What makes a business Industry 4.0 mature? We talk to SmarterChains co-founder Gustavo Lopez Ghory
You can read this article in 20 minutes
It is no secret that Industry 4.0 has the power to revolutionise the worlds of manufacturing and supply chain. New technologies and methodologies are increasingly being developed using Industry 4.0 principles, bringing more agility and efficiency along the way.
Even so, some companies are faring better than others when it comes to the implementation of Industry 4.0 solutions.
Therefore, to get to the heart of what makes an Industry 4.0 mature, and learn how companies can and should implement Industry 4.0 solutions, we took the opportunity to speak to a specialist in the field – Gustavo Lopez Ghory, cofounder of SmarterChains.
Having experienced 35 years at global giant Procter & Gamble working in key product supply roles, as well as a recent stint as Chief Supply Chain Officer at Kimberly-Clark, Gustavo is now on a mission to help some of the world’s largest companies harness the power of Industry 4.0 – creating global prosperity in the process.
Following his appearance at last year’s Alcott Global Makers and Movers global conference, we sat down with Gustavo to discuss SmarterChains and Industry 4.0 in detail.
Read on to find:
- What motivated Gustavo to be a part of smarterchains
- Why education has such an important role in the implementation of Industry 4.0
- What makes an Industry 4.0 mature
- Which technologies can advance Industry 4.0
- Why AI will not bring about job losses
You co-founded SmarterChains 4 years ago along with Vasilis Karamalegos and Luigi Matrone. What motivated you to do so, and how have things gone since?
There’s two parts to this question. Obviously, one side of it is the fact that our products and services are addressing real and relevant problems for Supply Chain and Manufacturing practitioners. That by itself already explains my interest in our enterprise and the passion I put behind it. The second part of it is the excitement I get by getting into new horizons that will leverage my experience and challenge my creativity. The opportunity of influencing the path forward towards the future of operations and the incorporation of digital technologies is simply something I could not let pass.
When I left Procter and Gamble in December 2016, I reflected on what I could do with the collected experience. P&G is an amazing institution, one that provides so many opportunities to develop and grow. 35 years full of challenges, successes and failures, travelling around the world, working on operations, planning, innovation and go-to-market in different regions and businesses. You simply feel the responsibility to continue contributing to society and prosperity by putting your experience to serve at an even larger scale.
Right after P&G, I started doing consultancy work and some very rewarding interim roles. I came across Vassilis and Luigi, who were already working and thinking of SmarterChains as a platform solution that industry could incorporate to help accelerate their progress towards digital operations.
And so I got involved with them, joining the team as a co-founder. This provided the opportunity to contribute and serve in that even larger scale as I mentioned before, incorporating my experience in our product design and developing an unparalleled solution to the i4.0 challenge.
If you are an industry leader, you run a complex operation involving multiple countries, plants, distribution centres, suppliers and so forth. You’re managing a very complex set up, and you need to deliver every day to business.
There’s really no time to deepen and learn about all the technologies that are popping up every day. The proliferation of technological solutions that exist is amazing, and it is developing every day. While these technological advances are there to improve our work, the rapid proliferation adds complexity to the decision making process leaders need to go through.
Yes, some big companies have been able to create departments to study technologies and then recommend what tech suits their operation. This is a process that takes time, effort, and a lot of money though. By the time you incorporate those technologies, they might already be outdated or obsolete.
So how do you keep yourself fresh in this climate? These are real problems faced by industry leaders. We set up SmarterChains to be a platformed framework and algorithm to accurately assess operations’ proficiency in digital solutions, define strategies and identify the right technologies roadmap for significant productivity, cost, quality and service improvement, and we do that in a fraction of the time traditional approaches require.
Industry leaders may have 20 plants and 100 distribution centres, there is no way you can think of solutions one by one. So the purpose of SmarterChains is to help businesses weigh up choices and figure out enterprise-wide solutions that can be leveraged to better the implementation process.
Now, on a personal front, after leaving P&G and looking for a high level inspiration, I found SmarterChains.
If you look at operations, they make up about 26% of global GDP. This includes manufacturing and logistics. If we can make an impact on this 26% of GDP, and thereby deliver some prosperity and global growth, that would be an amazingly satisfying achievement. That’s my inspiration, my current everyday north.
Last summer, SmarterChains won an EFD Global award for its workshop on Building an Industry 4.0 Transformation Roadmap. Leaders from major global companies have also participated in your workshops. What have you found to be key when putting together education packages on Industry 4.0 methodologies?
