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The impact of digitalisation on global supply chains

Supply chains in global production networks are likely to become even more complex once the full impact of increased digitalisation is felt. Professor Nikolay Mehandjiev has been studying the challenges and opportunities.

A modern jet liner is, in many ways, a perfect example of the dynamism and complexity of the modern-day supply chain.

Take a Boeing aircraft apart and you will find that virtually every key part of its structure comes from somewhere different in the world. Its nose may come from the US and Sweden, parts for its wings from Japan, Korea and Australia, its engines from the US and UK, and its fuselage from Italy and Japan. The supply chain for Airbus is more geographically concentrated around Europe, yet it is by no means simpler.

Professor Nikolay Mehandjiev has been working with Airbus for many years on EC-funded projects, most recently looking at how to support demand-driven collaborations in such a complex supply chain as the company seeks to reduce the number of its suppliers.

As he explains: “In common with most OEMs (Original Equipment Manufacturers) across both the aerospace and automotive industries, Airbus has been streamlining its supply chain and reducing the number of first-tier suppliers. But at the same time it wants to retain and maintain its innovation levels as highly customised products in the automotive and aviation industry require innovative solutions, mainly developed by small but innovative high-tech companies.”


These challenges come at a time of huge flux across the wider manufacturing sector, driven by the immense opportunities afforded by the digital ‘Industry 4.0’ revolution and the emergence of the ‘Internet of Things’ (IoT) which allows sensors, actuators and electronics to connect, interact and exchange data. Also, there is the increasing impact of Artificial Intelligence (AI) and robotics on the factory floor.

As Professor Mehandjiev says: “Manufacturing companies compete in a global knowledge-driven economy and increasingly seek competitive advantage through quality, agility and personalisation based on latest advances in IT.

“This means there are huge demands across the supply chain today, demands which have only been amplified by Industry 4.0 trends. In particular there is a need for rapid assembly of teams of SMEs to pool together capabilities to bid for complex contracts. There is also a need to pool together capacities to handle peaks in demand. And there is a need to change teams and supply networks in order to respond to changes in requirements or technologies, to changes in demand, and to performance issues.”


One of the central challenges of Industry 4.0 is ‘lot size of one’ - the vision that any product can be personalised for a particular customer to a much higher level than currently possible. Two particular approaches have emerged in order to combat this challenge of flexible manufacturing. As he adds: “Firstly there is a knowledge-based collaborative design approach, mostly applied outside the factory to bring together demand-driven supply networks for highly customised products. Secondly, within the factory we approach flexibility by optimising production facility using mobile machines and a system for co-ordinating product movements.

“One of the big challenges of personalisation within a factory is that different product types will need resources in different sequences. This then leads to facility layout problems and how best to optimise the location of machines. These are very difficult issues to resolve.”


To help tackle these complex challenges Alliance Manchester Business School has for the last few years been the UK academic research partner within the EC-funded project DIGICOR (Decentralised Agile Coordination Across Supply Chains).

DIGICOR enables demand-driven collaborations amongst SME suppliers and OEMs like Airbus by providing knowledge-driven coordination support over secured IT infrastructure, using a set of software tools for planning customised products and their demand-driven production networks.

Adds Professor Mehandjiev: “The DIGICOR solution is based on an open platform integrating tools and services, and implementing case specific governance rules and procedures for collaboration, knowledge protection, and security. We aim to break the barriers to collaboration and supply chain entry experienced by small specialised SMEs, and to create a level playing field for them, also increasing innovation levels and hence the competitiveness of European industry. The Manchester team is focusing on the heart of the system, namely the knowledge-based algorithms and modules which enable the creation of teams to deliver complex assembly.”

Nikolay Mehandjiev is a Professor of Enterprise Information Systems.