The weakest link
The world is on the brink of a new industrial revolution which will radically change materials, markets, manufacturing and machines. Can shipping pull its weight? Or will we continue to drag our anchor?
At the time of writing the mystery of Malaysian Airlines Flight MH370 remains unsolved. Any speculation as to the fate of that jet and the 239 souls aboard is above Futurenautics’ pay grade. But what the intense focus around MH370’s disappearance has exposed is the extent to which Industry 4.0 is already with us.
Whilst the aircraft’s satellite tracking and other transponders were switched off—deliberately or otherwise—the sensors buried in its two Rolls-Royce Trent 800 engines were not. According to reports these sensors continued to transmit a variety of data which was being monitored by engineers back in Derby, UK in the firm’s Service Operations Room.
In fact, that Service Operations Room monitors all Rolls-Royce engines currently in service, as do similar operations rooms run by the likes of General Electric (GE) and others supporting a huge range of components making up complex machinery from aircraft to manufacturing plants.
It goes by a variety of names, but whether you call it the Industrial Internet, Internet of All Things, or Machine to Machine (M2M), doesn’t change the magnitude of its implications. And it is one of a group of technology trends which are forming the basis of a new industrial revolution, one which could fundamentally alter the way that goods are conceived, how and where they are manufactured, and the journeys they make both as component parts, and finished products, across the world.
We are at the precipice of a major technological shift at the intersection of the cyber and physical worlds, one with broad implications that will lead to substantial benefits, not just for any one organisation, but for humanity.
“We are at the precipice of a major technological shift at the intersection of the cyber and physical worlds, one with broad implications that will lead to substantial benefits, not just for any one organization, but for humanity,” said Janos Sztipanovits, E. Bronson Ingram distinguished professor of engineering and director of the Institute for Software Integrated Systems at Vanderbilt University, in a statement recently.
In isolation that statement is in danger of sounding like hyperbole, but when you begin to identify the practical ramifications of this technology shift and concurrent generational trends—examples of which are manifold—it’s hard not to agree. It has to be fairly profound in order to be labelled the next industrial revolution. Industry 4.0 is a term originally coined by German manufacturing giant Siemens, and other German industry leaders and follows the steam engine, the conveyor belt, and the first phase of IT and automation technology. Manufacturing 3.0 is part of it, what some call a renaissance in that sector which has traditionally been seen as the bedrock out of which economies evolve service industries. Now the technological shift which Sztipanovits is talking about is opening up a new era for manufacturers, but with it comes massive new challenges.
You may wonder why Industry 4.0 should be of interest to shipping and maritime. The short answer would be because its implications and benefits apply to humanity, and by the commonly accepted definition of humanity, at least most of the shipping and maritime industry qualify. The more pointed answer is that the business of shipping rests upon moving raw materials, components and finished goods around the world on behalf of their manufacturers and owners. The implications for our customers of Industry 4.0, the new challenges it poses, and the changes it will bring to the way they need to operate, have to be appreciated, understood and—ideally—anticipated by the shipping industry. Because the truth is that we’re struggling to support them adequately now, and things are about to get far, far more complex.
Is shipping the weak link?
We’ve called this article the weakest link, and that’s not a reference to a quiz show, it’s how one major auto manufacturer described shipping and it’s part in their supply chain. We’re fond of telling everyone how shipping transports 90 percent of everything, but where we’re slightly more reticent is in admitting how much of everything that gets shipped gets there on time, or at all. Current manufacturing depends upon long, and tightly integrated supply chains, but these supply chains are going to become an even more crucial area of competitive advantage for manufacturers in the future and there are some very good reasons why.
With approximately 3 billion new consumers expected to enter the consuming middle-class by 2030 demand is going in only one direction, but technological advances like the industrial internet, digital manufacturing and factory digitisation, new materials, advanced robotics, 3D printing, or additive manufacturing, plus the new energy landscape are changing the goalposts for manufacturers. The result is that traditional manufacturing strategies which focus on long supply chains and low-cost labour in cheap countries are unlikely to be optimal in the future.
