Impact of Industry 4.0 on Supply Chain Management

The assignment discusses the impact of Industry 4.0 on supply chain management, highlighting its potential to increase capacity, improve agility, adaptability, and alignment in humanitarian supply chains. It also mentions the importance of risk management approaches and big data analytics for organizational performance.

Impact of Industry 4.0
on supply chain

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of the case scenario................................................................................................1
Literature review on impact of Industry 4.0 on supply chain.................................................2
Szozda's case study in context of BMW................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Today with development of technology, organisations dealing in any sector, whether in
manufacturing or retailing, gets opportunities to operate autonomously. In this regard, Industry
4.0, is coined to mark as fourth industrial revolution, which impacts on entire supply chain
process of organisations (Gunasekaran and et. al., 2017). The report presents a critical
demonstration on impact of Industry 4.0 on BMW and emphasis on supply chain management.
This is a German multinational company and deals in automotive manufacturing sector. It
manufactures luxury auto-mobiles and commercial motorcycles as well as offers aircraft engines.
Scope of this report is mainly focuses on four main functions of supply chain- transport logistics,
procurement, order fulfilment and warehouse. For this purpose, some articles and case study
given by Szozda is also reviewed to evaluate impact of technology on supply chain.
MAIN BODY
Overview of the case scenario
Over the last decades, technology has undergone a significant revolutionary progress
which subsequently impact on every aspect of organisations. In this regard, one of the main
radical changes is now shifted from computers to smart devices for utilisation of infrastructure
services (Giannakis and Papadopoulos, 2016). It increases the possibilities of interconnection of
not only human beings with machines but also develop communication among machines.
Therefore, implementation of such kind of network within operation and production environment
is known as Industry 4.0. It helps organisations in increasing their transparency on entire steps of
supply chain process. It includes collaboration among manufacture, suppliers and customers.
BMW (Bayerishe Motoren Werke) AG is a British Multinational Company which was founded
in 1916. It deals in manufacturing sector and has a large business organisation that expands in
more than 14 countries. It offers a wide range of luxury motorcycles and auto-mobiles in various
countries like United Kingdom, South Africa, China, India and more. As per report in 2015, this
company has become the 12th largest manufacture of motor vehicles which is near about
2,279,503 vehicles. It mainly targets to high-income group of population and young generation
as they purchase such vehicles for maintaining their status and drive to get more comfort. As
BMW is mainly famous for its series of cars, where BMW 3 series is designed for customers
belong to age of 30 to 35 years old (mostly unmarried). While BMW 5 and BMW 7 series
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mainly targets to 40-55 (living in a big lavish apartment) and 55 to 65 years age of customers
(high-income) respectively. Targeting to such potential customers, this firm has sold near about
2,490,664 auto-mobiles till 2018.
The BMW Group has set a trend under production technology and also develop
sustainability as an innovation leader having an intelligent material mix. By shifting its
technologies towards resource-efficient production and digitalisation as well as creating
flexibility and continuous optimisation related to value chains, helps this company in ensuring a
high competitiveness in manufacturing sector. For example: With Industry 4.0, BMW Group
gain advantages in utilising the usage of Internet of Things, storing big data and Artificial
Intelligence etc. This industrial revolution has envisaged an environment within automotive that
enables smart machines to communicate with one another. In addition to this, it also helps in not
only enable BMW related to automation of production lines but helps in resolving a certain level
of issues with minimal human interference.
Literature review on impact of Industry 4.0 on supply chain
In manufacturing industries, cooperation among different functions related to supply
chain is essential to match supply and demand curve. Due to increase usage of data processing,
automation, Internet of Things and more in industry, modern factories are undergone with
constant transformation (Swink and et. al., 2017). A review of the literature based on impact of
technology like Industry 4.0 on supply chain concept is given below, whereby some articles are
taken to draw significant result.
According to Klaus Schwab who is a Founder and Executive Chairman of World
Economic Forum, it has evaluated that concept of Fourth Industrial Revolution is driven largely
due to convergence of biological, digital and physical innovation. In this regard, the past three
decades of revolution includes - Steam powered factories in Industry 1.0; Application of science
related to mass production and manufacturing under Industry 2.0, whereby Industry 3.0 has
started into digitization (The Fourth Industrial Revolution, 2019). With such revolutions in
technologies, Industry 4.0 includes artificial intelligence, robotics, genome editing, 3-D printing
and more. It changes the way of operational process of organisations. Therefore, it gives
opportunities to unite global communities, adapt and modernise governance models, build
sustainable economics, reduce material and social inequalities and more.
