Supply Chain 4.0 in the Manufacturing Industry

Supply Chain 4.0 leverages the overall business potential

Par Yacine Mahdid | 2 août 2022

Industry 4.0 is forcing companies to rethink the design of their current supply chain. Many technological advancements have emerged that are rapidly changing traditional ways of getting the job done, coupled with increasingly demanding customer expectations, and keeping up with trends has greatly changed the game. Aside from the necessity to adapt to these changes, supply chains now also have the chance to reach the next level of operational success, influence digital supply chain business models, and revolutionize the company into an entirely digital supply chain.

Supply Chain and Logistics via Sea; Photo by David Vives on Unsplash

From a historical perspective, over the past few decades, logistics have drastically changed and become increasingly more sophisticated. Currently, the focus of supply chain management is on advanced planning processes, like integrated S&OP or analytical demand planning, which have become standard processes in many companies. Industry 4.0 has sparked a change in the supply chain management arena, often dubbed Supply Chain 4.0. Let’s take a deep dive into the key aspects of Supply Chain 4.0.

How Digital Waste Negatively Impacts Supply Chain 4.0 Potential

In today’s current processes of supply chain management, many causes of digital waste can weigh down the overall potential of Supply Chain 4.0. It is imperative to recognize the sources of the waste and create solutions to reduce them.

There are three classifications of digital waste sources that hinder the ability of Supply Chain 4.0:

  1. Data capturing and management. Often available data is manually handled and improperly updated at a regular cadence and as a result, it stays unchanged for years. Another primary example of data capturing mismanagement is in warehousing where advanced shipping notifications are collected, but not used to enhance inbound techniques. It is often unclear which additional data could be used to improve other processes such as to eliminate potential supply chain disruptions. With most data management systems, companies will not be alerted until an issue is reported at the end of the month, which can create operational trouble and potential supply chain breakdowns.
  2. Integrated process optimization. Numerous companies have begun to invoke an integrated planning process, but this is often done in a warehouse and not all the information is used to manage the best planning result. Additionally, automatically forecasted planning data is often overwritten by planners, which typically has a negative influence on forecasting certainty. There are still hiccups in intracompany optimization as well as the need to improve the optimization potential between companies. To achieve an advanced level of integrated optimization, it is necessary to align processes within and between all parties within the supply chain.
  3. Physical process execution of humans and machines. Presently digital management at most companies such as those in the warehousing, assembly line replenishment, and transport oversight sectors is done without adequately analyzing and utilizing the applicable data. Warehouse processes are still supervised with an out-of-date system lagging by one to two hours, instead of granting the real-time distribution of new orders and effective routing. Additionally, opportunities that are created by new devices, like wearables or exoskeletons, are not being utilized to their fullest potential ideally.

Supply Chain 4.0 Streamlines All Aspects of Operations

Supply Chain 4.0, without a doubt, will have a positive impact on all areas of supply chain management. With Supply Chain 4.0, companies will gain the advantage of enhanced service, cost savings, increased capital, as well as flexibility.

There are 6 main business areas in which significant supply chain improvements will be seen with Supply Chain 4.0:

