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Industry 4.0 – Digital Transformation of Supply Chains

17 February 2016, Brussels –  Dr. Andreas Schwab, Member of the European Parliament (MEP) and the Alliance for European Logistics hosted a lunch debate on the topic of digital transformation of supply chains. Dr. Schwab welcomed the participants representing MEPs, permanent representations, the European Commission, industry and standard-setting organisations expressing a wish for “a Europe wide framework for digitalization, across borders, to give a better experience for consumers and industry alike”. To this end, he stressed the importance of getting the Digital Single Market (DSM) right.

Mathieu Grosch, president of the Alliance for European Logistics agreed with Dr. Schwab, highlighting the fact that harmonisation across the Union is needed to avoid 28 different pieces of legislation, and that industry needs to collaborate and exchange information in order to ensure interoperability.

Head of Logistics and Order Fulfilment at SAP, Markus Rosemann, described how digitalization is affecting his company: 72% of global GDP runs through SAP systems, stressing the fact that there is more to digitalization than what immediately meets the eye. He noted how the sharing economy has influenced all sectors, and is likely to drive developments in the logistics industry in the coming years by driving the need for enhanced services offering. The digital core of future business offerings include four key elements, according to Mr. Rosemann:

  • Customer centricity: The power of the end customer has increased, and their purchasing behavior has changed. People now have the opportunity to research products online before buying them (web rooming) or to look at the physical product in a store first before buying it online (show rooming). In addition to this, young people no longer use computers or email – it is therefore important that businesses adapt to these new behaviours and opportunities for product individualization.

  • Digitalised products: 3D printing is a game changer. It is already now used for such novel application as printing pasta. This opens the door to new thinking and business models. • Resource scarcity: As the digitalization landscape is changing, different skills are needed. Supercomputing is becoming increasingly important, and it is difficult to see where the next global supply chain leaders will come from – the logistics industry the networks or perhaps even the Internet companies.

  • Networks: Business networks impact the entire supply chain. Hamburg port is an example of collaboration around business networks, creating a hub that connects all the different elements.

Mr. Clemens Zielonka, national expert seconded to the European Commission, formerly in charge of the German Industrie 4.0, outlined the European Commission’s view, to be concretized in the Digitising Industry Strategy expected in April 2016.

The Commission intends to issue a package consisting of Communication on standardization and another one on the EU cloud initiative. It will also contain staff working documents on the use of IoT and on high performance computing and quantum technology. The package will show how the Digital Single Market activities will contribute to maximizing the European growth potential. In addition, the Commission actions need to coordinate the diverse national efforts and to engage key stakeholders. Some key obstacles include:

  • Digital readiness level disparities between industries and regions

  • Standardisation/interoperability

  • Potential market dominance

  • Liabilities/trust/safety

  • Education and training

The actions should therefore focus on coordination, PPPs, Research, Development and Investments centering on 5G, big data, IoT and manufacturing processes.

During the debate, participants stressed the importance of the Internet of Things as well as the need to address cybersecurity. Cloud can actually help cybersecurity, as it builds a stronger connected defense system rather than relying on smaller, weaker defense mechanisms. Standards, as the Commission mentions in their upcoming strategy, are one approach, but that coordination is needed, as most industries are global and most standard setting occurs outside of the control of any governmental body.

Finally, it was emphasized that consolidated supply chains, bringing together different players, will force all industries to change their way of manufacturing and operating quickly.

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