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The Struggle With Supply Chain Disruptions

May 12, 2022
Here's how retrofitting can strengthen supply chains, help manufacturers better know their processes, and protect against unexpected disruptions.
“If you know the enemy and know yourself, your victory will not stand in doubt; if you know Heaven and know Earth, you may make your victory complete,” advises Sun Tzu’s The Art of War.

This is tough for manufacturers, who face increasing disruption to supply chains both from cyberattacks and extreme weather.

Manufacturing was hit hard by supply chain disruptions in 2021 due to various factors including COVID-19, extreme weather, the continuing semi-conductor shortage, and cyberattacks.

First and foremost, supply chains are designed for the fast delivery of products and services, rather than for optimal security. They are also becoming more complex as unconnected stand-alone devices give way to Industrial Internet of Things (IIoT), faster 5G connectivity, and cloud technologies.

These networks thrive on real-time data, which makes cyberattacks especially hard to spot―particularly when hackers design their activities to blend in with the legitimate activities of companies, workers, and customers.

These cyberattacks vary in size and scale, attacking all levels of government and industry. According to data released by Resilinc, a global leader in the supply chain risk monitoring space, human-caused supply chain disruptions are rising overall.

For example, the number of factory fires increased by 150% in the first half of 2021, compared to the first half of 2020.

Major cyberattacks in 2021, as listed by the Center for Strategic and International Studies (CSIS), included an attack by Chinese government hackers targeted at Microsoft’s enterprise email software. The attack’s goal was to steal data from over 30,000 organizations around the world, including government agencies, law firms, and defense contractors.

In February 2021, unknown hackers attempted to raise levels of sodium hydroxide in the local water supply of Oldsmar, Florida, by a factor of 100, which would have been toxic to humans if ingested. The hackers attempted this by exploiting a remote access system.

2021’s supply chain disruptions could also be blamed on extreme weather, whose most common consequence is preventing delivery trucks from arriving on time or employees from getting to work. There is also the threat of widespread damage to critical infrastructure and the blocking of normal supply routesMcKinsey predicts that “The probability of a hurricane of sufficient intensity to disrupt semiconductor supply chains may grow two to four times by 2040.”

The National Oceanic and Atmospheric Administration (NOAA) reports that the years between 2016 and 2020 saw an average of 16.2 disasters per year that cost $120 billion annually. This was more than double the figures recorded between 1980 and 2020.

Whether it’s against malicious human acts or catastrophic forces of nature, manufacturers must better protect and reinforce their supply chains.

But Forbes says that technology is the way forward: “Resilience is high on the agenda following the unprecedented disruption of the past two years, and IoT technology provides great opportunities to build more robust and disaster-resistant organizations.”

Digitalized Networks

McKinsey & Company recommends that manufacturers strive for greater supply chain resilience and optimization. Its report Could climate become the weak link in your supply chain?, concludes that, “Industry 4.0 technologies could help support companies in achieving resilience as well as efficiency; for example, through improving transparency in supply chains, and in some cases, potentially changing the economics of production.”

For example, Nokia, according to PwC’s Digital Factories 2020 report, has turned to digitalization to incorporate lean management and data analytics across its global supply chain. Workers on Nokia’s shop floor are equipped with wearable technologies with gesture-based equipment controls and collaborate with robot co-workers.

Nokia says its new Industry 4.0 systems have improved manufacturing processes and increased operational stability. Digitalized networks can also be better prepared against supply chain disruptions wrought by humans or nature.

Meanwhile, Apple has pledged to cut emissions from its supply chain to net-zero by 2030. Its strategy is to review its supply chain partners and the emissions they generate by using AI, data analytics, and sensors to spot patterns, anticipate purchasing demands, and better manage their inventories.

The Apple example, in particular, shows how IIoT devices like smart sensors and edge systems can give an all-encompassing view of supply chains.

Retrofitting Strategy

Stronger supply chains won’t just depend on more advanced technologies, it’s also about taking the right approach.

In his interview with McKinsey, Dirk Holbach, the chief supply-chain officer at Henkel, recommends three main areas.

First, visibility, or understanding what’s going on at any point in time in an extended supply chain.

Second, people, which means to “set up the business to be more centrally standardized and organized, adding to strong regional and local teams empowered to make fast decisions within a given framework.”

Lastly, Holbach recommends companies review their product sourcing.

These approaches, and the idea of reconfiguring a whole supply chain for Industry 4.0, might sound expensive. However, manufacturers can opt for a retrofitting strategy. By retrofitting smart sensors to existing equipment, it’s possible to integrate the big data management capabilities of sensors and other technologies into existing equipment and processes.

A major benefit of installing smart sensors is predictive maintenance.

For instance, overall equipment lifecycle models based on past performance can give a prediction of when components are likely to break down. Predictive maintenance can help manufacturers better guard their supply chains against unexpected disruptions—whether they are caused by nature or malicious human acts.

The IIoT can also help achieve more secure supply chains.

A 2021 study of 1,500 business leaders by Entrust, Securing the New Hybrid Workplace, found that 40% are utilizing biometric authentication technologies, while 36% are using mobile identity verification systems.

Other manufacturers are incorporating Know Your Business and Know Your Customer (KYB and KYC) measures in their working cultures, with digitalized and automated functions like databases to verify the identities of customers, partners, third-party vendors, and suppliers.

In these cases, better supply chain management is being integrated into the working cultures of organizations, while retrofitting sensors can add communication capabilities to existing legacy machines.

Compared to more advanced technologies, obsolete parts are often easier to integrate. Retrofitting by adding communication capabilities to legacy machines is often quicker, easier, and more profitable than replacing an entire production line.

However, it’s important to find a trustworthy partner to supply spare parts to perform maintenance without a hitch. Whether manufacturers are planning to buy legacy equipment or need help upgrading existing machines, EU Automation can provide obsolete parts from all major manufacturers in a timely manner.

As the industry faces the uncertainty of future supply chain disruptions, to paraphrase Sun Tzu, it may not always be possible to “know the enemy”.

However, manufacturers who hit the ground running when it comes to connecting legacy equipment to the IIoT can better know their processes, and leverage the power of Industry 4.0 and big data to strengthen their supply chains.