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

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