Software-Defined Batteries: An Insurance Against Supply Chain Crisis
Everybody is talking a good game about electrification, but for many critical applications, implementation is still lagging. Why?
The problem lies in the product-specific approach to battery solutions. In practice, only lithium batteries (which can easily weigh a few hundred pounds) can power industrial and commercial applications. We need technologies more robust than the double-A batteries in a TV remote control to drive electrification at scale.
Yet, all too often, product manufacturers must conduct lengthy and costly R&D to custom-design battery packs for each application. Only builders with deep pockets can afford the upfront investment and get in the game.
Imagine diverting the budget for battery packs (currently a necessary evil) to product innovation — everyone can do more with less. The lower barrier to entry also allows smaller companies to throw their hats in the ring and help accelerate the development of electrification applications.
Democratizing access to battery solutions is key to realizing the promises and potential of electrification. It starts with the concept of commoditization and software-defined battery solutions.
First thing first: What’s commoditization, and why is it important?
The commoditization process turns goods of economic value into generic and interchangeable resources. The market can treat instances of the good as nearly equivalent no matter where they come from or who produces them.
It creates a liquid and efficient market for easy trading of the commodity in question. The more transactional and straightforward production and purchasing processes increase trade volume, injecting more cash into the market.
Buyers can benefit from the economies of scale — accessing higher quality products at a lower cost. Compared with specialized solutions, the supply chain of a commodity is more transparent and less risky. Since supply and demand are more predictable, manufacturers can gain better control over their inventory KPIs (e.g., turnaround time.)
What does the commoditization of battery solutions look like?
Batteries for commercial and industrial applications aren’t commodities yet. Most packs are engineered for specific purposes, while cells come in a wide range of form factors and chemistries. Builders must commit to large sums upfront before production can start, even though battery packs are just a means to an end — to power their products!
The commoditization of batteries allows product builders to buy an off-the-shelf solution and customize it to meet their specific requirements. They can use a flexible software system to achieve last-mile customizations at the implementation or delivery stage.
This approach disconnects the product design and manufacturing process from an application-specific mindset. Product builders no longer need to invest heavily in battery pack R&D. They can instead buy plug-and-play solutions, apply them to their equipment, and configure the batteries to meet various requirements.
Most importantly, the commoditization of battery solutions democratizes the development of electrification applications. Smaller companies building innovative and experimental products can easily access a safe and scalable battery pack without investing in R&D, which many often can’t afford.
Optimizing the commoditization of battery solutions
Commoditization is the first step in making electrification viable at a global scale. The market becomes more fluid, and manufacturers no longer need to rely on a single supplier for custom battery packs. But with it comes new supply chain challenges if we stick with the old way of doing things.
For example, companies still need to stock the shelf with numerous battery packs if each SKU uses a different battery solution — requiring more space and inventory and making the business more susceptible to supply chain hiccups (more on that shortly.)
So what does the new way of doing things look like?
Instead of stocking multiple types of battery packs, you’d only stock a few models but more of each. These packs are modular, and their functionalities are software-defined (instead of built into the hardware) — you can combine and configure generic modules on the fly to meet the requirements of various applications. Additionally, you can combine different types of cells in the same application so you aren’t constrained to just a handful of suppliers.
Here’s an example:
Did you know that Dell only makes around ten types of laptops? How does it meet the many different requirements of corporations in various industries?
Companies buy the hardware from Dell and have an IT provider or internal tech team burn a customized version of the Windows operating system (OS) into the hardware with a unique set of security features, intranet access keys, preinstalled software, and more.
As a result, Dell manages a supply chain of a limited number of SKUs. It doesn’t have to invest in meeting end-user requirements because the functionalities are driven by software and can be configured right before delivery.
Moreover, the ability to configure functionalities and characteristics (e.g., output voltage, redundancy, resiliency) late in the implementation process is a powerful insurance against supply chain crises.
Here’s an example:
The surge in investment into AI-powered applications coincides with the crash in demand for crypto-mining gear. Since the hardware for mining cryptocurrencies is mostly generic — their functionalities are defined by software — a lot of the equipment can be quickly repurposed for AI farms without the manufacturer even considering those use cases.
On the other hand, the recent supply chain crisis amplified the semiconductor industry’s fragility. The complex and diverse supply chain took a hit during the pandemic when demand for cars and computers skyrocketed. Stock for some chips was so depleted that cars were sitting in lots to wait for one purpose-built chip to arrive (with a 6- to 12-month lead time.)
Software-defined battery solution: An insurance against supply chain fluctuations
Software-defined battery solutions leverage generic and interchangeable underlying assets to achieve supply chain fluidity.
Suppliers don’t need detailed information about the final product to know what to produce. The software will determine the specifics and behaviors of the hardware to make it fit for purpose at the point of implementation.
Manufacturers and operators only need to stock a limited number of SKUs to streamline inventory management. They can also repurpose excess stock quickly across geographic borders (e.g., without worrying about input and output voltage or varying safety standards.)
As such, product builders aren’t dependent on one single cell supplier, or even a single type of cell. If lithium-ion cells are in short supply, they can easily substitute that cell type with alternatives such as lithium iron phosphate (LFP) cells.
So why aren’t manufacturers already doing that? The different cell voltages ( 3.7V for Li-ion cells and 3.3V for LFP cells) mean that these cells aren’t interchangeable in a traditional battery solution. But the Tanktwo battery operating system (TBOS) uses software to reconfigure the topography and compensate for the difference automatically.
Product builders can buy cells at the most favorable price, mix and match different types and chemistries, and service existing packs without needing to match existing chemistries. No other solution comes close to providing such flexibility.
For manufacturers and operations, the unprecedented agility and flexibility mean they don’t have to sit on multi-million dollars of inventory. The forecast for future demand is much more forgiving, which helps lower financial risks. Meanwhile, turnaround time and other supply chain KPIs become easier to manage.
Bottom line
We must approach battery solutions differently for electrification to reach a global scale, which will happen when the vast majority of value-add shifts to the software. Battery pack design must be decoupled from cell availability and price volatility, while the design, production, distribution, and servicing must become more flexible and easier to execute.
We have seen such a transition toward software as the main value driver in various technologies as they mature (e.g., computers, smartphones, TV, HD radios,) and we have reached the tipping point for battery management solutions.
