What Does Industry 4.0 Mean for Supply Chains?

With characteristics ranging from visibility and interconnectivity to autonomous performance and predictive analysis, Industry 4.0 supply chains are poised to transform day-to-day supply chain activities and capabilities.

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Industry 4.0 is a hot term these days, but what exactly is it? First defined in 2011 by Siegfried Russwurm, German professor and chief technology officer of Siemens, Industry 4.0 refers to the fourth phase of the industrial evolution. This era is characterized by interconnectivity between equipment and facilities throughout supply chains made possible by the Internet.

Industry 4.0 is a step beyond the digital era. In the digital era—in which many companies still operate—having data generated by and collected from discrete automated equipment is useful for determining both past and present operational states. However, most of the data sits in silos, not easily accessed for analysis and certainly not passed among different systems automatically.

Conversely, although Industry 4.0 is also data-dependent, that data is more effectively utilized by leveraging the Industrial Internet of Things (IIoT), which seamlessly connects industrial automation equipment and systems via the Internet. Supported by connectivity technologies embedded within previously isolated equipment and machinery, companies can automatically gather and use information in ways that are not just informative, but also predictive, proactive and actionable.

The impact on supply chains
Industry 4.0-empowered supply chains are characterized by four capabilities:

  • Visibility into operational status at the device level throughout all physical locations via real-time information collected and processed by intelligent sensors.
  • Interconnectivity of equipment, machinery, facilities and people for transparency throughout all levels.
  • Autonomous performance of equipment and systems to complete tasks as efficiently as possible with minimal human intervention.
  • Predictive analysis of all data to identify patterns and trends in inventory, purchasing, equipment usage and more, thereby enabling proactive decision-making.

With these four capabilities in place, companies can more effectively manage their upstream vendor and supplier arrangements, as well as respond faster to unforeseen events within their supply chains.

Likewise, with a more holistic view backed by historic and real-time information, a more agile and resilient supply chain that minimizes time-to-customer-delivery can be designed or reconfigured, inventories optimized, quality enhanced, and labor utilization and safety improved. Other data-driven, Industry 4.0 benefits include better reporting tools for increased operator and equipment productivity, improved training practices and reduced product damage.

Further, unscheduled machine downtime can be avoided through more accurate planning of preventive maintenance. Industry 4.0-enabled supply chains will ultimately generate better customer experiences, higher performance and greater cost savings—giving companies a competitive edge.

Taking action

You might be wondering what actions your company can take to adapt your existing supply chain and navigate toward an Industry 4.0 operational state. Here are a few guidelines for consideration:

  • Evaluate current data capture processes. If your data-capture methodologies are manual, they likely won’t be adequate to accommodate the real-time demands of an Industry 4.0-ready climate. Semi-automated or fully automated systems, on the other hand, do not require human interaction to trigger data capture and information transfer. Replacing manual operations with a degree of automation will not only boost throughput, but also increase accuracy and efficiency while reducing labor costs.
  • Assess customers’ service level expectations. Regardless of your company’s place within the supply chain (manufacturer, wholesaler, distributor, e-commerce shipper, etc.), your downstream customers want visibility into their orders, their location and their progress toward delivery. Without automatic identification and data capture systems in place to support the interconnectivity between each piece of equipment and each facility, that degree of transparency within the Industry 4.0 environment cannot be achieved.
  • Establish service-level compliance requirements. An Industry 4.0-ready supply chain relies on consistent, reliable and easily verified transactional information. That means the information marked on a carton must meet a certain level of readability by sensors. Hence, vendor compliance requirements must be established for code placement, legibility, intactness and other factors. Without adherence to minimum standards, automated devices won’t be able to pull the data needed for autonomous operation or predictive analytics.
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