The Manucore Guide to

Disruptive Technology:
AI, Co-bots, Autonomous Vehicles,
Blockchain and Industrial IoT
 About the Author

Sean Culey

Sean Culey is a business transformation expert whose work on

disruptive technologies and their impact is globally recognised. He
is a sought-after keynote speaker, speaking at events and
universities across the world, and a widely-published author of
thought-provoking pieces in journals such as The European
Business Review and Forbes. Sean is also a member of the
European Leadership team of the APICS Supply Chain Council,
SCOR Master Instructor and Visiting Fellow at Cranfield School of
Management.

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Artificial Intelligence is one
of the pivotal technologies
of the next wave of
technological change
1 Artificial Intelligence:
Automating the knowledge worker

To be deemed as ‘intelligent’, a machine must be

able to operate in a multitude of variable conditions,
Sean Culey assesses the
absorb and process a stream of sensory data, find
rise and threat of artificial
patterns in that data, and be able to determine the
intelligence (AI) and appropriate course of action based on the conditions,
automated workers, data and patterns presented. It must be able to learn
explaining its progress from over time and handle a vast multitude of different
science fiction to variables. Computers are increasingly getting better
everything from assisting in at handling unexpected situations, and doing so with
supply chain processes to greater accuracy.
suggesting movies on
Netflix.

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 Variations of self-learning algorithms are now
routinely embedded in mobile and online services
to recommend products and adapt the experience
based on our previous choices and preferences.
However, we are now starting to see some of the
real technologies that will power the AI revolution,
especially when it comes to the world of work.

First movers in automated workers

AI capabilities such as cognitive computing and machine learning are all

advancing behind the scenes. Cognitive computing, the poster child for which is
IBM’s cognitive supercomputer named Watson, came to prominence after
thrashing the two best competitors ever on the US game show Jeopardy back in
2011. However, whereas Jeopardy was all about providing answers, IBM directed
Watson towards the process of discovery, offering Watson’s capabilities to any
parties who felt they had a compelling business case for this technology.

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The first takers were the healthcare industry, using the Artificial Intelligence
capabilities of IBM Watson to analyse large amounts of imaging and text in
electronic health records to identify traces of malignance. Watson Genomics can
create tailored drug recommendations for cancer patients in minutes rather than
the weeks it would normally take human doctors. The insurance industry was
another place where Watson’s capabilities found a home. In 2017, an insurance
firm in Japan replaced thirty-four employees with an IBM Watson based artificial
intelligence system, giving the company a return on its investment in less than
two years.

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Watson is not the only AI in town. While AI researchers are busy building smart
machines, machine-learning experts are striving to make them truly intelligent,
autonomous machines. Nidhi Chappell, head of machine learning at Intel
describes the difference between AI and machine learning as follows; “AI is
basically the intelligence – how we make machines intelligent, while machine
learning is the implementation of the computing methods that support it. The way
I think of it is: AI is the science and machine learning is the algorithms that make
the machines smarter. Machine learning is therefore the enabler for AI. If AI is
driving the car, machine learning identifies the stop sign and what to do.”[i]

Machine learning is being used to discover patterns and correlations in data, and
in doing so powering the development of predictive models and analytics helping
companies to provide new offerings in today’s on-demand world. Machine
learning powers the new wave ride hailing companies such as Lyft and Uber,
enabling them to determine optimal routes, match rides with drivers, establish
ride and wait times and determine prices.

In the world of financial services, JP Morgan hit the tech headlines when it
announced the creation of a learning machine called COIN (short for Contract
Intelligence) that was able to interpret commercial loan agreements in seconds, a
task that had previously took lawyers and loan officers 360,000 hours per year.
Machine learning is also being used to extract and analyse information from
unstructured data captured from its customers such as emails, chats, comments,
videos and support requests to accurately gauge customer sentiment, such as
satisfaction with the service.

Areas which rely heavily on experience

and knowledge, gained from years of
study and in-field practice, are
suddenly finding themselves being
replaced by machines that can process
information that would take a human
their entire working life to process in
just seconds.

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To whom am I speaking? Voice recognition and Artificial Intelligence

The increasing use of AI and machine learning to power voice recognition

systems that understand language and enable conversation via voice rather than
text has given rise to the chatbot. The benefits are obvious. Firstly, a chatbot never
sleeps, takes a break or is likely to damage your brand by being rude or sarcastic
(not yet, anyway). It increases the level of service customers receive by being able
to filter out and answer easy questions, while also increasing the response time
preventing people from waiting ages listening to looping, soul destroying
messages about how important their call is to the company. They can learn by
experience, able to answer ever more sophisticated questions relating to the
business of the company they support.

IBM’s Watson is also being used to power chatbots. Watson Virtual Agent uses its
cognitive and deep natural language processing capabilities to provide a
conversational self-service experience, providing callers with answers to
questions and appropriately reacting to their requests. Companies like Staples
have already utilised this technology to enable people to verbally order goods
anytime, anywhere, from any device they prefer. They can also talk to the virtual
agent to reorder supplies, track shipments or chat about customer service needs.

