Understanding of Digital Supply Chain Management: What is Industry 4.0?

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Industry 4.0 has helped in the evolution of SCM into Digital Supply Chain Management (DSCM). But what is industry 4.0?

The First Industrial Revolution involved switching to the use of machines, the Second Industrial Revolution involved the use of technologies and development in communication through railroads and telegraph networks, Third involved digital development.

Next, The Fourth Industrial Revolution – Industry 4.0

The core of Industry 4.0 – Artificial Intelligence, Machine language and automation.

Industry 4.0 is nothing but automation, digitization and integrating digital, analytical and quantitative data analysis software and methods to ease and improve the supply chain management (SCM) process.

It is the automation of physical processes by the use of technology. With the growth in the technology sector and application of the same in other fields, work is becoming far easier and more profitable.

Not only this but the communication gap, which is a result that used to take days, now could be gotten in minutes due to Artificial intelligence, Machine languages and The Internet Of Things (IoT). These are some of the emerging technologies in the past few years. Time management is one of the most crucial advantages of industry 4.0.

Digital Supply Chain Management

Digitization and analysis not only help to automate the process but also help in increasing the efficiency of a process. It also helps eliminate any waste steps that were, in reality, not contributing to the output in a profitable way.

On one side, though automation may reduce jobs or the need of humans in some segments but it also creates new opportunities. This particularly may involve machine language learning that helps make life easier.

Key takeaways

  • Industry 4.0 is automation, digitization and integrating digital technology to ease and improve the supply chain management (SCM) process.
  • Five of the basic steps in SCM are procurement, production, storing, transportation and selling to customers.
  • Companies can drastically improve Planning, Execution and Profits with Digital Supply chains.

Industry 4.0 is it Fake or Real value add?

The impact of the industrial revolution is quite significant on SCM. The digital supply chain is not a fad by a long shot and this is proved again and again with businesses doing better with integrating the latest technologies. 

The growth in processes like procurement, supply, demand, inventory management, transportation, etc., can be efficiently increased.

The Fourth Industrial Revolution - Industry 4.0

Decreasing Lead time and production time are some of the real value-adding advantages of the digital supply chain. 

With the fast pace of society and customer expectations and businesses to have quick results, it’s imperative for firms to stay alert at each step. DSC real value added to each step in SCM is further discussed below in detail.

Steps in Supply Chain Management

So, what is supply chain management? Supply chain management is a process involving planning, production and selling to customer steps. Basically the whole process of creating a product.

Now that you know what is supply chain management, let us ow find out the various Steps in Supply Chain Management:

  1. Procurement of raw material
  2. Converting it into the desired product
  3. Storing in Inventory (storehouses)
  4. Transportation to businesses/customers
  5. Selling to customers

1. Procurement stage

While procuring raw materials, a lot of factors are looked into, such as demand, the capacity of production in a facility, storage space, backup safety products for any unexpected problems, etc. 

At the first step itself, where planning is to be done on how much raw material to acquire, digitization is useful on a whole new level. Knowing real-time demand in the market, companies can start and plan their work accordingly. 

Procurement stage in supply chain management

Real-time data is available through the use of internet applications, because of which on-demand and customizable products can be provided to people. 

Real-time data helps in getting rid of processes like extra storing of products, mismatch in the number of products ordered, etc. Indirectly if no additional products are manufactured, expenses get reduced. 

Also, this saved money can be invested in improving other company segments like customer satisfaction for one. Good service helps in promoting brand image.

For the above stage, take the Covid scenario itself, with fast information flow, companies stopped their production in fear of less demand and cut back on losses.

2. Production – Converting it into the desired product

Now in the production step with data analysis, one can calculate the time taken and the idle time for each process. And making improvements after knowing this data, the efficiency can be increased. With this, companies can reduce the lead time and production can also be increased as per demand. 

With automation and digitization in the production step, product quality, quantity and service can be further improved.

Production stage in supply chain management

Using automated machines, accuracies of new heights can be obtained. And also, the problem of human error can be reduced immensely if automation is integrated into the production line. 

Covid might not have impacted a lot as companies in the production stage. The reason being lockdown and people not being allowed to go to work. Here companies can still operate with less workforce and more automation.

3. Inventory (storehouses)

Next in inventory, the business’s inventory costs are about 20 % of total inventory costs. These 20% costs, which are due to the unsold product, backup products and others, can be eliminated if proper calculation is done and if products are manufactured only according to demand. 

This is where DSCM and real-time data is beneficial. Just in time (JIT) method can be applied and time management can also be improved with organized storage.

inventory stage in supply chain management

With information stored digitally, it’s easier to find things easily. Previously one would have to look through many boxes to find the desired product, but now just by looking at data about the stored location, it can be found. 

Of course, information can be stored on paper, but digital info is valuable when dealing with a large quantity or many branch warehouses.

The below chart depicts the “Operational cost savings in retail stores using automation technology worldwide in 2019.”

4. Transportation – logistic and supply chain management

In transportation on the customer’s side, it is possible for them to track their orders. This feature helps in knowing the exact time the product will be delivered. Monitoring is the most significant advantage of automation and digitization in the transportation part. 

Logistics stage in supply chain management

Now for the businesses, they can analyse and calculate the best routes which will result in fewer expenses. 

Let us take the delivery business job as an example, the firm can assign regions to each branch and ordered products can be dispatched from the closest branch. This helps provide quick delivery, reduced cost in the fuel used, and labour is utilized to the maximum.

5. Selling to customers

This is the last step in SCM but ironically the most important one as well. With digitization, we can get a lot of data from the customer about the product, service, and future expectations. 

With the feedback obtained, a company can further improve itself and grow with the ongoing trend. Even customer information is recorded and saved digitally, which can be sought after for having repeat and loyal customers. 

selling to customer stage in supply chain management

Previously before digitization, looking through information was a time-consuming job with storing on papers and all, but now all data can be stored on one device/server with little expense. With microeconomics analysis on society, demand, supply and what price to set can be calculated.

Conclusion

Industry 4.0 has helped in converting supply chain management into digital supply chain management. 

Reduction in process time is the most significant benefit of digitization. Getting real-time data is what helps a company grow in the market. 

Apart from this increased efficiency, reduction in wastage of product, better customer service are some of the sought after benefits for any company.

All in all, the Digital supply chain helps a company grow. Companies can drastically improve planning, execution and profits with digital supply chain management.  

To either dominate or at the very least keep up with many startups and rivals (competitors), it is of paramount importance for companies to upgrade themselves at each step.

Integrate technology, Grow steadily.

Frequently Asked Questions

What are the steps in Supply chain Management?

The 5 basic steps are Procurement of raw material, Converting it into the desired product, Storing in Inventory, Transportation to businesses/customers and finally Selling to customers.

What is Industry 4.0?

Industry 4.0 is nothing but automation, digitization and integrating digital, analytical and quantitative data analysis software and methods to ease and improve the supply chain management (SCM) process.

What are the 4 types of industrial revolutions?

Innovation of machines, use of technologies & development in communication, Digital development and last automation & digitization.

What were the impacts of the industrial revolution?

The main impact is the improvement in the standard of living. Each industrial revolution has led to positive impacts like increased productivity, better lifestyle, better facilities and increase in profits for businesses.

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