SUPPLY CHAIN 4.0: HOW WILL IT AFFECT THE GLOBAL VALUE CHAINS
Supply chain 4.0 refers to the product of a revolution in the world of trade and commerce. It is being brought about by certain technologies known as “Industry 4.0”. It is set to reorganize supply chains in terms of design and planning, production, distribution, consumption and reverse logistics. As lofty as it may sound, parts of it are already realized especially by firms at the forefront of supply chain management in high-income countries. Although not quite universal, it is being widely adopted.
Objectives supply chain 4.0
Some of the key objectives it seeks to achieve are:
- transforming business models by making them more customer-driven. For instance, supply chain 4.0 contemplates management from a linear model wherein there is a linear path for the information to flow between the various entities at different stages of the production and distribution process to a more integrated model in which information flows in an omnidirectional manner. It can be understood as being calibrated by what firms call ‘supply chain control towers’ to oversee the system.
- to generate jobs. There are studies to suggest that employment in dynamic parts of the supply chain has grown substantially. It is pertinent to note that e-commerce when powered by supply chain 4.0, involves a great substitution of market labour. This is because traditional shopping is time-consuming and as household time is scarce, it will be a boon for human welfare.
- transforming the operation of the global value chain. Supply chain 4.0 provides ample room for firms to enhance profitability, productivity and efficiency. This is achieved by the resulting cost reductions and sophisticated logistical management by technologies.
Impact on Firms (
Technologies and management strategies
Initially, one can understand supply chain 4.0 as the application of Industry 4.0 to the supply chain in a graded manner. Usually, these are understood to be a ‘cluster’ of typical technologies, there might be variations among them. Supply chain 4.0 alters the fundamentals of the information flow. Thus, firms must reshape their strategies and the technologies available at their disposal.
Big Data and supply chain 4.0 analytics
Now, with increasing costs of elementary technologies like the bandwidth, processing costs and Sensors used in IoT technology, it is necessary to manage and sort the data diligently as new technology gather massive amounts of data. Thus, Failing to do this would increase costs and would render the entire shift ineffective.
Smart logistics and the warehouse of the future
Smart logistics entails scheduling of transport, activities within the warehouse. As an assumption, supply chain 4.0 bring greater transparency for the customers and the customers themselves become more visible to each other. The final purchases trigger product moves within the warehouse and the inventory along with moves from one warehouse to other units. In e-commerce, the internet makes the warehouse visible to the customer.
Impact on customers
In the conventional paradigm, the final step is usually a retail establishment. Very often, this system frustrates consumers because of goods being out of stock, goods that are usually on the shelves but are not there on the day the customer visits the store and other such contingencies. Questions like “Do you have any more in the back room?”, “May I speak to a manager?” arise abundantly in stores. For a particularly vigorous consumer inquiry, the manager may prevail upon to call another store in the chain, or a regional warehouse or distribution centre. This might significantly disrupt the efficiency of the entire retail unit and also might disappoint the customer. By this time, the consumer may well have given up and not made the purchase at all, or gone to a competitor.
In these markets, the ability to use analytics and advanced supply chain management to improve performance is in many ways more advanced than in business-to-consumer (B2C) markets, especially in sectors such as electronics, apparel, and motor vehicles where sophisticated supply chain methods have been in existence for an extended period of time. You can see this in the section on e-commerce.
INTRODUCTION: supply chain 4.0
For any organization seeking to achieve a massive goal, logistics plays a key. Logistics can be the determinant of the outcome of a war. Logistics in the past few decades has evolved drastically. It started as a purely operational function which was one of the constituents of the process. Now it has become an independent supply chain management function with dedicated firms handling the same. Companies appoint dedicated chief supply chain officers to ensure smooth functioning.
Trends in supply chain management
In essence, this model requires firms to make a necessary disruption and requires companies to rethink the way they design their supply chain. This will enhance the chance of achieving mid to long term accomplishments. The emergence of several technologies has facilitated and at times kick-started the alteration of the now obsolete ways of working.
Macro socio-economic trends
Macro socio-economic trends across the globe deeply impact the supply chain and how the stakeholders perceive it. For instance,
- The continuing growth of the rural areas worldwide, with wealth spreading into regions that were in oblivion before.
- A benevolent wave of awareness regarding climate change has induced pressure to reduce carbon emissions and ponder upon other environmental regulations.
- changing demographics due to the high mobility of the population also leads to reduced labour availability. But it increases ergonomic challenges.
- At the exact time, customer expectations due to high awareness and competition are growing.
The digitalization of the logistics chain empowers enterprises to cater to the specific needs of a varied and diverse range of customers in a much better way. This development brings about a Supply Chain 4.0, which will seek to be
With advanced forecasting approaches for example predictive analytics of internal and external data, as well as machine status data for spare parts etc., the delivery time of high runners, will be significantly reduced. Amazon holds a patent for “predictive shipping” wherein products are even before the customer places an order. It ships the products based on an algorithm and later adjusted with the actual customer inputs.
Real-time planning and fluid systems enable the company to shape its response to the dynamic supply or demand equations much better. The onus of distribution is much more distributed and is thus more apt to mid-process alterations.
The specialization and focus of service providers allow them to create economies of scale as well as economies of scope and also attractive outsourcing opportunities.
Granulated supply chain
- The demand for individualistically customized products is ever increasing across the sector of industries. This demands a strong push towards a granulated and decentralized supply chain wherein it implements mass customization ideas at the latter stages of the chain. It also ensures that the products are compatible with those changes. New transport concepts, such as drone delivery. allow companies to manage the last mile efficiently for single and high-value dense packages.
Digital waste is a mitigating factor to leveraging the potential of supply chain 4.0 and thus it must keep down. The firms should regularly manage and upgrade the data.
Advanced analytics and automation of knowledge work would help to achieve prospects of the future supply chain. The transformation into a digital supply chain broadly hinges on two factors which are capabilities and environment. Organizations need to build within their capabilities regarding digitalization. This should couple with targeted recruiting of specialist profiles. Moreover, the research and development of the ancillary units in the information technology world need to go hand in hand.