The drive for increased efficiency, transparency, flexibility and accuracy are at the core of every supply chain transformation program. The arrival of new connected, data focused technologies has the potential to make considerable impact to the new Supply Chain 4.0 era. According to a recent McKinsey report, by adopting Supply Chain 4.0 within three years companies could see:
• 30% decrease in operational costs
• 75% fewer lost sales
• 75% decrease in inventory
These statistics may seem improbable at first look, but by learning more about Supply Chain 4.0 and how it ties into the greater movement of Industry 4.0, the potential not only seems realistic but possibly even modest. The effects of Supply Chain 4.0 have the momentum to reach far beyond industry and change how we live our everyday lives.
Why do companies need to adopt Supply Chain 4.0? The answer is the same as many other industry transformation questions; to satisfy customer expectations. Customers are expecting an unparalleled level of fast, accurate and transparent service. Stock shortages, delivery delays, and vague status updates no longer cut it. So, what exactly does Supply Chain 4.0 look like and how will it help businesses exceed customer demands?
Industry 4.0 moves away from automated machines to cyber physical systems, i.e. machines that not only perform program tasks led by a human programmer, but have deep learning capabilities as well as being socially connected to the rest of the components in the manufacturing process. They are independently aware of real-time movement of goods from supplier to end-user. This transparency removes the questions of “what’s next?” or “how much?” or “where is…?” from the manufacturing process. The information is available at that moment to the entire supply chain. Building on that, the connected warehouse is able to continue the delivery of accurate, instant information around inventory and demand.
The cache of data collected from the process will continue to drive the supply chain transformation providing the basis for planning that passes historical forecasting to predictive analytics which anticipate issues before they become a crisis. Supply Chain 4.0 has the capability of removing shortages or over-production from the equation. Going a step beyond that, Amazon has a patent for “predictive shipping” which would get product into the delivery network before a customer has even placed an order – a supply chain that knows what you need before you do!
The constant stream of data makes Supply Chain 4.0 agile enough to react to changes in real-time. The free-flow of data creates total transparency, no more waiting for one party within the supply chain to inform the next party of an upcoming situation. All parties have the same information in a real-time environment and able to make more informed and faster decisions – and the development of systems with deep learning capabilities means that these decisions could be make instantaneously without having to wait for human interaction.
This flow of data could be taken to another level of transparency by the utilization of blockchain as a means of data transference, communication, and storage. Risk factors, product movement, and demand are communicated to the entire network securely and at the same time. I’ll dive into blockchain’s impact on Supply Chain 4.0 at a later date.
The way we work is also changing. The traditional 3PL company, where an outside source manages each piece of the logistics network, is dying. Companies are looking to technology focused 4PLs that manage and work a connected end-to-end view of the entire supply chain. Performance management through the standard QBR report will also be a thing of the past with the advance of instant, agile and response quality control towers and dashboards.
At Titan we don’t believe in playing catch-up. We pride ourselves on building robust 4PL programs that look towards the future and put our clients in the best position possible for future growth. We’re not interested in the” what’s happening now,” we look at the “where the world is going,” and how we’re going to get there. First.
So, will Supply Chain 4.0 bring about the promises of reduced inventories, operational costs and increased accuracy? Without a doubt. The data-driven cycle of accuracy, transparency, flexibility and efficiency has the potential to get us there. And as we see the continued development of Industry 4.0 technologies, autonomous vehicles, artificial intelligence, and data science, we have the tools to not only transform to Supply Chain 4.0 but look at the possibilities that Supply Chain 5.0 will bring…
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