Supply Chain 4.

0
Farhan Abdul Shaheed
C Batch
37120055
School of Management Studies
CUSAT, Kochi- 22
E mail: farhanabdulshaheed@pg.cusat.ac.in
Abstract: With the advent of Industry 4.0, the whole manufacturing
ecosystem underwent a massive shift towards adoption of technology. Machines and
intelligent systems became integrated to streamline the supply chain process as well
and resulted in SCM 4.0, a technology and data driven approach that improves
efficiency, cut costs and makes the whole system agile.

Key Words: Supply Chain Management, Industry 4.0, IoT, SCM 4.0

1.0 INTRODUCTION

The term ‘Industry 4.0’ was coined to mark the fourth industrial revolution, a
new paradigm enabled by the introduction of the Internet of Things (IoT) into the
production and manufacturing environment. The vision of Industry 4.0 emphasizes
the global networks of machines in a smart factory setting capable of autonomously
exchanging information and controlling each other. This cyber-physical system
allows the smart factory to operate autonomously. For instance, a machine will know
the manufacturing process that needs to be applied to a product, what variation to be
made to that product etc., so that the product can be uniquely identifiable as an active
entity whose configuration and route in the production line is unique. As the
collaboration between suppliers, manufacturers and customers is crucial to increase
the transparency of all the steps from when the order is dispatched until the end of
the life cycle of the product, it is therefore necessary to analyze the impact of Industry
4.0 on the supply chain as a whole.[1]

Thus Industry 4.0 gave rise to Supply chain 4.0, the logistical counterpart.
The recent developments in technological advancement have enabled not only the
virtually endless possibilities of interconnecting human beings and machines in a
cyber-physical system context using information obtained from different sources but
also direct communications between machines. The implementation of this kind of
network within the production and operations environment has facilitated the rise of
Supply Chain 4.0. [2]

2.0 SCM 4.0

 Collaboration between suppliers, manufacturers and customers is crucial to
increase the transparency of all the steps from when the order is dispatched until the
end-of-life of the product. Furthermore, due to the introduction of digitalization and
automation of processes, the whole supply chain management (SCM) structure has
become technologically integrated, streamlining the processes and increasing
efficiencies.

Supply Chain 4.0 specifically involves a radical shift in how production

factories and floors operate currently. It could arguably be considered as a global
transformation of the manufacturing industry with the introduction of digitalization
and the Internet, these transformations consider revolutionary improvements in the
design and manufacturing processes, operations and services of manufacturing
products and systems. This results in smart factories.[3]

A smart factory is referred to as the use of new innovative developments in digital

technology including “advanced robotics and artificial intelligence, hi-tech sensors,
cloud computing, the Internet of Things, data capture and analytics, digital
fabrication (including 3D printing), software-as-a-service and other new marketing
models, mobile devices, platforms that use algorithms to direct motor vehicles
(including navigation tools, ride-sharing apps, delivery and ride services, and
autonomous vehicles), and the embedding of all these elements in an interoperable
global value chain, shared by many companies from many countries”.

Virtual and augmented realities, 3D-Printing and simulation, big data analytics, cloud
technology, cybersecurity, the IoT, miniaturization of electronics, AIDC, RFID,
robotics, drones and nanotechnology, M2M and BI are the major technologies that
enable Supply Chain 4.0

Within the context of Supply Chain 4.0, the factory of the future will enable the
connection between machines and human-beings in Cyber-Physical-Systems (CPSs).
These new systems focus their resources on the introduction of intelligent products
and industrial processes that will allow the industry to face rapid changes in
shopping patterns and address supply chain disruptions.[4]

