INDUSTRIALISATION 4.0

In this, the second of a series of five articles under the broad title, Industrialisation 4.0, Max Smeiman and Garth Strachan set out the principles, technical terminology and building blocks for the digitalisation of technical value chains (TVCs) in the domestic economy. The first article of the series, published on June 26, provided an overarching perspective and motivation for digitalisation. The first article of the series, published on June 26, provided an overarching perspective and motivation for digitalisation.

Item identification is a critical first step in a TVC digitalisation process. This is so because it is the foundation for the creation of production bills of materials and equipment breakdown structures with data quality. A fundamental principle to master data management is to ensure data quality. Without this, the integrity of a ‘digital twin’ is compromised and is one of the reasons expensive information technologies sometimes deliver suboptimal value in industrial companies.

Recent studies have demonstrated that the absence of data quality significantly increased equipment repair costs and substantially reduced bottom-line revenue in this sector. The significant benefits of ‘clean data’ included a substantive reduction in sourcing costs and inventory productivity improvement. ‘Free-text’ spend is a symptom of nonexistent or ineffective material planning processes that lead to unproductive equipment (waiting for spares) and production delays (waiting for material). The end result, among other possible contributors, is the marginal status of companies and mines across the value chain.

For these reasons, the inclusion of an item identification clause in Mining Charter III was proposed prior to its promulgation in 2018. Inclusion would enable the categorisation of procurement spend and underpin a collaborative industrial strategy. If this practice was adopted in the mining value chain and beyond, across all domestic TVCs, it would be a significant first step towards the digitalisation of the TVC and lay the foundation for the creation of more globally competitive domestic companies. Unfortunately, the proposal was not adopted in the Charter, a decision which, in the view of the authors, should be revisited.

Standards

To compound the problem, there is currently no singular standard agreed for item classification and identification within domestic technical industries. This is unlike the retail sector, which, through consensus collaboration, adopted the barcode as a simple item identifier in 1973.

TVC item identification standards can be grouped in two areas: those defining the supply chain commercial environment to facilitate trade, and those describing the supply chain technical environment, defining the engineering specification and the form, fit and function of each item.

A common technical product catalogue serves the purpose of creating a master data record that enables demand and supply visibility, comparing cost and performance data to guide sourcing policy. In short, critical support information enshrined as a number to denote quality and safety certificates, the country of origin and local content.

ISO 55000 formalises a system’s engineering approach, which covers the economic management and utilisation of equipment over its entire life cycle. ISO 8000 establishes the quality of data within information systems in organisations. Buyers stipulate these as a specific requirement and, as with ISO 9001, sellers decide whether to provide standardised catalogues or risk exclusion from the supply chain. The adoption and implementation of an item identification standard, together with the adoption of ISO 55000 and 8000, will fundamentally change the manner in which transactions are managed and optimised in domestic TVCs.

Classifications & Catalogues

The following classifications and catalogues are pivotal to the digitalisation process:

• Standard Industry Classification (SIC) describes where an item is manufactured.
• Harmonised Commodity Description (HS Codes) are used by the World Customs Organisation to define global trade tariffs.
• The United Nations Standard Products and Services Code (UNSPSC) is a World Trade Organisation means of classifying products and services.
• The Open Technical Dictionary (OTD) is set out in ISO 8000 to unambiguously describe legal entities, locations, goods and services, formulating the engineering language to locate specific equipment parts for maintenance. An eCl@ss is similar to OTD and has gained traction as an Industry 4.0 ‘language’. Convergence of these concepts is expected.
• The GS1 Global Trade Item Number (GTIN barcode) is a unique item identifier with more than six-billion commercial transactions scanned daily.

SIC and HS Codes are used for macroeconomic analysis and national statistics. However, it is apparent that this language is not proficient to facilitate daily commercial transactions or define technical specifications, a critical engineering requirement.

UNSPSC® for item categorisation and the GTIN barcode are increasingly becoming the standard to facilitate commercial transactions. For example, Amazon lists UNSPSC codes and many global technical item manufacturers are adopting the barcode as an identifier. However, within the engineering technical environment, the OTD has not seen the same level of adoption in South Africa, notwithstanding the efforts of the South African Bureau of Standards/ISO Technical Committee 184 since 2006.

In its current form, GTIN does not contain the OTD technical engineering taxonomy and linking these concepts will be critical for the TVC. The inherent ontology of OTD enables linking of multiple GTINs from various manufacturers to a single item of supply.

Cost Considerations

Importantly, there should be no cost to government, State-owned enterprises and technical industry buyers to adopt digitalisation, (apart from digitalising very old equipment). On the other hand, it is reasonable that sellers carry the responsibility to provide product catalogues based on agreed standards. It is also unnecessary for government to fund the development of the required standards and systems, which already exist and require minimal amendment for TVC commercial and technical needs. The one exception, the finalisation of a standard for item classification/identification by SABS TC 184, which includes public and private sector representation, should be fast-tracked. The significant procurement power of government should, however, ‘nudge’ industry towards digitalisation.

The adoption of a digital methodology based on item identification, the relevant key standards and catalogues, outlined above, will engender a mindset transformation from a “pick the cheapest of three quotes” mentality to much higher levels of strategic sourcing and cost efficiency and lay the foundation for building globally competitive domestic companies across the value chain. Global buyers have increasingly adopted ISO 8000. This poses a risk to domestic manufacturers that remain outside accepted global standards and who can face exclusion from global value chains. This is an added and important imperative for digitalisation. A domestic economy, characterised by uncompetitive suppliers, conducting business outside accepted global standards; reliant on limited domestic demand and crude import substitution interventions carries great risk for South Africa’s industrialisation effort.