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A better plan. A better planner. A better supply chain

The task of planning, especially for consumer-facing companies, is becoming

untenable. Online shopping continues to explode, and in certain sectors such as
apparel, consumer behaviour results in large numbers of orders being returned
because the shopper ordered multiple clothes in multiple sizes, keeping the one
outfit they like and returning the rest. These types of demand behaviour cause
severe headaches for supply chain managers as it has become harder to predict
where the product needs to be and when. This creates almost impossible
pressure for companies.

Realising the opportunity, supply chain planning companies like ToolsGroup and
Quintiq have embedded AI and machine learning into their supply chain
optimization software. These solutions create baseline forecasts by using an
algorithm that learns from early levels of consumer demand, combined with
realistic product output numbers and promotions. They then accurately forecast
upcoming needs and optimise inventory and replenishment plans far better than
human planners can.

These new forms of data analytics are shaking up multiple industries as machines
gain unprecedented capabilities to improve processes that humans have
struggled with for decades. Whereas in the past planning was linear, with silo-
based demand plans, inventory plans, supply plans and even silo exception plans,
today they are increasingly automatic and event-driven. The ability to plan routes
with up-to-date information from smart machines enables more detailed
distribution planning, dramatically reducing costs and time to replenishment. An
AI-planned supply chain could begin to predict how many customers are going to
require a product based on when specific sets of criteria are met – for example
weather conditions. The ability to make an almost instant prediction based on
years of data, to say ‘when a specific set of conditions occurs, x more sales occur’
will prove to be a very powerful differentiator for those companies who can get
take advantage of this technology.
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Digital Dilbert?

The market for building greater levels of machine intelligence is huge, as is the
wealth that will be created because of it. Silicon-based AI systems will be able to
process and make sense of far more information than our carbon-based brains
could ever hope to achieve. What companies are rapidly finding is that AI is
cheaper, more efficient, less error-prone and potentially more impartial in its
actions than human beings. Many knowledge workers are already doing standard,
repetitive work such as contracts reviews, invoice and order processing,
mortgage servicing operations and dealing with compliance issues. These can
easily be, and are already being, automated.

There is a new sense of urgency to utilise this technology as businesses realise

that data has a shelf life and its value diminishes rapidly over time. The more data
that is collected, analysed and used, then the greater the economic value it
produces. In addition, the economic value of data multiplies when combined with
context and right time delivery. Everyone is now in the data business.

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Prepare for an AI future

We have only just started the AI journey. The technology is in its infancy, yet it is
already changing the world around us in profound ways. We haven’t seen
anything yet. So how will an increased use of AI affect the way companies liaise
with customers and support this relationship with enhanced supply chain
functionality?

• When shopping in brick-and-mortar stores, advanced analytics, GPS, computer

vision and machine learning algorithms will identify when you are near a store
and offer you personalised vouchers, offers and discounts. When inside the
store, your purchasing history will be accessed and items suggested and
matched to accompany previously bought goods.

• Increased use of store robots who will offer personalized product

recommendations made based on data about each customer’s unique interests
and buying propensity. Over time, the Amazon Go style experience will expand
to other retail shops as well, eliminating checkouts and automatically charging
accounts, enhancing the shopping experience.

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Prepare for an AI future

• At home, demand signals will be immediately received via intelligent machines,

prescriptive ordering AI systems, connected smart home devices or by you just
placing an order the moment you notice the need. This demand will
increasingly include information on the customer’s preferences, location, age
and background, and the machine’s current stock levels and consumption data.

• When shopping online, chat bots will increasingly be used to drive intelligent
and meaningful engagement with customers, provide customer service and
ongoing support to queries to an increasingly level of complexity

• The detailed build-up of data from your viewing and shopping history will
enable websites to present an increasingly more tailored list of recommended
products, and algorithmic pricing engines will also make personalised,
situational pricing offers to each customer.

• These demand signals will be combined and processed by AI and machine

learning powered data analytical tools, which constantly adjust replenishment
schedules and plans real-time based on the latest consumer data.

• Machine learning based AI systems will be used to provide accurate

replenishment forecasts, production and distribution plans, helping to
continually establish the optimal cost-to-serve models, stocking profiles and
manufacturing schedules. Companies will use AI and machine learning to
sharpen analytic algorithms, detect more early warning signals, anticipate
trends and have accurate answers before competitors do.

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Co-bots, the new
generation of co-
operative, collaborative
robots, have the power to
2 Collaborative Robots:
Man meets machine

Robot, from the Czech word, robota, meaning

transform manufacturing. ‘forced labour’, was first used to denote a fictional
humanoid in a 1920 play R.U.R. (Rossum’s Universal
Sean Culey looks at the key Robots) by the Czech writer, Karel Čapek.[1] Robots
trends and future prospects have since captured the imagination of sci-fi
writers and industrialists alike. While they became
an almost immediate feature in films of fiction such
as Metropolis (1927), it wasn’t until 1961 that we
saw them appear in the real world of industry.

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 General Motors installed the first industrial robot, a one-armed welding machine
called Unimate, back in 1961. Fifty years later, the automotive industry is still one
of the biggest users, with more than 80% of car production completed by
machines. Most industrial robots are large, heavy, expensive single-purpose
machines capable of repeatedly performing precise steps such as lifting heavy
objects, cutting metal or welding. Expensive to program, incapable of handling
even small deviations, and so dangerous that they must be physically separated
from human workers by cages, they remain impractical to other types of
manufacturing. Until now.