In general terms, when you are leading an operation and you attend events and association’s gatherings, you find that everybody talks about digitalisation and claims a great deal of success implementing technologies. Digging a bit more into it brings to clarity that there is insufficient leveraging of those technologies. We are far from seeing the potential.
The same is true when it comes to creating enterprise-wide strategies that are effective, and perfectly fitting a given business’ situation.
So the need for enhanced education was evident to us, which is why one of our 4 steps is dedicated to helping people learn about technologies and how to incorporate and leverage them in an enterprise wide approach. Together with the Institute of Management Development, IMD, in Lausanne-Switzerland, we developed a case study that helps orient leaders. IMD has incorporated this case study in the Operations program for MBAs or Executive MBA participants. The educational material developed, brings to life the right mindset to adopt technologies in the context of their industries, and how to select and create a roadmap of the implementation choices they will need to make.
During the span of the course, they actually create a roadmap themselves by interacting with our platform. At the end of the exercise, participants are really able to act on it, which is amazing to see.
We were lucky enough to be selected as the number 1 case writing award winning by EFMD. It is now available to high level universities and business schools. It was great to have the opportunity to work with IMD on it.
This work is already helping a lot of major companies, and many executives have completed it.
What observations have you made via your SmarterChains Index Benchmarking standard regarding the technological & organisational capabilities of various different companies, as well as their adoption of industry 4.0 principles?
Well, during the COVID period, together with the operations consultancy team of Ernst & Young, we conducted and published a benchmarking study. The report was very telling, we analysed and understood the state of the industry.
You might be surprised to hear that only 10% of the operations we studied in our data were really leveraging technology at scale. We found that many advanced technologies are being explored and studied, but not really implemented or sufficiently leveraged.
There is a big gap to getting to the point we can claim we are mature in digital operations in the industry.
Our study included 50 different plants and about 500 manufacturing experts. I don’t have all the numbers at hand, but about 9 or 10 different types of businesses and something like 4,600 data points per plant. A sound database that allowed us to understand the state of the industry in this area in the 10 dimensions of Industry 4.0 maturity.
A critical element from the study is that it evidenced the need to deepen the area of education and training. It also emphasised the fact that many adoptions do not work – not because of poor technology choices, but rather our failure to prepare the workforce to adopt new technology.
There are a number of insightful findings in our report, which we’ve made public and can be found via our webpage (www.smarterchains.com) Many are already benefiting from its findings and SmarterChains and EY feel very proud of this work.
What makes a business Industry 4.0 mature?
Well, this is a complex question. At SmarterChains we created what we call the 10 dimensions of technology for i4.0. Every one of those dimensions encompases technologies associated with it that will enhance one’s ability to deliver value.
When we do an assessment of a given operation, we use those 10 dimensions to understand how well that given operation is using those technologies that are available for each. This is based on the business situation and industry best in class and general practises. Then we do a complex mathematical calculation determining a maturity index.
In general, the maturity index describes the operation’s proficiency in the use of i4.0 solutions and how much it is leveraging those solutions. It tells us whether the assessed operation is at an early stage or a mature one. We can then apply the required interventions depending on the level of maturity.
When you do an assessment with SmarterChains, you clearly understand where you are versus the best in class in the database and the industry average. That doesn’t mean that you need to implement everything others are doing. Technological choices ought to be fit for use and leverageable to maximum outcomes.
That’s why the assessment phase is so important – it allows us to move to the next stage, which is preparation which involves the definition of a strategy.
Many times people incorporate technologies, just because they believe it is a way to reduce headcount. Technology is not about reducing headcount – it is about enhancing the ability of the business to deliver better. It’s about positioning you to deliver your promise of quality every day in a consistent way. It is also a way of protecting the company and facilitating a sustainable approach. Productivity at a higher level, consistency predictability like never before.
All of these elements are at a higher priority level than just a headcount number. So many companies have made the mistake of justifying technologies solely based on headcount. I consider this to be a miope way to look at technology. Those that leverage technology are in a better position to deliver sustainable business with sustained performance and competitiveness.
In what ways do you feel the Factory of the Future can relieve stresses on supply chains? It has been said that 3D printing can be effective for example. Are there any other cases?
There is a group of technologies that would enable better specific performance in single operating units or areas, of which there are many of course. The other group of technologies would make the whole end-to-end supply chain really work for you. The secret is to choose the right ones and implement them in an enterprise wide way for maximum financial efficiency and performance.
Obviously, we are talking about the entire supply chain from raw materials or feedstocks to the consumer and point of consumption.
The industry has historically focused more on manufacturing than other areas. Logistics, for example, as well as supply, and transportation, are areas that have been elevated later, historically speaking.
