This report focuses on industry 4 or the fourth industrial revolution, a historical perspective, challenges and opportunities as well as its effect on a Logistics Company in Singapore. The company chosen is Best Global Logistics PTE Ltd., hereafter referred to as Best Global Logistics. It is one of the leading homegrown companies in logistics and freight here in Singapore and has already started implementing industry 4 technology. A sneak peek into industry 4 reveals a raging debate on its benefits versus its ethical and social implications not only in Supply Chain management but across manufacturing and service organizations (Richard & Felipe 2018).
Researchers, on one hand, agree that industry 4 can reduce manufacturing and overhead cost by over 30%, decrease logistics expenses by between 20-39%, improve on the quality of products and services, and finally improve on supply and distribution networks (Szozda 2017). On the other hand, the disruptive effects of industry 4 will be unprecedented. The potential of mass automation, cybernetic systems and Manufacturing Execution Systems (MES) will replace human labor is very real (Klingenberg 2017). Moreover, the industry has caused fear in many governments over security threats and unwarranted exposure of confidential information belonging to citizens and customers (Rojko 2017).
In the supply chain arena, there is no doubt that the fourth industrial revolution will result in shorter lead times, personalized service delivery, optimal use of transportation resources and improved inventory control(Ghadimi et al. 2018). However, there may be challenges before the benefits can accrue. To begin with, trade secrets may be compromised. What is more, the cost of adopting the technology may be high at the beginning and companies may have to deal with social unrest over ethical and moral implications (Gilchrist 2016).
Best Global Logistics, as the name suggests is a supply management and logistics company established in 2005. The company is among the biggest ten logistics companies in Singapore with branches in many European countries, the United States of America, South-East Asia and a franchise in the United Arab Emirates. Currently, the company employs over 50 employees in its headquarters in Singapore and its regional branches (Best Global Logistics [BGL] 2018).
The main services offered by Best Global Logistics include air, land and sea freight, clearing and forwarding services at the port, freight consolidation for efficient transportation, warehousing services, and cargo insurance arrangements on behalf of its clients (BGL 2018).
Its main customers include multinational e-commerce stores such as Amazon, Lazada, Redmart and Qoo 10. It also provides transport services for agricultural-based organizations such as Wilmar International and Greenland Horticulture Ltd. Best Global Logistics also provides its services to multiple fast moving goods companies, construction companies as well as apparel companies such as Charles and Keith. On a smaller scale, the company provides logistical services to individual importers and exporters (BGL 2018).
The Fourth Industry can trace its roots to four defined periods that marked the beginning of technological advancements in agriculture, health, transportation, and communication. To begin with, before the first revolution, man relied on simple tools to acquire food and fend off enemies. However, due to changing leasehold patterns and population growth, the agrarian revolution came about over 10,000 years ago. This period marked the creation of simple farm implements such as horse carts. It also led to the technological advancements as we know them today (Barret, Amaral & Pereira 2017)
This period falls immediately after the agrarian revolution. It can be traced to the early 18th century. It is marked by mechanization where people sought to become more productive in terms of agriculture and more efficient in terms of transportation (Lee, Kao & Yang 2014). During this period, horse carts and other animal-drawn implements were replaced with steam engines, water-powered tools, and machinery such as Jethro Tull’s seed drill in 1701(Klingenberg 2017).
The period is also characterized by the development of simple manufacturing, especially in textile. The diminishing natural resources such as wild game meant that people had to invent ways of feeding and clothing themselves. Farm tractors, locomotives, and the telephone were the major inventions of the period (Schwab 2016).
The second industrial revolution occurred in the 19th century. The period is characterized by exponential population growth. This led to mass production and the birth of the first advanced industrial setups. During this period, assembly lines began to take shape with the Ford Motor industries leading in this development. Mass production required more efficient energy and electricity was the answer to that call (Szozda 2017).
This period falls between the 1940s to present times. This revolution came with the advent of sophisticated computerized manufacturing and rapid automation systems. During the cold war, governments developed remote surveillance systems comprising of satellites and unmanned aerial and ground equipment (Klingenberg 2017). The manufacturing sector adopted some of the inventions by using computers to replace human labor and lower cost of production. Logistics companies adopted computerized inventory management systems such as the Just-in-time production system to minimize wastage and transportation challenges (Marr 2018).
The Fourth Industrial revolution or industry 4 can be traced to Germany in as recent as 2011 during the Hannover fair. Even so, the fair only accentuated what major companies have been advancing in terms of digitization, Just-In-Time production system and lean manufacturing. Toyota, for instance, had been using the Just-in-time production system for over 20 years and Dell Corporation, Google and Tesla had been developing artificial intelligence and lean manufacturing ideas way before the Hannover Fair (Klingenberg 2017).
