OVERVIEW OF INDUSTRY 4.0
Speaking of technology, there’s no better way to start this series than to talk about the biggest breakthrough in the Industrial Revolution. I’m referring to the “Fourth Industrial Revolution,” known as “Industry 4.0.“
Today I’ll be extrapolating the tremendous impact of this concept on “Supply-Chain Management.” This concept is centered on interconnectivity, automation, machine learning, and real-time data. The fourth industrial revolution has impacted every aspect of our life, in the words of Klaus Schwab, the founder of the World Economic Forum and the man who coined the term Industry 4.0. “It is a technological revolution further blurring the lines between the physical, digital, and biological spheres.” From Voice Id recognition, Healthcare sensors, Augmented reality, and Financial Technology, to GPS Technology, Supply-Chain Management is no exception to the effects of this phenomenon. By 2024, Industry 4.0 is expected to reach USD 156.6 billion, growing at a CAGR of 16.9%. In 5 years, 85 percent of industrial companies are expected to have implemented industry 4.0 technologies.
The evolution of Industry 4.0 can be traced from the very first Industrial revolution, which entailed mechanization through the steam engine, beginning in 1760 in Great Britain, to the second revolution characterized by mass production, assembly lines, and the usage of electric energy beginning in 1870, the third industrial revolution, which entails the use of computers and automation to perform mechanical tasks, beginning in 1969, and finally, the fourth industrial revolution in use today, characterized by smart and autonomous systems, and technology becoming an integral part of human lives.
THE NEXUS OF INDUSTRY 4.0 & “SUPPLY-CHAIN MANAGEMENT”
Before we go on, I’ll like to point out that although frequently used interchangeably, Supply Chain Management and Logistics are not the same. Whereas Supply chain management is the coordination and management of Supply chains, Logistics management is the process of integration and preservation of goods in an organization, meaning it’s basically a subdivision of the supply chain.
The nexus of Industry 4.0 with “Supply-Chain Management” encompasses a broad sphere, which includes various technologies, such as Machine Vision and Learning, Artificial Intelligence, Virtual & Augmented Reality, Blockchain Technology, Cyber Security, Big Data Analytics, The Internet of Things, Autonomous Robots, among many others.
It refers to integrating these emerging technologies, utilizing computing devices and algorithms connected to the internet to amplify the production, improvement, and distribution activities in our supply chains. These devices and algorithms function by capturing, optimizing, and deploying data, transforming the model of Supply Chain Management from a Linear approach in which instruction flows from supplier to producer to distributor to consumer and back to a more integrated model in which information flows in multiple directions to the Supply Chain.
The Digitalization of the Supply Chain enables companies to address the new requirements of customers and the challenges on the supply side, as well as any other expectations concerning efficiency improvement. This concept isn’t just the future of “Supply-Chain Management.” It’s the present. We can already see the tremendous revolutionary impact. Processes have gotten agile and quicker, real-time access to data, and greater visibility along the supply chain, all in a bid to promote a more customer-centered approach, but notwithstanding all of this, we’ve only scratched the surface of the capabilities of Industry 4.0. This concept is expected to further revolutionize all industrial activities in Supply chain management, from design to sourcing, manufacturing, distribution, retail, and even reverse logistics.
Industry 4.0 integrated with the Supply chain provides access to new Business models that were not possible before its advent, modifying the way businesses function and, by extension, the state in which economies and businesses are compelled to compete. The application of advanced analytics of big data in supply management places sensors in everything creates networks, automates everything, and analyses everything to significantly improve performance and customer satisfaction.
Data is fundamental to the functionality of supply chains, as all important decisions are driven by data; from processes such as Inventory levels, Demand Forecast, Customer orders, and Production plans to planned events such as Retail promotions and Factory Shutdowns, and even unplanned events such as Natural disasters, Panic buying, and even the anticipation and predictions about future events, Every decision affects the supply chain and the supply chain performance. Currently, the collection, conversion (of all of these collected Data to information), sharing, and application of converted information for making decisions, involves human processing. However, when we substitute the human actors for automated functionalities based on algorithmic decision-making (like those mentioned earlier), we understand how Industry 4.0 impacts Supply Chains properly.
THE IMPACT OF INDUSTRY 4.0 ON SUPPLY CHAIN PROCESSES
Going further, I’ll be highlighting four core ways in which Industry 4.0 is transforming the Traditional Supply Chain in recent times;
Firstly, it enhances easier management. Industry 4.0-enabled capabilities, including highly organized interconnections and real-time monitoring and control of materials, equipment, and SC parameters, help improve the value chain’s overall performance and reduce risks. Utilizing Supply chain clouds, which are joint supply chain platforms between customers, the company, and suppliers, advances rationed logistics infrastructure. The collaboration along the chain allows for lower inventories through swapping well-grounded planning data, changing lead time depletion through immediate information provision throughout the chain, and an early warning system, implementing the ability to react swiftly to disruptions anywhere, fundamentally enhancing the creation of a demand-driven Supply Chain Management.
Next, it promotes better business strategies. Incorporating Industry 4.0 Technologies also transforms business models and management strategies in these networks. This concept revolves around the deployment of modern technology to transform the model of supply chain management from a linear model in which commands diffuse in the order of supplier, producer, distributor, and consumer to a more integrated model in which information flows from multiple directions to the supply chain, thereby making information more “Customer-driven.” AI-augmented route planning platforms to meet critical production schedules and maximize truck capacity, Simulations of real-world scenarios to optimize factory flows, Collaborative tools to communicate effectively and resolve exceptions, Central control center for real-time shipment monitoring, and leveraging cognitive-enabled bots to execute routine tasks for enhanced workforce productivity: these are all examples of Supply Chain processes directly impacted by Industry 4.0, effecting a methodology that evolves customer expectation.
Next, the fourth Industrial Revolution has driven the Speed and efficiency of Production and distribution. Supply chain efficiency is boosted by the automation of physical tasks- control, planning, and information exchange process. A lot of companies utilize automated technologies, especially in their logistics systems. These technologies include unmanned autonomous vehicles, shipment tracking, fully automated warehouses, material handling robots, cranes, and automated pallet handling systems, among other things. This innovative approach to the manufacturing and distribution of products reduces delivery time by a major chunk. Another innovative process that increases speed and efficiency is “Advancing forecasting approaches.” A very good illustration is Amazon’s “predictive shipping,” for which the company already holds a patent. It entails shipping products before the customer places an order before it is eventually rerouted to the exact customer destination. Currently, processes like the Predictive analysis of internal (e.g., Demand) and external (e.g., Market trends & construction indices) data, as well as machine status data for spare-parts demand, and providing a much more precise forecast of customer demand is already in place.
Furthermore, it creates Accessibility and Flexibility. Industry 4.0 can be felt in different stages of the Supply chain- Real-time production capacity feedback from machines, improved supplier performance due to real-time information sharing and synchronization with suppliers, and intelligent warehousing and vehicle routing systems. Ad-hoc and real-time planning allow a flexible reaction to changing demand or supply situations. Planning cycles and frozen periods are minimized, making planning a more continuous process, which can react spontaneously to any constraint or changing requirement, promoting better precision in forecasting and planning through integrated flow and increased traceability of materials and products.
In conclusion, Industry 4.0 represents a fundamental paradigm shift in supply chain management, and the future of Industry 4.0 in “Supply Chain Technology” would vary for each organization based on their implementation, however having a constant awareness of optimizing value and minimizing waste will serve any organization well, when reviewing their operational activities. Adapting to changing customer needs, responding to technological changes, and evolving a strategy in this changing landscape, would be key to developing any organization in the Supply-chain Industry.
