Jit Hinchman, Founder of Supply Chain Adviser
Supply Chain 4.0 & Technology: The Roles, Current States, Impacts, and How Can You Leverage Them?
Updated: Mar 21, 2021
It all began a long long time ago...Did you know that in 300 BC, The Via Appia, a famous Roman road was constructed, 'Greek and Roman military officers titled “Logistikas” used to supply resources, Greek had the term “Rhocrematics” that discussed materials flow, in the year 1206, Genghis Khan had Yurtchis for the supply and distribution of resources (O'Sullivan, 2019)'?
This close relationship between the industrial revolution, logistics, and supply chain can trace back to ancient times. It influences one another and drives businesses to move forward. Industrial revolutions have been progressing along with human history as industrial technology development and economic growth. The first industrial revolution happened during the year 1784-1870, which had mechanization, the steam engine, and weaving loom. In the late 19th century, logistics were used in military applications. The Supply Chain Management term was coined for the first time in 1982 by Keith Oliver, a British logistician, and consultant.
Fast forward until today as of 2020, we are at the fourth industrial revolution, Industry 4.0, and of course, Supply Chain 4.0. In this article, we are going to learn about the role of supply chain 4.0 and technology, its current state, how to leverage them, and in the end, you can have a clear view of the impact that supply chain 4.0 and technology have on your organization and its future.
Businesses around the world across industries have been evolving to monetize constantly changing customer demand.
The role of innovation and technology in business is to drive growth and improve operations. Supply chain management is the backbone and competitive advantage in business. If an organization is a human body, technology is a nervous system, and supply chain management is the bone and connected tissues. And just it has been throughout history, logistics and supply chain management also progress along with businesses and industries.
Today, the fourth Industrial Revolution or Industry 4.0 is an ideal state of automation manufacturing and industrial practice using modern smart technology, that characterizes by cyber-physical systems, IoT networks, strong product individualization, and great flexibility production. Logistics 4.0 is an ideal state of future logistics that contains Intelligent Transportation Systems. Supply Chain 4.0 is also an ideal state of future supply chain management that characterized total network integration, can leverage all data available to improve, and faster decision making.
Therefore, the role of Supply chain 4.0 is being a reference model that helps transform and reorganize the traditional linear supply chain models between upstream suppliers to downstream customers, "the design and planning, production, distribution, consumption, and reverse logistics stages – using a set of technologies that are known in the Industry 4.0" (WTO, 2019), to overcome the complexity of the traditional linear supply chains, where the flow of products, information, and funds are still moving in a limited direction one stage at a time between each stage and trading partner, it's too slow to respond and lacking enough visibility to capture the real-time demand.
Technology set that identified in Industry 4.0 and especially digital technologies such as the Internet of Things, Big data analytics, 3D printing, Advanced autonomous robotics, Smart sensors, Augmented reality, Cloud computing, Energy storage, Artificial Intelligence or Machine learning, Human and Machine interface, Cybersecurity, Quantum computing are a few examples. Technology has a role as an enabler to help with the transformation from traditional linear supply chains into the total supply chain network integration.
The current states of Supply Chain 4.0 and Technology vary across industries. Indeed, Supply Chain 4.0 is already here but only in the frontier organizations that have the capabilities to deploy the pilot programs, and even in the more advanced economies, the concept is still not widely used or equally applied. A recent 2020 survey by HSBC of over 2,600 businesses across 14 countries indicated that 41% of businesses say they will digitize processing and adopt paperless documentation, 21% will utilize 3D printing technology to enable more production on-site. The survey also shows how the business looking ahead 5 years found that 35% of companies plan to increase digitalization/adoption of technology, 33% plan to do more workforce training, 32% want to invest in innovation (research and development), 31% plan to automate their business.
Business and their supply chains are under pressure to invest in new technology to keep up with industry leaders, the shift of change in technology, or they risk of falling behind the competition, not only technology is critical to business continuity, but also a tool to enable cultural change and facilitate greater agility.
However, pursuing the latest trends or going after shiny new things without alignment and tailor to fit the supply chain organization's strategy is not only costly but also cripple the flow, should not do it without well-coordinated internal supply chain processes, proper planning, and clearly define a digital supply chain roadmap. Underestimate the power and lacking preparation not only increase business risks but also creates further dysfunctional fragmented processes. A study from Gartner indicated that 81% of supply chain leaders say it's challenging to scale new experimental innovation into operational production use. 39% of chief supply chain officers plan to implement but have not started to define, a digital supply chain roadmap. Only 47% of companies are actively defining or implementing a digital supply chain roadmap. And, only 16% can say that their digital initiatives focus on supporting new business model designs over the next two years. 74% of top supply chain organizations across industries demonstrated Artificial Intelligence use cases. 66% of top supply chain organizations have been actively using or exploring advanced analytics capabilities.
Bring It All Together
Businesses and supply chains are looking to invest in new technologies to enhance their decision-making ability, optimize costs, and meet increasing customer expectations. Adopting the right supply chain technologies helps to drive business goals. Supply chain leaders need to have the ability to filter out noises and identify solutions relevant to their current and future business needs. Companies cannot successfully execute with proper speed or intensely pursuing strategies with confidence and focused discipline without sufficient preparation and well-organized plans.
Technology alone is not enough. To survive constant changes and disruptions, organizations must be able to adapt, flex to changes, and come out stronger. This requires a high-performing executive team, increase organizational critical skills and capabilities to evaluate risks, nurturing the culture of creativity, and embracing innovation, speaking accurate data as a language across functions.
Large enterprises may have more access to capital, more options to invest in new technology. However, its broader geographical operations and cultures, make it challenging to adapt quickly to new business models. Considering building a new separated identity with new thriving business models can reduce the risk of failing at large.
Small and medium-sized companies have the advantage of smaller-scale operations, that may be lacking capital, instead of looking at costly enterprise technology, they can consider new solutions by choosing the right partners from new emerging technologies. Such as solutions from Cloud technologies, blockchain, or other new supply chain technologies that can provide more effective and reasonable investment. Most importantly, companies of all sizes should look into customized solutions that have more flexible capabilities to design and capture both of their current and future business needs as well.
It is crucial to understand where your business is going in the future and to define what capabilities supply chains must put in place to meet future business needs. Defining and implementing a digital supply chain roadmap, identify the gap between the current states, plotting a direction and timeline for reaching a desired future states, action plans, and must aligning strategies, investing in people, in supply chain talents, technologies, processes, and nurturing innovative and healthy culture.
I hope you enjoy the article and keep thriving towards your ideal Supply Chain 4.0 and Technology. I would like to encourage you to start where you are regardless of how long the road may seem. It's never too late and I wish you much success and happiness.
We, at Supply Chain Adviser, are the expert in Supply Chain Management, to help you get on track with your business needs.
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About the author Jit Hinchman, M.Eng, M.Sc, CSCP, CLSS is the founder of Supply Chain Adviser, an inspiring Supply Chain Adviser™️, creative problem solver, stabilizer agent with the ability to bring a sense of continuous accountability for achievement.
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