The reorganization of supply chains using advanced technologies, such as the

Internet of Things (IoT), big data analytics, and autonomous robotics, is transforming
the model of supply chain management from a linear one, in which instructions flow
from supplier to producer to distributor to consumer, and back, to a more integrated
model in which information flows in an omnidirectional manner to the supply chain.
[5] While e-commerce is uniquely suited to many of these techniques, they also hold
the promise of improving efficiency in brick and-mortar stores.
These technologies are generating enormous benefits through reducing costs,
making production more responsive to consumer demand, boosting employment
(employment in supply chain sectors where such technologies are most likely to be
applied has grown much more rapidly than in other supply chain sectors and in the
economy as a whole) and saving consumers’ time. The impact of these technologies
on the length of supply chains is uncertain: they may reduce the length of supply
chains by encouraging the reshoring of manufacturing production to high-income
economies, thus reducing opportunities for developing countries to participate in
GVCs, or they may strengthen GVCs by reducing coordination and matching costs.[5]
2.1 Supply Chain 4.0 is here already
Supply Chain 4.0 technologies is already having a substantial impact as most of them
are already being applied in actual supply chains or is being piloted as of now. Its is
safe to say that Supply Chain 4.0 is here, by which we mean that it is here at the
frontier of supply applications and being more widely adopted, not that it is
universal. Even in high-income countries, the principles of Supply Chain 4.0 are
unequally applied. Advanced supply management techniques are more likely to be
observed in sectors such as electronics where earlier waves of management
techniques took hold first, or in big-box retailers such as Walmart. As recently as
February 2018, supply chain problems caused two-thirds of the 900 Kentucky Fried
Chicken restaurants in the United Kingdom to close because they had run out of
chicken.[6]
2.2 Transforming business models, making supply more customer-driven
While Supply Chain 4.0 involves the deployment of such contemporary tools as the
Internet of Things (IoT), big data analytics, autonomous robotics, and the like, it is
not really about any of these things. It is about transforming the model of supply
chain management from a linear model in which instructions flow from supplier to
producer to distributor to consumer, and back, to a more integrated model in which
information flows in an omnidirectional manner to the supply chain. While lead
firms are increasingly analyzing this information through “supply chain control
towers,” the end effect of this development could be making the goods economy
more responsive to consumer demand.
2.3 E-Commerce is ideally, but not uniquely, suited for Supply Chain 4.0
The ability to capture data in e-commerce empowers many of the data-driven
methods. In particular, older technologies (electronic data interchange) were already
gathering large amounts of information in business-to-business (B2B) e-commerce,
which can be used to improve supply chain performance. At the same time, most of
the developments discussed here can be used to improve the performance of
traditional brick-and-mortar stores, where the large majority of retailing still takes
place, as well as in an e-commerce setting.
2.4 It generates jobs, which substitute for household labor and promote
human well being
Most of the jobs being created involve moving goods around either in warehouses or
delivery vehicles and have many of the characteristics of factory work. Though
robots are used in many of these applications, they appear, at present, to be
complementary with human labor. Most importantly, e-commerce, powered by
Supply Chain 4.0, involves a great substitution of market labor for household
shopping time. Traditional shopping is a time-consuming and, for many, tedious
activity. Because household time is an intrinsically scarce resource, Supply Chain 4.0
is already having profound impacts on human well-being. However, time saved as a
result of e-commerce also has increased employment in the transportation and
material moving occupations.
2.5 It can transform the operation of global value chains
Supply Chain 4.0 provides substantial opportunities for firms to enhance
productivity, profitability, product quality, and performance in international trade be
it taken as an advanced management practice, or simply as a cluster of technologies
to be deployed by advanced management practices. Because Supply Chain 4.0
diffuses at an unequal rate, it can also influence the size distribution of firms within
industries as well as income distribution across countries. Activities of government
which depend on highly disaggregated firm data, such as tax enforcement and
monitoring of rules of origin in international trade can be enhanced by the ability to
track both physical and financial information with respect to operations throughout
the supply chain internationally.
3.0 Disruptive Forces Impacting Business Today
We are living in the age of Industry 4.0 which is disrupting businesses and impacting
most industries. To survive and be competitive in the presence of disruptive forces,
companies are being forced to innovate in every aspect of their business. The
manufacturing supply chain is no exception. Disruptions in supply chain will be
quite significant as supply chains globally are not equipped to cope with the
disruptive changes caused by emerging technologies, global uncertainty, increased
business complexity, changing environmental conditions, and shortages in skilled
labor.

There are four primary disruptive forces affecting the current supply chain
model:
1. Emerging digital technologies such as the cloud, the internet of things (IoT),
artificial intelligence (AI), 3D printing, robotics, autonomous vehicles, drones,
and augmented and virtual reality are pushing the value chain toward hyper-
transparency, real-time data sharing and predictive analytics.
2. Business ecosystems are shifting toward service-based outcomes, driven by
real-time and proactive strategies operating within the cyber environment.
3. The global nature of work, enabled by the internet, is creating new legal,
regulatory, financial, environmental and human issues that require new
infrastructures and networks.
4. Supply and demand fluctuations caused by factors such as raw materials
and resource scarcities, quality issues and natural disasters are becoming
extreme, putting additional pressure on supply chains.[7]

Why the Traditional Supply Chain Is No Longer Effective?

