In this blog post, our Machine analyst uncovers the role of Industry 4.0 in transforming supply chains. Most organisations spend 20 to 50$ of time on desk-based research that can be used more productively. However, we’ve used our insights automation tool to analyse thousands of unstructured documents and unearth key trends in how Industry 4.0 is reshaping supply chains, driving efficiency, agility, and innovation.
Industry 4.0 is the Fourth Industrial Revolution, characterised by the automation, monitoring, and analysis of supply chains, making the supply chain “smart”, from manufacturing and factories to warehousing and logistics. The global supply chains are experiencing post-pandemic disruptions due to the Ukraine War and inflation. Despite the global troubles, the supply chain management market is growing exponentially. The market was worth $27.2 billion in 2022 and is projected to reach $75.6 billion by 2032. This growth is driven by the increasing adoption of smart technologies and digital transformation in the supply chain.
Supply Chain Challenges
An Insights report on global supply chain challenges by McKinley and Company in April 2022 highlights “the three critical challenges facing global supply chains: labour shortages, equipment availability, and the ripple effect of global bottlenecks”. However, the supply chain challenges may fall into 2 main categories – economic and environmental challenges.
2 major economic challenges include:
Shrinking Margins – Due to global disruptions in the supply chain network, the costs of goods and products have been skyrocketing – leaving fewer margins for the businesses. According to Statista, international wheat prices creep up by 60% from Feb to Jun 202 while the worldwide crude oil prices increased by 20% for 5 months immediately after the Russian invasion.
Major factors for skyrocketing prices:
- Increased fuel costs to manufacture and transport goods
- Increasing labour costs throughout the supply chain processes
- Shortages and rising raw material costs
- Higher storage and management costs due to complex and disrupted global logistics
Supply Chain Volatility – Supply chain volatility refers to unplanned variations in material flows that create a mismatch between supply and demand at a company. Managing supply chain volatility is a major challenge as it disrupts supply and demand alignment, leading to lost sales and market share.
Major contributing factors:
- Russia-Ukraine War
- Rapid technological innovations such as I4.0
- Natural Disasters
- Increased customer choices
- Global market disruptions
The supply chain of consumer companies incurs significant social and environmental costs, surpassing those generated by their own operations. It contributes to over 80% of greenhouse gas emissions and more than 90% of the impact on air, land, water, and biodiversity.
To reduce the alarming impact, I4.0 technologies are playing a vital role in minimising pollution caused by manufacturing and supply chains. For example, an IoT-based Energy Monitoring System (EMS captures energy consumption in factories providing valuable insights and actionable opportunities for energy conservation which help companies reduce carbon emissions. According to a report by the World Economic Forum, Industry 4.0 has the potential to reduce global carbon emissions by 15% by 2030. With fewer emissions and environmentally friendly initiatives, I4.0 is creating smart supply chains while contributing to green manufacturing
Key Technologies Transforming Supply Chains
The adoption of Industry 4.0 technologies is on the rise. Emerging technologies like blockchain, IoT, cloud computing and AI, are enhancing supply chains, making them more transparent and sustainable. Although some of these advanced technologies are already used in supply chains, their full potential is realised when used together.
Blockchain technology has emerged as a game-changer in the supply chain industry. With its decentralized and tamper-resistant digital ledger, it enhances security and transparency in transactions. Beyond just storing monetary information, combining blockchain with IoT devices such as smart sensors and RFIDs enable the real-time tracking of products throughout their entire journey, providing a comprehensive record from manufacturing to delivery. For instance, De Beers an international diamonds exploration giant controlling 70% of the world’s diamonds across 23 countries tracks complex diamonds’ supply chain journey using blockchain technology to build trust and increase transparency between stakeholders in the supply chain. Everledger offers a Blockchain application focusing on ensuring trust in managing the supply chain of diamonds.
- Quality control
- Product Authentication
- Smart contracts
|Key Platforms for Blockchain in Supply Chain
|Supports product authentication and transparency in managing supply chains of diamonds and minerals
|IBM Food Trust
|Tracks food products across the supply chain, ensuring transparency and traceability
|Automate supply chain processes by connecting smart contracts
|Track pharmaceutical products across the supply chain and ensure their quality and authenticity
Internet of Things IoT:
Industry 4.0 and IoT are closely linked as most physical things in Industry 4.0 use sensors to provide real-time data for smoother supply chains The IoT market for the supply chain is projected to reach $34.91 billion by 2027 while the entire IoT market is worth $1.17 trillion having a huge impact on disrupting supply chains globally.
- Real-time location-tracking
- Storage condition monitoring
- Asset management
- Improved Resource Management
|Key Platforms for IoT in Supply Chain
|Offers comprehensive turnkey connectivity and device management e.g managing stained wastewater networks
|Supports the automatic flow of information, and operational processes and devices with workflow-based guidelines
|Supports asset tracking, fleet management and intralogistics
Cloud computing applications provide essential integration capabilities, facilitating data storage and access for all stakeholders. Cloud technology has enabled supply chain leaders to manage data more effectively from a single location. Not only does this help enhance visibility and scalability in supply chains, but also supports data standardisation and cloud-based data management. The global cloud-based supply chain market was worth $21.26 billion in 2022 and is expected to reach $47.29 billion by 2029. Therefore, we can expect a surge of new Cloud Supply Chain Management startups surfacing the market in the coming years and reshaping supply chain management.
- Increased Agility
- Better integration and collaboration
- Higher scalability
- Making plans and predictions
- Automated procurement
- Managing breakdowns
|Key Platforms for Cloud Computing in Supply Chain
|One comprehensive business management solution, beyond ERP/Financials, CRM and e-commerce
|Supports efficient freight forwarding and real-time visibility of shipments
|For global supply chain management offering business intelligence and actionable insight for informed decision making
|Logistics software for supply chain management to automate and accelerate processes.
|Offers an entire lifecycle solution to supplier management, from supplier onboarding to ongoing performance monitoring
|Support warehousing for high-volume fulfilment operations integrated with nearly 200 e-commerce and shipping platforms including Amazon and Shopify
AI has proven to be highly effective in identifying and prioritizing inventory optimization and shortage management activities. By integrating these insights into automated workflows, AI enhances the resilience and responsiveness of supply chains, leading to more efficient operations. According to a report by Garner, 50% of supply chain organisations may invest in AI systems by 2024.
The figure below indicates the major advantage of utilizing AI in the supply chain.
- Accurate Inventory Management
- Automated quality checks
- Predictive analytics for inventory levels optimisation
- Predictive maintenance and enhanced driver safety
- Failure protection of machines, vehicles and cargo ships
- Data-driven recommendations for improving supply chain profitability
|Key Platforms for AI in Supply Chain
|Offers predictive maintenance & mechanical failure prediction for vehicle and cargo containers
|For data analytics to deliver real-time visibility into loading processes and optimise inside trailers to reduce the “air shipped”
|Echo Global Logistics
|For shipping and procurement rates negotiation and recommends changes in supply chains to increase profits
These technologies enhance transparency, visibility, and efficiency, ensuring that consumers, businesses and governments can trace the origins of products more effectively. Ultimately, Industry 4.0 is a significant part of any company’s digital transformation.
In conclusion, the projected growth of the global supply chain management market signifies the increasing importance of streamlined operations and technological advancements. Businesses that adapt to these changes will reap the rewards of enhanced efficiency, improved profitability, and sustainable growth. Industry 4.0 is revolutionising the supply chain with automation, digitalisation, and smart technology. Its adoption is crucial for businesses to stay competitive and achieve sustainable growth. It represents a significant technological shift that promises to transform manufacturing and supply chain operations.