May 2, 2017

The fourth revolution of the supply chain

by Erik Mashkilleyson

Connectivity, transparency and real-time data must be extended outside the walls of the smart factory to upgrade supply chains to the fourth industrial revolution.

The new business models and possibilities in smart manufacturing are transforming the other aspects of the supply chain as well. Supply chain professionals can now reap the benefits of the next big revolution of smart manufacturing called Industry 4.0, named for the fourth industrial revolution, the first being the steam engine, the second mass production, and the third computerization.

The fourth ‘locomotive of history’, to quote Karl Marx, is seamlessly intelligent industrial digitalization brought on by the avalanche of big data and cyber-physical systems known more familiarly as the internet of things.

Instead of chains, networks
Like the step from telephone calls to social newsfeeds, singularly linked supply chains are evolving into global supply networks, which consist of multiple chains, consecutive and parallel flows of information and materials. Controlling a network like this will naturally (or unnaturally, if you will) be out of scope for mere humans to handle. The number crunching and grunt work will be done by advanced analytics and automated logistics instead. The humans will be left as orchestrators to administer the extended supply network with their centralized supply chain planning tools.

Technological advances, especially big data analytics will make optimizing production quantities, warehouse levels, vehicle routes and order fulfillment precise and predictable. Intelligent systems analyzing the trillions of bits of raw data flowing from industrial sensors in machinery, robots, drones, autonomous trucks and shipping fleets will produce real-time insights and forecasts, which were previously unfathomable. Just watch your monitor to see the effects of that flapping butterfly on the other side of the world on your delivery.

Swat that butterfly 
An end-to-end connected supply chain combined with data-driven performance management will uncover the holy grail of any supply chain manager: full, real-time data transparency showing you where that pesky butterfly is that is messing with your finely tuned supply network. Transparency allows you to anticipate how your supply chain will be affected by any disturbance and how you can quickly adjust your operations. You can also experiment with what-if scenarios to see how commodity shortages or a flood of orders will affect your deliveries and then solve those issues before they happen.

Lean cuts
On the operational side, the supply chain is closely tied to industrial processes and manufacturing execution. Each step along the value chain from the factory to the end-customer is going to be filled with possibilities to add some performance-boosting innovation to them. Or instead of adding, one could say in a lot of cases it will be subtracted because the changes in technology will make processes leaner, more optimized and purged of wasteful inefficiencies. Automatized and agile smart factories make smaller batches of customized, made-to-order products easier to manufacture to suit the specific needs of the long tail of customers.

It’s all for the customer
Why has this all come about? The raison d’être of all this technological wizardry is the fluctuating demand of customers and their requests for increasingly customized products with short delivery times. They have several competing suppliers at their disposal and it’s easier than ever to find the one who will produce the exact quantity needed, transport it for a reasonable price, with quick, hassle-free delivery. Competition is fierce. Then again, customer experience is an important driver of sales, just as important as the price of the products.

With a constant stream of data between the suppliers and the customers, customer-centric mass customization will make things that sounded too futuristic to be true possible (e.g. 3D-printed unique sneakers delivered by drones and created while en route). The suppliers will be able to offer a huge variety of products with minimal or no inventory, the customer can affect the production and delivery process instantly and both can track the deliveries in real-time.

What steps should you take?
The starting point is to look in the mirror, locate the pain points in your supply chain and find out how to bypass those bottlenecks. Nortal has a step-by-step white paper on the topic called 6 things to ask yourself about supply chain planning. And if you wish to take your supply chain on that locomotive to the fourth revolution, you can always contact us.