An introduction to Industrie 4.0(Internet of Things), and its Potential impact on Supply Chain. Industrie 4.0, touted as the Game changer and a seed for next industrial revolution. Funded by German Bundes Ministerium fur Education & Technologie.

1. Towards a Connected World
- Industry 4.0
Jan Christoph Jaehne
Sarathy Kalaichelvan

2. Agenda
1. Introduction
2. Industry 4.0 – In Focus
3. Case Study - Zalando
4. SWOT Analysis

3. Degree of
complexityFrom Industry 1.0 to Industry 4.0
First
Industrial
Revolution
based on the introduction
of mechanical production
equipment driven by
water and steam power
Second
Industrial
Revolution
based on mass production
achieved by division of
labor concept and the use
of electrical energy
Third
Industrial
Revolution
based on the use of
electronics and IT to
furtherautomate
production
Fourth
Industrial
Revolution
based on the use of
cyber-physical systems
First programmable
logic controller (PLC)
Modicon 084, 1969
First conveyor belt,
Cincinnati
slaughterhouse,1870
First mechanical loom, 1784
1800 1900 2000 Today Time
Source: DFKI (2013)
Industrial Revolution

4. Industry 4.0: Introduction

5. Similar Initiatives

6. Standardisation
Complex Systems
Comprehensive broadband
Safety
Design & Training
Regulatory framework
Resource Efficiency
Action Plan

7. Industry 4.0
Health
Mobility
Commu
nication
Security
Energy
Priority Areas

8. German BMBF
initiates the
Science Union
to identify future
High Tech Trends
with high impact
on society
First
Appearance
of the word
Industry 4.0
Final report
of the
Science Union
on
Industry 4.0
BMBF-Report
“Securing the future of
German manufacturing
Industry”
Recommendations for
implementing the strategic
initiative Industry 4.0
Foundation
of the
Platform
Industry 4.0
by industry
associations
2010 2011 2012 2013 2014
First I4.0
Demonstration
by Companies
Revised I4.0
Demonstration
by companies
Publicity
and
Demonstration
Funding program
Industry 4.0
(Research)
Funding program
Industry 4.0
(Application)
Governmental
Funding
200 (x2) Mio€
Expected
improved version
of the previous
demonstrations
The Road So Far…

9. Agenda
1. Introduction
2. Industry 4.0 – In Focus
3. Case Study - Zalando
4. Swot Analysis

10. • Shorter innovation cycles
• More complex products
• Larger data volumes
• Individualized mass
production
• Volatile markets
• High productivity
• Energy and resource
efficiency are decisive
factors of competitiveness
Increasing competitiveness
Increasing importance of Production & logistics industry in economies …
Increase efficiency Shorten time-to-market Enhance flexibility321
Manufacturing and Supply Chain is changing faster
than ever before

11. Smart phones
Smart Homes
Smart Cars
Smart Factories
Technology
Push
Market
Pull
Everything Gets Smart

12. Industry 4.0:
Algorithmicized "production chess" within Cyber-Physical Systems
Vision for Industry 4.0
ƒ The product to be manufactured
contains all necessary information
on its production requirements
Self-organization of integrated
production installations considering
the entire value chain
Flexible decision on production
process on the basis of the current
situation
ƒ
ƒ
Decentral cyber-physical systems (CPS) interact
via embedded internet-based technologies

13. Industry 4.0: Internet of Things & Services
Source: Fraunhofer – Industrie 4.0 - final_report

14. PLM
ERP
MES
Change
Management
Maintenance
Resource Control
designing
planning
scheduling
changing
savingrepairing
delivering
Logistics
Customer
informing
Information Backbone
Cloud
BigData
analyzing
Industry 4.0: Revolutionizes the complete lifecycle
DisassemblyDesign Engineering
OperationSet-Up

15. Horizontal Value Network Vertical Value Network
Industry 4.0: The Value Chain
Source: Fraunhofer – Industrie 4.0 - final_report

16. …be treated as
abstract objects
CAD model
Product model
Communication
model
Service model
R Resource and
Energy
model
…be described by models
…be locatable at
all times
…have a standardized
network interface
7
6
5
4
3
2
1
WiFi
IP
OPC UA
Services
…offer autonomy
IPV6
[2001:0db8:85a3:08d3:1319:8a2e:0370:7344]
…have a unique identity
and memory (by birth)
Industry 4.0: Unique Aspects

