Smart Grids and Collaborative Supply Chains Show Their Form at the 119th EDIFICE Conference

It has been a busy month for one reason or another and as a result I am slightly late reporting on the most recent EDIFICE conference in early March.  My colleague Matthew Walker provided his own review of the 119th EDIFICE Conference in Munich but I just wanted to offer some of my own thoughts as global expansion and supply chain collaboration are key themes for GXS during 2013.

This particular EDIFICE session was held at Infineon’s HQ in Munich, an enormous technology campus which certainly makes an impression when you first arrive. Infineon has been a GXS customer for many years, so we know them very well, but this was the first opportunity for me to visit their HQ.  Based on my previous experience, I thought Infineon was a provider of semi-conductors to the consumer electronics and automotive markets, well they do but they offer a lot more. Their solutions are used across the full end to end ‘power supply chain’, from where the electricity is initially generated, for example via a wind turbine, through to distribution of the power to the end consumer.  At each stage of the electricity transmission process, Infineon’s technology is used to modulate, regulate and transmit electricity from one end of the power supply chain to the other.

Infineon label their products as ‘Smart Grid Semiconductor Solutions’, and it then dawned on me that they are a key provider in the ‘Internet of Things’, ie a provider of the core infrastructure to support this new emerging ‘technology’. Infineon essentially puts the consumer in control, allowing them to ultimately choose, if they so wish, the exact source of their electricity supply. So in theory if you want your power to come from wind, sea, sun or from a more traditional power station then no problem, you simply select your power source.  Have to say I do find it amazing how many industries have become consumer driven in recent years, even the utility providers, who can now embrace technology such as that offered by Infineon. The aim of Infineon’s Smart Grid technology is to ultimately reduce CO2 emissions, provide a better balance between supply and demand and provide greater grid stability and security.

Interesting concept because GXS has invested millions of dollars in recent years to achieve a similar set of goals with our own Grid, Trading Grid®, offering much higher availability and allowing trading partners to remove paper based transactions from their respective supply chains. Actually it is interesting drawing comparisons with Infineon’s Smart Grid and our own Trading Grid.  Trading Grid connects suppliers, 3PL providers and financial institutions to their customers allowing all business transactions to be conducted electronically. Whether monitoring inventory levels, reviewing in transit shipments, making payments or proactively checking the quality of data passing across our network, GXS Trading Grid helps to enable the ‘connected supplier’.

My colleague Steve Keifer eloquently highlighted three examples of how the ‘Internet of Things’ is likely to change the way we do things in the future, you can read one of those articles here. Whether you are operating a Smart Grid based on power, procurement or simply connected consumer devices, providing interoperability between all these different ‘grids or networks’ will be key to the success of tomorrow’s business networks.

Collaboration and interoperability was the main theme of this particular EDIFICE conference, not just across the high tech supply chain but with the automotive supply chain as well.  I have to say this was one of the most interesting EDIFICE sessions that I have attended in recent years. 

The high tech industry, in particular the semi-conductor manufacturers such as Infineon, work in a highly cyclical industry sector where the end consumer is driving the purchasing decisions across the entire supply chain. The automotive industry is also becoming consumer driven now, so much so that a vehicle manufacturer may provide Continental with two weeks notice of a forecast requirement for incar electronic systems.  Continental must then inform their partner Infineon of their own semiconductor requirements and Infineon must then inform their own suppliers. So what turned out as a two week forecast will likely turn into a 16 week forecast further down Infineon’s supply chain.

To achieve this level of integration across their supply chain, Continental had to implement VMI (Vendor Managed Inventory) to allow their suppliers, in this case Infineon, to manage their semiconductor related inventory levels.  This allows Continental to focus on working with their customers whilst Infineon looks after their semiconductor inventory levels.  As Continental’s stock levels decline it then becomes Infineon’s responsibility to monitor Continental’s stock levels and then replenish as required.  Bosch presented an identical VMI scenario with their semiconductor partner Analog Devices.  No doubt Delphi and NXP Semiconductors (both GXS customers) will also undertake a similar type of project on the back of their recent announcement to work more closely together.  Cross industry supply chain integration projects will only increase in number in the next few years, especially in the automotive sector as more and more electronics based systems find their way into cars.

The ‘connected consumer’ is now driving demand for the ‘connected car’, not just providing internet connectivity but car to car connectivity as well. Cars will also become fully integrated to smart grid infrastructures in the very near future.  Some would argue that this is happening already with the electric car charging infrastructures but it has a long way to go yet to obtain much broader adoption levels.

I think the word ‘connected’ is starting to become very commoditised with consumers and they now expect to be connected to the internet 24/7. In the same way, companies will just expect their suppliers to be connected together, both vertically and horizontally across different industry specific networks, and across different regions around the world. I truly believe we are entering an exciting period with the Internet of Things offering the holy grail where everything is connected to everything else! This will certainly be a topic that I will cover in a future blog entry but in the meantime if you would like to read some further insights into this particular EDIFICE conference then please take a look at Matthew Walker’s recent blog entry. If you are a high tech company and you would like further information on the EDIFICE association, please CLICK HERE>>>