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Executive summary
Over the past few decades, there has been a tremendous revolution in the industries from 1.0 to 4.0. All the evaluations are merely because of the increasing customer requirements and market competition. However, in order to manage the sustainability of a company, they start using the concepts of globalization, digitalization, internet of things and automation.
Currently, the society is experiencing the concepts of smart factories, big data mining and analysis, industrial robotics and algorithms for forecasting. However, these smart concepts are not only applicable for industrial automation, these can also equally applicable for other business aspects but not limited to, such as finance and planning, procurement and supply chain management and talents and human resource management. This essay on practical application of aspects of Industry 4.0 for supply chain management for its effectiveness and efficient. Moreover, this essay evaluates the practical application of such Industry 4.0 aspects to supply chain management.
Table of content
The organization selected for case study 3
Industry 4.0 – from inception to now 4
Practical application of Industry 4.0 in supply chain management 7
The organization selected for case study
This assignment is to understand how the revelation of Industry 4.0 impacts to supply chain management systems. Hence, this assignment has been carried out about a famous German Automobile company “BMW”. This company is a multinational automobile company which provides premium level automobile products all over the world. BMW manufacturing plants are operating in 14 countries and has a world-wide sales locations operating in 140 countries with a staff force of 134,563 (bmwgroup.com).
The company’s provides a wide range of automobile solutions mainly world famous BMW Cars in both diesel and electric, small cars under the brand name of Mini, BMW Motorcycles and luxurious cars segment under the brand name of Rolls Royce. It also consists with few services segments namely: DriveNow, ReachNow, ParkNow and Digital Energy Solutions Company for innovative green energy solutions and BMW Financial Services provides leasing facilities.
BMW is well-known for its quality in the production lines and its innovation that bring in to its products. BMW factories are equipped with industrial robotics so that its employees does not involve in heavy tasks. It also uses state-of-the-art production mechanisms such as autonomous production and logistics functions to ensure on time delivery of both materials and final product.
Industry 4.0 – from inception to now
Industries 4.0 was initially inducted in Germany, this represents the current trend of automated manufacturing which created the cyber physical environment concept (Hermann, Pentek, and Otto 2016). As GTAI (2014) mentioned, Industry 4.0 enables each machine to talk to each other with centrally controlled system. This communication may means locally or maybe even globally, hence, this concept is based upon machine to machine talking and IoT which will finally create a cyber yet physical environment.
It is understood that business development may have short term, midterm and long term stages. With the globalization, companies are now facing a tremendous competition which is not limited to its country but also from the world as a whole (Scholte, 2007; Kristianto et al., 2017). Accordingly, for a company to survive its business in the long run, it is essential to make right decision at the right time. However, in order to make the right decision, a company need to have an efficient management support system. In a nutshell, for a company to grow in the current highly competitive global market, the company need to understand the optimal use of its limited resources (Stock and Seliger, 2016; Dolgui et al., 2018). In order to optimize entire business process, it is important have an optimized data management system to ensure accuracy of each decision made by companies. Hence, the world required end to end system integration process to achieve their desired goals. This process is backed by sophisticated computer systems which are connected to each other via networks (Ivanov et al., 2016; Liao et al., 2017; Bechtsiset al., 2018).
Industry 4.0 is widely understood as the next industrial revolution in the world which is driven by integrated systems and big data concepts. As these system integrations are based on World Wide Web which is not called as Internet of Things (IoT), this has eventually created a cyber physical system where all the machines can talk to each other over IoT (Wang et al., 2015; Jeschke et al., 2017).
CPS are the foundation of Industry 4.0 (Varghese and Tandur 2014). One of the greatest achievements of ICT world is the invention of CPS (Monostori, 2014). He further elaborated that, CPS are systems that collaborating computational entities which also uses intensive connections with surrounding physical world. Further, these systems uses huge number of data in the real time basis in order to achieve desired efficiency.
According to Landscheidt and Kans, 2016, system automation raises the quality of output while making the manufacturing process an efficient one. This has further developed to the extent of IT and industrial robots which will lead to computer integrated manufacturing systems which is widely known as cyber physical systems (Guilherme and Diego, 2017).
It is also noted that there has been few revolutionary milestones in the industries. The first one was the transformation from handmade productions to large scale mechanical productions in 18th Century. Afterwards the invention of steam and electricity in 19th century. This was used for the 2nd world war times. The major milestone in revolution 3 consisted with computerization, exploration for new energy sources and work automation. Finally the industry 4.0 was initially invented in Germany in 2011. Industry 4.0 initiated the concept of smart factories where entire production from procurement till the final product is automated in the factory. However this involves few human interaction as well. These factories ensures that machines and productions floors organize b their own and ensures optimum efficiency in the production line (Szozda N, 2017).
However, as Szozda N (2017) stated, although industry 4.0 is mainly focused about factories, there are other areas such as integrated supply chain management systems where Industry 4.0 can be benefited widely. This concept involves number of companies connected to each other through cloud systems to share data in a virtual space.
Further, it was noted that industry 4.0 is not only limited to production process, but also involves in distribution and procurement processes. General electronics have stated that the connection between complex physical machinery and devices with sensors connected to the internet and software are used to predict control and plan business outcomes.