17. Holistic concept covering the entire process of
Production & Logistics
Supply Chain Service
execution
3 4
Production
engineering
Logistical
planning
2
Logistics
design
1
The path to Industry 4.0: An integrated Logistical planning and Production process
enhances productivity, efficiency and flexibility
Intelligent networking Use of most efficient technologies
5
Industry 4.0

18. Industry 4.0: Architecture
Source: Fraunhofer – Industrie 4.0 - final_report

19. …
Step 1
Humans conceptualize and
product
Step 3
CPS simulates and compares Supply Chain
options on the basis of instructions
design the
Step 2
Humans determine the Production and
supply chain rules and parameters
Step 4
CPS proposes compliant "optimal"
production paths
Step 5
Selection of optimal Logistical path and implementation of SCM
… as creative planners, controllers and decision-makers
Human Beings Remain Essential

20. Industry 4.0: Future

21. Industry 4.0: Future
Present
Future
Source: Fraunhofer – Industrie 4.0 - final_report

22. Industry 4.0: Reception – A Survey
Source: BITKOM, VDMA,
ZVEI 2013

23. Industry 4.0: Current Developments
Source: Fraunhofer – Industrie 4.0 - final_report

24. „Streetlighting“-
Projects
Smaller consortia
>Industry
Academia
3-5 Mio€ each
4-5 partners
Application
„Lighthouse“-
Projects
Large consortia
>Industry
>Academia
10-15 Mio€ each
10-12 partners
Feasibility
„Laser“-
Projects
Small consortia
>Academia
Industry
0,5-2 Mio€ each
1-3 partners
Basic Research
Industry 4.0: Projects and Applicability

25. • Competitive advantage for German companies
• Leader in world markets(First Mover Advantage)
• Employement Opportunity
• A knowledge-based high-tech approach
• Reduces complexity
But…
• Needs a longterm committment
• Is a major upheavel and not a smooth change
• Is not a single industry solution but has wide-spread impact
• Needs new skills & interdisciplinary collaboration
• Security & Data Theft Concerns (Cloud and Big Data)
Industry 4.0: Impacts

26. Some Examples…

27. continuous flow process
colored soap production
discrete handling process
bottling, handling, labeling, QC, packaging…
Live-Webcam: http://www.smartfactory.de/webcam.de.htm
Industry 4.0: View into a Smart Factory

28. assembly process
Key finder production
augmented reality
Information, maintenance and control
Industry 4.0: View into a Smart Factory
Live-Webcam: http://www.smartfactory.de/webcam.de.htm

29. Source: Academy Cube 2013
Industry 4.0: In Motion- Academy

30. Agenda
1. eCommerce market in Germany
2. Zalando’s History & Business strategy
3. eCommerce: logistics as key factor
1. Introduction
2. Industry 4.0 – In Focus
3. Case Study - Zalando –
Introduction
4. Case Study – Zalando - Analysis
5. SWOT Analysis

31. eCommerce Market in Germany
Source: http://www.comscoredatamine.com/2013/11/zalando-has-grown-40-percent-in-germany-over-the-past-two-years/

32. • Founded in 2008 in Berlin
• Initially specialised in the sale of shoes in
Germany but has since expanded to the variety
of goods in 14 countries
• The fastest growing European company ever,
with >€ 1 billion in net sales in 4th year
Zalando: from Garage shop to
eCommerce Market Leadership

33. • 2008/09:
Germany’s leading
online shop for
shoes
Zalando
Market:
€ 10 bn
Market:
€ 100bn
• 2010: Expansion
to other fashion
categories
Market:
€ 500bn
• 2011/2012:
Leadership in
European fashion
eCommerce
Source: Kinnevik CMD 24.04.2013

34. Aggressive high budget advertising campaign:
Zalando: how they were engraved in
consumers’ mind

35. • No prepayment necessary
• Fast and free shipment
irrespective of the price
of goods ordered
• Refund free of charge
within 100 days
Zalando: Business Strategy

