Supply Chain 4.0: A New Strategic Management System

 

Guilherme F. Frederico, Associate Professor of Operations and Supply Chain Management at the Federal University of Paraná, Brazil, presents Supply Chain 4.0 as a Strategic Management System.

It is tempting to think that Supply Chain 4.0 consists primarily in implementing a set of disruptive Industry 4.0 technologies. However, to transform from a traditional to a fully digital and interconnected supply chain requires a new way of strategic supply chain management. There are four key questions to be answered before initiating the implementation of a Supply Chain 4.0 program:

  1. What are the core competences that a Supply Chain 4.0 program will bring to our organisation, and what competitive advantages will be generated?

  2. How must supply chain processes be impacted in order to guarantee that such core competences and competitive advantages will be achieved?

  3. What kind of technologies must be implemented to transform our supply chain processes and how can we create the optimal interoperability between these technologies?

  4. What are the capabilities required in our organisation to support a Supply Chain 4.0 program implementation?

This rationale to a management view of Supply Chain 4.0 is supported by a recent publication of Frederico et.al. (2019) which shapes a robust concept for Supply Chain 4.0. According to Frederico et.al. (2019), Supply Chain 4.0 is defined as follows: 

“Supply Chain 4.0 is a transformational and holistic approach for supply chain management that utilises Industry 4.0 disruptive technologies to streamline supply chain processes, activities and relationships in order to generate significant strategic benefits for all supply chain stakeholders.”

This transformational approach might be viewed as a new strategic management system as displayed in the following figure.

Figure 1 .jpg

The Figure above, demonstrates that disruptive technologies are just one aspect of the entire Supply Chain 4.0 scope. They play a crucial role in supply chain transformation, but the following four elements of the Supply Chain 4.0 Management Approach need to be considered:

Understanding the Core Competences and Competitive Advantages

Supply chain processes may be enhanced from the implementation of disruptive technologies. Improvements such as cost reduction, increase of EBITDA, higher profitability, EVA increments, responsiveness to the market, innovative mechanisms of production and delivery to customers, amongst other benefits, might be obtained. Disruptive Industry 4.0 technologies can transform the fundamental operations of a supply chain including plan, source, make, delivery and return. In order to achieve these new standards of performance, a detailed cause-and-effect deployment of a Supply Chain 4.0 program is needed. It is paramount to ensure that the entire program is strategically managed - performance measurement plays a crucial role in this process. Methods such as Balanced Scorecard might be used to effectively evaluate the success of the Supply Chain 4.0 initiatives (Frederico, et al. 2020).

Establishing the Performance Requirements for Supply Chain Processes

Before deploying new technologies, it is crucial to understand which supply chain processes must be improved. Evaluating key areas of the value chain such as collaboration, integration, transparency, visibility, flexibility, responsiveness and efficiency is a good starting point. In this early stage, as many of the upstream and downstream supply chain stakeholders should be involved as possible. A deep matrix between the technologies and process improvement must be built, this will ensure the application of the most relevant technologies in each process of the supply chain.

Defining which Disruptive Technologies to Implement and How to Make them Interoperable

The main Industry 4.0 technologies are: Internet of Things, Big Data Analytics, Robotics, Augmented Reality, Additive Manufacturing, Cloud Computing, Blockchain and Artificial Intelligence. Although these technologies are the levers to the performance attributes of a supply chain’s processes, of paramount importance is the interoperability between these technologies - their ability to communicate with each other. Moreover, interoperability must ensure that humans, robots and systems can be interconnected and create a supply chain cyber-physical system so that they are self-executed, coordinated and controlled. In order to achieve this, it is important to deploy a detailed plan across the supply chain, aiming to develop common protocols, systems integrations and interconnected, common technologies.

Structuring the Required Capabilities

A strong project management capability is required in order to effectively coordinate and achieve the goals from a Supply Chain 4.0 program. The primary managerial and capability elements include leadership support, people and organisational skills, compliance requirements, initiatives coordination, strategic vision, IT infrastructure and organisational awareness.

The supply chain leadership team will face a big challenge in digitally transforming their operations. The creation of a centre of excellence, specialising in the implementation of the best in class technologies will be a progressive step, but not sufficient to guarantee the effectiveness of the Supply Chain 4.0 program. To ensure success, it must be combined with managerial capabilities, a systems view and strategic management across the organisation.

The Supply Chain of the Future: Supply Chain 5.0 and Human Intelligence

Going beyond, on the search for the symbiotic relation between humans and machines emerges the concept of Supply Chain 5.0, which is likely to be the next Industrial Revolution (Frederico, 2020). The main difference between Supply Chain 4.0 and Supply Chain 5.0 is on the importance given to human intelligence.

Supply Chain 4.0 emphasises the technology applications for operations and how to support and make them effective. However, some visionaries are framing a new challenge to be explored, the reconciliation between humans and machines, working together with the aim of achieving higher performance. In the Industry 4.0 phenomenon, we are seeing the rise of new technological innovations. The next stage is exploring how organisations can effectively combine the capabilities of humans and robots. This is the challenge that will likely drive the discussions in the post Supply Chain 4.0 era.

About the Author  

Guilherme F. Frederico is Associate Professor of Operations and Supply Chain Management at Federal University of Paraná, Brazil and Visiting Research Professor of Centre for Supply Chain Improvement at University of Derby - UK. He is the author of the Book “Operations and Supply Chain Strategy in the Industry 4.0 Era” and has published articles in International Journals and Conferences. His research interests are related to Supply Chain 4.0, Industry 4.0, Maturity in Supply Chain and Operations Management, Performance Measurement in Supply Chains, Knowledge and Information Management and Supply Chain and Operations Strategy. Besides the academic experience, Prof. Frederico has more than 10 years experienced on supply chain management area having previously been worked at manufacturing and service global industries. 

References and Further Reading

 
Daniel Camara