The traditional supply chain can be described as a linear “plan and control” model
that is characterized by multiple, siloed and disjointed planning cycles, each with
only a partial view of the supply chain leading to ineffective feedback loops,
communication and collaboration that can lead to excessive firefighting.
Compounding factors are an increased variation between suppliers, an imbalance
between supply and actual demand, and increased inventory. The combination of
these factors can lead to ineffective responses, failures in on-time delivery (OTD),
diminished quality and efficiency and increased costs and resources. The overall
result is an inability to achieve operational excellence.

In a predictable and consistent business environment, this model is very functional —

and has served many organizations well for decades. In the current digital and
disruptive environment, it is apparent that the traditional supply chain model is not a
good fit and a new model must be adapted.

Supply Chain 4.0 is an upgraded supply chain model of the future needed for
overcoming the four disruptive forces, and for achieving business success in the age
of Industry 4.0. Companies like Hitachi are providing cutting-edge solutions to
clients to overcome these disruptions and establish supply chain 4.0 solutions for
optimal results.[8]

4.0 The Need for Supply Chain 4.0

Evolve the entire supply chain operations by bringing in resilient and agile
solutions

Create intelligent workflows to strategically improve the overall supply chain process
and enhance security. With the help of advanced analytics, AI and blockchain build a
resilient supply chain against disruption and uncertainties. Implement business and
process improvement solutions. Monitoring them continuously and process
rectifications where necessary creates minimizes the risk of operations.

Add an adequate level of intelligence and autonomy to logistics

Injecting more efficiency, effectivity, agility to establish smart and connected logistics
aligned to meet the needs of a connected and rea-time economy.

Need to strike a balance between self-autonomous systems and human in loop

model to develop a transformed supply chain
Focusing on having an active and intelligent system in place where peaceful
collaboration can exist between man and machine. Today, the environment demands
the changing ecosystem to function towards achieving the end results in a
comprehensive manner.

Ways of working and operations are transforming today

Deployments, frameworks, analytics, information ecosystems, realities, and aspects

need to be aligned to Industry 4.0. It requires managing the skills, making the right
decision, deliver outcomes and capabilities with respect to the changing economic
scenario. Developing real-time solutions, shifting centralized organizational and
planning approaches, on-demand planning, and managing uncertainties go hand in
hand. The overall digital transformation and the technological growth facilitate this
change towards a more automated and streamlined supply chain management.

5.0 Supply Chain 4.0 Impact

Impact of this radical Supply Chain 4.0 is felt across the entire operations. Supply
Chain 4.0 is a value addition when inculcated properly in the various aspects of
supply chain management. Following are the various ways in which the new
technology influences the entire system:

Resilience

Increasing resilience is a priority now for the majority of businesses as they emerge
from the current crisis. The retaining cost of supply chains in multiple locations will
be seen as the cost of doing business, rather than inefficiency. Strategies such as dual
sourcing, alternative factories, generous safety stocks do go against the lean supply
chain models, however, rebalance between resilience and efficiency must be achieved
for better functioning.

Agility

Upgraded and new approaches of product distribution reduce the delivery time of
the high performers and heavy machinery by a few hours. The foundation of these
services is advanced forecasting data and approaches, e.g., predictive internal
demand analytics, external market trends, construction metrics, weather conditions
etc. These forecasts are carried out on a monthly basis and dives deeper into the
customer demand and machine status data for improving overall operations and
productivity. Processes are made agile, and the swiftness is felt across all the
departments and workflows aligned to shifting customer expectations.

Flexibility

Makeshift and real-time planning permeates a flexible response to changing demand

or supply scenarios. Planning becomes a consistent process. Planning cycles and
freeze periods are reduced subject to changing needs or constraints. Once the
products are out for delivery, coherence and flexibility are ensured throughout the
process till shipments are reached to customers in the most convenient manner.