36. • Wide choice of goods: more than 1500 brands
Zalando: Goods Choice

37. • User friendly web site with intuitive product search
Zalando: Web Site

38. • Eye tracking camera
Zalando: User Lab

39. • The rise of eCommerce influences consumer
behavior and shipping patterns
• Consumers want control over their online
shopping
• Logistics can drive customer loyalty and sales
• eCommerce players have to keep their logistic
strategy competitive
eCommerce: Key Factor Logistics

40. Großbeeren Brieselang Erfurt Mönchengladbach
Zalando: Logistic Network as Key to
Growth
Pros:
• Located centrally, servicing all European countries
• Zalando is leasing land and buildings to limit capital investment
• Combined capacity of >250,000 sqm operational / in construction
Cons:
• Low wages
• Bad working conditions
• Unsatisfied employees
Source: Kinnevik CMD 24.04.2013

41. • Handling of the
refunded goods is
very costly and
complex
eCommerce: Average refund rate is 50%

42. Agenda
1. Logistics in Germany / Zalando
Erfurt
2. Industry 4.0 – recap
3. Analysis of SC Processes
 Zalando
 SFS unimarket
1. Introduction
2. Industry 4.0 – In Focus
3. Case Study - Zalando –
Introduction
4. Case Study – Zalando - Analysis
5. SWOT Analysis

43. Erfurt is located here!
One of 21 logistic hubs in
Germany

44. Erfurt as one of the smaller Logistic Regions in Germany
• Dachser
Logistics
• Nagel Group
• Axthelm &
Zufall Logistics
• TSG Global
Logistics
Erfurt Key Facts
• 200 K habitants, 6,3 % of work
force employed in logistics
• Connected to 6 main Autobahns
(A4, A71, A9, A73, A38)
• Airport Erfurt
• Connected to 6 important Rail
Freight Hubs
Important Logistics Providers
• TNT-Express
• BGL Logisitc Group
• Wincanton Trans European
• DB Schenker
• Panopa Logistics
• DHL
• Fiege Logistics
• Kühne& Nagel Logistics

45. Zalando Warehouse as “Biggest Wardrobe in Europe”

46. Dates and Facts on Zalando Erfurt
• Opened in 2012
• Biggest of three logistics centers of
the company with 120.000 m²
• About 1.000 employees in 2013
• Around 150.000 different products
stored
• Retour: up to 100 trucks from German
Post daily
• Outgoing: around to 10.000 packets daily

47. Agenda
1. Logisitics in Germany / Zalando Erfurt
2. Industry 4.0 – recap
3. Analysis of SC Processes
– Zalando
– SFS unimarket
4. SWOT Analysis

48. Core Elements of Industry 4.0
Smart Factory
Intelligent production systems and machines, comunicating with each other („internet of
things“), integrating the physical and digital world
Data in a Cloud
Data in a Cloud
Instrumented
Industrial
Machines
Big Data Analysis /
Real Time
Analysis
Virtual Networks /
collaboration
through devices
(e.g.mobile)
Physical and
Human Networks

49. Agenda
1. Logisitcs in Germany / Zalando Erfurt
2. Industry 4.0 – recap
3. Analysis of SC Processes
– Zalando
– SFS unimarket
4. SWOT Analysis

50. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored

51. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse Filler/Loader
Outbound Bin Puffer Picker Item stored
• 7800 m² surface
• All new products arrives here
• Daily, more than 10.000 items

52. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Registration of products
• Barcode (product
code) and producer
code for exact
identification of product
in packet

53. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Product is traveling to
warehouse in a bin
• 11 km assembly line

54. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• About 150.000 different products

55. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Chaotic
warehouse
system
• Filler puts goods
in any free shelf
• In every shelf,
there is only 1
product
item in 1 size –
employee finds
product

56. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Top shelf empty in case of fire
• Second level shelf shoes
• Third level shelf clothing
• Bottom level shelf accesory
(jewelry)

57. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• 500 employees work as picker
• Every picker has a personal
navigation device with scanner
• Multible pickers work on one
order
• IT system leads picker to right storage
unit to find right product on shortest way
• If IT broke, big problem !
• Picker puts product in a bin

58. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Every bin moves to bin puffer
• Every bin is waiting in the bin puffer, till all
products of one order have been arrived
• 300 orders are waiting simultaneously in
1.800 bins

59. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Employee takes different bins,
products and is putting together the
one order
• Around 10.000 packages per day
• Packages are sorted to the right post-
outtake
• Delivery of packet per post (DHL)