The days of needing highly structured

environments for robots are fading, and
more capable machines are on the rise.
Robots are breaking free of their cages,
and a new generation of smarter, more
adaptive, collaborative industrial robots
has emerged. Designed to work
alongside their human counterparts,
collaborative robots, or co-bots, can
safely and effectively interact with
human workers while performing simple
industrial tasks. Their flexibility allows
them to perform multiple tasks in
multiple industries, while also
decreasing the amount of space needed. Image: Rethink Robotics

This collaborative technology is offering huge advantages to businesses,

production lines, and workers. The other powerful factor is that they are
effectively a platform, able to be upgraded to perform new tasks without a
change in hardware. The old industrial robots did one thing, whereas these can
do many – and they increase their capabilities all the time. In the past, every time
you needed to change the purpose of the robot, you needed a new robot. This
was expensive, making them cost effective only in narrow situations, thereby
becoming capital investment decisions that companies thought very carefully
about, limiting the growth of the robot industry.

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 Now this is changing. Software updates can dramatically alter the capabilities
and performance of the robot, and different grippers can be installed in minutes
to allow them to do different tasks. Programming robots used to be a job for
engineers, but now advanced-learning algorithms allow machines to pick up
skills directly from workers on the assembly line.

This new breed of flexible robots is driving a robotic resurgence. Sales in the US,
Canada and Mexico are increasing as more companies move manufacturing
operations closer to US markets. According to the Robotic Industries Association,
In the first quarter of 2017, US companies bought a total of 9,773 industrial
robots, valued at approximately $516 million. This a 32% increase over the same
time in 2016. The International Federation of Robotics (IFR) is predicting that the
number of industrial robots deployed worldwide will increase to 2.6 million units
by 2019.

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 Key players: co-bot producers

The poster child for this renaissance is Baxter and his younger brother Sawyer.
Their developer, Rethink Robotics, has designed the 3-feet tall, two-armed
Baxter, and one-armed Sawyer with a computer-screen face, animated eyes,
and the capability to automatically adapt to changing environments. It uses a
series of cameras, sensors and software to enable it to ‘see’ objects, ‘feel’ forces
and ‘understand’ tasks. Baxter is neither particularly fast (although it is
continually getting faster) nor particularly accurate (although it is getting more
precise with every update).

However, it excels at just about any job that involves picking objects up and
putting them down elsewhere while simultaneously adapting to changes in its
environment, like a misplaced part or a conveyor belt that suddenly changes
speed. Baxter can handle a broad range of tasks ranging from line loading and
machine tending, to packaging and material handling.

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 What’s different in the new era of robotics

The new breed of co-bots boast these game-changing characteristics:

Price: Traditional industrial robots start at around $100,000+. but market-

leading co-bots are priced $25,000, the same as an average salary for a US
warehouse or production worker.

Working conditions: unlike humans, co-bots can work all day and night for the
cost of electricity, don’t get sick, require breaks or need holidays. They also
don’t join unions, complain or go on strike.

Safety: their collaborative, adaptive nature means they require no security

cages, working seamlessly alongside human coworkers, continuously sensing
and adapting to what’s going on in its environment. As soon as it touches
something unexpected it stops with a concerned look on its face.

Image courtesy
of KUKA
Aktiengesellschaft

Intelligence: To teach Baxter a new job, for example, a human guides the arms
to simulate the desired task through a sequence of motions, records them and
watches as they repeat the process automatically. Equipped with sensors and
other software to help it see and understand its environment, they apply
common sense to their environment. For example, if it drops an object, it
‘knows’ it must get another one before trying to finish the task.

Ease of Use: Simple interfaces make this technology work more like an
application than a traditional industrial robot; plug-and-play machines that
15 small manufacturers can use without lengthy training of employees. 15
 Robotics industry leaders

Rethink Robotics is not the only collaborative robotics company in town. Other
major players with robots designed to work safely alongside humans include
Kuka, ABB, Fanuc and Universal Robots.

Kuka, based in Germany, has two single-armed collaborative robots with multi-
joint flexibility and safe torque sensors on every axis that make them well suited
for tactile solutions and simple gripper systems.

Japanese company Fanuc has four single-arm collaborative robots equipped

with vision and 3D sensors. ABB, the Swedish/Swiss company, has developed
YuMi (‘You and Me’), a dual arm collaborative robot like Baxter (minus the
screen) and the Danish company Universal Robots has a series of robotic arms
with collaborative capabilities.

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 The ROI of Robots

The importance of collaborative robots and the flexibility they bring is

significant. Many companies have embraced off-shoring to chase the lowest
possible labour costs, relocating production to countries like China, Bangladesh
and now Vietnam. What they’ve since found was that the total cost of the
supply chain was far greater than any planned savings. Excessive transportation
costs, long lead times and significant quality issues change the economics.

Collaborative robots are creating new possibilities for small- to medium-sized

manufacturers that previously assumed robots were outs of their budgets.
Their ability to operate at a per-unit cost less than even the cheapest worker in
emerging nations makes them a desirable proposition. They neutralize the
location issue, enabling manufacturing to be located near the consumer and
reduce the transportation and storage needed. Manufacturing locally by
machines not only saves on supply chain costs, but also removes the other
issues of counterfeiting, IP theft, quality control, long lead times, and cultural
and language difficulties.