New business frameworks such as Supply Chain as a Service for planning, functions
or transport management, fine tunes the flexibility of the operations allowing the
organizations to create both economies of scale and scope along with fascinating
outsourcing opportunities.

Accuracy

The next-gen Supply Chain 4.0 provides real-time, end-to-end openness and
transparency throughout the supply chain. The scope of information travels from top-
level KPIs, such as overall service level, to the granular level process data, such as
determining the exact location of vehicles in the network. The data range offers a
clear view of information based on all levels of seniority and processes in the supply
chain. All the stakeholders operating in the same cloud are integrated, and the same
outcomes are delivered across the nexus.

With the help of a high-performing digital supply chain management, targets are set
automatically, having a realistic target and aspiring to achieve one set the bar.
Performance management system automatically identify risks and exceptions to
change the supply chain parameters, accordingly mitigating the risks and enabling a
process to ace these targets.
 Efficiency

Automation of both planning and physical tasks augments the efficiency of a supply
chain. Intelligent automation handles the complete warehousing operations – from
receiving or unloading to pack, ship, and deliver consignments. Optimizing
transports and truck utilization increasing the flexibility and efficiency of the entire
transport system. Putting together the entire network in place and continuous
optimization ensures enhanced efficiency.

Quality
Consumers demand more personalized products, and the need for them is
continuously increasing. Thus, micro-segmentation and mass customization are
strongly focused on for the final implementation of ideas. With it comes the need to
look into the product quality. Customers are identified and segregated into small
clusters. A broad range of products and offerings are identified suitable to their
needs, and finally comes the entire process of quality checks. Checks are put across
the various endpoints to ensure higher quality. Process automation ensures quality
measures against set benchmarks, quality control, and revisiting the journey in case
of degradation in the outcomes.[9]

Supply Chain 4.0 and Resilience

The concept of Supply Chain 4.0 has been emerged in recent years because of the
Industry 4.0 phenomenon. Supply Chain 4.0 has a management approach much more
than only the implementation of disruptive technologies. On the supply chain side,
the disruptive technologies play a crucial role for the expected transformation of
supply. These main disruptive technologies of Industry 4.0 that may be adopted by
supply chains include big data analytics, Internet of Things (IoT), artificial
intelligence, cloud computing, blockchain, robotics, additive manufacturing and
augmented reality.[10]

6.0 Key benefits of supply chain 4.0

Digital transformation of the supply chain can bring a company a plethora of benefits

from better end-to-end visibility and improved decision-making to higher operational
effectiveness and minimisation of expenditure. Here’s more about the top advantages
of the digital supply chain:

 Espouse end-to-end transparency. With the digital supply chain, data

exchange between an organisation, multiple suppliers and customers becomes more
effective. Real-time asset tracking powered by IoT, cloud-based dashboards and
other tech solutions make it possible to establish an item's precise location.
Organisations can see all updates added to the digital ecosystem, leading to
ordering accuracy, traceability and efficiency.
 More accurate forecast approach. Predictive analytics has the potential to
reduce forecasting errors by 10% to 20%. Fuelled by AI and machine learning,
predictive analytics evaluates historical information about demand, current market
trends, weather conditions and other data to provide statistics-based demand
forecasts and optimise inventory. Predictions can be carried on a monthly, weekly
 or even daily basis depending on the product, helping to prevent out-of-stock
situations and ensuring on-time delivery. Moreover, performing real-time analysis
of a constantly changing market allows organisations to adapt to prevailing trends
and stay flexible.
 Enhanced supply chain management. According to the Boston Consulting
Group, digital supply chain management offers a 25% faster response to market
demand changes. Process management, supply and demand planning, cash flow
and other underlying supply chain processes can be managed within one digital
ecosystem. Custom warehouse management systems that use IoT and data analytics
can optimise the warehouse space by providing insights into shipping and picking.
Immutable records offered by blockchain technology and smart contracts allow
supply chain optimisation, guarantee secure and automated transactions, and
increase the visibility of purchases and transactions in supply chains.
 Improved customer experience. The end-to-end visibility guaranteed by the
digital supply chain increases the knowledge of employees in customer-facing
positions. Customers can receive an immediate response about product availability
and detailed information about the order, improving the overall experience and
bottom-line growth.[10]

7.0 Use Cases of Supply Chain Management 4.0

Warehouse Automation 

The warehousing industry is at a tipping point. The number of parcels being shipped

is rapidly accelerating, and with the aim of same-day delivery. Meanwhile, there is
a growing shortage of warehouse distribution workers and space. This has forced
retailers to construct and retrofit warehouses with modern automation material
handling systems and robotics. It’s estimated that there will be more than 4 million
robots operating in 50,000 automated distribution warehouses globally by 2025. Thus,
companies will have to automate more or risk perishing.