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(Source: Four industrial revolution, in progression from 18th to 21st century, 2019)
Through this figure, stages of Industry 4.0 are evaluated which depicts that from last four
decades, companies like BMW are more concerning towards investment, in order to deploy more
powerful technologies. Here, Industry 4.0 involves a systematic change which come across many
sectors as well as aspects of human life. Therefore, impact of emerging technologies is
considered as more important rather then capabilities it represent. In this regard, through such
fundamental transformation, BMW gets opportunity for proactively shape the 4th industrial
revolution which is more inclusive and human-centered. This would help in managing supply
chain process through which cars and other vehicles are competitively prices. While comparing
with another article given by Klaus Schwab, it has evaluated that concept of Fourth Industrial
Revolution has not only change the way to operate the business but it also modifies human's
ability. It affects identity of human as well as issues associated with them (Understand the
Impact of the Fourth Industrial Revolution on Society and Individuals, 2019). It includes sense of
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Illustration 1: Four industrial revolution, in progression from 18th to 21st
century

privacy, consumption patterns, notions of ownership, time denoted for work and leisure etc. In
context with auto-mobile sector, Industry 4.0 reducing road fatalities and insurance costs, carbon
emissions and reshaping the living spaces of cities. This article also depicts that after emergence
of Industry 4.0, expectation of potential customers are shifted which assist BMW to transform its
business as well. They expect more to companies to fulfil their desires and give personalised
support as well. In this regard, whether individuals belong to B2B or B2C, are mostly concerned
on internet based and digital technologies. Therefore, for this purpose, to gain success in
business, BMW and other manufacturing companies needs to shift from transactional model to a
relationship. This is built on selling services and create much deeper connection with potential
customers. One of the main advantage of this technology is enhancement of human productivity.
For example: AI and other automation technologies, augmented the profession lives and make
employees able to give high performance. Thus, through both articles which are given by Klaus
Schwab, it has been analysed that 4th Industrial Revolution is a powerful agent for good in
business. It doesn't the way a company perform its activities but also modifies entire system. It
can be shown by online shopping and delivery services which include drone. It makes easy of
delivery that transform communities, jumpstart the economies even in remote places as well. But
first article shows progress of industrial revolution from initial step while second one helps in
understanding the impact of forth revolution on societies and individuals.
For understanding the concept of 4th Revolution, another article has been taken, given by
Scott Fawcett, The Divisional Managing Director of Essentra Componets. Apart from changes in
operational activities and services of a company, this article is emphasised more on impact of
this technology on supply chain network. Industry 4.0 revolution has redefined the traditional
manufacturing process which is moving more rapidly towards automated, digitised and agile. It
ultimately leads to efficient operation where, to understand this concept of development of
industrial revolution, supply chain operation is considered as best example under automotive
sector (What does Industry 4.0 mean for the supply chain network?, 2019). It is a multi-faceted
ecosystem which link product-development and distribution network including manufacturing
process into single transparent and digitised system. As any lack of clarity between suppliers
under supply chain ecosystem, may break down their relationship and disrupt entire efficiencies
of process. Therefore, by installing digitised and fully integrated supply chain network, BMW
become able to respond towards demands of customers in more effective and efficient manner.
