Applying Industry 4.0 to build better supply chains

The Covid-19 pandemic, war in Ukraine, and inflation have pushed stories on global supply chains to the frontpage over the last few years. Facility closures, export restrictions, and shipping bottlenecks have caused many citizens, businesses and governments to pay closer attention to where their food and medical supplies come from, or to wonder why computer chips seem to be in everything.

Global supply chains are immensely complex, and can stretch across multiple continents, dozens of regulatory jurisdictions, and hundreds (or thousands) or different companies. Coordinating and monitoring supply chains is more challenging than ever, particularly considering past and ongoing disruptions.

How can anyone possibly keep track of the products and impacts generated by global supply chains, much less respond to urgent and ongoing challenges in matching supply and demand? Our research shows that new technologies can help provide answers.

Blockchain, sensors, artificial intelligence (AI), satellite imaging and other technologies have emerged to help make supply chains more responsive, resilient, transparent and sustainable. These technologies are increasingly being integrated to digitize manufacturing and supply chains under the umbrella of Industry 4.0, often referred to as I4.0.

As Bernard Marr explains, I4.0 represents the “Fourth Industrial Revolution”, following steam-powered mechanization (I1.0), mass production (I2.0), and computer-driven automation (I3.0). Now, I4.0 furnishes the foundation for intelligent and highly efficient operations, stressing that technologies are most effective when they are used together in an integrated fashion. The use of I4.0 is rapidly growing, and firms increasingly employ I4.0 technologies in their supply chains to address many different functions, facilities and processes.

Blockchain is one prominent example. It is helping companies in tracking the flow of information and inventory, with example applications in securing transactions, tracking information and streamlining payments. For instance, De Beers, a diamond mining and trading company, now uses blockchain to track diamonds’ supply chain, including their origin and where they are sold. This is pivotal to assuring customers they are buying real diamonds sourced from conflict-free areas, a challenging ethical and reputational issue for companies like De Beers.

Another example is the Blockchain In Trucking Alliance (BITA), an industry-standard council invested in advancing the use of technology in supply chain networks. FedEx and UPS, for example, are currently working to employ blockchain-based technologies in their supply chains. Many retailers, such as Target and Carrefour are also working on blockchain applications in supplier certification and streamlining the supply chain. Indeed, blockchain has been called the backbone of supply chain digitization.

Digital twins, another key I4.0 technology, have many applications in supply chains and remote operations management. Digital twins build on a combination of technologies, such as sensors, AI, cloud computing, simulations, and augmented reality to make a digital copy of physical processes. Digital twins are now being used in farming, mining and logistics operations to improve workers’ safety, cut resource consumption, and reduce human exposure to chemicals, noise, and unsafe environments. They can also increase visibility throughout the supply chain and prevent disruptions.

Cloud computing applications furnish core integration capabilities, store data and enable access by all participants. Cloud computing drives agility, speed, visibility and scalability. In addition to their role in streamlining supply chains, cloud computing can support data standardization, cloud-based data management and real-time reporting in ESG (environmental, social, and governance) performance disclosure. A pwc survey of US business leaders shows that cloud computing applications are gaining popularity among C-suite executives for their role in enabling ESG disclosure.

As a final example, sensors and RFID are used to track the movement of goods. Among their other uses, sensors can automatically collect data from exhaust tailpipes and factories’ waste emission outlets, as well as synthesizing the carbon footprint of a company and its suppliers. These technologies are being supplemented with AI, satellite imaging and drones to develop the environmental profile of supply chains.

Critically, I4.0 focuses on the integrated use of technologies. Beyond the given examples above, our research shows that blockchain, cloud computing and digital twins can work together to enable instantaneous supply chain audits. Additionally, I4.0 can facilitate greater information customization and can help shift the power balance from centralized information repositories in corporate headquarters to decentralized decision-making and more choices by the users distributed throughout vast supply chains.

Enhanced availability of high veracity, timely information can provide a basis for quick adjustments in shipping, manufacturing, and other aspects of supply chain management. Importantly, adjustments aren’t just needed in response to disasters. They also address ongoing coordination and monitoring around key supply chain issues like material shortages, demand surges, working condition and environmental discharges, to name but a few examples.

High demands from investors, regulators and other stakeholders for responsiveness, resilience, transparency and sustainability across the entire supply chain requires more than the isolated use of a few technologies. I4.0 provides a basis for the integrated use of technologies to address unique challenges in different supply chains.

While technology comes with the potential for misuse and cannot fully address all problems on its own, it offers the possibility of revolutionary transparency that can inform decision-making on building more responsive, resilient and sustainable supply chains.

Muhammad Asif is an associate professor of management sciences at Plymouth State University, USA, and can be reached directly at [email protected]. Cory Searcy is a professor and the vice-provost and dean of the Yeates School of Graduate Studies at Toronto Metropolitan University, and can be reached directly at [email protected].

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