  • Planning: Sophisticated supply chain planning will greatly benefit from state-of-the-art analytics and data being automated with Supply Chain 4.0. Companies will see a significant improvement in predictive analytics in demand planning, which will reduce forecasting errors by 30-50%. The progressive algorithms will produce probability distributions for the anticipated demand volume, which will allow companies to target discussions around upside potential and downside risks in the S&Ops (Standard Operating Procedures), and new approaches to leading inventory supervision. Vastly automated and completely integrated closed-loop demand and supply planning will revolutionize planning into a responsive, uninterrupted process.
  • Physical flow: Logistics is expected to take a giant leap of change through improved connectivity, state-of-the-art analytics, additive manufacturing, and cutting-edge automation seen in Industry 4.0 and Supply Chain 4.0. The innovative technology of voice, touch, and graphical user interface and their rapid expansion through customer devices provide much better assimilation of machines in nearly any process in warehousing operations. Smart and autonomous vehicles will greatly reduce operating costs in product handling and transportation while also providing benefits concerning lead times and reduced environmental impact. Additive manufacturing will also have a powerful impact on the supply chain. 3-D printing, an additive manufacturing process, has become increasingly more applicable for a wide range of business applications, including the local production of slowly moving spare parts or tools.
  • Performance management: Performance management is rapidly changing. Now, with Industry 4.0 data optimizations, performance management processes have moved from a consistent, typically monthly process, to an operational process focused on exception handling and stable growth. This is made possible because data is available in real-time from both external and internal sources. Performance management systems can utilize automated root cause analyses to identify proper exception handling. Depending on the detected root cause, the system will immediately generate countermeasures, such as creating a replenishment order or modifying the parameter set-up in the safety system, like safety stocks.
  • Order management: Order management will be enhanced through no-touch processing and real-time replanning with Industry 4.0 and Supply Chain 4.0. This will ultimately result in lower costs through the mechanization of production, greater security due to rapid feedback, and exceptional customer experience through prompt and dependable responses. To achieve no-touch order processing, a reliable available-to-promise process must be supplied. This will make it possible to have an entirely “no-touch” process, where no manual interference is needed between the order intake and order confirmation. Real-time replanning seen with Industry 4.0 will allow order date confirmations through automatic, in-memory replanning of the production schedule and the replenishment while simultaneously taking into consideration all the possible constraints. This means that the supply chain setup is always up to date, which will result in a very dependable planning platform.
  • Collaboration: Supply chain clouds serve as joint supply chain platforms between customers, the company, and suppliers, given that either a shared logistics framework or even joint planning solutions. In non-competitive associations, partners can take on supply chain tasks collaboratively to cut down admin costs and implement best practices based on what they have learned from working with one another. Collaboration in end-to-end/multi-tier connectivity of Supply Chain 4.0 gives the green light for lesser inventories through an exchange of accurate data, a change in lead time cutback through routine information arrangement throughout the entire chain, and an early warning system making it possible to react quickly to disruptions.
  • Supply Chain Strategy: In today’s logistics world, it is necessary for supply chains to further individualize and customize. This means that supply chains need to excel in the breakdown of the supply chain into various unique segments based on customer demands and in their ability to mass-customize supply chain products. “Made-to-order” products provide a specific value for the customer and reduce the costs and inventory overhead costs within the supply chain.

How Supply Chain 4.0 Can Leverage Business Potential

Eradicating today’s digital waste and using new technologies is a huge reason to increase the operational capabilities of supply chains. The inevitable beneficial influence of Supply Chain 4.0 over the next few years is extraordinary. Businesses can expect a reduction in operational costs and lost sales, while also being able to reduce their inventories, resulting in expanding the dexterity of their supply chains significantly.

Quality customer service can be impacted for different reasons, but by improving the customer interaction, using all available POS data/market intelligence, bettering the forecast quality, and using methods of demand shaping/sensing to predict changes in trends, the service level will increase significantly, and in turn, lost sales will decrease.

Supply chain costs consist of warehousing, transportation, and the network setup. But these costs can be reduced greatly. This change can be achieved by using progressive methods to calculate the costs of transportation and warehousing and further developing the network. In combination with smart automation and productivity enhancement in warehousing, on-board units in transportation, etc., the savings capacity can be actualized. Additional cost decreases can be obtained by leveraging means of dynamic routing, leveraging autonomous vehicles, and where possible, using 3-D printing.

With advanced system support, most supply chain planning tasks can be automated and still safeguard better quality compared to tasks completed manually. This breakdown, accuracy, and speed all have significance for the other operations, such as supply chain costs, inventory, and service. Systems can identify the exact point in their processes where intervention needs to happen. By utilizing new planning algorithms, the inventory uncertainty will be greatly reduced, making it unnecessary to hold safety stock.

The other important factor for inventory is the replenishment lead time - with more production and fast changeover, the lead time will be largely reduced. Also, long transport time will decrease because of the increase in local production. In addition, 3-D printing will make it easy to decrease necessary inventory.

Our mission at Axya is to reduce supply chain risk and failure by digitizing and structuring the manufacturing world. Contact us to know more about how we can help you start digitalizing your supply chain!

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