Manufacturing

Automation for manufacturing is also accelerating especially in the few years.  The
dropping costs of sensors, robotics and controls with advancements in artificial
intelligence, connectivity and computing power has opened automation up to solving
these use cases.  Additionally, advancements in additive manufacturing, rapid CNC
and other production methodologies have shortened dramatically the time it takes to
get a product from concept to test and even production.   [11]

Demand Forecasting using AI & ML

Research says that businesses can reduce their planned inventory by 2.5% if the
inventory forecast is improved by 1%. Detection and treatment of outliers crucial for
creating a stable AI and ML model. Carving the machine learning model based on
the outcome of the outlier detection treatment has to be done. Exploratory data
analysis is done to identify patterns and trends. For certain cases, data might not
show any trends. For certain other, a predictive analysis model might be a better fit.
[12]

The final step is to evaluate the data accuracy of these models. In a nutshell, the entire
demand forecasting process ensures smarter integration and futureproof planning.
Logistics Planning and Routing Using AI

The future sees more automation across the various logistics component such as
supply chain, inbound, warehouse management, outbound logistics, intralogistics,
and logistics routing. Highly encouraged by Industry 4.0, Industrial Data Space is one
approach adopted by all the major logistics players who are looking towards carving
a strong digital future.[13]

Blockchain technology, AI, and the Internet of Things (IoT) are identified by all the
major players to automate supply chain management and logistics routing. A core
component of Logistics 4.0, an extended arm of Supply Chain 4.0 is faster logistics
routing. Enabling semi-autonomous decisions, self-driven vehicles, maintenance of
logistical assets, edge computing, fog computing, ensuring multiple logistics use
cases, and deploying solutions specific to the case, streamline the entire operation and
work processes with limited manual intervention and increased productivity.

8.0 The steps for the adoption of the Supply Chain 4.0 digitalization
enablers
(1) First, perform the first digital adoption with a focus on the digital experience with
the client. Offer products, services and rapid responses focused on digitalization and
real time. As much as possible, be in direct contact and create virtual value (develop
those Industry 4.0 enablers of wholesaler, retailer, customer and final customer). A
long-term result of success in this first strategy may be the disappearance of
intermediaries such as wholesalers and retailers.

(2) Second, make a considerable investment in the virtual value chain, particularly in
the distribution channels with the support of 5th party logistics, to make the
customers aware of the new delivery services.

(3) Third, execute the transformation to a smart factory or, if this is the case, the
development of smart services and processes. In addition, support the incorporation
of this initial approach to DSC by suppliers. This can develop interesting success
stories with a more effective and efficient vertical integration.[14]

 The application of Industry 4.0-enabling-technologies is expected to bring about

significant performance improvements in SCM by enabling a holistic approach
towards supply chain management resulting from extensive supply chain integration
as well as information sharing and transparency throughout the supply chain.
Moreover, these technologies allow for huge performance improvements within
individual supply chain processes such as procurement, production, inventory
management and retailing through enabling process integration, digitisation and
automation, and bringing about novel analytical capabilities.[15]

9.0 Conclusion
Supply Chain 4.0 is indeed a making revolution in the whole supply chain and
logistics ecosystems by integrating cutting edge technologies with a data driven
approach. As companies adopting it widely are able to reduce costs, increase
efficiency and add value to the stakeholders with higher profits as well. [16]
Although the world is still getting used to Supply Chain 4.0, with the dynamic nature
of technology, experts have already introduced an improved version Supply Chain
5.0 where humans have more collaboration with machines for a streamlined process
flow[17].Supply Chain 5.0 aims at mass personalization, adds revolutionary
technologies, enables a super smart and sustainable society, and faces some transition
challenges in its implementation, mainly linked to the paradigms established by the
ongoing Industry 4.0 wave.[18] The transition has already started, and will be yet
another paradigm shift in the supply chain ecosystem.

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