60. The Process of Zalando Erfurt
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored

61. Where to find Industry 4.0?
Smart Factory
Intelligent production systems and machines, comunication with each other („internet of
things“), integrating the physical and digital world
Data in a Cloud
Instrumented
Industrial
Machines
Big Data Analysis /
Real Time
Analysis
Virtual Networks /
collaboration
through devices
(e.g.mobile)
Physical and
Human Networks
Conclusion
Zalando uses some elements of Industry 4.0, but to a low level

62. Excursus: Logistics at SFS Unimarket
• Founded 1928
• 7.125 Employees (2012)
• Turnover about 0,9 Mrd EUR (2012)
• Sells fastening and fixing systems

63. The Process of SFS Unimarket
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored

64. The Process of SFS Unimarket
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• All new products arrive here

65. The Process of SFS Unimarket
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Employee unpacks products
and enters them in system
• Puts products in a bin
• Currently 150.000 products at
all times in storage room
available

66. The Process of SFS Unimarket
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored

67. The Process of SFS Unimarket
One IT System: SAP ERP extended
warehouse system
„Dematic Sub Diver“ is controlling the
interaction between ERP and Dematic
Shuttle system
Dematic Shuttle System picks and
stores products

68. The Process of SFS Unimarket
http://www.youtube.com/watch?v=CSmpQrpWt9Q
Guru how do i put this video in here?

69. The Process of SFS Unimarket
1 2 3 4
8 7 6 5
Inbound Receive Warehouse
Filler/Load
er
Outbound Bin Puffer Picker Item stored
• Employee takes
different bins,
products and is
putting together the
order
• Employee does not
have to walk at all

70. Where to find Industry 4.0?
Smart Factory
Intelligent production systems and machines, comunication with each other („internet of
things“), integrating the physical and digital world
Data in a Cloud
Instrumented
Industrial
Machines
Big Data Analysis /
Real Time
Analysis
Virtual Networks /
collaboration
through devices
(e.g.mobile)
Physical and
Human Networks
Conclusion
SFS unimarket uses Industry 4.0 to a high level

71. Agenda
1. Logisitcs in Germany / Zalando Erfurt
2. Industry 4.0 – recap
3. Analysis of SC Processes
– Zalando
– SFS unimarket
4. SWOT Analysis

72. SWOT Analyses of Industry 4.0
Internal Perspective
External Perspective
Strengths Weaknesses
Opportunities Threats
• Process efficiency leading to High Precision
and Quality
• Security
• Less Human Intervention
• Customized
• Reduced Usage of Energy
• Lean Processes & Easy Monitoring
• Data security in a cloud
• Complex & Costlier to implement / maintain
• Not applicable for all businesses (SME, some
sectors)
• Less manual labor needed (Role of government
critical at Zalando!)
• Fear of technology leads to non-implementation
• Industry 4.0 in the beginning – fear of “baby”
mistakes
• Low acceptance level from workers
• Competition: non—trust from competitors to share
datasets
• Outsourcing threat
• E-commerce “return rate” as a risk for environment
• Competitive advantage due to process efficiency
(For Germany & its Industries: First mover
advantage)
• Knowledge based industry and Hub
• Flexibility remains a key factor for the
manufacturing work in Germany

73. People & Sources
- For Inputs on its Processes
We thank the following institutions for this Case Study:
- Dr. Tobias Kraus for Inputs on Industry 4.0
http://www.awk-aachen.de/__C1257B97002C1799.nsf/html/en_home.html
http://www.bmbf.de/en/19955.php
http://www.comscoredatamine.com/2013/11/zalando-has-grown-40-percent-in-germany-over-the-past-two-years
http://www.textilwirtschaft.de/business/Zalando-erweitert-Logistikzentrum-in-Moenchengladbach_89141.html
Kinnevik CMD 24.04.2013
http://www.prosieben.de/tv/galileo/videos/5330-konsumgigant-zalando-clip
http://www.zalando.de/
http://www.manager-magazin.de/unternehmen/handel/a-883570.html
http://www.logisticsmgmt.com/article/ups_exec_addresses_how_e_commerce_has_changed_logistics_and_supply_chain_op

74. Thank You..