Supply Chain 4.0

Supply Chained is a weekly newsletter discussing trends, tools, and principles of Supply Chain Management and Engineering.

When I hear people talk about Industry 4.0 it sometimes feels like they're describing a fantasy world - like The Jetsons or Star Trek. The World Economic Forum even argues that "the Fourth Industrial Revolution represents a fundamental change in the way we live, work and relate to one another."

Those of us who work in the supply chain tend to be pretty "grounded" in our approach to adopting new technologies. Supply Chain 4.0 is all about creating value. We're skeptical, because we understand that innovations need to pay for themselves by increasing revenue or reducing costs. At the same time, we're hungry for solutions that could really give us an advantage. So, where do begin?

Even though we are still in the very early stages of development, it is clear that Supply Chain 4.0 thinking and practice have the power to transform the way we serve the customer. (Martin Christopher, Supply Chain 4.0)

I remember meeting the team from Kiva Robotics at a trade show a decade ago. They were fighting to get the attention of senior supply chain leaders, and looking for customers who were willing to collaborate with them on pilot projects. It wasn't until Amazon acquired Kiva that everyone else in the retail world woke up and began to realize what a huge opportunity they had missed.

Many people think about supply chains in terms of three flows: money, material, and information. Likewise, technologies generally provide value by improving planning, execution, or visibility processes. So, we can start to evaluate Supply Chain 4.0 technologies by using a classification matrix like the one below. That makes it easier to see how the supply chain operates today, and to build a roadmap for integrating new technologies in the future.

The emergence of supply chain control towers as a software category brings us a big step closer to realizing Supply Chain 4.0, because the aspirational goal of a control tower is to fill in every box in this classification matrix.

Next, we can think about the goals of our supply chain. As we look at new technologies, one of the dangers we need to consider is whether we are using the right ruler to measure them. Supply chains will always be accountable for meeting goals such as cost, efficiency, and capacity. But those are not the only characteristics that matter. These days we are also being measured in terms of resilience, sustainability, and social impact. These goals are becoming more important to stakeholders like customers, boards, and governments, which means that supply chains will need to respond.

We also need to consider the risks and the downsides of Supply Chain 4.0. Increasing the level of automation in supply chains means that companies are becoming more vulnerable to cyber threats. As Maersk and Target have learned the hard way, every company is a potential victim for a ransomware attack or an attempt to steal financial records, so cybersecurity must be included as a part the digital supply chain strategy. And last, but certainly not least, there is the social impact that automation will have. As Jason Schenker points out in his book Jobs for Robots, the jobs that are most easily automated are often the jobs held by workers who have less education and fewer career opportunities. This could have serious social consequences, and we can't pretend that supply chains will be immune to the effects.

My take on how this affects supply chain professionals. Supply chain leaders need to be both magnets and filters for innovation. On the one hand, we need to be looking for new ideas. This involves being open-minded and curious. On the other hand, we need to focus our attention and resources on the investment opportunities that will provide the greatest returns to our stakeholders. So, in order to lead successfully in a Supply Chain 4.0 environment, we need to combine supply chain expertise and business acumen with skills such as technology management and project leadership.

What do you think? What new technologies are likely to be commonplace in your supply chain in five years? What are you doing today to prepare yourself, and your team, to harness these innovations to create real value?

In the News

Here are some recent articles that show the range of issues we need to consider as we evolve into Supply Chain 4.0.

The Physical Internet

The Physical Internet is a proposed model that would allow physical distribution networks to operate collaboratively, using shared infrastructure, much like how the Internet works today. 

• How the ‘physical internet’ could revolutionise the way goods are moved (Horizon)

Blockchain

Blockchains are basically databases that can be shared between several different companies. Separating real opportunities from hype is a challenge, but there are opportunities for blockchain to provide valuable benefits for many supply chains. If you’d like to see a real-live blockchain in action, check out the free blockchain for supply chain demo, hosted by the Blockchain Institute of Technology.

• How blockchain could make fashion greener (CNN)

Social Challenges

It’s not surprising that Supply Chain 4.0 technologies could lead to greater inequality. The tasks that are most easily automated are also the ones which usually pay the least. Looking at the global trends may provide insights about the challenges that developed countries will face as autonomous trucks and robots begin to displace truck drivers and warehouse associates. 

• ‘Industry 4.0’ tech for post-COVID world, is driving inequality: UNCTAD (UN)

Cyber Security

As they become more dependent on software and digital data, our supply chains also become more vulnerable to hackers. From sabotage to industrial espionage to blackmail - cybersecurity and supply chain security are rapidly converging.

• SolarWinds Hack - From Supply Chain Risk To Full Spectrum Awareness (Forbes)

Videos

Supply chain leaders are trained to think in terms of optimizing established processes. Making strategic decisions in a dynamic environment often requires a radically different approach. Here's an excellent video about the danger of "best practices" from the course Counterintuitive Leadership Strategies for a VUCA (Volatile, Uncertain, Complex, Ambiguous) Environment by Sara Canaday. (Note: This course is part of the Advance Your Skills as a Supply Chain Manager learning path on LinkedIn Learning.

Articles and Books

Here are a few good references for digging deeper into Supply Chain 4.0.

• Supply Chain 4.0: Improving Supply Chains with Analytics and Industry 4.0 Technologies (Kogan Page) edited by Dr. Emel Aktas, Professor Michael Bourlakis, Ioannis Minis, and Vasileios Zeimpekis
• Supply Chain 4.0 – the next-generation digital supply chain (McKinsey) by Knut Alicke, Jürgen Rachor, and Andreas Seyfert
• Digital Supply Networks: Transform Your Supply Chain and Gain Competitive Advantage with Disruptive Technology and Reimagined Processes (McGraw-Hill) by Amit Sinha, Ednilson Bernardes, Rafael Calderon, and Thorsten Wuest
• Coronavirus Is a Wake-Up Call for Supply Chain Management (HBR) by Thomas Y. Choi, Dale Rogers, and Bindiya Vakil
• Futureproof Supply Chain: Planning for Disruption Risks and Opportunities in the Lifeline of the Global Economy by Jason Schenker (The Futurist Institute)

Who Is Mr. Supply Chain?

Daniel Stanton is a supply chain industry veteran and the best-selling author of Supply Chain Management For Dummies. He is dedicated to empowering professionals through education and technology. His courses on LinkedIn Learning (formerly Lynda.com) have been viewed by students around the world, and he's a frequent speaker at educational conferences and industry events.