Industry 4.0 can consider on the process of management level which covers entire supply chain system. This will enable a supply chain to digitalization, automation, mobility and network collaboration. Hence, Industry 4.0 will eventually support the value chain of a company [Herman, Pentek and Otto 2015].
There are four major technologies which have been backed by Industry 4.0, they are namely, 01. Data and connections – large database analysis (big data concepts), Internet of things (IoT) and cloud technologies to store data centrally for ease access to data. 02. Analytics and artificial intelligence – digitalization of work based on knowledge to use machine learning, advanced analytics to predict future forecasts. Improved and advanced algorithms and data availability. Implementation of advanced data mining tools 03. Human and machine interaction – touch screens and graphical user interfaces to make life easier and virtual realities. 04. Automated machine park – new production opportunities such as 3D printing, advanced robotics with the help of artificial intelligence and machine learning, energy storage (Lee, Kao, Yang 2014, Pfohl, Yahsi, Kurnaz 2015; Yu, Nguyen, Chen 2016).
Although the concept of Industry 4.0 is widely discussed about all over the world, yet discussed under different aspects such as, “Second Machine Age”, “Made in China 2025”. However, it is understood that this is the same concept that has been discussing all over the world (Zhang et al., 2016).
Practical application of Industry 4.0 in supply chain management
The corporate strategy of BMW is that they focus on customer satisfaction. Its vision to achieve this main strategy is lies upon two main factors namely, sustainability and competitive advantage. The main objectivity of the supply chain of BMW is therefore, to protect its core principles of both success factors mentioned above.
Since BMW is a world famous brand, it also partnered with over 12,000 suppliers in 7o countries. This world-wide supply network creates a significant value in the final product. According to its Senior Vice President – Purchasing and supplier network (BMW USA): Mr. Murat Askel, BMW won’t be a success story if not for their suppliers: Supply chain is the heart of the business (supplychaindigital.com, 2019).
BMW uses SAP systems for its operation. Once an order captured in the system, it captured through the main database of BMW and start allocating resources to the production. This process happens in a real time basis in order to reduce lead time in delivery and to maintain its inventory in an efficient manner. According to BMW group, nearly half of its supplies are from Germany itself. The rest has been spread across the world. BMW’s supply chain division is responsible for selection of suppliers and evaluations, quality assurance and audits and validations. For this purposes, BMW trains its staff to increase awareness of their work. This is one way to ensure sustainability of the brand BMW. Its central purchasing warehouse is situated in Munich. However, there are few more purchasing quarters located across the world as well to help locating, validating and quality assurance of its suppliers. These sub purchasing quarters helps both local BMW manufacturing plants as well as global supply chain of BMW (
Sachin Mathews, 2015).
Sachin Mathews further stated that since BMW is purchasing and sourcing at a global scale, the BMW Group is espoused to a big foreign currency exchange risks. In order to mitigate the risk, the company entered in to a Hedging strategy where if BMW is purchasing from a foreign country, they pays in such country’s currency. Accordingly, the risk of significant market fluctuations from foreign currencies will be mitigated and the value created through its supply chain will not be espoused to exchange losses from purchasing.
Currently the company is upgrading its connected supply chain system for them to connect most of its suppliers and logistics providers with GPS data. The company believes with this implementation, they will be able to track material inbounds in a real time basis with higher accuracy for delay times. This system is also empowered with AI so the Company can perform predictive analytics over delivery times and accordingly plan its production in an efficient manner (Victoria Johns11 December 2018).
BMW’s manufacturing process is now fully Industry 4.0 compatible (www.bmwgroup.com, 2019). According to BMW Group, present digitalization and innovation is impacting its every single part in its production line. This will enable them to ensure the value created in the supply divisions are intact and increased further. Its production lines use, Smart data analytics – this has been used to capture and evaluate data in the production. Three dimensional image processing is one example that BMW to uses to ensure accuracy of each product that goes through its quality checks. The algorithms used in cameras captures thousands of bolts and fittings in the car to identify any defect. This data will also be used to improve its quality in further.
BMW also uses automated robots in its production lines. For this purposes, it uses a light weight robots alongside with its employees to increase production efficiency. However, more than half of BMW’s production lines are invaded by autonomous light weight robots. Each robot’s performance is captured in real time and even before a defect occurs, its algorithms can detect under performance and send those robots to maintenance. It also provides an external support robotic structure to its employees called “Exoskeleton”. This has been given for employees who are engaged in heavy work. These robotic structures helps it employees to strengthen their arms and legs.
It is also noted that from purchasing and inventory levels, to the distribution, all the prices are captured in a single IoT platform in BMW. Their data engineers can capture, evaluate and visualize data that they captured. Almost everything is connected to a computer system and then all the data has been transferred to a cloud for the easy access of information. Accordingly, BMW algorithms shows processes that blocks its target achievements and where they need to perform maintenance precisely. This will reduce over maintenance costs and reduce delay times. Ultimately these will increase value created through supply chain.
References
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GTAI (Germany Trade & Invest). 2014. Industries 4.0-Smart Manufacturing for the Future. Berlin: GTAI.
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