The move to ethical manufacturing: Q&A with Dan Lionello, CEO of Omnae

Dan Lionello, CEO of Vancouver-based Omnae, recently sat down with Manufacturing AUTOMATION to discuss how automated supply chain management can lead to more ethical manufacturing, and how to shift out of the Industry 3.0 mindset.

Manufacturing AUTOMATION: You were running your own manufacturing company when you started thinking about a cloud-based platform for global supply chain networking. What was your challenge?

Dan Lionello: The recognition of the problem really became obvious about 13 years ago. We had pivoted to move all of our manufacturing offshore. We had to develop systems that would be very clear about information transfer and timeliness. And then, secondly, focus on those vendors that had the capabilities – to not just purportedly to make the product, but to also have the integrity and the quality systems that we could have faith [in] without us having to see it all day, every day.

We were shipping directly to customers from factories that were global, without actually having to do inspections. The reason we were able to do that was because of all of these other things that we did from a vendor qualification standpoint, and then from an information management standpoint once we had the partners up and running.

We [started] looking at where the world was going to go with manufacturing. We saw it being more global, and we saw a lot more requirement for information. I recognized that there was going to be a good need for something that would manage this information globally.

MA: What led you to develop Omnae five years ago?

DL: Scarily enough, email, Excel spreadsheets, PDFs, WhatsApp, WeChat, phone, fax – all of those methods are the way that manufacturing is managed globally, even today. An order is typically entered into a computer a half a dozen different times between the purchasing side, the vendor side, the quality side, and engineering.

So as a result, you’ve got this “hairball” of information and communications that’s happening in all kinds of different ways between different people in different companies. And if there is ever a challenge, even the challenge of managing quality, it means you’ve got to pull all that information together in another place, coordinate it, and sort it in order to report it.

We built a system designed to manage the relationships, quality, communications and agreements – including sustainable and ethical manufacturing – between outsourced manufacturing partners going from product lifecycle management and the design side, through to order management and quality management. Then it’s able to, in real time, aggregate it and give you the analytics that you need to be able to know how vendors are performing for you.

MA: How does automation like this help in situations of supply chain crisis?

DL: It will allow you to have a higher level of confidence in the suppliers that you’re moving to, because you can see how they’re performing for other people historically. That’s one piece that you don’t see, typically, until you start to work for someone and you create your own quality data for how they’re performing.

Quality is an island for everybody, because they all see what they experience, but they don’t see what others have experienced as well. For example, as a brand owner or as a customer, I can see what’s happening with my vendor, but I can’t see what’s happening below them with any critical other processes or other parts.

The [automation] does two things: it creates transparency. It will also allow you to find a new vendor – if the vendor you’ve got is either in a geographic location that’s in trouble, or if you’re just solely wanting to second- or third-source, you can then find companies in other regions.

It becomes a single source of truth for the specifications, what it is you’re supposed to build. So from a vendor standpoint, it makes the probability that they’re going to build the right thing much higher because all the information is in one place. If there is a problem, it’s typically very easy to see where that problem came from.

MA: We talk a lot about single source of truth, Industry 4.0, etc., but what we hear, especially from SMEs, is that they’re still in Industry 3.0. What’s your take on that?

DL: These companies that are still in 3.0, the biggest challenge is the mind shift to do things in a new way – because people have been doing things for three decades [in another] way. They don’t even recognize the amount of time and energy that they’re spending chasing information until suddenly they’re not doing it.

Humans are averse to change generally. They get upset until the change is ingrained and then all of a sudden, they can’t even remember what it was like beforehand. From our standpoint, when we’re working with clients, the biggest thing is actually the change management in the habits that people have. The biggest thing is getting into the new habit of using the system versus going back to email and spreadsheets.

The bigger companies [are] the ones that typically have the budgets for the enterprise systems. But their challenge is that they don’t have visibility below, and into, the deep parts of the supply chain. Our target market is the two-thirds of the manufacturers on the planet that have no ERP systems at all, and are doing everything longhand. Our longer-term plan is to have the brands and the OEMs recognize the visibility that having these things mapped will give them, and the value that’s going to create for them.

MA: What is that value?

DL: It either allows you to scale, or it allows you to use your smarter people in areas where they can add more value, which is what I think is the most important thing – for people to be able to reach their potential in life. The purpose is to create efficiency, but a second reason is risk mitigation. And the third is scalability.

So, even if it doesn’t change your numbers of people, it means that you can grow without adding new people. And it also means that your information is going to be much better.

MA: You mentioned the ethical supply chain — what is that? How can unethical behaviour be mitigated by automation technology?

DL: The biggest challenge with ethics, and this is from a sustainability standpoint and from a human standpoint, is that to date, all of the companies have to audit themselves and report what they’re doing themselves, and it’s a massive amount of overhead. Plus, there’s a probability that people [don’t] necessarily tell the truth about what’s going on. With our system, what we’ll be able to do in the future is use the same processes that we use for reporting and managing quality to report and manage ethical manufacturing.

I envision a system that will be like ISO coming at some point in the next few years, but it’ll be more to do with ethical and sustainable manufacturing, and there will be a governing body. We built this network where we have connected all of the different manufacturers…[and] the same system that we’re using to manage quality can be used to both manage and report ethical manufacturing.

Quite simply, if a factory gets caught, then everyone on the system will know immediately. And that’s where the resilience and the ability to move factories and all of these other things becomes important, because it will then allow them to find other companies that haven’t gotten into this kind of challenge and very quickly move there.

The companies that are acting ethically and sustainably will grow and get better, and the ones that choose to be not transparent and to hide things and get caught – they’ll either choose to change, or the world will choose for them to not be around anymore.

Brands and OEMs only have seven per cent of their supply chain visible. That 93 per cent invisibility is allowing a lot of people to hide a lot of things.

This article appears in the February 2021 issue of Manufacturing AUTOMATION.