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This is kicking off a reshoring trend, with companies like Adidas and Nike
already bringing manufacturing to Europe and the US. Localization of
production also means that items can be made in smaller batches, increasing
the agility needed to meet the demands of a consumer base that increasingly
demands ever shorter lead times. Connected robots are also capable of sharing
and re-using programming, which means manufacturers can flexibly set up
production in multiple locations and still maintain the quality and consistency of
global brands, regardless of the local labour pool. The projected ROI of
collaborative robots is therefore measured in months, not years.

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 Manufacturing’s coming home – but are the jobs?

The tipping point for robots is about to be reached. This process is irreversible
as humans simply cannot compete with this level of productivity per dollar. The
prices of robotics hardware and software are dropping fast, while their
capability increases exponentially. Often only a small upgrade and increase in
intelligence is needed to allow an ROI-worthy increase in output.

This new robot revolution has also had a direct impact on nations such as China,
where the government has realised that an ageing population and growing
wages has impacted its attractiveness as a manufacturing destination. It has
taken proactive steps by focusing on becoming the largest producer and
purchaser of industrial robots, incentivizing its different regions and companies.
In 2015, the government of Guangdong province in south China promised to
spend $150 billion equipping factories with industrial robots and creating two
new centres dedicated to advanced automation.

Collaborative robots play a pivotal part in the development of the PAL

(Personalized, Automated, Local) supply chain. They will enable the personal
aspect through allowing companies to produce smaller batches of more
customized products on demand, enabling them to design products for more
niche markets and sizes. They obviously form part of the automation revolution,
and they will help companies to localise production to where the consumers
are located.

As collaborative robots grow in sophistication, the cost advantages of making,

storing and shipping goods locally and in smaller quantities using smart
machines and on-demand manufacturing will become pervasive. They will be
cheaper, faster, and far more reliable than humans. They also make far fewer
errors, are unlikely to pilfer goods, act inappropriately or put your company’s
brand at risk. Add all these factors together and it’s easy to understand why
we’re going to be seeing more and more silicon-based employees working
alongside our carbon-based colleagues.

18 18
How close are we to
seeing autonomous
vehicles on every road and
drones flying regularly
3 Autonomous Vehicles:
Driving the future

In 2004, two of the smartest guys around,

above us? Sean Culey Professor Frank Levy from MIT and Professor
assesses the current state Richard Murnane from Harvard, published a book
of autonomous vehicle called The New Division of Labor: How Computers
technology. Are Creating the Next Job Market.[i] They asked
the question “What kind of tasks do computers
perform better than humans?” Their conclusion
Autonomous Vehicles:
was that it continues to excel at rule-based logic,
Making the improbable,
but struggles with tasks that involve expert
possible. thinking and complex communication.

19
They suggested that computers, while disruptive and impressive, would not be
able to replace humans in jobs that required a variety of observational and
decision-making skills. The example they gave was executing a left-hand turn
in oncoming traffic. “As the driver makes his left turn against traffic, he confronts
a wall of images and sounds generated by oncoming cars, traffic lights,
storefronts, billboards, trees, and a traffic policeman. Using his knowledge, he
must estimate the size and position of each of these objects and the likelihood
that they pose a hazard.”[ii]

They therefore concluded it was extremely unlikely that we would see

autonomous vehicles on the road anytime soon. But just six years later,
Google’s first-generation autonomous cars were doing just that. Then, two
years later, on October 23, 2012, California Governor Jerry Brown sat alongside
Sergey Brin from Google and signed a new bill that allowed autonomous cars
on the state’s roads.[iii] “Today we’re looking at science-fiction becoming
tomorrow’s reality—the self-driving car,” Brown stated.

Since 2012, the buzz around autonomous vehicles has reached fever pitch.
Initially pioneered by Google who modified a fleet of Toyota Priuses, now
nearly all the major car companies have advanced self-driving car projects in
the works, and one company in particular – Tesla – already provides semi-
autonomous capability via its Autopilot hardware that was installed in every car
coming off the production line since October 2014.

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How do they work?

The US Department of Transportation defines full self-driving autonomy as the

vehicle being designed to perform all safety-critical driving functions and
monitor roadway conditions for an entire trip. The vehicle is equipped with
sophisticated sensors that include radar, LIDAR, sonar and multiple, high-
resolution cameras to provide object detection, and actuators that control the
electric steering, braking and throttle control to provide collision avoidance if
obstacles are detected. All controlled by complex and sophisticated software.

Elmar Frickenstein, Senior Vice President of BMW, explains the level of end-to-
end architecture required to develop a truly autonomous car. “Inside the car, we
have to have a central computing platform — a supercomputer provided by
[Intel]. In addition we need motion control for highly dynamic and elegant
driving, a sensor cluster and a safe, secure and private environment. Outside
the car, we need a high-performance cloud solution to help us with things like
swarm intelligence for new driving strategies, planning, data analytics and
machine learning to create new functions.” GPS will provide route and traffic
information to its destination so the car knows where it’s going and how it’s
getting there.
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While autonomous cars are getting most of the media attention, the same
technological advances are being used to make a whole variety of vehicles
capable of operating without a human driver. These range from the very large –
such as ocean going sea vessels being developed by Rolls Royce, autonomous
cargo planes being developed by Airbus and autonomous trains being
developed for Rio Tinto, to the very small, such as pavement delivery robots
such as those being developed by Starship and autonomous drones, first
demonstrated by Jeff Bezos of Amazon.

