Abstract

Logistics 4.0 will play a key role in enabling Supply Chains in Industrie 4.0. While progress has been made in the logistics space in individual areas, to harness the power of Logistics 4.0, a combination of the right mindset, digital capabilities and a highly secure and integrated technology architecture is needed.

 Industrie 4.0 and its implications on Supply Chain

Industrie 4.0, the so-called fourth industrial revolution, intends to serve the fast changing business needs and elevating the customer experience index. Supply Chains as a consequence cannot be immune to the changes that Industrie 4.0 will usher in and in fact will play an integral role in its success. This change to the Supply Chain, called Supply Chain 4.0, will be made possible via the application of intelligent technology in creating smarter solutions with superior connectivity and collaboration. This will enable quicker decisions and interoperable workflows using technology like IoT, Advanced Analytics, Block chains, Advanced Automation and Security. One of the key areas of focus in Supply Chains 4.0 will be in the area of Logistics and is popularly referred to as Logistics 4.0.

 What is Logistics 4.0?

Logistics 4.0 incorporates the use of intelligent technology in warehouse operations, material handling, inventory management and transport systems, ensuring a fully networked supply stream that offers supply chain managers, shippers, freight forwarders and others the necessary transparency and visibility to route transport and perform other logistics tasks in an optimal manner [1]. Hence Logistics 4.0 changes the way products, both semi-finished and finished, are stored and transported to reach the next receiving point, eventually reaching the end consumer. It is useful to note that Logistics 4.0 can be linked to “sister” functions like procurement, manufacturing, and planning departments. The desired goal that organizations desire is to have a single system which will enable the entire logistics execution, armed with all the information and analytics, to be operated by as few users as possible.

 

Figure 1. Services within the logistics value chain [2]

 

There is no special or unique mantra to get started on the journey to Logistics 4.0. In fact, the leaders in the logistics segment have demonstrated a tremendous appetite in adopting digital enablers and advanced automation and are well on the way to achieving a truly connected logistics environment or the so called “Digitally Connected Supply Chain”. Some examples include:

• Warehouses adopting advanced automation features including the use of autonomous robots, drones and material handling systems that are overseen by sophisticated control systems
• The concept of driverless trucks and the thought of using a convoy/platoon of driverless vehicles that can improve fuel efficiency are in advanced stages of trials
• There is increased awareness about the use of sensors to gain real time visibility of fleet movement, analyze and optimize fleet performance, routing, fuel efficiency and managing the fleet
• Using emerging technologies like blockchains to execute smart contracts, track provenance, digitize trade workflows and enable end-to-end shipment tracking
• Use of commercial drones is being explored for making the last mile deliveries

 

The image below represents the evolution of the various segments within logistics in terms of digital maturity [4]. However, to adapt to the next level and truly unleash the potential of Logistics 4.0, they will have to encompass multiple functions of logistics with seamless flow of information for smooth execution. The potential benefits of such use cases will not only push logistics to the next frontier, but also could potentially drive the laggards in the logistics space to speed up in adopting and embracing the changes.

Figure 2. Evolution of the logistics function into the 4.0 environment

Embracing the Logistics 4.0 Mindset

Before embarking on the journey of Logistics 4.0, companies must identify and develop a good set of Design Principles that articulates what the rational is to go down the path. These should identify the objectives and boundaries as well as the underlying rational for undertaking this initiative. Some examples of factors to consider are:

• Service levels and/or customer orientation
• Growth or Scalability desired
• Level of interoperability among physical systems, people and smart entities via the web or IoT.
• Real time data followed by complexity of real time analysis
• Visualization of the Supply Chain and results of the analysis for decision enablement

 

Having finalized the design principles, the path to getting started on Logistics 4.0 is:

• Get management executives on board to support the initiative to by showcasing the overall financial performance benefits of Logistics 4.0
• Start with a small initiative then scale up based on the learnings
• Outsource by finding reliable partners to assist in planning, implementation and scale
• Integration with IT as operational needs as operations technology needs to be integrated with data, IT applications and infrastructure.
• Identify a capable and committed in-house project team
• Set performance measurement objectives to build confidence with management, employees, suppliers, partners and customers

Logistics 4.0 use case

A use case for a Logistics 4.0 can show how a product gets shipped based on a customer order in the Logistics 4.0 environment as described below:

A user places an order online for a product with payment linked to a smart contract which will trigger the payment when delivery is confirmed. Once the order is processed, the system identifies the stocking locations for the products and runs a program to identify the option that results in the lowest cost to serve while meeting the service level expectations.

Once the location is identified, a trigger is sent to the connected WMS/WCS that controls the warehouse to pick the product from its stocking location and package it for pick up using ASRS/robotics. While the pick and pack process is being executed, the transporter is alerted to collect the shipment and the appropriate mode of transportation is chosen (trucks, vans, drones, etc.) Once the package is scanned and picked up from the warehouse, the inventory is automatically deducted from the records and updated. The customer has real time visibility during the entire process to track the order and when the delivery to the consumer is acknowledged, the payment is triggered.

This end-to-end process in a connected ecosystem would minimize leadtime and total process time, be transparent and achieve a high level of customer service. There are multiple use cases across the logistics value chain that use a combination of digital technologies and the underlying interconnected architecture to enable execution.

Conclusion

Without a doubt Logistics 4.0 is here to stay and will continue to evolve and mature.  In the authors engagement with selected companies, it has been observed that they are myopic to exploring Logistics 4.0 as an initiative for implementation.  Logistics 4.0 is the future and is a must to remain competitive and elevate service levels to customers. The maturing technology is available now to enable implementation of Logistics 4.0 and the above sections propose an approach to embrace.  However, like most implementations, there are challenges that need to be overcome. Three major challenges are :

• Reducing shadow IT and information silos through digital collaboration
• Breaking free form past oriented planning methodologies and embracing cognitive analytics
• Eliminating the independent spreadsheet through digital connectivity

 

It is the opinion of the authors that “eliminating the independent spreadsheet” is the most difficult to overcome notwithstanding the fact that the first 2 challenges require significant effort too. The familiarity and so called “flexible to use” mindset with spreadsheets is not only a show stopper but a behavioral aspect deeply entrenched within many employers and employees. Spreadsheets enable silo-ed information flow and block effective collaborative workflows which lead to several inefficiencies including extended lead time based on inefficient approval workflows. Overcoming the aforementioned challenges is key to achieving Logistics 4.0 success.