However, those are areas where we can really leverage data to our favour and create outstanding capabilities like sensing demand or the use of supplier portals and things like that. This really creates possibilities for much better performance of the entire supply chain, I call it orchestration. But all too often, the manufacturing team is not ready for that challenge.
So you get all these capabilities around the chain, and you cannot leverage it to its full potential because manufacturing cannot respond to the new requirements, and to the new levels of required agility and synchronisation.
This is one of the reasons why SmarterChains started with manufacturing. Manufacturing needs to be ready for changes in anticipation of the supply chain demanding those capabilities. That way we can really leverage the results of having better service, lower inventory, more responsive systems, business continuity plans and so on, coming from digital operations.
Now if we turn back to the first point, when we have a manufacturing operation that in fact can accommodate the improvements of the other elements of the supply chain, then we are in the game. If we don’t have that, we will likely pay with inventory, and suffer from inconsistent quality and responsiveness among other negative effects.
While inventory could protect the supply chain from failing to serve, it can be very costly. So the manufacturing operations should be tuned to the needs of the supply chain, which is in turn synchronised to the needs of consumer demand – all the way back to the entire supply chain to the feedstocks. If we think like that, it is essential that manufacturing is at the top of the priority list. That’s why we dedicated special attention to it.
When it comes to the example you referred to on 3D printing, yes there are a lot of technologies that can help the operations process in specific ways. However, I won’t champion one too much over another.
If your strategy is to innovate in the market and stimulate growth, then there are other technologies that will help you, such as those that anticipate the effects of new changes in operations machinery and technology. This is why it is very important to set your assessment and make choices based on the business model and needs, avoiding the incorporation of technological solutions that are not going to deliver the competitiveness being pursued.
That’s why as a means of keeping things orderly, we need to really make decisions based on payout and business need – not just the needs that we see now, but the ones that will come. So we need to really play a little bit in advance as well.
How significant a role do you see AI playing in the development of Industry 4.0? Can AI ultimately grow to the point it replaces experts in the field of production and supply chain management?
AI certainly has a major influence over how fast and how much we can progress towards becoming really digital in our operations. There are a lot of benefits of AI.
The algorithms have a logic that somehow recreates human thinking but potentially extrapolates beyond with capacity many more moving parts. So the database we normally start with is a database of current situations and current knowledge. AI is nonetheless an amazing way to deliver repeats and extrapolate unknown repeats with knowledge that is incorporated into the system and by correlating multivariable situations and patterns.
I don’t believe AI or any of the technologies that we’re talking about here are able to replace mankind. Somebody needs to create interaction with people into the operations. In my mind, the futuro of operations is still human centric. Human centric – technology enabled humans.
Do we have any roles that will be replaced by technologies? Certainly. There are roles that will change, disappear or become very mechanical because a lot of the interpretation of the data is in the system. However, new jobs are being created at the same time and many roles will be elevated to a new level of skills and performance/contribution.
The fear of jobs being eliminated via technology is a bit out of proportion in my book.
In every Industrial Revolution, the fear of losing jobs has been present. People were worried their jobs would be eliminated. The truth of the matter is, there is no historical case where you can say there is less employment than before [a major industrial revolution]. You take every 10 or 20 years, and you see the progression, and yet there are more jobs than before out there. There are some variations of course, but the net is always always upwards. This is what progress and prosperity is about. An outcome of the technological revolution we are in today.
Computers didn’t exist before, now they’re an ever-present in every industry. We didn’t have automation available either and now we do. Robots have been around for years and people are scared of losing their job to them, and yet we still are where we are. Fear sometimes paralyses and blinds us from the potential of employing more people and contributing with more and new goods and services more every time. Workforce flow to new horizons, innovation and new opportunities.
I would worry about education. Is the upcoming workforce skilled to the needs of tomorrow’s needed capabilities? An area where I feel we could do way more and where the private and public sector should direct more efforts. That way we can really grow together and create more jobs.
Finally, what does the near future hold for Smarterchains?
We do have an exciting year coming up. I say so because we continue innovating and we are due to launch the expansion of SmarterChains to cover more, if not all of the supply chain, end to end.
My hope is that this, and other developments on the works, shall help us to really make that impact in the industry. Today we’ve been very lucky to have a lot of relevant companies playing with us and become our clients. Mostly Fortune 500 companies. But really our target is to go across the industries.
That means SMEs are very important to us. It’s our desire to really democratise this knowledge in a way that makes a strong impact. If we only focus on a few, we will be limiting ourselves in achieving that dream of positively impacting GDP and generating prosperity across the world.