Economic Sector

Last updated: Wednesday, January 23, 2019


4th Industrial Revolution: Supply Chain Integration Is Crucial

Posted: Wednesday, April 26, 2017

In the fourth industrial revolution, the so-called advantages that Vietnam has held such as a young, abundant young labour force are no longer strong points. In the future, people will likely lose their jobs to robots because the latter can do well from production to service. Therefore, Vietnamese companies need to choose other development orientations for themselves and building and integrating supply chains is very important to them.

Karen Reddington, President of FedEx Express, Asia Pacific, said, today’s always-on, e-commerce-driven global economy is creating a brave new world known as the fourth industrial revolution, or ‘Industry 4.0’ and businesses need to rapidly adapt to avoid being left behind.

Industry 4.0 is shorthand for applying new, digitally-driven capabilities to manufacturing and at each subsequent stage in the value chain. At its simplest, it can mean applying technology to a single stage in the chain for instance, a gold mine in Africa leveraged big data from its sensors to discover an irregularity at a particular point in its production process, fixing this increased yield by 3.7 per cent, or US$20 million each year.

“However, to realise the full potential of Industry 4.0, companies are looking more holistically at their value chains. With four decades of experience in supporting customers, FedEx is uniquely positioned to observe how these changes are impacting supply chains everywhere. I believe that a rethink of supply chain management is needed if manufacturers and retailers are to successfully harness the possibilities of Industry 4.0,” said Karen Reddington.

Modern supply chains now have a vital additional role in ensuring customer satisfaction and retention. To achieve this goal, logistics now needs to work across the company from the front-end to the back-end, seamlessly integrating production, inventory, marketing, sales, payments, distribution, and product returns to optimise the supply chain model that balances cost efficiencies with keeping customers happy.

Achieving this degree of integration is complex. In a recent research study, only 7 per cent of executives believed they had created fully-integrated businesses that could be regarded as Industry 4.0-ready. Access to the right technology is only one part of the puzzle. Businesses also need a culture that embraces innovation and a workforce - from c-suites to general staff - that is willing to innovate to drive change.

However, these barriers to implementing an Industry 4.0-ready supply chain have to be weighed against the potential benefits and when they are, an almost unassailable business case emerges in favour of making the leap for businesses large and small. A typical example is the aircraft maker Airbus. The company has invested significantly in creating a “Factory of the Future” by building aircraft in virtual reality, with production lines that include computer-suited personnel and robots working side by side. As a result of these changes, which the company dubs ‘smart production’, Airbus is able to keep pace with increased demand, and also now manufactures its products in a more sustainable way.

Moreover, the benefits of Industry 4.0 are certainly not confined to large multinational corporations. Closer to home, China-based furniture retailer Markor realised that it could innovate its supply chain to identify trends in customer purchasing behaviour. The company created a smartphone application that interrogates big data to identify these trends, then make personalised recommendations to customers on product designs. Using mobile devices, sales staff can show products demos and 3D images of custom furniture. When sales are made, customer preferences and purchase details are saved automatically, and the company uses the information to drive future business.

She recommended that by doing so, enterprises will be on the way to achieving efficiencies, reduced time-to-market, cost savings, improved productivity and revenue gains. Despite the substantial investment involved, more than half of the respondents in a recent Industry 4.0 global survey anticipated return on investment in just two years.

In a world where business is increasingly transacted digitally, preparing supply chains for Industry 4.0 represents the next frontier in the battle for a competitive edge.

Huong Ly

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