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This will lead to ultimately improve its productivity and proactively respond also help in staying
ahead under competition. For building such kind of supply chain ecosystem, BMW needs to
integrate logistic visibility, planning and execution system, smart procurement and warehousing,
autonomous logistics and advanced analytics. This would help in reassuring that the immediate
improvement in efficiencies of supply chain procedures. Henceforth, such type of transparency
and digitalised network that emerge under Industry 4.0 help BMW in bridging a gap between
demand and supply. It also support with fully visible feedback system that reports on
requirements and challenged of such ecosystem as well. For further understanding the impact of
4th Revolution on supply chain network another article has been explored which is given by Rich
Thompson. It has ascertained that with three momentous and new trends, there is rapid changes
in the way through which companies view and integrate their strategies for managing supply
chains. It includes cultural and political winds, cost curves and rapid advancement of
technologies. Here, trend towards protectionsim is taken as evidence by Trump (President of
UK) and Brexit, where people demand more to regulatory bodies to concern on welfare and
interest first. Therefore, this has tightened the global trade agreements, border protection and
immigration policies. In this regard, BMW has established its manufacturing presence more in
those nations where demand is highest in order to reach potential customers. Along with this,
rising transportation cost also needs to be focused by respective company to accomplish its
sustainability goals. According to 2017 report, which was conducted by Deloitte Consulting and
MHI, automation and robotics were considered as best technological process that has disrupted
the supply chain world (Three Supply Chain Impact of Fourth Revolution, 2018). It includes top
five advantages that are- driverless vehicles and drones, Internet of Things, sensors, predictive
analytics and automatic identification. Therefore, development in fourth industrialisation like
robotics will disrupt entire current operating practices of BMW as well as help in creating new
competitive advantages. Therefore, there is much similarity has seen in both articles because
both are shown that how Industry 4.0 leads to influence supply chain procedures of companies,
including BMW. In order to deliver products in highly efficient manner, organisations now
moving to implement digital supply chain in business, at varying speed and levels. To understand
this fact that modification in supply chain procedure may enhance customer expectation, an
article given by Ben Barlow has been analysed. It states that Industry 4.0 can be described as
technological revolution, which will fundamentally alter the way of operation. The impact of this
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revolution on supply chain could be considered as both regarding and concerning for auto-
mobile industries. In this regard, positive side is demonstrated as achievement of greater success
for BMW as revolution increases productivity and effectiveness of supply and logistics. But
process of automation of more system, might leads to cut in personnel manner also (How might
the ‘Fourth Industrial Revolution’ affect supply and logistics?, 2017). This may lead to enhance
expectation of customers, which create difficulties for organisations in completing the same. As
per Jargo Calvo, it has evaluated that today companies like Apple, BMW, Tesla, Toyota and
more, are focusing more on bringing autonomous system. This key technology is considered as
mother of entire artificial intelligence projects. Therefore, fourth industrial revolution helps in
reducing the barrier between traditional or manufacturing organisations. It includes heavy
industry, IT, auto-mobiles and electronics (Business Transformation towards the fourth
industrial revolution, 2018). Logistics sits at the centre of Group of BMW is spanning globally
where its management handle 30 million parts. This company also manufacture 9,000 vehicles
per day which reflects that its future related to logistics is mainly centred towards convergence of
digitalisation as well as on advanced technology. Therefore, it has also analysed from this article
that through implementing Industry 4.0, process of supply chain operation of BMW Group has
become more smooth and transparent. This technology brings greater efficiencies and flow into
its logistics and supply chain process. This would help in delivering products from distributors to
end customers more easily. With this assistance, it has evaluated been analysed through
perception of Jonny Williamson that handling 9000 vehicles and 30 million parts per day is not
easy task for BMW. Head of logistics for this company is considered as heart of production
system. Usage of digital technologies like Industry 4.0 has become a key factor for its logistics
process. It helps in increasing the transparency under supply chain operations. For this process,
BMW has concerned on four main steps which includes: obtain and record data; analyze and
control; improve; automate and forecast. With the help of fourth industrial revolution, data can
be easily gathered from sensors, which are located on trucks (Logistics, The beating heart of
BMW, 2019). Along with this, it allows BMW for responding in quick manner towards any
delays in real-time. In this regard, actions will include rerouting, bringing alternative shipping
methods as well as requesting for additional orders in order to cover expected losses. Thus, these
processes help in enhancing transparency within customers, suppliers, vendors and more, under
supply chain operation of BMW.
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Thus, through all articles it has been analyzed that there is a large impact of Fourth
Industrial Revolution on Society and Individuals. Here, advances in automotive safety through
this technology helps in reducing road fatalities and carbon emissions. It aid manufacturing
companies like BMW in reshaping its supply chain management processes.
Szozda's case study in context of BMW
Four industrial revolution consist main technologies- Mechanisation, water power and
steam power; Mass production, assembly lines and electricity; Computers and automation; Cyber
physical system respectively. For illustrating the areas, where fourth industrialisation can be
implemented into modern supply chains, Szozda has given various articles. These are bases
mainly on Nova Chemicals, Knapp Logistics AG, Stratatys and Bosch etc. In this regard, BMW
is considered as one of the most automated factories within automotive industry. Here, latest
technology like robots are used at each level of production (Industry 4.0 and its impact on
functioning of supply chain, 2017). As shown in figure given below, it has analysed that
companies begin to bring changes in their structures. These changes are particularly linked with
supply chain operations. On the basis of research conducted by Szozda, it has interpreted that
companies like BMW, now begin to introduce changes in their structures including the concept
of Industry 4.0. However, such changes are not directly linked with supply chain operation,
which can be illustrated by using below figure. It demonstrates an example of the supply chain of
automotive industries, where electric toothbrushes are manufactured in a traditional manner, with
using assumptions of Fourth Industrial Revolution.
