What is Industry 4.0 and How it Relates to Supply Chain

Updated: Sep 24

Very roughly, the first industrial revolution is characterized by steam power and mechanization, second by electrification, and finally third by computers and digitization. Many consider that we are undergoing a fourth industrial revolution. The fourth industrial revolution will be driven by increased automation and application of data that is enabled by technologies such as big data analytics, cyber-physical systems, and the Internet of Things (IoT). Many of these developments relate directly to what is often referred to as the digital supply chain.

Here are some things we can expect from the digital supply chain/supply chain 4.0:

  • Increased efficiency by reducing manual data entry to the use of sensors that automatically capture and transfer data to information systems. This will reduce human error while allowing humans to focus on higher value-added activities. For example, warehouse receiving evolved from manual receiving to barcode scanning and then to the use of RFID (Radio Frequency Identification) tags where shipments are automatically tracked and identified.

  • Improved integration of the supply chain function with operations and manufacturing. Data and the accompanying business intelligence software including artificial intelligence will provide the optimization that results in more agile operations.

  • Supply chain information will shift from time-consuming reporting with limited visibility toward real-time availability with end-to-end transparency of the supply chain. Internet of Things will build a more seamless supply chain network with the use of cyber-physical systems, machine-to-machine communication, and cloud computing where supply chain partners can access and then act on this information.

While the digital supply chain promises significant productivity upgrades, there are still risks that we have to manage. With the ubiquity of data comes cybersecurity concerns. Privacy concerns need to be addressed both from a technological and policy perspective to ensure security and fairness. Information theft and malicious cyber-attacks will create greater damage when perpetrators are successful. Also, like the other industrial revolutions before it, it will result in social changes that require a transition of the workforce’s skillsets. Therefore it is critical to understand how these emerging technologies work and the implication it has in order to ensure career success.