Industry 4.0 is a concept that initially appeared in Germany and is considered to describe the fourth industrial revolution in manufacturing. This industrial transformation shall be achieved with real-time exchanged data, automation, robotics, cloud, artificial intelligence (AI), connected devices and equipment (Internet of Things), and augmented reality to connect innovation, new technologies, and humans.
For logistics and supply chains, Logistics 4.0 has recently emerged as a move to smart transportation and logistics, enhanced sales and operations planning (S&OP), and dynamic logistics network configuration.
As far as S&OP is concerned, real-time data provided by connected devices will be the most disruptive factor. In a connected world, real-time end consumer behavior has a major impact on the amount of real-time data available and as a consequence has a real-time effect on supply chains. Changed priorities, real-time adjusted activity forecast, real-time adjusted warehouse and transport capacity, etc. will help manufacturers increase productivity, reduce costs, and significantly improve the customer-centric approach — which means value creation with enhanced customer experience.
Big data is obviously one of the critical success factors; the more collected real-time data available, the more value and optimization are put into supply chains. However, the challenge for companies is to be able to cope with this huge amount of data. A new generation of enterprise resource planning (ERP) is expected to come that shall include more AI features and connected devices to cope with predictive analytics in demand planning, real-time planning adjustment, scenario planning, and advanced profit optimization schedules. Manufacturers will have to move from their traditional S&OP monthly process if they want to at least remain competitive on their respective markets and meet their customer expectations. This is a deep trend, and by 2021, 20 percent of the Global 2000 Manufacturers will depend on embedded AI, powered by intelligent ERP. It is therefore not only a question of remaining competitive but a matter of survival; remember that Toys R Us missed the digital revolution and did not initially believe in e-commerce. Remember Kodak did not believe in digital pictures at all.
Sectors with 'flexible' warehouses
Even traditional logistics networks will evolve from local, regional, or even global operations structures to more decentralized — but connected — open and flexible operations footprints. As a result, traditional distribution centers might be ultimately replaced by a “no warehouse” concept. It does not mean that there will be less need for warehousing. This is exactly the opposite: as the world is constantly changing, flexible warehousing concepts will be implemented. It means the typical three-year contract plan in Europe might disappear for short-term agreements. Third-party logistics providers (3PLs) should include this new trend in their own development strategy to further develop multi-user warehouses, invest in automation to implement lean processes, develop a network of well located warehouses, and finally create “plug and play” implementation methodologies in order to start new operations with customers with a maximum of agility and efficiency within shorter time frames.
Regarding warehousing and transportation, real-time data provided by autonomous devices, equipment, and vehicles require real-time traceability and visibility. This is a challenge for freight forwarders who occasionally invested in advanced order management and track and trace systems. This is also critical for warehousing and logistics providers who did not yet invest in automation and robotics as most of the e-commerce and retail key players such as Amazon or John Lewis did.
The number one question is how to give access to expensive technologies to medium-sized 3PLs that have limited capital expenditure capabilities. Phil Oliver, topVOX managing director for the United Kingdom and Ireland, perfectly described this challenge during the last UKWA National Conference earlier this month, stressing the importance for technology providers to build attractive and collaborative solutions by consolidating several 3PL projects.
A second question is how to anticipate the strong impact of Industry 4.0 on organizations and human dimensions. More agility will be required from organizations to be able to react to real-time adjustments and continuous changes in the supply chain management in order to meet demands of the stakeholders (internal and external). And new skills will be required from employees who will work with all this technology: new techniques (such as project management), new training methods to ever-changing technologies, new planning systems, etc. By 2023, this Supply Chain 4.0 revolution will require 4 million more high-skilled logistics workers in the United Kingdom alone while 6 million low-skilled logistics jobs will disappear during the same period in the country. As it was perfectly described by Peter Jones, managing director, Logistics Learning Alliance, the challenge is to train as much as possible the current workforce and attract more people — especially young workers — to be able to bridge the skills gap and provide the workforce the logistics industry will need in the future.
The third question is probably the most important question to ask — did 3PLs, freight forwarders, and transportation companies hear this “wake up call” that the world has changed and that it is time to invest in technology and people development?
Pierre Liguori is director of Tokema International, a supply chain consultancy firm. Contact Liguori at: firstname.lastname@example.org.
To learn more, go to www.tokema-international.com.