Autonomous cars are being developed by nearly all the major manufacturers,
specifically Ford, Daimler, BMW, VW Group and Toyota, plus new entrants such
as Tesla. However, technology companies such as Uber, Lyft, Waymo, Apple
and Google and Amazon are all working on autonomous vehicles.

The same technology can of course be used in larger vehicles such as trucks.
Existing manufacturers such as Volvo and Daimler, logistics companies such as
FedEx, UPS, US Postal Service and technology companies such as Otto and
Tesla, all intend to have their versions of the driverless truck on the road in the
next two or three years.

There are variations of autonomous capabilities from fully autonomous vehicles

to platooning, where a lead vehicle with a human driver has a convoy of other
vehicles behind it, all connected and autonomous copying and following the
actions and speed of the lead vehicle.

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There have even been examples where different autonomous capabilities are
combined – for example Daimler is partnering with Starship robots on the
development of a mothership van concept. An autonomous van loaded with
Starship delivery robots travels to an optimal location, the delivery robots
scatter from the van and travel to each house, deliver the goods and then
return to the van to be reloaded with the next batch of orders.

When joined together, autonomous vehicles are capable of disrupting almost

every stage of the end-to-end supply chain. For example:

• autonomous mining vehicles will dig material out of the ground and…
• move it to an autonomous train that drives the goods to…
• a fully autonomous port, such as the one in Rotterdam, loads goods onto…
• an autonomous ship, which travels to another autonomous port,
• unloads the goods onto an autonomous truck, which…
• drives to a factory, where the goods are used in the production of finished
products, that are…
• loaded onto another autonomous truck and driven to a fulfilment centre
where…
• they are picked and packed by robots before ‘the last mile’ is completed by…
• autonomous drones / robot or delivery vehicle, delivering the goods to the
end consumer.
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Autonomous vehicles: a compelling business case

Firstly, they stand to reduce the number one cause of vehicle accidents –
humans. Human error is responsible for 70-80% of all maritime accidents[iv],
90% of all haulage accidents and 95% of all car accidents (car accidents alone
were responsible for 1.25 million deaths in 2013).[v] Widespread adoption of
self-driving vehicles could eliminate around 90 percent of all auto accidents in
the US, preventing up to $190 billion in damages and health costs annually. This
will cause a productivity boost due to saving time normally lost through
recovering from accidents.

Secondly, the biggest cost in nearly every vehicle-related activity is usually the
human at the front. Take the driver out and the costs reduce significantly. As
Uber’s ex-CEO Travis Kalanick declared in 2014: “You’re not just paying for the
car; you’re paying for the other dude in the car. When there’s no other dude in
the car, the cost of taking an Uber becomes cheaper than owning a vehicle.”

Research by Ark Invest[vii] highlights that the average cost-per-mile of

travelling in a US taxi is $3.86, whereas a San Francisco Uber is $2.25 per mile,
and travelling in your own vehicle costs $0.76 per mile. However, the estimated
cost of travelling in a shared autonomous vehicle in 2020 is predicted to be just
$0.35 per mile. Morgan Stanley has estimated that autonomous technology
could save the freight industry upwards of $168bn annually, $70bn of which
would come from reducing staff, $35bn from fuel savings, $36bn from accident
savings and $27bn from productivity gains.

Thirdly, commuting consumes an enormous amount of time that could be used

more productively. Management consultants McKinsey estimate that
worldwide time saved every day by driverless cars could total as much as one
billion hours. Morgan Stanley has estimated that autonomous vehicles will
generate $507 billion in productivity gains in the US.

Finally, human drivers are limited by their biological constraints, needing to rest,
take breaks and sleep. Autonomous vehicles need none of this, meaning use
rates will rise dramatically. When productivity gains are combined with other
savings such as fuel efficiency and accident avoidance, Morgan Stanley
estimates the total potential annual savings to the US economy will be $1.3
trillion per annum. Worldwide, that number could reach $5.6 trillion.
24
Safer, cheaper, harder working – what’s not to love? Unless, of course, you are
currently employed as a driver. According to the American Trucker Association,
there are 3.5 million professional truck drivers in the US and an additional 5.2
million people in non-driving roles in the industry. That’s 8.7 million trucking-
related US jobs that could potentially be eliminated in the next five to ten years
due to the impact of autonomous trucking alone.

Where next: future developments

While we are yet to see autonomous vehicles on the road in any great capacity,
all this will change very soon. By 2020, autonomous taxis and trucks will be a
feature in many countries such as the US and Japan, and by that time,
autonomous road robots and drones should be a familiar sight.

Waymo has already announced that it will begin offering

an autonomous taxi service in 2017, a Norwegian
container ship, the Yara Birkeland, will be the world’s first
electric, autonomous, zero-emissions ship when it
launches in 2018, autonomous trucking has already
started in the US, Starship road robots have been tested
in London and Barcelona, and drones have already
completed successful trials around the world. In many
cases it is the legislation, not the technology, that is
the barrier.

