The traditional supply chain can be outlined as a linear model that is useful in a predictable and consistent environment. However, the uncertain times we are currently experiencing requires the adoption of a new supply chain model that allows organizations to be more responsive and agile to survive and lead the market. Supply chain 4.0 is the application of the Intelligence of Things, big data combined with data science, digital connectivity and many other smart technologies brought by the fourth industrial revolution.
Innovative technologies reorganize the traditional model, change how information flows within the chain and help to achieve greater business success through automation and digitalization. Global organizations like Adidas, Maersk Line, Volvo, Port of Hamburg and Decathlon already use IoT in their supply chain operations to get valuable insights into things like inventory, logistics and warehousing.
Key benefits of supply chain 4.0
Digital transformation of the supply chain can bring a company a plethora of benefits from better end-to-end visibility and improved decision-making to higher operational effectiveness and minimization of expenditure.
Here’s more about the top advantages of the digital supply chain:
- Espouse end-to-end transparency. With the digital supply chain, data exchange between an organization, multiple suppliers and customers becomes more effective. Real-time asset tracking powered by IoT, cloud-based dashboards and other tech solutions make it possible to establish an item’s precise location. Organizations can see all updates added to the digital ecosystem, leading to ordering accuracy, traceability and efficiency.
- More accurate forecast approach. Predictive analytics has the potential to reduce forecasting errors by 10% to 20%. Fueled by AI and machine learning, predictive analytics evaluates historical information about demand, current market trends, weather conditions and other data to provide statistics-based demand forecasts and optimize inventory. Predictions can be carried on a monthly, weekly or even daily basis depending on the product, helping to prevent out-of-stock situations and ensuring on-time delivery. Moreover, performing real-time analysis of a constantly changing market allows organizations to adapt to prevailing trends and stay flexible.
- Enhanced supply chain management. According to the Boston Consulting Group, digital supply chain management offers a 25% faster response to market demand changes. Process management, supply and demand planning, cash flow and other underlying supply chain processes can be managed within one digital ecosystem. Custom warehouse management systems that use IoT and data analytics can optimize the warehouse space by providing insights into shipping and picking. Immutable records offered by blockchain technology and smart contracts allow supply chain optimization, guarantee secure and automated transactions, and increase the visibility of purchases and transactions in supply chains.
- Improved customer experience. In the US, poor customer service lead to an average $62 billion loss annually. The end-to-end visibility guaranteed by the digital supply chain increases the knowledge of employees in customer-facing positions. Customers can receive an immediate response about product availability and detailed information about the order, improving the overall experience and bottom-line growth.
Supply chain 4.0 use cases throughout industries
The disruption in today’s business environment makes digital supply chain adoption a necessity rather than an option. And while many organizations are just considering the benefits, some have already implemented a digital supply chain and proven its capabilities. Here are a few applications of supply chain 4.0:
Digital technologies can help to mitigate the disruptions caused by the pandemic and boost operational efficiency and continuity. For instance, wearables like augmented-reality glasses can help employees receive or render remote assistance, leading to reduced maintenance time. Machine vision algorithms can conduct an automatic quality inspection by analyzing images for specific results.
It is unlikely that 3D printing will substitute the traditional manufacturing process. However, it can be applied as a cost-effective solution for producing personalized items. Dr. Scholl, a manufacturer of foot care products, uses 3D printing to create custom orthotics.
Smart logistics powered by connectivity, advanced analytics and automation solutions encompass route optimization and vehicle scheduling. Moreover, COVID-19 has increased the need to deploy fully autonomous vehicles to deliver goods and minimize physical interactions. The introduction of fully automated vehicles depends on deep learning algorithms, and the technology is not yet available.
Even though most vehicles still have to be controlled by human drivers, they are starting to adopt self-driving features. In 2019, an autonomous truck with a safety driver on board made a trip from California to Pennsylvania in three days. Such a trip would usually take nearly nine days. Unmanned aerial vehicles can also be used to optimize the delivery process and maintain social distancing. For example, Amazon developed a delivery system to distribute packages by drones in 30 minutes or less. Another example of no-contact delivery is self-driving robots. At the beginning of 2021, Starship Technologies’ delivery robots have already completed around a million autonomous deliveries.
With the rise of e-commerce, optimizing operational costs with technology solutions is also growing. Digital supply chains powered by intelligent, data-based processes provide retailers with enhanced transparency, including raw material acquisition, production and last-mile delivery. By adopting intelligent, data-driven processes, retail businesses can not only effectively manage inventory and meet consumer expectations, but they can also synchronize information-sharing across the whole supply chain.
To learn more about the concept of the intelligent supply chain, check out our latest whitepaper – The Evolution of Retail Technology.
As such, retailers are now adopting a 360-degree view of their entire supply chain—from raw material acquisition to production to last-mile delivery. Zara, a fast-fashion retailer that also manufactures its clothing, uses RFID tags to produce more fast-selling clothes and avoid out-of-stock situations. Walmart has invested $14 billion to improve its supply chain, leveraging automation solutions in distribution centers.
More than 80% of organizations are preparing to leverage the digital ecosystem in the next few years. Digitization is a win-win solution for all supply chain stakeholders. The adoption of cutting-edge technologies allows companies to stay responsive to the changing business environment, deliver excellent customer experience and stay ahead of competitors.