The impacts of digitization to supply chain management in the 4.0 industrial revolution - Nguyen Thi Mai Anh

CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 72 Journal of Marine Science and Technology No. 56 – November 2018 THE IMPACTS OF DIGITIZATION TO SUPPLY CHAIN MANAGEMENT IN THE 4.0 INDUSTRIAL REVOLUTION NGUYEN THI MAI ANH Faculty of Maritime Business, Vietnam Maritime University Abstract When the market demands not only the efficiency but also the agility of the supply chains, the supply chain models of the new generation are gradually succeeding in combining automation and digital technology to achieve the best results. While digital systems help to save costs, innovate and create value for the benefit of all parties, they also increase competitive pressure on the changes the application of technologies and innovation on business. In this sense, this article addresses the following issues: which digital technologies will make a big change in supply chain management by 2030, which kind of changes will be set due to the changes of digital technologies and what are some preparations for the supply chain leaders towards these changes. Keywords: Digital supply chain, DSC, industry 4.0, internet of Things, supply chain management. Tóm tắt Khi thị trường đòi hỏi không chỉ tính hiệu quả mà cả tính nhanh nhạy của chuỗi cung ứng, các mô hình chuỗi cung ứng của thế hệ mới đang dần thành công trong việc kết hợp công nghệ tự động hóa và công nghệ kĩ thuật số để đạt được những thành quả tốt nhất. Trong khi hệ thống kĩ thuật số giúp giảm thiểu chi phí, nâng cấp và tạo giá trị cho tất cả các bên, chúng cũng gia tăng áp lực cạnh tranh trong việc thay đổi những ứng dụng của công nghệ và cải tiến trong kinh doanh. Bởi vậy, bài báo nhấn mạnh những vấn đề sau: Những công nghệ kĩ thuật nào sẽ tạo ra bước thay đổi lớn trong quản lý chuỗi cung ứng trước năm 2030, những thay đổi đó là gì và người quản lý cần có những chuẩn bị gì cho những thay đổi này. Từ khóa: Chuỗi cung ứng kĩ thuật số, DSC, cách mạng công nghiệp 4.0, internet vạn vật, quản lý chuỗi cung ứng 1. Introduction Also regarded in the similar terminology as digitalization, digital supply chain (DSC) lies on the Industry 4.0 revolution. The evolution of the digital supply chain was first started by steam and water power which is called Industry 1.0. The transformation was then followed by Industry 2.0 with electricfication and Industry 3.0 with the digital computer. We are currently in Industry 4.0 as the manufacturing sectors orient themselves with customer-focused through digital innovation such as social media, e-commerce, the customer experience and digital marketing. However, there comes higher evolution which is regarded as digital ecosystem. This broad concept of ecosystem is a complete set of wide range of digital technologies such as analytics and monitoring of goods, vehicles and other assets via the Internet of Things (IoT), big data, Cloud-based systems and others. Specifically, they promote new business models with the advantages of digitization in products and services, also every aspect of the enterprise’s value chain, such as engineering and manufacturing, product development, distribution, engineering and manufacturing, marketing and sales. Thanks to the advance of social and sensors technologies which are controlled by a central control hub and overarching data analytics engine, DSC becomes the key operation of every manufacturing and distributing company. This article bases on the recent survey findings of the 2017 MHI Annual Industry Report which is conducted in late 2016. It interviewed hundreds of material handling, logistics and supply chain equipment and systems manufacturers, integrators, consultants, publishers, and third party logistics providers for their evaluation on the next- generation supply chains. Most of today's articles are about the effects of DSC but there is no in- depth study on which digital technologies will directly affect DSC. This article, through the assessment of the direct leader who are influenced by technologies and innovations, will also bring new perspectives to supply chain leaders about the technological potential that will be inherited in the next few years. The smart supply chain is associated by two factors. First, it is the combination in the application of the Internet of Things, The Cloud and big data analytics which are the pushing elements in the market. Second, it is the requirements of employees, business partners and customers in a more reliable and responsible supply chains which are the sources of pulling demand on DSC. Thus, the involving companies are urged to promote their own models of DSC. CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 Journal of Marine Science and Technology No. 56 – November 2018 73 2. Survey analysis According to 2017 MHI Annual Industry Report Key Survey Findings, within 5 years 80% believe that DSC will be the dominated model. Also, top 6 disruptive technologies which are the potential competitive advantage of companies are Robotics & Automation (61%), Predictive Analytics (57%), Internet of Things (IoT) (55%), Driverless Vehicles & Drones (54%), Sensors & Automatic Identification (53%), and Inventory & Network Optimization Tools (50%). The survey also showed the overwhelming of typical technologies in-use today and 5-Year Compounded Annual Growth Rate. It is estimated that Cloud Computing & Storage, Sensors & Automatic Identification, Inventory & Network Optimization Tools, Robotics & Automation will have a decrease in the usage while Wearable & Mobile Technology, Predictive Analytics, 3D Printing, Driverless Vehicles & Drones, Internet of Things predicted to be dramatically increase in adoption rate. In order to successfully take advantage of technologies, enterprises foremost face the top challenges from Hiring and Retaining a Skilled Workforce, Customer Demand for Faster Response Times, and Customer Demand for Lower Delivered Costs. The lack of skilled labour in order to deliver the best service with short time but low cost is still among the ultimate challenges for service providers. Besides, due to the increase in IoT adoption, the companies also face the critical obstacles from Cyber Security, the lack of the talents to utilize technology effectively, the lack of a clear business case to justify investment. Figure 1. Planned adoption of emerging innovations 2.1. Robotics and Automation Robots and automation will enhance the efficiency to replace traditional manual activities like picking, sorting, inspecting, storing, handling and classifying items. The adoption rate is currently at 37%, nevertheless, expected to increase to 53% in the next 2 years and reach 71% within 5 years. In addition, due to the virtual benefits of automation which is a faster, safer, smarter, also a cost- effective and flexible tool to implement, this is the evidence for the critical role of robotics and automation to be the key competitive advantage in DSC era. The survey also shows the fields to make use of Robotics and Automation today as following. Figure 2. The applications of Robotics and Automation today CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 74 Journal of Marine Science and Technology No. 56 – November 2018 2.2. Sensors, Automatic Identification and IoT Thanks to smart sensors technology, the condition and location of the products and supplies system are tracked in the facility and stored in global system. This complement is for the end-to- end visibility and the smart operation is for the demand of Next-Generation Supply Chain. In addition, the data that are accumulated from these sensors together with the cloud-based applications can be used for analytic models. The fundamental benefits from predictive modeling capabilities and end-to-end visibility lead to an optimized performance, fast delivery time, risk and cost reduction, operational processes improvement. Sensors can also be a supplement as a part of or along with other technologies such as drones or robots, turning it to be a versatile up-to-date technology. Sensors and automatic identification have also potential impacts on numbers of fields as below. Firgure 3. The application of sensors and automatic identifcation today (or planning in the next 1-2 years) Sensors and automatic identification (also known auto ID) help to collect the information in a precise way and rate than ever before. They are imagers and beacons, barcode readers, point-of- sales systems, radio frequency identification (RFID) tags and readers. These technologies are not only to capture, verify, store and communicate supply chain data in an automated and timely method, but also to replace the cumbersome manual processes. This combination is also an effective components for tracking systems, inventory management and process control. The Internet of Things (IoT) is defined as the conjunction of smart devices through a network which enables these objects to exchange data and information. The concept of IoT appeared in around 1980s. With the emergence of Internet in 1990s, IoT took the first leap and become reality, however, it is technically developed recently with the take-off of variety of devices. This is a foundation for numbers of application in business process by collaborating innovative technologies for the Next-Generation Supply Chain. The real-time digital information has never been accurate than ever before. According to the surveys, enterprises can take advantage of IoT for numbers of following fields. Figure 4. The applications of the Internet of Things today (or planning to use it over the next 1 - 2 years) 2.3. Wearable and Mobile Technology Wearable and mobile technologies are the instruments that allow people to access immediate information conveniently wherever they are. In this sense, it ensures the stable flow of information in supply chains. Mobile technology are, namely, smartphones, tablets and other wireless devices. Wearable technology are smart watches and glasses. Due to its cost-effective advantage, firms of all sizes can make use of this devices. For instance, drivers can give live CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 Journal of Marine Science and Technology No. 56 – November 2018 75 updates on deliveries so that the customers can have a tracking on delivery status, the digital documents on a mobile updates is a proof of delivery. Users can quickly send appointment confirmation regardless their location or implement a checkpoint status updates for the products, hence, the information on the products is accessible for all stakeholders. The prominent benefits of these technologies are real-time visibility so that the information outside or inside the company are all connected and the delivery service are improved with faster, cost effective manners. Regarding to inventory management, stationary terminals and paper documentation are replaced so we can instead save time, labour and add benefits to real-time data. The top ways wearable and mobile technologies are used in companies that are among these following fields Figure 5. The application of Wearable and Mobile Technologies today (or in the next 1-2 years) 2.4. Driverless Vehicles and Drones These technologies can be mobilized from a place to a determined destination thanks to