How can Industry 4.0 meet the demands of an increasingly interconnected world?
There is a moment of breathless anticipation that every first-time parent experiences: that split second when you try to figure out if your little one is going to laugh, cry, or throw up. Sometimes, they do all three.
As the world moves into the fourth industrial revolution that is giving rise to Industry 4.0, we are in that same exact holding pattern—but not for long.
“The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace,” shared Klaus Schaub, founder of the World Economic Forum. “Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.”
It’s All About Data
The Industry 4.0 revolution is data driven and akin to the Internet of Things. In 2015, McKinsey identified four major disruptions that drive Industry 4.0. Chief among them is the unprecedented amount of data that is being collected, processed, and analyzed for business intelligence.
The evolution of analytics, new forms of human-computer interaction, and improvements in translating digital instructions to the physical world, such as advanced robotics and 3D printing, round out their list.
What Modern Customers Expect
The shift in customer expectations over the past decade is perhaps one of the biggest drivers of this new phase in our industrial history. The expectation of lightning-speed responsiveness is heightened with each digital advance.
In the developed world, the ease of connecting is giving rise to more demanding B2B and B2C consumers who expect nothing less than precisely customized experiences delivered on their schedules.
Enhancing the Supply Chain Ecosystem
At the heart of Industry 4.0 is pure connection. As products evolve to meet stringent consumer demand, so must the supply chain that created them. The supply chain as we know it is made up of isolated steps from the moment a product is envisioned to the moment it reaches the end of its life cycle. Industry 4.0 integrates those steps into a cyber-physical system that is infinitely more flexible and responsive than traditional supply chains.
These intelligent ecosystems support automated manufacturing technologies. New technologies in cognitive computing cross boundaries to create smart value chains throughout a product’s life cycle, from ideation and R&D to marketing, manufacturing, distribution, and beyond. The era of the smart factory is here.
As cloud-based platforms, data analytics, artificial intelligence, and intelligent automation revolutionize markets, industries, and societal and economic expectations, few businesses can afford to function in a linear fashion.
As data exchange brings new levels of scalability, agility, and efficiency to business and manufacturing processes, supply chains must follow suit.
“Indeed, for many companies the supply chain is the business,” stated a PwC report on the impact of digitization on the supply chain.
“It extends the vertical integration of all corporate functions to the horizontal dimension, knitting together relevant players—the suppliers of raw materials and parts, the production process itself, warehousers and distributors of finished products, and finally the customer—through a network of sensors and social technologies, overseen via a central control hub, and managed through an overarching data analytics engine.”
Top Three Supply Chain Trends to Watch
Trend 1: Prescriptive Analytics
Predictive analytics is an extraordinary marketing tool that enables firms to understand consumer desires and buying habits based on demand. Prescriptive analytics offers an approach to understanding the impact of organizational and competitive behavior on the supply chain from planning, product development, sales and marketing, through to distribution options.
Trend 2: Procurement 4.0
Traditionally viewed as a cost center, Industry 4.0 procurement is poised to become a profit center. As the link between suppliers and their company, procurement departments contain a depth of knowledge about suppliers, markets, and innovations. Leveraging this data to optimize critical supply chain functions such as inventory management and logistics in real time adds tremendous value to the organization.
Trend 3: Smart Warehousing
From drones used to count inventory and robots designed to work with humans to exoskeletons used to enhance human performance and augmented reality, the IoT is transforming traditional warehousing and materials handling into a faster, sleeker, more dynamic version of itself.
Early Adopters Profit
Companies that are embracing the relentless innovation that Industry 4.0 demands are already reaping the benefits of their digital supply chains. A recent Deloitte survey of over 400 manufacturing and retail executives revealed that organizations with innovative supply chain capabilities show radically better performance on revenue growth when compared to industry averages.
Deloitte found that 79 percent of organizations with superior supply chain capabilities achieve “significantly above average” revenue growth, while just eight percent of those with lower performing supply chains demonstrate above-average revenue growth.
According to a 2016 PwC report, digitization is expected to dramatically sweeten top and bottom lines: “Companies with highly digitized supply chains and operations can expect efficiency gains of 4.1 percent annually, while boosting revenue by 2.9 percent a year.”
Supply chain leaders like Unilever, H&M, and Nike are laughing their way to legendary performance. At this hour, most of the industry is working through the multitude of technical options and tough decisions needed to catch up, and we’re sure many supply chain managers are so excited by what’s on the horizon they’re on the verge of losing their lunches.
One thing is for sure—if companies don’t catch on and catch up to the fearless organizations on Gartner’s top 25 supply chain leaders list, there will be tears. Lots and lots of tears.