Having cycled through ‘offshoring’ and ‘re-shoring’ where certain business functions were first sent offshore and then brought back to be located close to consumer markets, McKinsey are dubbing this new phase ‘Next-shoring’. According to them, “A next-shoring perspective emphasizes proximity to demand and proximity to innovation. Both are crucial in a world where evolving demand from new markets places a premium on the ability to adapt products to different regions and where emerging technologies that could disrupt costs and processes are making new supply ecosystems a differentiator.”
So what are these emerging technologies and why are they proving a catalyst for such major change? One you will most probably have heard a considerable amount of talk about. 3D printing, or additive manufacturing, has been around for some time, but it’s only in the past few years that the technology has moved mainstream. This isn’t the place for an in-depth description of how it works, more for its implications, which are considerable.
A huge range of items and component parts can be 3D printed now, from aircraft engine parts to human organs without the need for massive factory production line tooling. This opens the way to rapid prototyping, personalisation, single item manufacture or economic short runs. It’s also driving innovation. Whereas traditional machining and production techniques favoured certain materials, 3D printing is different. There are some traditional materials with which additive manufacturing struggles, but it’s opening up scope to experiment with different types of existing materials, and new ones, which never suited traditional manufacturing, but work with 3D printing.
In short, it means that one auto manufacturer has reduced an 8 month prototyping lead time to just one week, and another manufacturer has dropped their Mexican, low-cost parts supplier, from whom they regularly shipped bulk orders, in favour of a local 3D printing supplier who produces on demand and allows them to carry no inventory. Or shipping costs.
It’s also opening up a talent and expertise gap within manufacturers. GE, which already has additive manufacturing competencies, used a crowdsourcing approach to solve its issues with a particular engine bracket problem you can read more about in our The In-Crowd article this issue. GE are also going beyond 3D printing developing a new additive technology called ‘Direct Write’ which involves inking miniaturised sensors directly onto parts of products which were previously unreachable. This, as GE says, “…will allow us to collect new data points to perform real-time analytics and condition monitoring for our customers.”
Which brings us neatly to the industrial internet, IoAT, or M2M depending upon your preference. Cisco have a fun widget on their website which counts in real time the number of devices which are connected to the Internet of All Things. But there’s nothing flippant about the stats.
According to Cisco in 2012 there were 8.7 billion, today it’s over 12 billion and by 2020 they expect it to reach in excess of 50 billion objects. By the way, they believe that more than 50 percent of the connected objects added between 2013-2020 will be added in the last three years of that decade, because that’s when the connectivity costs will be lowest, but more of that later.
These objects include everything from coffee makers to cars and even, as already discussed, jet engines. Utilising tiny, low-power chips—and thanks to GE, now inked sensors—these devices are able to send us streams of real-time performance and environmental data about everything from their location to their temperature, speed and altitude. But they are evolving to do more than that. Combined with actuators, advanced robotics and algorithms they are part of what is possibly the most science fiction part of Industry 4.0, the Cyberphysical System.
One kind of cyberphysical system is the robot which, rather than being programmed can actually be trained by humans on the factory floor. It is the deep learning algorithms which make this possible. But from the supply chain point of view it is even more profound. It is here that the ‘intersection of the cyber and physical worlds’ which Janos Sztipanovits talks about finds its expression. At Robert Bosch GmbH, they’ve tried to capture the concept of fusing the digital and physical worlds in a slogan, “process2device”.
“A piece of metal or raw material will say, “I am the block that will be made into product X for customer Y.” Once the material is in the machine, the material itself records any deviations from the standard process, determines when it’s “done,” and knows how to get to its customer.” Siegfried Dais, Robert Bosch GmbH
Siegfried Dais, the former deputy chairman of the board of management described what that translates to in practice, “For example, a piece of metal or raw material will say, “I am the block that will be made into product X for customer Y.” In an extreme vision, this unfinished material already knows for which customer it is intended and carries with it all the information about where and when it will be processed. Once the material is in the machine, the material itself records any deviations from the standard process, determines when it’s “done,” and knows how to get to its customer.”