Most autonomous vehicles are also likely to be electric. Tesla CEO, Elon Musk,
believes that half of all car production will be electric by 2027, and almost all
will be autonomous.[xi] This will have a positive effect on the environment. The
use of electric autonomous taxis alone could reduce greenhouse gas emissions
by 87 to 94 percent per mile by the year 2030.[xii]

Autonomous vehicles are also creating significant opportunities for rethinking

business models. Today the car industry is measured by the number of cars
sold; tomorrow it will be measured by how many passenger miles it undertakes
and the margin per mile. As cars become autonomous, the business model will
move towards access, and away from ownership. The days of owning a rapidly
depreciating car that is only utilised 5% of the time are coming to an end. A
Jetsons future awaits.
25
Continuing our series
exploring disruptive
technology, Sean Culey
looks at Blockchain’s
4 Blockchain & Trust
Networks of the Future

Talk of Blockchain is everywhere, whether that’s at

impact on supply chains of the peak of Gartner’s emerging technology Hype
the future and how it can Cycle, or generating headlines declaring it to be ‘as
build new levels of trust big as the Internet’. All for good reason: it could
and accountability potentially transform industry operating models
and create decentralised mechanisms the like of
which we haven’t seen before.

Originally developed for managing payments in

with cryptocurrencies like Bitcoin, Blockchain has
the potential to fundamentally change the way
global supply chains share information and
conduct transactions by automating the recording
of product, asset and financial transactions.

26
Instead of a single, centralized ledger and multiple users accessing only part of
its data, Blockchain uses a completely different principle: digitized distribution
of public or private copies of the ledger that are time-stamped and consolidate
all transactions of a system.

A Blockchain consists of a series of blocks that hold batches of valid

transactions, from the start of the supply chain to the end. Once the transaction
is completed, a block goes into the Blockchain as a permanent database, and a
new one is generated, including a hash (record number) of the previous block in
the chain, linking the two. There is a countless number of such blocks in the
Blockchain, connected to each other like links in a chain, held together in a
linear, chronological order from manufacture to consumption, including all
changes of ownership.

The Blockchain therefore serves as an open ledger, where every transaction on

the network is registered and available for all participants to see and verify,
providing each member of the network with far greater visibility of the total
supply chain.

The Blockchain was designed so these transactions are immutable, meaning

they cannot be deleted. The blocks are added through cryptography, where
computers from separately owned entities are used to follow a cryptographic
protocol that continually validates updates to a commonly shared ledger. It
therefore becomes increasingly secure as more people participate in it, and the
data can be distributed and added to (via new blocks being appended to the
chain), but not copied or altered. Bridgett McDermott, IBM’s Blockchain VP
summarises it as follows: “Blockchain is a trusted system of record – that’s all it
is, it’s that simple.”
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Why it matters: potential uses

The complexity and diversity of the different interests in a global supply chain
present exactly the kinds of challenges Blockchain technology seeks to
address. Consider a typical example of the globalised nature of trade, for
example:

• food grown in an emerging company is picked from the field, put in boxes,
moved by a packager to a temperature-controlled distribution centre…
• shipped across the world, unloaded at a port, moved on once again by
another haulage company…
• placed in another distribution centre, picked and packed…
• and finally sent to a retailer, who then sells to a consumer.

Currently all the information relating to each one of these transactions and the
partners involved– from field to fork – is sitting in silos that just don’t talk to
each other. You therefore cannot view the end-to-end supply chain holistically,
and this is a problem. You may trust your supplier, but do you trust (or even
know) your supplier’s supplier? Or their supplier?

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Recent examples show why food traceability and transparency is important. In
2013, meat sold across Europe as beef was found to contain horse DNA. The
fallout caused UK sales of frozen hamburgers to fall by 43 percent, frozen
ready meals by 13 percent and supermarket Tesco to lose 360 million euro off
its market value.

Just this year, an undercover operation into 2 Sisters, the largest supplier of
chicken to UK supermarkets caught them altering the slaughter date of poultry,
altering records of where chickens were slaughtered.

From a product traceability perspective, Blockchain could therefore be

transformative, addressing the product quality and safety issues that have
arisen from this fragmented, multi-echelon, globalised supply chain. Through
the provision of a single, constantly updated view, a Blockchain removes the
need to transfer information between organizations using traditional, time-
consuming and error-prone methods, as well as the laborious and often error-
prone reconciliation of each party’s own internal records.

It would enable the instantaneous digital tracking of the provenance and

movement of food throughout the entire supply chain, giving retailers and
restaurants assurance that the products they receive and serve their customers
are safe. Blockchain therefore represents the opportunity to provide a truly
global system for mediating trust, traceability and transparency, addressing
globalisation’s need to facilitate a broad range of supply chain relationships
across a wide variety of different cultures, languages and systems. This level of
transparency helps reduce fraud and errors, reduce the time products spend in
the transit and shipping process, improve inventory management and
ultimately reduce waste and cost.

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Key players: pioneers, early adopters in industry, key suppliers/developers

To address these kinds of worrying scandals and breaches of trust in the food
supply chain, IBM has already partnered with Nestle, Unilever and Walmart in
the development of a food standards Blockchain, and started traceability
testing with foods like mangoes.

