The global flat glass market is projected to grow from USD 102 billion in 2017 to USD 150 billion by 2023 at a CAGR of 6.25%. Rapid urbanization is fueling this growth globally. The construction industry continues to have the highest share of flat glass consumption, especially as the real estate sector makes a global come-back. Glass uses in construction are varied – Building exterior: windows, facades, Interior : Partition walls, furniture etc. Aspiring consumers looking to own a car of their own make the automotive industry the second largest consumer of flat glass. Growing solar energy market, smartphones (screens), defense (bullet-proof) and other innovative applications are further adding to this growth.
About 90% of world’s flat glass is produced by the float glass process. Asia, North America and Europe are the top 3 producers and consumers of flat glass. However, ratio of flat glass demand to production capacity (float lines) clearly identifies Asia as a net exporter, while North America and rest of world, excluding Europe, are net importers. This global trade of flat glass is increasing every year and because of the need of new-age products like smartphone screens, the supply chain tends to have multiple production hops.
Float plants are highly capital intensive (Euro 70-200 million) and become profitable only after several glass production campaigns with line utilization of over 70%. Raw material, labor and energy are the three largest cost heads in float glass production. Distribution costs, unlike other industries, are significantly high, typically accounting for 10-15% of total costs.Source: Pilkington, 2010
Given the increasingly global nature of flat glass supply chains, the share of distribution cost will continue to rise. Hence, it becomes a critical area to address for top glass producers.
Let us look at the complexities of a global flat glass supply chain:
- Damage of glass products during transit: Flat glass damage during global transit is estimated to be 5-10% of product quantity being shipped.
- Breakage and chip: Typically happens as a result of shock and vibrations experienced during loading & unloading at warehouse or ports, during rail transit or just bad road conditions. Bad packaging, obviously, makes matters worse.
- Corrosion and Stain: Whenever water remains on a glass surface for longer than a moment even at room temperature, several unique chemical reactions can occur that cause corrosion damage, or stain. In packaged glass, it is the spaces between adjacent glass sheets where the conditions for corrosion can exist. Given the intra-day fluctuations in temperature and humidity during multi modal transport, these spaces can readily trap and retain moisture if temperatures drop below the dew point (when daytime temperature is 80° F and relative humidity is 61 %, the dew point is 65° F). Additionally, due to condensation, paper packaging can get stuck to the glass surface, thereby staining it permanently.
- Delamination: For laminated glass, humidity and temperature cycling leads to glass delamination. This is commonly seen in marine shipments lasting over a week.
- Downstream assembly line issues: Float glass lines manufacture large flat glass sheets, which are transported to factories, sometimes in a different global geography. In the factory, glass sheets are cut based on end customer requirements using highly automated assembly lines. If transportation of glass sheets from float line to factory is riddled with defects (discussed in point 1), downstream assembly line suffers from delays and even breakdowns. This directly impacts end customer SLAs and has severe financial implications.
- Automotive OEM production impact: The automotive industry works on JIT model of components procurement. Any delays or defects in glass component shipments affect automotive production lines and lead to cost excursions. For the glass manufacturer, there could also be financial penalties and future revenue loss due to OEM dissatisfaction.
- Choice of shipping mode: Sea shipping is the most economical, in spite of high lead time and additional handling and packaging costs. Rail is generally used for large quantities and when lead times are critical. For short distances and small quantities, road transport is the most ideal. Road transport for float glass becomes economically unviable at 600 KMs, hence most manufacturers restrict road transit to 200 KMs or less. In fact, multi modal transport of float glass is becoming increasingly common as the supply chain becomes more global. The sheer number of handoffs in multi modal transport makes the supply chain prone to delays and product damage.
- Inloaders: An Inloader is a special truck designed specifically to transport glass sheets of big dimensions. Inloader fleet is limited and needs to be reserved in advance for peak periods. Also, most Inloaders charge round trip kilometers, hence the cost multiplies. In the event of product damages during transit, re-shipment costs escalate very quickly as JIT Inloader costs become exorbitant.
Figure: An inloader getting loaded with glass trestles
We estimate that for a flat glass manufacturer who ships USD 1.2 Billion worth of product, the total cost of product damages is anywhere between USD 60 Million to USD 120 Million. This includes the actual cost of product damage (scrap), assembly line delays, lost cost of round-trip transportation, cost of re-fulfillment and inventory handling cost for returned goods.
Clearly, in a highly competitive market, distribution seems to be a key lever for glass companies to achieve higher profitability, customer satisfaction and eventually increased market share. While the large glass companies have implemented lot of advanced technology and automation in glass production, supply chain remains an area of neglect from a technology perspective.
We believe flat glass manufacturers can reduce significant amount of transit loss by deploying a combination of IoT (Internet of Things) and Machine Learning technologies to radically improve the supply chain. Following is a snapshot of Tag360 sensor and TagHub GO gateway deployed on a crate which is being used to transport flat glass on an international route.
These sensors measure Temperature, Humidity and Shock and the TagHub GO gateway transmits all parameter data, along with location real-time. As simple as that!
By combining this streaming real-time condition data with ERP parameters, a lot of actions can be enabled:
- Communicating ETA to destination factory for assembly line planning
- Choosing transport mode midway based on shock profile seen until that point. Example, rail shipments see much higher shock and hence are not a good choice for this scenario.
- Identification of specific locations, routes or times which cause product damage due to shock, temperature or humidity excursions
- Contextualized, parameter driven QA at destination factory
- Intelligent mode selection, after enough time-series data is generated
- SmartContracts using BlockChain to assign appropriate financial accountability to logistics partners
- Potential reduction in insurance premiums given higher visibility of root causes of damage and delays
- EWS at warehouse to prevent potentially damaged products from being shipped-‘[
- Warehouse staff and equipment performance management
- Multiple R&D use cases such as packaging selection, inloader utilization and packing density
Given the high distribution cost and generally high value of flat glass, this IoT + Machine Learning solution can deliver ROI as high as 20X over 2-3 years. Supply Chain leaders need to collaborate with CIO and Quality leaders to test and implement such solutions at scale. Full benefits only get realized when every single crate of flat glass is tagged and preventive actions are made possible. Anything less wouldn’t even be par for the course!
- Supply chain optimization in the process industry. Methods and case-study of the glass industry Nicolas Miegeville
- The Freedonia group – world flat glass report
- Delamination Issues with Laminated Glass – Causes and Prevention, Mr. Phillip Davies, Du Pont (Australia) Limited, Mr. Robert Cadwallader, E.I. duPont de Nemours & Co. Inc.
- TagBox Analysis