The advent of these cyberphysical systems and the real time data they provide will mean that manufacturers will have an unprecedented window into, and opportunity to optimise, every area of their operations. Particularly as advances in communications continue.
HTS, Ambient Backscatter & The Crowd
The new generation of high throughput satellites are making even remote areas accessible to the industrial internet. Recent advances in battery-free wireless communications like ‘ambient backscatter’ devices which communicate with each other and exchange data without a battery by either absorbing or reflecting ambient signal, like those from a TV tower, will extend that reach even further.
These and other steady increases in communications quality, speed and reach, together with cloud technologies delivering increasingly powerful software, is allowing collaboration and digital manufacturing on a previously unthinkable scale. Micro manufacturer Local Motors which developed the world’s first crowdsourced military vehicle (see The In Crowd) relies upon a high-end CAD system called Solid Edge from Siemens. Whereas collaboration in the past may have involved 100 people, now that could be a dynamic crowdsourced team of tens of thousands of people working on different CAD systems.
The Siemens system enables the Local Motors platform hub to import non-native formats, and offer professional grade CAD services to any member on a rental basis. The software can also be downloaded rapidly and used to work offline—an essential feature for the Local Motors community. It’s also worth recording that GE have recently starting working with Local Motors to translate this approach into developing consumer appliances. Crowdsourced ideas will become prototypes in dedicated GE micro-factories—about 20,000 sq ft employing around 50 people, as opposed to current appliance factories at 1 million sq ft and employing 7,000—and sold in small quantities.
Siemens isn’t just working with auto manufacturers though. Its Shipbuilding Catalyst is designed to enable shipyards to accelerate the digital transformation of the enterprise, optimising productivity with preconfigured elements for key processes. The objective is to allow operators to improve fleet support and achieve greater availability and reliability while reducing the total ownership cost.
Current customers include Hyundai Heavy Industries, Fincantieri and IHC Merwede which announced earlier this month that it was standardising on Siemens’ Product Lifecycle Management (PLM) software as part of its “One IHC” initiative. “Our business strategy is based on four pillars—growth, internationalisation, innovation and co-operation,” said IHC CFO Dave Vander Heyde in a statement. “This strategy led us to the creation of our One IHC initiative with the aim of increasing value for our customers by striving for harmony and operational excellence in all our processes. Having instant access to all product data from any location will increase efficiency, reduce costs, enhance quality and help us make smart product development decisions more quickly.”
At its recent press conference at the Hanover Messe Siemens revealed a variety of new technical innovations designed to support the transition to Manufacturing 3.0 and Industry 4.0, but it also recognises that overcoming the decline in productivity gains is key.
Looking at the reasons behind that decline offers an insight which contextualises just why Industry 4.0 is badly needed. The year 2000 marked a turning point for the global economy, at which the rise in the real prices of natural resources began to wipe out a century’s worth of real-price declines. Not even the global economic downturn has halted that trend and resource prices have continued to rise faster than global output.
The Circular Economy
Resource scarcity means that for the first time since the first industrial revolution the linear economic model which sees us take virgin natural resources, make something from them, sell them and then throw the lot away, is under severe pressure. Rising and volatile resource costs are forcing manufacturers to look again at how the economic model works.
The result is the concept of the ‘Circular Economy’, where the emphasis is on re-use and regeneration which has the potential to de-couple the economy from resource constraints. Already major companies including Renault, Philips, B&Q, and others are aiming to reduce waste, which in the fast moving consumer goods sector (FMCG) alone, accounts for 80 percent of the $3.2 trillion worth of materials it uses each year.
The results so far indicate that the benefits of the circular economy could be huge, capturing opportunities to increase margin, reduce costs and re-think businesses.
Moves towards leasing rather than purchasing, use cycles rather than life cycles and cost of ownership rather than purchase price give manufacturers the opportunities to embed deep relationships with customers, gain powerful data about their usage and habits, and eventually ensure that equipment is returned to them to be refurbished or re-used.