sensors, cameras and advanced in-vehicle technologies. They have been used in many fields for a while, however, since the technology evolves, their capabilities have been improved like unmanned drones or smarter driverless vehicles. They are used for movement of material and products, order picking, real-time inventory control. There is only 8% of respondents are used the technologies now, nevertheless, 31% of respondents are willing to use these technologies in the next 5 years and 19% are expected to adopt them in the future. These vehicles have improved the performances in manufacturing facilities and distribution centers in an accurate and efficient way due to its flexibility and transportability. They are not like a static fixed asset as many other permanently installed forms of automation, but a flexible operation. For instance, instead of a RFID monitoring equipment or a hardwiring, a security camera system firms are likely to implement an adaptable security system of drones with sensors and cameras. 2.5. Predictive Analytics Predictive analytics generate collective data in application of data mining and statistical modeling resulting in a precise advanced projecting views. For instance, predictive analytics can provide an overview of future and a look into emerging patterns of the marketplace which brings highly effective customer strategies. By synthesizing data’s insights provided by DSCs, predictive analytics can improve efficiency of supply chain operations by forecasting behaviour of customers. For ages, enterprises have engaged in forecasting techniques using sales historical data to be the basic indicator for future market demand. Nevertheless, the supply chain data has proliferated, the volume and sources of lagging or leading indicators require a broader applications and analysis. While only 17% of respondents are using predictive analytics recently, predictive analytics are expected to be widely used within 3-5 years by 79% of surveyed companies and up to 89% in the next 6 plus years by 89% of surveyed companies. Thus, with this significant expected growth, this technology will be the competitive advantage of firms in near future. In accordance with the development of advanced predictive analytics, a considerable variety of solution providers and consultants are trained to deal with huge amount of information collected by DSCs and to support companies in promoting predictive analytics. 3. Implication to leaders in supply chain system. In order to maintain the momentum and conquer the critical challenges ahead, the supply chain managers need to take consideration of the three following issues: Firstly, it is essential to CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018 76 Journal of Marine Science and Technology No. 56 – November 2018 look at how their supply chain will look like in five years from now; work with sales and marketing teams to develop product development strategies, distribution channels and regions; consider scenarios that will cover the possibilities available and use the most advanced modeling tools to build your own supply chain models and assessments in order to support for the planning process. In addition, no matter whether the companies are small or big, they need to take lead in catching up with the technologies and innovations that have big impact on the future supply chain by their profitability and cost savings advantage. Last but not least, the leaders should pay attention to invest in workforce hiring and training .The crisis of human resources in the supply chain is real. It will increase rapidly as the demand of advanced technology requires high quality human resources. Customers will persist on the best service at the most cost-saving status and these demands will only be responded by an efficient and innovative supply chain. 4. Conclusion Thanks to the emergence of culture and technology exchange, the world becomes more connected and the capabilities of digital technology are increasingly growing. In order to meet the challenges and to reinforce the potential of service quality and performance, the supply chain is facing the urgent need to change into next-generation models. This article has shown the innovations and technologies that will dominate in this transformation period. Next-Generation Supply Chains will be more digital. It will take advantage of advances in information technology and the development of available data sources in all areas. It will be increasingly used in strategic locations to provide data from which to filter, analyze and communicate with the whole supply chain. The next-generation supply chain system is synchronized in the commercial network to be able to operate on a smart platform and becomes more connected. As the volume of information is dealt by consumers at a rapid rate, they demand the supply chain with better customer care services: Excellent packaging, visible order status, short delivery time, free shipping or more. Distribution centers, retail stores, inventory control points, suppliers and manufacturers, e-commerce sites need strategic and synchronous cooperation to meet the need of customers in real time. REFERENCES [1] “Industry 4.0: Building the digital enterprise Industrial manufacturing key findings”. PwC report (www.pwc.com/industry40), 2016. [2] “The 2017 Next-Generation Supply Chains Digital, On-Demand and Always-On”. MHI and Deloitte report, 2017. [3] "Industry 4.0 & How digitization makes the supply chain more efficient, agile, and customer- focused". PwC report. Stefan Schrauf and Philipp Berttram, 2016. Received: 09 January 2018 Revised: 01 March 2018 Accepted: 06 March 2018