Comment: Industry 4.0 is disrupting the supply chain for good

By Michael Wallraven, LLamasoft
The impact of Industry 4.0 could easily be identified as a threat and a disruptor to the traditional supply chain. The truth is that, when deployed corr...

The impact of Industry 4.0 could easily be identified as a threat and a disruptor to the traditional supply chain. The truth is that, when deployed correctly, this dynamic combination is the antidote to supply chain disruption. 

In 2016, global supply chains were impacted by a series of unfortunate natural disasters including earthquakes and typhoons that ravaged nations throughout Asia. In 2015, analysis by insurance firm Allianz Global Corporate and Specialty found that between 2010 and 2014, the top five causes of business interruption loss globally were fires and explosions, storms, machinery breakdowns, faulty equipment or materials, and workforce strikes. 

Current events that are continually unfolding must also be considered, such as the economic nationalism propelled by the election of Donald Trump and the UK’s impending exit from the European Union. However, there are less dramatic situations that can cause supply chain disruption on a more frequent basis – small acts than have a large impact, such as human error causing delays on the production line. This creates an obvious knock-on effect that directly impacts the rest of the supply chain.

It is clear that the supply chain is vulnerable to disruption. The traditional supply chain ecosystem is built around a rigid process that does not provide supply chain organisations with the flexibility to adjust to disruptions that will impact the bottom line, or the opportunity to predict or prepare for those disruptions.

The traditional process is typically governed by inaccurate analysis of the market that dictates supply chain operations in order to meet the predicted sales. A digitised reinvention of the supply chain will replace this inaccurate, siloed process with a flexible and agile solution that utilises data to severely diminish the impact of disruption. 

Industry of Things
The moniker Industry 4.0 represents the fourth industrial revolution which in turn refers to the rise of data exchange and automation in manufacturing technologies. ‘Internet of Things’ (IoT) is a similar term that supports the same notion of the world becoming more connected and is widely used to describe connected devices used in both industrial and domestic environments. In theory, connected devices, whether in a factory or in the home, bring all of these environments together to create one interconnected eco-system. 

Take Amazon Dash, for example. The e-commerce giant’s Wi-Fi-enabled device can be placed anywhere in the home and reorders a specific product with the press of a button. The user could place the button in a kitchen cupboard, enabling them to replenish their supply of a specific product. Even smartphones providing access to online shopping platforms have enabled consumers to directly impact the supply chain from their own homes. The domestic benefits of connected devices are clear, but there is now an opportunity for the supply chain itself to benefit too.

The ‘smart factory’ utilises automated machinery connected via the internet to facilitate more efficient and flexible production processes that can quickly adapt to production changes and demands. The Siemens AG plant in Amberg, Germany, is 75 percent automated while German truck builder MAN is building IoT technology into its vehicles, enabling haulage operators to access live feeds of raw data on the vehicle’s performance and track their journeys.

For supply chain organisations, these developments provide them with the opportunity to pull their supply chain operations forward into the future. In comparison to the interconnected and automated technologies going into these factories, as well as the technologies that are making homes and shops smarter in the way that they are supplied with products, the traditional supply chain is exposed as outdated and inefficient. With the right flow of data, a digitised supply chain can help organisations thrive. 

Disseminating the data
From the shop floor to the factory floor, each connected device provides important data that can be fed into the digitised supply chain. To be of true value, this data must be tracked and visualised. Visibility is a key area of focus in leveraging data in the evolution of Industry 4.0, and it’s equally as important in the supply chain. Once the data is feeding into the supply chain and clearly visualised, the organisation can begin to think about disruptions before they occur. This can be achieved by manipulating the data in three key areas; supply chain design, event simulation and decision support.

These three areas make up the functionalities of the solution that can be provided by digitised supply chain software. Designing the overall supply chain requires the visualisation of any route within the supply chain network, beginning with partners such as suppliers and service providers. Following the overall design of the supply chain within the software, the potential scenarios and ‘what if’ questions can be entered. As the software runs these scenarios, the outcomes will be generated and from here, organisations can explore the actions that can be taken to avoid total disruption should any of the potential events unfold. 

From this point, the supply chain becomes a flexible and reactive system that ensures disruptions have minimal impact. However, this all depends on the quality of the data that is fed into the digitised supply chain. Organisations will rely on the data to answer the tough questions, therefore flow of data must be carefully managed and stored to provide the most accurate responses. As the availability of data increases from all directions, including the factory, the warehouse and the shop floor, the data that is relevant to each organisation and its own supply chain must be filtered out. 

Without effective filtration of the data, the digital supply chain will become overwhelmed and the clear resolutions to disruption will not be achievable. When the flow of data is suitably managed through the adoption of intelligent supply chain software, organisations will benefit from a far-reaching view across all potential scenarios, enabling them to recognise and react to supply chain disruption before it has the chance to make an impact.   


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