In 1963 the National Council of Physical Distribution Management was created to help give visibility to the emerging field of supply chain management. In the following decades, records keeping and other traditionally manual processes would become the province of newly-emerging computer technology, leading to significant changes in the industry. In the ‘80s, the council changed its name to the Council of Logistics Management to reflect the industry’s increasingly nuanced view of the complex process of sourcing raw materials for production and distributing finished products to customers. Supply chain management as a field went through plenty of change during that span, including the continued rise of computers as a tool, just as it's going through big changes now with the advent of Industry 4.0. Below, you’ll find our predictions for what might change about supply chain management in the coming year.
Over the course of human history, many of our most critical technological advances have been put to use in helping people and goods get from Point A to Point B more effectively. Take air travel, for instance: only a few years ago, most travelers needed travel agents in order to cut through the complexity involved in bundling together connections and return flights in the most sensible manner. Cut to the modern day, and a simple Google search can give you the times, connections, and prices for your various options based on your desired travel dates and destinations. Not only that, but once you’ve booked your travel itinerary, you can check in online (rather than at the airport), receive your boarding passes via e-mail, and receive alerts about your flight on your phone. All of sudden, life as a traveler is about connectivity and convenient digital workflows.
Let’s pretend that you and a friend are both mixologists at an upscale cocktail lounge. On weekends, there tends to be a rush of patrons late in the evening who ask for drinks faster than you can produce them. As a supply chain or logistics manager in real life, in this scenario you might be tempted to suggest that you and your fellow bartender start creating a buffer stock of drinks before the big rush, so that people can receive their drinks as soon as they order them. Unfortunately, you can’t really know what drinks people will order in advance (to say nothing of the fact that the ice will melt), so creating a buffer stock is impractical. You can, however, do some prep in advance, like preparing garnishes and simple syrup. When the rush comes, you’re still slammed, but you’re able to create drinks more efficiently.
Buying health insurance in the U.S. is an odd business. Essentially, you have to balance your monthly premium (i.e. the amount that you pay your insurance provider each month for continued coverage) with your deductible (the amount that you have to pay out of your own funds before the insurance company will contribute to your care, broadly speaking). In general, if one of those two costs is particularly high, the other is likely to be lower, and vice versa. If you’re thinking about your choice in terms of total cost, a high deductible is risky, but has the potential to be cheaper if you can avoid getting sick over the course of the year. A high premium, on the other hand, might put you in a position where you’re essentially paying for medical care that you’re not receiving. The question, then, is how much risk are you willing to take on?
Imagine for a moment that you’re a manager at a large restaurant. Part of your job entails assigning sections to your servers in a way that ensures that as soon as a customer’s food comes out of the oven it’s being moved to the appropriate table. Other than the short lead times, this may seem simple enough—but let’s say the restaurant is split up into a few sections. There is a bar area, which has happy hour specials during some days and times, which means that your servers need to know that these patrons might be receiving slight variations from the usual menu that wouldn’t be appropriate in the other parts of the restaurant. These items are still being cooked on the same lines as the others, which means that all parts of a given meal might not come out of the kitchen simultaneously.
Let’s say your manufacturing outfit is looking to hire a new employee, and you’re tasked with creating the job listing. What are you likely to ask for in your potential new hires? Depending on what type of IT environment your business runs on, you might require that they be familiar with a certain software or suite of software products, so that they can easily assimilate into your existing workflows. You might also ask for references from previous employers, so that you can be sure that they don’t present any obvious red flags. Going a little bit deeper, you might make a point of searching for employees who exhibit the potential to learn and grow, i.e. people who can potentially take on more responsibility as they go forward, helping your business to grow and adapt over time.
Raise your hand if you remember what it was like navigating on road trips in the pre-smartphone, pre-GPS era. Before you set out from your house, you had to find your destination on a roadmap, and chart a course that could, if the destination was far enough afield, involve multiple intersecting highways or interstates. If you were driving alone, checking your map could be hazardous during driving, meaning that you had to memorize most of the turns, even if they were on unfamiliar roads. If you needed to fill up on gas, finding out the location of the next gas station would be a matter of waiting for signs on the highway to appear and alert you to the exit number of the next rest stop. Once you left the highway, you had to navigate by street signs until you reached your destination. If, at any point, a road you intended to use was closed, you would be back to the drawing board.
Let’s think back for a moment to the early days of Facebook. Today, the social media giant boasts more than a billion users worldwide, but there was a time when its base was just an infinitesimal fraction of that number—a handful of early adopters scattered across American college campuses. Pretty quickly, that handful, having influenced others to join up, grew to a critical mass. People across the world felt that they had to be on Facebook because their friends were already using it, and the more users joined, the more attractive the social networking site seemed to potential users. This quickly reached a tipping point and led to the explosion of users that they’ve seen in the past few years.
When we discuss Industry 4.0, we often mention the origins of its name, i.e. the concept of the fourth industrial revolution defined by machine-to-machine communication and autonomous processes. With Logistics 4.0, on the other hand, there is typically no such history lesson involved, perhaps because we think of the new logistics paradigm as fundamentally an outgrowth of Industry 4.0. Whether or not that’s the case, it’s becoming increasingly clear that this new era in logistics is very much its own entity—and it’s already changing the way that shippers and freight forwarders (to say nothing of their customers) do business.
This all begs the question, what are the distinct elements that define Logistics 4.0 systems? How do these elements incorporate the logic of Industry 4.0, and how do they build on the logistics paradigms of the past?
Last month, Abu Dhabi Ports introduced a unique blockchain solution, enabling freight forwarders and their customers to digitally check on the statuses of shipments and transports while facilitating real-time tracking of cargo and documents. Officials expect the result to be a more efficient shipping environment in which reduced paperwork and administrative tasks could potentially slash 20% off of physical shipping costs for freight forwarders who take advantage of the new system. While this might seem revolutionary, it’s actually emblematic of shipping trends that have been evolving for some time. Digitization has been increasing for some time, and the world is finally starting to see the results of this paradigm shift.
Topics: Supply Chain Logistics