Supply chain implications of Industrie 4.0

The ICT enabled convergence of technological and business processes will herald the new age of (German) manufacturing.

These were the wise words of Prof. Dr. Henning Kagermann, whom I was fortunate to see present on Industrie 4.0 to the Royal Academy of Engineers in February 2014. They were not documented in his presentation but have continued to motivate my work. Why they resonate with me so strongly is that they look beyond the bounds of a factory, or a technology to provide guidance on how we should look to develop new innovative ways to do business. He is encouraging us to think about new business models and supply chain implications. In essence, as the video you have just watched explains that this leads to the emergence of more consumption driven supply chain. The focus shifts from cost to customer, and ensuring products and services are used in the right way. A more customer centric viewpoint leads to a different perspective on how we view costs. It leads to the adoption of a total landed cost, or total supply chain perspective rather than a myopic view of manufacturing costs, or worse still labour costs. It also sees a shift from economies of scale, to economies of scope, as we seek to produce a batch size of 1, in a socially and environmentally responsible way, at a price comparable to mass production.

It is therefore imperative that we think of the opportunities of Industrie 4.0 from a business model perspective, whilst recognising the important role that technology plays as an enabler. These themes are discussed in more detail in the full presentation made to WMG’s Supply Chains in Practice event: Supply chain implications of industrie 4.0 (17:59).