Bridgett McDermott, IBM Blockchain VP, stated that, in testing, they had
reduced the time it took to identify the actual farm that had grown the fruit in a
pack of pre-packaged mango slices, bought from a US retailer from 6 days, 18
hours and 26 minutes – to just a couple of seconds.

Back in September 2016, IBM also completed a proof of concept for Maersk,
the largest container carrier in the world, tracking a container of flowers from
the Kenyan coastal city of Mombasa to Rotterdam in the Netherlands. In the UK,
software start-up ‘Provenance’ is already testing Blockchain technology with
several supermarkets, financial houses and fashion retailers. In one case study,
they tracked sustainable alpaca fleece from the point of shearing in the farm,
through to spinning, knitting, and finishing in fashion designer Martine
Jarlgaard’s London studio – creating a digital history of the garments’ journey.

The concept of a global, public encrypted open ledger that no-one controls but
every party can access should therefore mean that we regain trust in the goods
we buy – and their suppliers.

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The Future: broadening the reach of Blockchain

It’s still early days in the Blockchain journey, but its use is set to rise
exponentially. Even though it is still primarily focused around the
cryptocurrency Bitcoin, the growth rate to date is startling. In July 2012, the size
of all block headers and transactions was 1,604MB. Five years later in July 2017
it had reached 127,000MB, or 221,000 transactions a day.

As the IoT expands and chip and sensor technology advances, it is expected
that Blockchain will become almost semi-autonomous, receiving and
translating data from the physical goods as they reach certain nodes, be that a
port, plane or warehouse. Deloitte predicts that by 2025, at least 10 percent of
global GDP will be on Blockchain. When combined with ‘smart contracts’, which
contain all the relevant contractual rights and obligations for the entire supply
chain, including all the terms for payment and delivery of goods and services, it
is expected that almost all necessary transactions could be processed by an
autonomous system that’s trusted by all signatories.

These could include validating the authenticity and accuracy of documents

such as birth certificates, passports, wills, land rights, contracts, criminal
records, medical records, building permits, health and safety inspections,
business licenses, vehicle registrations, intellectual property rights, software
and hardware licences and patents, copywrites and trademarks. Basically,
wherever there is a transfer of ownership of anything of value, the Blockchain
could be used to improve traceability and transparency.

However, before governments get involved with Blockchain, industry must first
agree on a set of best practices and standards of technology and contract
structure across international borders and jurisdictions. Once the foundations
are laid across national borders, then the Blockchain will be the way we
conduct and record business in the future. 31
Industrial IoT has emerged
as a hugely influential
concept, but what can it
do now and in the future
5 Tech Blast:
Industrial Internet of Things

In 2015, Chancellor Angela Merkel told attendees

for manufacturing and to the World Economic Forum in Davos,
supply chain? Sean Culey Switzerland; “We must deal quickly with the fusion
looks at the current and of the online world and the world of industrial
future trends production. Because otherwise, those who are the
leaders in the digital domain will take the lead in
industrial production.”

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This merging of the physical and digital worlds, Industry 4.0, otherwise known
as the ‘Industrial Internet of Things’ (IIoT), is enabling leading manufacturers to
completely reimagine how they design and make products. There are multiple
definitions of the IIoT, but in summary it is combined of four primary parts:

• Intelligent assets such as smart robots, sensors, controllers and any

application software or machine capable of built-in intelligence, self-
diagnosis, connectivity and support for analytics
• A data communications infrastructure
• Analytics and applications to capture, combine and generate meaningful
information from this mass of data collected from a huge number of different
sources
• People

IIoT and the software solutions powered by it will touch nearly every aspect of
manufacturing moving forwards. It will bring together a series of sensors and
intelligent machines across the value chain – in virtually all industry sectors –
creating a multitude of networked, connected devices. IIoT will enable the
generation, capture, retrieval and analysis of valuable machine, operational, and
environmental data from a variety of disparate sources. Powerful examples
include sensors designed to:

• Measure the dryness and composure of soil so farmers can remotely water
crops or add fertiliser
• Detect corrosion inside a refinery pipe
• Track the energy consumption of every machine in a production plant
• Provide real-time production data to uncover additional capacity
• Create visibility and control over your industrial control systems environment
to prevent cyber-attacks.
• Automatically alter the pitch on wind turbine blades to improve power output
• Monitor machine status, reorder inventory, highlight issues and order
replacement parts and their instalment
• Make predictions about future demand for aftermarket parts based on wear-
and-tear analytics
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IIoT will therefore change the way businesses and industries work, helping to
break down the system, functional and cross-company silos that have
traditionally prevented full operational transparency. This will provide
previously unobtainable levels of insight into the efficiency and productivity of
the entire end-to-end process, allowing for more cost-effective decisions to be
made.

The Potential of the Industrial Internet

The IIoT is already more advanced than the more consumer-focused ‘Internet
of Things’. This is primarily due to the prevalence of ‘things’ – connected
sensors – in the industrial world. There are already hundreds of millions of
connected wired and wireless pressure, level, flow, temperature, humidity,
vibration, acoustic, position, analytical, and other sensors installed and
operating in the industrial sector.