Through mentioned articles presented Szozda's case study, it has been proved that
organisations dealing in manufacturing sector like BMW now begin to introduce changes in their
structures where, they implemented Fourth Industrial Revolution in production. Moreover, these
changes are particularly link with supply chain process only instead of entire operational
activities. Therefore, the given figure has illustrated what will be the functioning of a supply
chain which uses entire potential given by concept of Fourth Industrial Revolution. It shows how
the supply chain of a BMW of electric toothbrushes is used under Industry 4.0. Here, traditional
functioning model of this supply chain of electric toothbrushes is normally based on mass
production, which is also known as production for stock which is executed in line having push
concept. This has also included the performing consecutive activities, that are design, production
and sale, where BMW takes place on the basis of plans specified at production, mostly within
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forecasting product sales procedure. Here, this traditional functioning model related to supply
chain of companies, which produces electric toothbrushes is usually based on mass production
(Dubey and Gunasekaran, 2016). It can be also known as so-called production, whereby stocks
are executed in systematic manner with push concept. It consists some performing activities such
as design, production and sales. In this regard, manufacturing and supply chain operations takes
place as per planned activities in given period.
(Source: Supply chain for electric toothbrushes using the assumptions of Industry 4.0, 2017)
While as per new model as given below, planning process can be transferred to
distribution area, whereby data related to sales are collected from end customers. It is considered
as transition to pull model, that is operations in a supply chain of BMW to a specific customer
order. In this regard, application of Industry 4.0 in a supply chain involves development of
distribution channels, which is also known as omnichannel (Stevens and Johnson, 2016). It can
be defined as toothbrush users, as they determine when and in what manner they want products
to be delivered. In this regard, products entails information related to customer behaviour,
manner in which toothbrushes are used and process including wear and tear process. Through
this information related to customer behaviour, BMW can determine demand forecast, which
brings efficiencies in entire supply chain process as well. It is here essential to meet needs of end
customers as well as provide then uniform experience during purchasing, returning or resolving
any complaint related to product.
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Illustration 2: Supply chain for electric toothbrushes using the assumptions of Industry 4.0.

(Source: Supply chain for electric toothbrushes using the assumptions of Industry 4.0, 2017)
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Illustration 3: Supply chain for electric toothbrushes using the assumptions of Industry 4.0

CONCLUSION
It has concluded from this report that every new technology has directly impacted on supply
chain operations and other activities. In this regard, the fourth industrial revolution is still an
unexplored market whose development directions are taken as multi-branch. The business
models related to functioning of supply chains operations are constantly changing. Here, same
thing is applicable for end product because it is also getting increasingly individualized as well
as adjusted as per expectations and demand of customers. As this report mainly highlights impact
of fourth industrial revolution on automotive companies, whereby products of high value are
delivered. But it also influences every manufacturing and retailing industries. It increases the
transparency among suppliers, dealers, customers and more, in effective manner.
However, this refers to only beginning of an upcoming industrial revolution, that is
mainly concerned on developing communication between machines as well as aggregation of
data obtained from such devices to be stored appropriately. But this includes a number of risks,
related to data security as well as capacity for maintaining long-distance wireless networks.
Therefore, for this assistance, construction of desired supply networks, distribution channels and
developing a secure communication networks for increasing capacity, will consider as a future
trend. It is also referred as significant key element under the development of supply chains and
industrial revolution.
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REFERENCES
Books and Journals
Swink, M. and et. al., 2017. Managing operations across the supply chain. New York, NY:
McGraw-Hill Education.
Giannakis, M. and Papadopoulos, T., 2016. Supply chain sustainability: A risk management
approach. International Journal of Production Economics. 171. pp.455-470.
Gunasekaran, A. and et. al., 2017. Big data an1d predictive analytics for supply chain and
organizational performance. Journal of Business Research. 70. pp.308-317.
Dubey, R. and Gunasekaran, A., 2016. The sustainable humanitarian supply chain design:
agility, adaptability and alignment. International Journal of Logistics Research and
Applications. 19(1). pp.62-82.
Stevens, G.C. and Johnson, M., 2016. Integrating the supply chain… 25 years on. International
Journal of Physical Distribution & Logistics Management. 46(1). pp.19-42.
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Industry 4.0 and its impact on functioning of supply chain. 2017. [Online] Available
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