Impact of Industry 4.0 on Supply Chain Management

If you remember, we studied the Industrial Revolutions in the history subject at some point. There have been 3 industrial revolutions.

• First Industrial Revolution: Textile and Steam Engines
• Second Industrial Revolution: Heavy Machinery and Electricals
• Third Industrial Revolution: Computers and Process Automation

But did you know that the world is at the cusp of the fourth industrial revolution, known as Industry 4.0? In this blog, we discuss the role of Industry 4.0 in the supply chain.

What is Industry 4.0?

Industry 4.0 works on the concept of integrating physical and digital systems seamlessly. What does it mean? 

Computers in Industry 3.0 were introduced to support employees in performing daily tasks. As a result, the customer interaction was with the employee. But, there were many risks and challenges involved.

Industry 4.0 has brought humans and machines closer, making it possible to establish real-time communication between them. Creating a smart environment using machines and sensors has helped make it possible. Some of the key technologies of Industry 4.0 are:

• Internet of Things (IoT)
• Artificial Intelligence (AI)
• Big Data Analytics
• Cloud Computing
• Nano Technology
• Advanced Robotics
• Block Chain
• 3-D printing
• Augmented Reality
• Quantum Computing

Supply Chain Management in Industry 4.0

Supply Chain refers to a network of companies that together create the chain of production and the delivery of a product or service. There are many components of a supply chain, including:

• Producers
• Vendors
• Warehouses
• Transport Companies
• Distributors
• Retailers

The biggest challenge of the traditional supply chains was managing their communication. As a result, the supply chains used to operate with much less efficiency. In this regard, the impact of Industry 4.0 on the supply chain is profound. 

Integrating Industry 4.0 in the supply chain has connected the missing dots from procurement to the final delivery. It creates an agile supply chain that responds to real-time customer needs.

Key Benefits and Impact of Industry 4.0 on Supply Chain Management

There are many benefits for supply chain management in Industry 4.0. Here are the key benefits of using advanced technology of Industry 4.0:

Improved Efficiency

With Industry 4.0's automation in the supply chain, the risk of manual errors is reduced. Technology also speeds up processes, increasing production levels and efficiency.

Optimum Resource Utilisation

Automation helps better utilise the available resources, leading to lower wastage.

Lower Costs

Supply chain management in Industry 4.0 benefits from more efficient processes and optimum utilisation. As a result, lower wastage and manpower are required to perform the same work, which helps save a lot of costs.

Prompt Customer Service

Real-time communication helps overcome the latency caused by manual intervention at each level. This single benefit has the potential to grow a business manifold.

Adapt Quickly

In today's dynamic world, adaptability is one of the key ingredients that keeps a business afloat. Integrating Industry 4.0 into the supply chain helps make the entire process more flexible and adaptable.

Saves Time & Effort

Automation reduces employees' physical activity load by mostly performing redundant activities. This helps save the employees' time and makes them available for high-value activities.

Enhanced Visibility

With Industry 4.0 in the supply chain, data is available in real-time, making it visible to all concerned parties at any time. This helps make the supply chain proactive and aids in quick decision-making.

Better Integration & Collaboration

Industry 4.0 technologies integrate systems across the entire supply chain. This improves collaboration at all levels, including suppliers, manufacturers, and distributors.

Industry 4.0 Readiness and Digital Transformation

If businesses and supply chains want to benefit from digital transformation, they must assess their Industry 4.0 readiness. Here are the steps to determine if you are ready:

• Understand the current situation of your organisation.
• Whether your staff is tech-savvy and digitally mature.
• What processes do you need to implement to integrate Industry 4.0?

To be ready for Industry 4.0, you must ride the tide of digital transformation. Here are the steps you should take to create Industry 4.0 readiness:

• Upgrade to the latest technology: Getting the right tools and platforms is very important. Once implemented correctly, they can transform the way your business operates.
• Redesign your business processes: Your business processes should be redesigned to become digital-friendly. This will help integrate new systems and processes.
• Train your staff: A new technology or system is useless if the workforce lacks the skills to perform their tasks using it. Hence, you should arrange special sessions and training modules to equip your employees with the required know-how.
• Build a digital culture: Supply chain management in Industry 4.0 is creating a cultural shift. To assimilate well, you should align your organisation with this thought process. Building a culture of innovation and adaptability will help you grow faster.

Technologies Driving Industry 4.0 in Supply Chain

As we discussed at the beginning of this blog, various technologies form part of the digital revolution in Industry 4.0. Here's a brief explanation of the key technologies driving supply chain management in Industry 4.0.

• Internet of Things (IoT): Devices across the supply chain can be integrated using the Internet of Things (IoT). This advanced technology uses sensors and software to link physical devices like vehicles, machines, appliances, etc. Hence, they can communicate seamlessly in real-time. When it comes to supply chain management, IoT helps in real-time tracking of the goods and monitoring the processes.
• Artificial Intelligence (AI): AI identifies and analyses critical metrics for predicting future demand. By helping with demand forecasting, AI can help with inventory management, logistics planning, and cost reduction for the supply chain. It makes decision-making more accessible by providing the necessary information to management.
• Advanced Robotics: Robotics has taken the supply chains across industries by storm. They have proven effective in performing repetitive tasks like loading, unloading, manufacturing, etc. Not only does it increase speed, but it also decreases errors.
• Big Data Analytics: Gathering and analysing large data sets and identifying controllable patterns is essential. This can help with proper demand forecasting and better inventory management.
• Blockchain: Blockchain has proven to be one of the most secure technologies for data sharing and transactions. Bitcoin is based on this technology, and the best part is that it increases traceability at each level of the supply chain.

Challenges and Risks in Implementing Industry 4.0 in Supply Chains

While it looks very promising and straightforward to implement Industry 4.0 in supply chains, it also has its fair share of challenges. Here are the significant challenges:

• High Initial Cost: Investing in cutting-edge technology is expensive. Now, consider it from the perspective of an MSME that forms part of the supply chain. It can be very challenging for it.
• Threat of Cyber Attacks: With more digital integration, cyber-attacks are more likely. Hence, concerns about cybersecurity in Industry 4.0 are real.
• Problems in Integration: Integrating new technologies with old processes can take time and effort. Unless it is integrated, the supply chain might be disturbed.
• Skill Gaps: Companies hire employees from all fields of study, and not all may have the same level of comfort with advanced technologies. Ensuring that they are properly trained can be a challenging task.
• Employee Inertia: It can be difficult to convince employees that the change is beneficial, especially given the risk of AI taking their jobs.

While we all know that change is the only constant, it is the most challenging thing to implement in the real world. Integrating Industry 4.0 in supply chains could lead to real transformation, but only if the industries are ready to face the challenges of implementing new technologies. Some concerns, like cyber and job security, are crucial and at our doorstep. It is also true that Industry 4.0 is here, and it is the future!