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Building a Cognitive Supply Chain for Industry 4.0

 
February 22, 2018

Manufacturing organizations are increasingly moving to Industry 4.0 or digital manufacturing, which revolves around machine learning and automation, revolutionizing the traditional way of production and decision making.  With rising expectations, today’s manufactured products are undergoing radical transformation. Automated vehicles are now in vogue – from self-delivery drones to self-driving cars and self-guided cargo ships.

Supply chain is an integral part of the entire manufacturing value chain, and it has to keep pace with the changing environment and be self-orchestrating. It will absorb, evaluate, adjust, and react to data based on analytics and rules engine.

Transition to a Cognitive Supply Chain

Let’s look at the five key areas of the supply chain and try to understand the essential elements in transitioning to a cognitive supply chain:

  1. Planning: This is a key supply chain parameter to understand market demand and position its resources for optimized results. Digital Integrated Business Planning and predictive maintenance based outputs help accurately sense and shape demand forecast for the regular and aftermarket requirements and help optimize the operational cost to gain maximum output.
  2. Network Design: Another key element that aids in decision making to design the supply chain. By using simulation tools coupled with external feeds, one can analyze the locations/practices best suitable for supply, demand, and other data points accordingly. With simulation, it’s easy to visualize potential gains and losses, thereby enabling strategic decisions.
  3. Logistics: Logistics uncertainty can be reduced with a global track and trace solution that provides exact location information and estimated time of arrival of the parts and shipments, based on which one can alter the sequencing and laydown plan. It also helps to make dynamic decisions on carrier, route, load, and supplier allocation using performance analytics and a rule-based engine.
  4. Procurement:  Procurement 4.0 will help deliver new value propositions to automate decisions for sourcing and procurement and supplement the supplier portal with a rules engine based flexible solution as per company’s purchasing policy and supplier contracts.  This will automatically reduce the supplier onboarding cycle time and reduce the supply chain failure risk.
  5. Inventory: Demand-driven inventory profiling coupled with a smart warehouse solutionkeeps the inventory at optimal levels and aligns them with the preset tolerance limits. Using mobility and analytics, one can provide alerts and other control options to stakeholders in case of any discrepancies.

Stepping Stones for a Cognitive Supply Chain

Although one might think the five areas of the supply chain as different parts of the supply chain, these areas are interlinked with each other as either providers or receivers of information. In-order to synchronize all the key areas, one needs to build a cognitive chain with the following four enablers:

  1. Accurate master data maintenance: All the analytics and machine learning will work as desired, only if we are able to properly store/manage and retrieve data from all the sources.
  2. Stakeholder Digitization for complete ecosystem automation: Supply chain is a combination of multiple stakeholders such as buyers, suppliers, logistics, and 3PL; so, everyone on the chain needs to be digitally ready to onboard the transformational journey.
  3. Well-defined KPI tree: Organizations need clear vision and goals, to drill down to quantifiable targets for the subsequent levels, which in turn will define the actions and rules aligned to achieve those KPIs.
  4. Data Security: Data is set to grow 10 fold by 2020, and it will be exposed to various stakeholders in and out of the organization. So, it would be critical for the organizations to have strict data security policies to avoid infiltrations and hence huge losses.

These four key elements provide a strong foundation, to build automated supply chain. All you have to do is key in the correct nodes and let the chain run the show.

Need to Manage Change

According to a 2017 McKinsey report, optimism regarding the benefits of Industry 4.0  has risen significantly since last year, with the highest levels of optimism observed in the US and China. It’s time for companies to rewire their supply chains to complement the Industry 4.0 ecosystem.

Will manufacturing companies be able to see supply chain not as a cost center, but as a propeller to efficiently manage change and gear up for Industry 4.0?

Ankit Nigam is a Supply Chain Consultant with TCS’ Manufacturing Transformation and Innovation group. He has diverse industry and consulting experience in the supply chain domain. He holds a Bachelor’s degree in Engineering from Harcourt Butler Technical University, Kanpur and a Master’s degree in Business Administration specializing in Operations and Strategy from Great Lakes Institute of Management, Chennai.