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Collecting all this data through the network to the cloud allows for its
consolidation (hence turning this collection of small data sources into ‘big data’)
and analysis, enabling companies to interrogate thousands or millions of data
points to learn, understand or control something more effectively.

Manufacturers are reimagining their value propositions and manufacturing

processes, and looking at how smart devices, artificial intelligence and
sophisticated robotics can work together. It is enabling businesses to tear down
the silos between design engineering, manufacturing engineering,
manufacturing operations, and after-market support, treating the supply chain
as one process to be tuned and optimized. Advanced automation, complexity,
and lean supply chains increase the probability that things can go wrong in
manufacturing settings – and the costs of those disruptions are massive. In
manufacturing, seemingly identical processes can produce big variations in
output – finding out why could save billions.

Ahead of the game: Early adopters

Rather than having costly but unchangeable factory configurations and single-
purpose robots, leading manufacturers like Siemens and General Electric (GE)
are seeing the possibilities offered by automated, multi-purpose factories.
McKinsey estimates[ii] that IIoT could have a potential economic impact of up to
$6.2 trillion by 2025, and the potential to drive improved productivity across
their $36 trillion operating costs across multiple industries including
manufacturing, healthcare, and mining.

GE’s recently retired CEO, Jeff Immelt, shares McKinsey’s optimistic projections,
calling the IIoT “beautiful, desirable, and investable.”[iii] The gains that Immelt is
hoping for from IIOT look incredibly modest at first glance – an aligned series of
1% improvements across the various nodes in the supply chain. However, he is
tapping into what the ex-British Cycling chief Dave Brailsford called ‘marginal
gains’ – the power of incremental but aligned improvements in performance.
Like Brailsford, Immelt sees the benefits of combining multiple marginal gains
together – only across GE’s vast industrial landscape. Something he believes
will create massive economic benefit. GE estimates that a 1% improvement in
productivity across its global manufacturing base translates to $500 million in
annual savings. Worldwide, GE thinks a 1% improvement in industrial
productivity could add $10-15 trillion to worldwide GDP over the next 15 years.

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As a specific example of how sensors on simple points of waste and failure can
create big savings, the monitoring of valves controlling gas flows to flare stacks
in refineries using wireless acoustic transmitters enabled one refinery to
improve regulatory compliance, detect and repair faulty valves and reduce
hydrocarbon losses by $3 million annually. The project paid for itself in five
months, with an estimated annualized return on investment of 271% annualized
over 20 years.

Challenges to consider

This new network of connected devices can help drive smarter, faster business
decisions for industrial companies. A lot of the technology required to build the
IIoT isn’t exactly new, more that each element has reached a maturity and cost
effectiveness where it is now easily available. We will, within the next five years,
start to witness the Internet of Things in full flow, with machines making
replenishment decisions based on a wide variety of consumption and
environmental data.

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But there are challenges to be overcome – data integration, system
interoperability and security for example. Currently there are a lot of systems
and machines producing data, but very few ways to exchange and store
information in a standardized way that enables the IIoT to be implemented at
scale. A universal ‘machine data language’ that promotes plug-and-play
solutions still needs to be developed.

Another inhibitor to implementation is the age of the legacy technology people

wish to monitor. In manufacturing, it isn’t uncommon to have 20-year-old
systems that still work OK and therefore create no burning need for upgrade.
The inability of some of these older systems to be a part of a connected
enterprise can therefore increase risk and impact of IIoT initiatives.

Security is another major issue. Any ‘thing’ or device that is controlled by

network communication and connected to the Internet is vulnerable to being
hacked. Manufacturers should therefore always consider how they could
integrate an advanced cyber-threat protection solution into their network.

However, the increasingly obvious benefits of the

IIoT will see most manufacturers incorporating
some elements into their business and forcing
upgrades in their systems and equipment over the
next five years. This is not dissimilar to how the
integration benefits of ERP systems like SAP
forced companies to upgrade their mainframe
systems. However, like then, business leaders
must recognise that there is no silver bullet, and
any large scale IIoT initiatives can be incredibly
disruptive. It is likely the organization will have to
be realigned to support cross-functional decision
making – but this is no bad thing and should be
embraced regardless of whether the company is
implementing IIoT technologies. Success will
depend on clear senior executive mandate and
support against organizational resistance and
efforts to ensure that critical stakeholders are all
on the same page.

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Future developments

We are now entering an era of profound transformation as the digital world

merges with our most critical physical assets. Innovations in hardware,
connectivity, big data, analytics, and machine learning are converging to create
massive value-creation opportunities. Merkel’s concerns in the opening quote
were that if Germany does not take the lead in this area, its reputation as a
manufacturing centre of excellence could be undermined.

The bottleneck isn’t really the technology; the fundamental components or

‘things’ are all there. What the market needs is more industry innovators who
can put the technology together in unique ways that will solve specific industry
problems. While there is an abundance of optimism about the potential impact
of IIoT, most companies are currently waiting on the sidelines, watching how
the early adopters fare and waiting for standards to be developed. The tough
questions they must ask themselves is ‘What is the opportunity cost for
waiting? What happens if a known (or unknown) competitor uses the IIoT as an
opportunity to lower costs, increase reliability or improve their agility? What is
the danger in reacting to what others are doing, rather than aiming to become a
leader in this new, connected world?

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All rights reserved.

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