John Burgess is project delivery director at Balloon One, specialists in supply chain management software. In this article, he examines the impact that Supply Chain 4.0 is having on the manufacturing sector.
The last few years have been tough for the manufacturing sector in the UK. With the unclear impact of Brexit impending, a growing skills gap, and uncertain government policies, it's not surprising that the industry's output recently fell to its lowest since 2012 (HIS Markit/CIPS).
But, there's one development that could revitalise manufacturing in this country: the arrival and integration of Supply Chain 4.0.
What is Supply Chain 4.0?
Supply Chain 4.0 is the reorganisation of supply chain management from a linear system to a much more integrated model, where advanced technology allows data to flow in many directions, rather than just back and forth up the chain.
This improved capability for sharing data has the potential to improve the manufacturing process across the whole supply chain. Essentially, it will allow businesses at every stage — from designers and factories to warehouses and logistics — to make smarter decisions for their own benefit.
What is driving Supply Chain 4.0?
The driving force behind Supply Chain 4.0 is the advancement of technology, with a number of new developments allowing processes to get smarter and smarter. The main challenge for those in the supply chain is incorporating this new tech and ensuring it can be integrated within existing systems.
Let's take a closer look at some of the cutting-edge developments that are evolving the supply chain.
The Internet of Things
The Internet of Things (IOT) represents the increasing connectivity between different objects with no need for human involvement. In terms of manufacturing, this means that we’ll see data shared at nearly every stage of the supply chain, ensuring that its available at critical points for smarter, faster decision-making and rapid, efficient production and delivery. With this in mind, it's little wonder that the manufacturing industry is forecast to spend $78 billion on IOT technology in 2019 alone (IDC).
AI and machine learning
While the IOT will ensure facts and figures are delivered across the supply chain, it will be AI and machine learning that turns this data into useful information and makes those important split-second, autonomous decisions. To make a simple analogy, the IOT will be the nervous system that delivers the raw data to the AI and machine learning brain, where it's turned into insight and action. Both AI and machine learning will allow us to produce things more intelligently, boosting efficiency and capacity while forecasting customer demand for just in time manufacturing.
Big data analytics
Big data is a concept that's been around for a while now and has been utilised across many sectors to make decisions and plan strategies. However, a new level of insight will be gained as Supply Chain 4.0 becomes the industry standard, fuelled by technology like the IOT integrating improved data-sharing at every stage of the chain. By analysing this information, manufacturers will be able to achieve a deeper understanding, allowing them to make better decisions at the highest level.
How will it impact the future of manufacturing?
So, now that we know what is driving Supply Chain 4.0, it begs the question: how will it impact the future of the manufacturing industry? Here are some developments I expect to take place over the next few years as the supply chain adapts and changes.
It will make manufacturing more customer-driven
With an increasingly integrated supply chain, there will be more data available to manufacturers about just what their customer base needs, leading to the adoption of a more customer-driven process. We'll see a migration to factories that are set up to meet consumer demand, moving away from the past method of estimating and producing batches.
A new, consumer-focused process will have a profound effect across the entire supply chain. For instance, warehousing will no longer need to deal with huge inventories, as parts and products will be produced on-demand and stock orders will be much more tailored.
Additionally, consumers will also benefit, as, with a leaner and faster supply chain, they'll always be able to get the products they need in a much quicker timeframe. This is likely to lead to improved relations between businesses and their customer bases as it will feel like the customer is being put at the centre of the manufacturing process.
It will allow for the creation of a more efficient supply chain
As I've mentioned, the improved flow of data will allow for more accurate and predictive production, resulting in a much more efficient supply chain. This promises to offer financial benefits to adopters, including lower overheads by reducing overproduction and the amount of raw materials needed, as well as allowing more room to increase profit margins as the end of the chain.
In fact, a 2018 survey by Deloitte asked manufacturers about which financial benefits of Supply Chain 4.0 they were anticipating, and they cited increased sales efficiency and effectiveness (22%), reduced operating costs (17%) and improving pricing and margins (17%) as their leading goals.
It will be better for the environment
Currently, the manufacturing industry has a heavy impact on the planet. There's the carbon footprint of factories and logistics networks to consider, as well as overproduction creating products that go to waste when there's insufficient demand. Not to mention the environmental impact that mining and processing raw materials can have.
However, with more efficiency thanks to Supply Chain 4.0, manufacturing will become a lot greener. We'll be producing less to match customer demand with a reduced carbon footprint, which will also mean that stock will only be moved as and when it's needed, keeping unnecessary batch deliveries to a minimum. And, as we'll have a much better idea of the quantity of products required, we can tailor the amount of raw materials that are processed.
As you can see, Supply Chain 4.0 has the potential to change the manufacturing supply chain from top to bottom for the benefit of businesses, customers, and the environment. There are certainly exciting times ahead for the sector.