September/October 2021 | Vol. 26 No. 5

by Ken Engel, Senior Vice President of Global Supply Chain for North America, Schneider Electric

Mr. Engel has more than 30 years of supply chain management experience and 26 years with Schneider Electric.

A few miles northwest of downtown Lexington, Kentucky, a factory looks much like the other industrial buildings nearby. Its unassuming exterior is mostly brick, with an office area in the front.

When you walk inside, you’ll hear the familiar hum of people and machines at work. You’ll see more than 7,000 parts for load centers and safety switches conveyed overhead, journeying from fabrication to painting and assembly.

But if you look closely, you’ll see this factory isn’t quite like an ordinary factory. The first thing you’ll notice is all the screens. You’ll see workers using augmented reality–enabled tablets to diagnose equipment faults. You’ll see dozens of human–machine interfaces broadcasting the same data throughout the facility. In short, what you’ll see is the future of industry.

When the Schneider Electric Lexington plant opened in 1958, Dwight Eisenhower was president, and a single computer filled an entire room. Today, it’s one of the most advanced factories on earth, according to the World Economic Forum’s (WEF) Global Lighthouse recognition.

This is the story of what happened in the last 60 years that made such a transformation possible. A transformation not just in one factory, but across Schneider’s entire global supply chain—and across our customers’ supply chains—using an Internet of Things–enabled solution.

Digital Transformation, Decades in the Making

Digitalizing the 63-year-old factory didn’t happen overnight. The groundwork was laid for more than 30 years, starting with programmable logic controllers, drives, and other connected shop floor devices. Around 15 years ago, the plant integrated enterprise resource planning systems and manufacturing execution systems.

Despite these initial steps, the factory’s operations remained siloed, with various teams collecting and analyzing—but not sharing—data. The data itself was stored on paper or in Excel sheets. Without standardized data, various departments analyzed and reported on different metrics. It made it difficult to see the bigger picture or focus on optimization.

It wasn’t until the last three years that the Lexington site moved past the Industry 3.0 status quo. During this period, the factory progressively connected the physical infrastructure with Internet of Things–enabled devices. Doing so allowed the facility to integrate power distribution, building management systems, industrial automation equipment, and edge IT deployments for the first time. By modernizing these systems, operators could track key performance indicators (KPIs) such as energy use, power quality, and equipment health with much more granularity.

Beyond mechanical systems and machines, people processes were also digitally transformed, including maintenance, fault detection, and lean optimization activities. It’s easy to overlook how people fit into a digital transformation. But change management process alignment, and training—not the technology itself—are often the biggest hurdles to overcome in terms of financial and time investments.

“Skill development was a critical focus area for us,” says Bharat Bhushan Virmani, Vice President of Supply Chain Performance. “It’s not just about getting our team real-time data. It’s about making sure they’re ready to respond to the data the right way. To make digital upskilling meaningful, we also had to build core manufacturing skills.”

When all these factory subsystems and processes were finally digitalized, they could be brought into a single “system of systems,” uniting hardware, software, people, artificial intelligence (AI), and analytics. At its essence, this system enables people and machines to use the right data at the right time to make the right decisions.

What does that mean in practice? For our plant, it resulted in:

• A 300 percent explosion in operational technology data sharing
• 4.4 percent year-over-year carbon emissions reduction
• Energy savings of 3.5 to 4 percent year over year
• Shrinking paperwork by 90 percent
• Forecast accuracy improvements of 10 percent
• On-time delivery improvement of 18.7 percent over three quarters

And the list goes on.

As much as these numbers demonstrate the opportunities of Industry 4.0, there’s more to the Lexington story than on-site optimization. The full impact of the factory’s digital transformation comes into focus by zooming out to the broader supply chain.

From a Single Node to the Full Supply Chain

Upstream of the factory, raw material input and customer orders modify supply and demand. Without visibility into changing conditions, it was difficult for Lexington decision-makers to calibrate production to fit needs. By consolidating fragmented spreadsheets and sales data into a single system, they gained line of sight into demand forecasts and capacity risks. With these analytics tools, decision-makers now work with enhanced forecasting accuracy that keeps the supply chain moving.

Downstream, the factory now responds faster to real-time customer feedback and satisfaction scores. These survey tools integrate with sales platforms so that all Schneider teams can access what customers are thinking. Using this data, teams have a head start in improving products and delivery times.

Schneider’s vision is a digitalized global supply chain that can continuously optimize production and distribution to fit demand and remain strong enough to withstand global disruptions. It’s a vision that was put to the test almost immediately.

Uncertainty, Agility, and Resilience

Over the past 18 months, nearly every company’s supply chain has been impacted—including Schneider’s. And yet, the company’s investment in digitalized operations helped it bounce back and continue delivering critical infrastructure to its customers.

“We had to do two things at the same time,” says Jean-Pascal Tricoire, Chairman & CEO of Schneider Electric. “Operate our facilities safely—but operate them. There was no choice to stay home and say, ‘Call us in two months.’”

Remote monitoring applications, temperat scanning, and AI-guided facial recognition helped protect workers and keep production on track. Demand forecasting simulations and supplier hot spot visibility helped plant decision-makers plan for changing upstream conditions.

“Digital transformation enabled us to survive and operate in a complex global supply chain,” says Kenneth Labhart, Schneider’s North America Innovation Leader for Supply Chain Performance.

Ultimately, Lexington plugs into Schneider’s broader push for agility and resilience across the supply chain. The pandemic is just one disruption amid a changing world. Trade and tariffs, decarbonization initiatives, and fluctuating commodity prices also factor into the equation. The ability to retool, reimagine, and reorganize production quickly will be a decisive advantage in the years to come.

“We’ve tailored our supply chain for customers, but this isn’t enough to protect business resilience against a stressed supply base and the growing number of black swan events,” says Annette Kay Clayton, CEO & President of Schneider Electric North America. “We’re modeling a new approach in partnership with Massachusetts Institute of Technology and Dr. David Simchi-Levi that optimizes for lead times, time to survive, and time to recover. It’s about finding the just- right balance between just-in-time and just-in-case.We’re focusing investments in the supply chain where they’re needed and thereby avoiding the potential to overspend and drive excess cost on redundancy.”

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Proof of Concept

The real significance of this story is that it’s replicable. It proves that you can take any brownfield manufacturing site—no matter its age—and turn it into a world-class facility.

Every manufacturing organization in the U.S. can do this. As the WEF Lighthouse designation affirms, the Lexington factory is a beacon for others making the journey. In fact, during the last two years, the plant has given more than 1,500 virtual and on-site factory tours to our customers, partners, and other interested parties. Schneider is now implementing the same Internet of Things technology used in Lexington at its customers’ smart factories across the country, including a global medical equipment manufacturer and a top three automaker.

Even if every manufacturer can make this journey, not all will. A digital transformation such as this one doesn’t just happen through inertia. It requires buy-in from the entire organization, top to bottom—from production line workers to the C-level.

And not every brownfield facility will follow the same path. Each digital transformation is different. Many, thankfully, will occur much quicker than the 30-year journey that the Lexington factory took—especially now that there’s growing momentum for revitalizing U.S. manufacturing.

Caveats aside, the bold idea stands: Every manufacturer can do this. Successes such as the Lexington factory illuminate the path forward. ei