Disruption in the supply chain
Other sectors Food Maritime

We are in the midst of a fourth industrial revolution. Unlike its forerunners, this revolution is powered by the utilization of different digital technologies that further merge the physical, the digital and biological domains into a new reality. According to Klaus Schwab, the CEO and founder of the World Economic Forum and author of book of the same title, this revolution is catalyzed by:

  • Velocity
    Contrary to the previous industrial revolutions, this one is evolving at an exponential rather than linear pace, often referred to as Moore’s Law. However, the advent of advanced quantum computing will make this scale obsolete.
  • Breadth and depth
    Combined multiple technologies are leading to unprecedented paradigm shifts in the economy, business, society, and on individual levels.
  • Systems Impact
    This concerns the transformation of entire systems, across and within countries, companies, industries and society.

The changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril. Klaus Schwab, Author of The Fourth Industrial Revolution

A subset of this revolution is the concept of supply chain 4.0, where digital technologies are applied on global value chains creating a world where virtual and physical systems of manufacturing and transportation are working together to streamline production, enable mass customization and facilitates new business models in a transparent way1. Alternatively, mismanaging or even failing to adapt to these processes could have a jeopardizing affect.

Predictive analytics and you

;Supply chain 4,0 doesn't refer to a specific technology but rather the applied and integrated use of, amongst others, robotics and automation, sensors and IoT, additive manufacturing, wearables, AR and VR, cloud computing, the application of AI and big data analytics, and blockchain to make the supply chain faster, more flexible, more efficient, more accurate, more granular and more transparent.

Supply chain 4.0 is expected to make a big impact on businesses and consumers alike in coming years, with a forecasted 30% lowered operational cost, 75% reduction in lost sales, and a decrease in inventories of 75%2. Three years ago, around a third of companies had already begun to digitize their supply chains, with 75% having plans to full digitize by 20213.

Imagine the following scenario: You order a pair of new sneakers, which you have wanted for some time now, from your smart phone. However, the retailer knows you well. He knows your shopping patterns, what you look at and when you look at it. From AI-based predictive analytics of market demand and trends, time of year, temperature and several other indicators, the sneakers have been shipped well before you even placed the order. The new sneakers are delivered at your doorstep, by an autonomous drone, in matter of hours. This is not a futuristic fantasy; this anticipatory shipping approach is what retail giant Amazon plans to roll out in 20214.

Predictive analytics also allows for a more flexible response to changing demands and trends. Coupled with de-centralized manufacturing, fueled by developments in advanced manufacturing (e.g. 3D-printing) gives the opportunity to quickly respond to both seasonal variations as well as sudden, and more unpredictable, changes in demand. With the emergence of novel business models, like crowdsourced transport solutions, deliveries can also be made flexible and with highly granularity.

The coupling of decentralization and 3D printing opens up opportunities to include the customer in the design process. Adding a digitized interface directly between the consumer and the producer enables the possibility for mass-customization of both the production and the transportation of goods, and still while keeping both costs and carbon emissions lower.

Automation is the most prominent enhancer of efficiency in the supply chain. Both in physical tasks like automated production lines, warehousing and transport and delivery, but also in the form of planning and cooperation between different chains in the supply chains5. Automation technology is already here but building successful implementation frameworks is currently reliant on big-tech e-commerce companies, like Amazon6 and Alibaba7, and logistics providers like Maersk8 and Flexport9, testing out the ground first. But trust in automated processes is key.

Trust an essential element in supply chain 4.0

A new level of transparency is envisaged in an integrated supply chain. Data will be collected from all stakeholders, creating end-to-end visibility of everything from inventory to delivery status on the supplier end, and preferences and behavior on the consumer end. Transparency and customization in supply chains through automation, robotics and IoT empowers consumers to know the impact of products and increases freedom of choice.

Blockchain is one technology that can be utilized to orchestrate this trust. Because all data recorded within a blockchain is distributed among all network members, records of transactions and activities are open for every member to access, unlike in the traditional method of utilizing a third party.

However, blockchain – and digitalization of systems and processes in general - also generates new potential trust gaps, an increased need for new and updated regulation and verification processes, and increased consumer demands. The big tech and logistics players will be pressured by smaller, newer players to ensure easy integration with the rest of the chain, improving transparency, reliability and customer service. The vertical integration and horizontal consolidation of supply chains means that new players could potentially take new roles in the chain.

These disruptions to today’s supply chain are on the near horizon. Whether it will be the large, traditional players or opportunity-seizing newcomers who perform best in the transition will largely be a matter of who digitizes in a transparent and efficient way.

"Amazon is a threat if we don’t do a good job for them. If we don’t do our job well, then there’s no doubt that big, strong companies like Amazon will look into whether they can do better themselves." - Soren Skou, CEO, A.P. Moller Maersk A/S10


Main author: Hans Anton Tvete

Editor: Tiffany Hildre

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