these and other disruptive changes. The car industry would have to think about how it wants to position itself in the future if, for example, Google develops its own car. Otherwise some current OEMs might become suppliers in the future.
Cellular conveyor systems based on swarm intelligence
Swarm intelligence, intelligent products, self management - doesn't that today sound like a pure fantasy future for many businesses?
Probably, but we already have some specific applications: A few years ago, intelligent containers were developed at our institute, which are able to count their contents (i.e. screws) through the use of cameras. Based on swarm intelligence, we created cellular conveyor systems in a next step. These small robots can receive the containers, communicate with each other and move through space like a swarm. Our newest product is the RackRacer, which reduces vertical and horizontal movement in the warehouse because of its ability to move diagonally. This enables a high degree of flexibility and comes from the 3D printer.
Will the classic pyramid of strategy, planning, and management disintegrate with Industry 4.0?
I think that these changes cannot be halted in the medium term and actually affect all areas of a company. Already today we are using the Internet of Services and Things in our personal lives. In the future, it will also be the driving force in B2B and lead to a necessary transformation of organizations. But for this to happen, we need a secure and stable digital infrastructure and binding standards worldwide. It cannot work without this global perspective, and we don't have that yet.
More planning security in purchasing units
Another critical point is "savings," which until now has been the proof of successful purchasing—the more savings, the better. However, you say that savings is merely an indicator of insufficient planning?
Purchasing units continue to focus primarily on savings. The buyer receives incentives to that end. But, ultimately, this just rewards inadequate planning. Because the more exact the planning is, the less leeway there is for savings in purchasing.For that reason, the focus should be on planning security, not savings. In this way, purchasing gets more planning capacity and consequently more budgetary responsibility and can provide a more detailed representation of its performance, which currently can only be represented a fraction.
Won't that have to change anyway, given the ever larger available amounts of data?
We like to say - even if it is exaggerating a bit - Industry 4.0 is Logistics 4.0. There is not yet a Purchasing 4.0, but whether it is coming is a valid question. I think that the subject of Industry 4.0 will also force changes in the budgeting process.
So there will be major innovations in logistics?
It doesn't just have to become more efficient but especially more effective - and that is not just a matter of words. Efficient ultimately means increasingly better movement along existing paths. Effective means daring to think outside the box and to try out completely different things. Companies today are often not prepared to do that. Many are investing in ever more efficiency but fail to see the development as a whole.
A good example is the Pony Express from the U.S. in the 19th century, which got ever more sophisticated and efficient, even developing a standardized saddlebag to become the best means of communication from Missouri to the Wild West. That lasted until the even the most remote inhabitants in California became connected to the telegraph network. That was the end of the Pony Express.