Industry 4.0 & Supply Chain Management
The industrial revolution has brought significant changes in the way we live and work. The easiness in the
works that we perform today is attained by the rapid growth in the industrial and economic development.
The industrial revolution has begun in the 18th century and from there on the mechanization of labour have
been the primary focus of industrialization. Now by 2020 we have evolved through three stages of
the industrial revolution and have reached the fourth which is known as industry 4.0. All these industrial
revolutions have had several positive social and economic effects whereas on the other hand
industrialization also had some negative impact over the society. Let us have a look at the present stage
of industrial revolution ie Industry 4.0 in a deeper sense.
Industry 4.0 or the fourth industrial revolution is focused on automation of machines with wireless
technology and sensors, which could help visualize the entire production process and make decisions on
its own. Industry 4.0 includes the Internet of things (IoT), cyber-physical systems, Industrial Internet of things
( IIoT), cloud computing, cognitive computing and artificial intelligence. The concept encompasses smart
manufacturing, smart factories, light outs etc. Industry 4.0 uses the current digital technologies to monitor
physical processes and create a virtual environment of those processes and make decentralized decisions.
The ability to make decentralized decisions on its own resulted in attaining a high degree of automation.
Smart factories and smart manufacturing
Being an outcome of the fourth industrial revolution, smart factories are the digitization of processes by
employing technologies such as the Internet of Things, Artificial intelligence, Big data, analytics and robotics.
Smart factories are completely automated and run without much human intervention. Visibility,
connectivity and autonomy are the defining aspects of a smart factory. With the use of modern
technologies like sensors and other devices, machines are connected to each other and create a real-time virtual world which provides the visibility of the entire factory processes. Along with that, the human is
replaced with robots for routine tasks which helps perform more work with higher accuracy and in lesser
time. Smart factories rely on smart manufacturing which interconnects the manufacturing processes to the
other factory entities. Smart manufacturing can easily adapt to the rapid changes in the industries. It uses
modern digital technologies to encompass the changes in production based on the varying demand
and also helps in the optimization of the supply chain. The use of cyber-physical systems has greatly
increased the flexibility of manufacturing. This, in turn, resulted in the movement of products to the market
in lesser time. In short, the advent of smart manufacturing and smart factories have greatly influenced
the supply chain management system.
Benefits of Industry 4.0 over supply chain management
Digitization of factories and manufacturing units have tremendously benefited the supply chain
management system. Digital supply chain management system has led to a considerable reduction in the
operational cost, lost sales opportunities and inventory requirements. Transition to a fully automated and
digitized interconnected supply chain can take off enterprises to a higher level of operational effectiveness
resulting in a significant reduction in the cost. Following are a few benefits of industry 4.0 over supply
• Accuracy and Transparency- With the digitization of the supply chain, companies can have a real-time
monitoring on the supply chain and track the movement of goods throughout its way. The entire supply chain system has become transparent to the companies. On the other hand, digitization has also improved order accuracy.
• Cost savings through accurate demand prediction-With the advent of digitization in the supply chain
the prediction of demand for a particular product have become more accurate. This helped to
foresee positive as well as the negative potential of the enterprise and the risks associated with
the supply chain management and plan accordingly. Accurate prediction of demand has helped
enterprises in inventory optimization which in turn helped in cost reduction.
• Greater collaboration and interconnection- In an interconnected digital supply chain system,
the flow of information between the suppliers, manufacturers and the customers seems to be more
coherent. Through better communication within an interconnected platform can increase the
revenue of companies and optimize the inventory by providing warnings on the demand
fluctuations and planning accordingly.
• Improved warehouse management- Digitization improved the warehouse management by
tracking the exact location of products and predicting the accurate time taken for the product to
arrive at its destination. The accuracy in demand prediction can also help in inventory
optimization. Smart warehouses can easily track and control the flow of inventory across the
• Intelligent supply chain – Intelligent supply chain can predict the risks associated with the supply
chain parameters and take necessary actions to mitigate such risks.
From all the above it is evident that Industry 4.0 has positively benefited the supply chain management
system. Automation of the supply chain system has taken away the need of human element and the decentralization context of Industry 4.0 have taken the supply chain to the level of automation extremity.
November 11, 2020
September 3, 2020