4 minute read 23 Sep 2019
Robot placing components circuit board factory

Why the fourth time’s the charm for your supply chain

By

Sven Dharmani

EY Global Advanced Manufacturing & Mobility Supply Chain Leader

Passionate about transforming supply chains. Problem solver. Curious and collaborative. Avid traveler, scuba diver and car enthusiast.

4 minute read 23 Sep 2019

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Industry 4.0, the fourth industrial revolution, is remaking the auto industry with disruptive technologies such as blockchain, AI, and more.

We are in the fourth industrial revolution. Industry 4.0 is not simply a buzzword or a term thrown around by the Davos crowd: it is affecting every sector and every business operating today, and the automotive industry is no exception.

Industry 4.0 is an integration of the physical, biological and digital worlds, built on a base of emerging technological breakthroughs including autonomous capabilities, artificial intelligence, the Internet of Things (IoT), next-generation wireless technologies, nanotechnology, big data, blockchain and cloud computing. Some of this technology is in use today — on a mass scale, or just emerging and being tested. Others, such as blockchain and cutting-edge autonomous capabilities, are in their infancy and not widely adopted or understood.

The pace of change is becoming more rapid. Customer expectations are higher and seemingly ever-increasing. At the same time, demand is becoming more and more volatile. For example, say a photograph of a celebrity wearing a particular brand goes viral, or a social media influencer makes a video about a particular cosmetic. Sellouts in these cases may seem almost instantaneous. Unconventional channels are creating disruption and impacting supply chains in a matter of hours, not months.

While these examples are retail-focused, they demonstrate how disruption impacts global supply chains. To operate in this more-volatile environment with an entirely different dynamic, we need to embrace new capabilities that enable greater agility.

Why does this matter for the automotive industry? Because there’s a fundamental shift happening in the business model of every automotive company and supplier today. And it starts in one place: the supply chain. Original equipment manufacturers (OEMs) are going from a traditional, linear supply chain to a networked supply chain — and from a relatively straightforward production line to a complex ecosystem of various companies, suppliers and industry players.

To plan for what’s ahead, it is critical to consider this and other increasing complexities. The first step is to look at your business model, identifying your biggest opportunity and your biggest pain point. Examine the different capabilities within the spectrum of Industry 4.0 and find a combination of capabilities to address weaknesses in your business. Those capabilities have to come from somewhere: joint ventures, new talent, M&A, outside knowledge or a fundamental business transformation altogether.

Remember, innovation is a means to an end. It’s not about randomly experimenting with ways to apply different technologies and capabilities in your business. Innovation requires:

  • Discipline
  • A constrained environment in which variables can be solved for
  • Proofs of concept, demonstrating that the business issue has been solved before scaling and deploying across the enterprise
  • Tracking of success by reviewing the business benefits before and after

This doesn’t have to be scary or a doom-and-gloom situation. On the contrary, Industry 4.0 stands to improve your supply chain through many technologies. Big data can be used for predictive analytics, which can better prepare you for changes or disruptions in the market. IoT and the cloud can enable near-real-time collaboration between suppliers, OEMs and customers. Robotic process automation (RPA) can automate monotonous and repetitive tasks, enabling the workforce to focus on work and activities that add higher value and are more stimulating. Autonomous supply chains can react to events without significant manual effort and make event response much more streamlined. And blockchain can create transparency and real-time collaboration across various tiers of the supply chain.

Some of this technology is so new that it may be hard to understand. Don’t get discouraged. Industry 4.0 means a lot for your supply chain. You can compress your product development cycles and launch products faster. You can reduce your supply chain costs. And you can increase customer order fill rates without substantially impacting cost and improve inventory and asset utilization. These are just a few examples.

Ultimately, you need to be able to respond to the onslaught of changes to your business. That means making your business flexible, agile, responsive and ready for Industry 4.0. You have to start now because the pace of change is increasing so rapidly, and the change is relentless.
 

This doesn’t have to be scary or a doom-and-gloom situation. On the contrary, Industry 4.0 stands to improve your supply chain through many technologies.

Summary

The fourth industrial revolution is already having far-reaching consequences in the automotive industry. The supply chain is no exception. As with most transformations, there will be opportunities and challenges; those suppliers who adapt to stay ahead will not only survive, but thrive.

About this article

By

Sven Dharmani

EY Global Advanced Manufacturing & Mobility Supply Chain Leader

Passionate about transforming supply chains. Problem solver. Curious and collaborative. Avid traveler, scuba diver and car enthusiast.