Phygital Fitness: Melding the Physical and Digital to Improve Supply Chain Outcomes

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From digital twin to building information modeling (BIM), the blending of the physical with the digital is nothing new in the manufacturing world. What is new, however, is a growing expectation among customers across the industrial landscape that their suppliers deliver a smoother and more reliable “phygital” experience.

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A term that originated in the retail space, phygital lately has taken on new importance for B2B (and B2B2C) manufacturing enterprises. It’s especially relevant in the area of supply chain dynamics, where companies that have historically focused on manufacturing excellence are shifting their efforts to improving the customer experience through greater flexibility, more real-time information sharing and tighter collaboration.

As inherently physical as businesses like building materials and mill and mining products are, companies that supply these items give themselves an edge when they focus on how the digital elements of the customer journey mesh with the physical aspects. The goal is to create the kind of seamless experience that B2B customers have experienced personally as consumers, but due to recent massive fluctuations in demand and supply, haven’t always gotten. Companies that move first to meet customers’ expectation of an elevated phygital journey in a B2B context will put themselves in a strong position to win market share.

Fulfilling customer expectations in the new normal means contemplating several fundamental questions. What should the phygital interactions between a customer and a manufacturing company look like? What are the essential contact points and connections between the world of heavy industrial materials and their digital twin world? What can we learn from phygital first movers? And what kinds of capabilities might a manufacturer need from an operational and supply chain standpoint to be a winner in the phygital race?

The Phygital Foundation

If the last 18 months have taught manufacturers anything, it’s that they need to prioritize resilience, real-time intelligence and transparency in their supply chains. Customers nowadays demand not only shorter delivery and fulfillment cycles, they also want faster, deeper and more accurate insight into the whereabouts of the goods they seek. And they expect an integrated, smooth phygital experience to connect the dots from inquiry to configuration and selection of options, fulfillment, and in-use service issues. In a supply chain context, meeting that expectation will require a variety of intelligent Industry 4.0 capabilities and approaches. In particular, that means:

  • Providing consistency across channels and interaction points.
  • Enriching the self-service online experience, with better tools for customers to explore their options in an e-commerce setting, and the ability to tailor product information to the specific needs of the person seeking it, be that an architect, installer, owner or service contractor.
  • Offering a slick, interactive, immersive and highly visual e-commerce experience.

A digital enterprise resource planning system provides the foundational framework for these typesof capabilities. The ERP is where a manufacturer defines what it sells, how it makes it, which variants and configurations are feasible to offer and produce, and how much it will cost to make them.

Building on the ERP, a manufacturer needs the ability to “platformize” its products, with all their variations and configurations, to deliver the multi-layered e-commerce experience that customers expect. Mohawk Industries, Inc., for example, is using a “commerce experience platform” with advanced, artificial intelligence-driven search, merchandising and personalization capabilities. The designer of the platform touts its ability to improve conversion from search by as much as 15%, to enable the launch of new commerce channels in weeks, and to give marketing teams the ability to easily update and shape the commerce experience on the platform without relying on I.T. To further enrich the phygital experience, Mohawk could add a 3D or augmented reality viewing tool to the platform.

Syncing the Supply Chain

Subpar communication and a lack of transparency have been among the fundamental supply chain shortcomings exposed by the recent disruptions. In many situations, B2B customers along the building products supply chain have been left in the dark about which products will be available, when, and in what quantities. As a result, contractors have had to physically visit multiple distributors in search of the materials they need for their projects, while distributors have been reluctant to take on excess inventory, worrying that it will go unsold.

That guesswork could be eliminated if the various segments of the supply chain were more closely networked so they could provide one another and their customers with access to real-time information about product and material availability and demand. This collaborative, digitally networked approach could sync the various links of the supply chain to the shared data in real time, improving transparency and responsiveness, while also providing much-needed visibility into alternative supply and logistics pathways, and even alternative products. That in turn would strengthen planning, decision-making and, ultimately, the communications and outcomes provided to customers.

A Smoother Customer Journey

The COVID-19 pandemic revealed new ways for manufacturers to connect the physical and digital aspects of the customer journey. With in-person events not an option during the peak of the pandemic, German bathroom hardware manufacturer Hansgrohe pivoted its annual “Aqua Days” trade fair for distributors and contractor professionals to a virtual event in 2021. It functioned as a handover of sorts, the starting point of a journey that eventually could lead a contractor customer of Hansgrohe to the company’s virtual showroom app to explore specific products with one of their customers, then to an actual brick-and-mortar showroom to see and touch those products prior to the purchase, and finally back to the e-commerce environment to complete the purchasing process.

Then it’s a matter of the contractor using the Hansgrohe app to track the order from its smartphone, so it can schedule a plumber to be at the construction site to install the products when they arrive. On the back end, that app is tied to a digital warehouse management solution that confirms product availability and delivery logistics. Say the onsite plumber discovers the need for a certain specialized part to complete the installation. They use the same Hansgrohe app to locate the part locally, then drive to the parts distributor to pick it up.

This is how the phygital world should work: providing a positive outcome with a seamless toggling between the physical and digital.

Simplifying Supply Chain Complexities

Dubbed “the most important regeneration project in Britain for decades,” HS2 is a high-speed railway construction project in the U.K. that will link London, the Midlands, North England and Scotland, serving more than 25 stations and connecting about 30 million people in many of the region’s largest cities.

To say the three-stage project is a complex undertaking would be an understatement. It involves 200 active worksites, more than 2,000 businesses and 30,000 workers, plus hundreds of miles of track, dozens of miles of tunnels, and hundreds of bridges and underpasses to be built. As enormous as the scope of the $150 billion project is, there’s a big role for the phygital in completing it efficiently. Supporting the physical, onsite management of workforces, materials and processes across the many companies and worksites involved in executing the project is a digital, blockchain-based shared ledger platform that various project participants — among them four chief contractors, assorted design and professional service providers, materials suppliers, primary and Tier 2 contractors, and transportation/hauling entities — are using to track, orchestrate and automate workflow and processes. The ledger affords all the participants an up-to-date view into the moving parts involved in the project, from project definition through design and modeling, to the issuance and fulfillment of purchase orders and the execution of specific tasks. Not only is the permission-based blockchain ledger secure, it ensures that all the parties are on the same page, and serves as a business network to encourage collaboration and communication.

As a key supplier for the project, Tata Steel Europe can access the ledger to view purchase orders, product specifications and delivery expectations, then update relevant parties when the required products have been manufactured and are expected to be delivered to specific sites. Once those products are delivered and scanned onsite, the contractor can post its acceptance of Tata’s steel panels, triggering automatic issuance of a payment to Tata. Then the contractor can post to the ledger once the panels have been installed. What’s more, the ledger stores data about the chemical composition of those steel panels, data that will be useful to HS2 management when the time comes to repurpose or recycle the steel panels at the end of their life span. All this information is available via mobile app, so workers can access it onsite.

The ledger crosses company boundaries and helps to simplify a complex supply chain by providing “a locked-in evidence trail” for every aspect of the project, according to Alex Small, BIM and digital platform manager at Tata Steel Europe.

Ultimately, a well-orchestrated phygital experience helps to de-risk projects and material supply chains for greater efficiency, transparency and sustainability, delivering the kinds of positive outcomes and experiences that customers now expect, whether they’re a contractor buying building materials for a massive infrastructure project, or a consumer choosing the next color to paint their kitchen.

Stefan Weisenberger is global head of mill products industries at SAP.

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