Industry 4.0: the digital supply chain

4 min read

Supply Chain Digitalisation


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Industry 4.0, also called the fourth industrial revolution, is happening right now. It’s the name given to the rapid trend towards technology that is driving interconnectivity, automation, machine learning and real-time data.

Industry 4.0 technology is the driving force behind digitization in supply chain management. Since the coronavirus pandemic, businesses have increased their focus on moving towards digital supply chains to improve resilience, responsiveness and efficiency.

In this post we look at what a digital supply chain looks like and how you can plan for supply chain digitization.

What is a digital supply chain?

A digital supply chain uses advanced technologies and data insights to allow people to make better decisions at each stage of their supply chain.

What is supply chain digitization?

Supply chain digitization is the process of making existing data and processes digital. It should not be confused with supply chain digitalisation or digital transformation, which describe how businesses use this data to make step changes and improvements across their supply chain.

Digital supply chain management

Why are digital supply chains a necessity?

There are a number of factors that are making digital supply chains a necessity:

Supply chain complexity

Very rarely are supply chains simple. Often they span across more than one country and manufacturers, suppliers, distributors and customers are often part of a long, complex, multi-national network. This makes overseeing the entire supply chain a complex task which can be eased with smart technology and data insights.

The need for supply chain resilience

Since the coronavirus pandemic began in 2020, supply chain management teams have been in the spotlight. Disruption across supply chains has been unprecedented, from factory shutdowns, to shipping container price hikes and HGV driver shortages. More and more businesses are looking for ways to deal with these challenges and build resilience into their supply chains of the future. Digitizing is one way to do this, as it will allow business to be more agile and responsive to market changes.

The rise of ecommerce

In 2021 online sales on B2B ecommerce websites, log-in portals and marketplaces increased by 17.8% to $1.63 trillion. Yet again it was the coronavirus pandemic that accelerated this growth as businesses moved online to keep their routes to market open.

Growing customer expectations

Consumers will go where they can find the best prices and the best service experience – they want goods as cheap as possible and delivered as quick as possible, with minimum hassle. The need for quick and accurate order fulfillment has driven the move towards digital supply chains.

Efficiency and profitability

If implemented correctly, digital supply chains should improve the efficiency and profitability of a business. Automation, predictive analytics and real time data will all help businesses plan smarter and execute more productively.

What does a digital supply chain look like?

A digital supply chain can include a vast array of technologies that make processes more efficient and data more manageable.

Software systems can include warehouse management systems, demand forecasting tools, inventory optimisation software, transportation, logistics and purchasing platforms.

In the warehouse, automation such as conveyor systems, picking devices, automated guided vehicles, drones and robots are used to increase productivity and reduce operational costs.
Supply chain digitization

At the heart of all these technologies is data – each one needs a data input to perform and then provides outputs that give feedback and help with analytics.

A truly digitized supply chain will utilise the Industrial Internet of Things. This is when all devices, software and machines are connected using sensors and unique identifiers, such as Radio Frequency ID, allowing them to send and receive digital data. This data is then sent to a central system – so there’s one place to manage all aspects.

With such sophisticated systems, you can track inventory items throughout the whole supply chain in real time.

Advanced digital supply chains go on to use predictive analytics. Technologies such as artificial intelligence (AI), machine learning and digital twins can analyse and interpret the most complex data to automate workflows and processes across the supply chain. They can also identify patterns and influential factors to enable the early detection of supply chain issues, helping reduce risk and avoid potential losses.

How to implement a supply chain digitization plan

Assess the current situation

Every business is at a different stage in its supply chain digitization journey. The first step therefore is to review and understand your supply chain’s current business and technical capabilities.

Mckinsey recommends looking at:

  • Data. What data do you generate and collect across your supply chain and is it easily accessible and useable?
  • Analytics.  Do you have the analytical capabilities to extract useful insights from your data?
  • Software and hardware. Are your software and hardware systems fit for purpose?
  • Talent. Do you have a workforce with the right skills to transform your supply chain?
  • Processes. Which processes currently work well across your supply chain and which ones could be improved as part of the digitization project?

Set out your vision and goals

With a good understanding of your current supply chain operations, the next step is to set out your future vision.

Your supply chain vision should be aligned with your business’ strategic goals. It should also account for current supply chain challenges and opportunities. This could include issues such as logistics disruption, rising raw material costs, or omni-channel sales. The goals should be clear and measurable.

Set priorities

Review the scope of your digital supply chain programme and set priorities. Carry out a cost/benefit analysis on each project and also evaluate their ease of implementation. There may be some ‘quick wins’ that will be cheap and quick to execute and will deliver significant improvements, versus those that will cost more and have less impact.
Digital supply chain

Upskill your workforce

Review the skills of your workforce and identify capability gaps. These could be around technology or process implementation. Decide if you can upskill or need to recruit, so you have the expertise you need to manage your digital supply chain.

Monitor progress

Monitor the progress of your supply chain digitization plan. As soon as you have the technology to do so, set and review key performance indicators so you can continuously evaluate your progress against your vision.

Don’t overlook change management

Whilst digitization projects require experts to drive the programme of change, success will only come if the entire workforce is taken along for the ride. Moving to a digital supply chain will need you to nurture a culture that encourages experimentation, innovation, and continual improvement.

If you’d like to know more about how EazyStock demand forecasting and inventory optimisation software can support your supply chain digitization journey, please get in touch.


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