The results so far indicate that the benefits of the circular economy could be huge, capturing opportunities to increase margin, reduce costs and re-think businesses. With strategies designed to minimise the use and extend the re-use of virgin materials, a recent report about the potential impact of this trend by the Ellen MacArthur Foundation says, “If applied to steel consumption in the automotive, machining, and transport sectors, a circular transformation could achieve global net materials savings equivalent to between 110 million and 170 million metric tons of iron ore a year in 2025.” Something that shipping should be particularly alert to, see A Bigger Boat to learn why.
New Kinds of Consumers
But there’s another reason that the circular economy should and will gain more traction, and that is because it sits neatly alongside the mindset of the Millennial generation. Collaboration, sustainability, crowdsourcing, digital rather than physical, access rather than ownership adds up to a different kind of consumer than that which has gone before.
Whereas the current generation buy cars which spend 96 percent of their time idle, and drive on roads which are poorly utilised, the Millennials and their children, increasingly won’t. That means not only are resource scarcity issues challenging the traditional linear economy, so are consumers. The days of mass produced consumer goods making a one way trip from the Far East to the US and Europe look to be numbered. The mass market is fragmenting rapidly.
Manufacturers-shipping’s customers-are beginning to wrestle with a whole new range of technological and strategic questions. Questions which shipping should at least understand, and begin to actively help solve.
No one can be certain how fast or how deeply these changes are going to make themselves felt, but already major manufacturers are trying to prepare for and make sense of how they’ll deal with the new order. What is absolutely clear though is that economies of scale, reputation and heritage are no match for agility, innovation and the ability to add value to products, supply chains or consumers.
Manufacturers, shipping’s customers, are beginning to wrestle with a whole new range of technological and strategic questions. Questions which shipping should at least understand, and begin to actively help them solve. But a brief survey of some of our big customers sends a stark message: shipping is already the weak link in many operations.
As we wrote in our launch issue shipping has been described as operating in the stone age, and when one compares the level of connectivity, digital operations, insight, data and intelligence involved in our customers’ businesses, as compared to the average ship operator it’s hard to dispute that. But we do have the opportunity to change. Maritime connectivity has advanced massively, and that opens the doors to closer digital integration and adding value of which shipping hasn’t always been capable in the past.
Industry 4.0- Radical Change for Shipping
Industry 4.0 could radically change shipping as a business, and there is an urgent need to technologically upskill to remain competitive. But we can’t start to do that until we appreciate the challenges our customers are facing, and our part in both addressing and solving them. We need to innovate with them, collaborate with them and potentially far more broadly with each other. We too need to be looking at smart materials, sensors and data, but not just from shipping’s side. “The thinking really has to expand. It has to expand beyond the traditional industry that you’re in,” says Stefan Heck, co-author of Resource Revolution: How to Capture the Biggest Business Opportunity in a Century.
It’s an area where shipping is weak. The rest of industry are looking at strategies to add value as suppliers both to businesses and consumers, taking advantage of new technologies to help them. Shipping is still stuck in the linear economy mindset, focussed on any kind of money it can get, when what we need to work out is how our ships can become part of the cyberphysical systems of the future.
Despite the best efforts of Rolls Royce and Inmarsat, not to mention the hundreds of vessels, both surface and underwater, military airplanes, and the men and women who crew them, there has still been no trace of flight MH370. It has, we can only assume, been swallowed up by the ocean.
The awesome power of nature is nowhere clearer than at sea, and there is a tacit acceptance by those who ship their goods across the oceans that some things are beyond anyone’s control. But if Industry 4.0 is about anything it is about optimisation, using technology to improve wherever possible.
Shipping will always be under extra strain in the supply chain because of the environment in which it operates, but if the industry which carries 90 percent of everything could just improve its performance by percentage points, the effect on our customers, and the world, could be massive.
And when you put that way, doesn’t it feel like a really tantalising prospect?