Germany had tasked its researchers to come up with ways of exploiting the technological potential of the trending inventions. The researchers came up with solutions such as the power of harnessing social media, use of internet of things, augmented reality and virtual reality, lean production systems and finally the integration of human, technological and business operation systems (Szozda 2017).
According to Man and Strandhagen (2017), Industry 4 promises huge potential in terms of saving business operational costs. Researchers agree that it has the potential to decrease production costs, supply chain cost and costs of quality by a margin of 10-30%. Furthermore, industry 4 has been shown to enhance information sharing between businesses, enhance distribution networks and streamline inventory control (Klingenberg 2017).
Also referred to as the smart factory, Industry 4, the core activities of the company such as production, inventory control, and logistics are linked together through a flow of information enabled by automated systems that organize all these processes by communicating with one another without human intervention using internet of things (Gilchrist 2016).
This is made possible by employing cloud computing and company servers that always collect information on all core activities, therefore, acting as the nerve center for the company. Human intervention is only required where the system is unable to diagnose or schedule repairs in case there is a damage (Ibarra, Ganzarain & Igartua 2018).
Machines and processes in the fourth industrial revolution use Manufacturing Execution systems, Enterprise Resource Planning Systems (ERP) and Cyber-Physical Systems (CPS) that are connected to information communication technology to monitor themselves. They are capable of artificial intelligence and machine learning which enables them to operate autonomously to optimize company operations (Muller, Buliga & Voigt 2018).
The ability of machines to make autonomous decisions is always a cause for concern because it treads lightly on the question of morals and ethics. Research affirms that most countries do not entirely trust the internet of things or cloud computing. Only 19 percent of US companies and 12 percent of Japanese companies are willing to trust cloud sourcing technology outside their precincts. Many companies are also not fully prepared for the technology. Security concerns are very rife about the internet of things besides social apathy on machine labor concerns (Luthra & Mangla 2018).
Unlike in Szozda’s case study, Best Global Logistics is in the service sector not manufacturing. For this reason, the company has clients, who provide the company with business. It also has transport dealers who provide the company with transportation be it by air, land or sea. The company also deals with customs agents for clearing and forwarding freight and insurance agents who underwrite clients’ consignments. Finally, the company deals with the final recipients of orders who are its clients’ customers. Nevertheless, the recipients of the orders are integral to the success of Best Global Logistics as their satisfaction reflects good business for the company (BGL 2018).
The sequence starts with the clients when they avail their products to be delivered to their recipient customers. Immediately the clients convey their order, Best Global Logistics makes the necessary preparation with their warehousing agents for the availability of space for temporal storage of the orders (Stadtler, Kilger & Meyr 2014)
Once optimal orders have been delivered to the warehouse, the agents make necessary arrangements for clearing with the customs agents if the orders are to be delivered abroad. This step is not necessary if the orders are to be delivered locally. Finally, Best Global Logistics makes necessary arrangements with third-party transporting agents for the orders to be delivered to the recipients. Once the orders are fulfilled, Best Global logistics contact the clients for payment. Order processing and delivery takes a month to fulfill (BGL 2018).
To implement Industry 4 system, Best Global Logistics installs an information and communication technology system to its operations. It installs an Enterprise Resource Planning (ERP) system that monitors its human resources, its fleet of vehicles and those of the third party, the inventory, customs operations, the order recipients and finally the order details. All the data gathered is stored within the company servers and the cloud database (Szozda 2017).
Figure 1. Product and information flow at BGL. Adapted from (Szozda 2017)
Under the industry 4, all processes are automated, the clients fill their order details through the company website. The system through IOT gathers the information and optimizes inventory in the warehouse. Furthermore, it collects collates the data on customs and transport agents to minimize delay in order processing. The ICT system also collates the data to know the preferences of the recipients (Lee et al. 2014).
The ICT and ERP systems process the data for optimal information. With the information required on optimal conditions for the warehouse, customs, transportation agents and the recipients’ location and preferences the ICT system then makes the optimal delivery decision anonymously. Payment and delivery details are conveyed to the clients for order fulfillment. The whole process should take 1 week instead of one month.
To begin with, the company will require less human resources since the industry 4 technology will automate all processes done by company employees such as contacting clients, taking inventory, financial planning, and payment processing. This means that Best Global Logistics will be a lean organization requiring only essential staff.
The company will streamline its operations. In the case of order processing to delivery, the whole process takes just one week instead of a whole month. This will reduce operational costs such as transportation and logistics cost and increase the company profit margins. Moreover, the quality of service delivery will improve by over 20 percent (Zezuika et al. 2016)
Optimal inventory will also be achieved. The industry 4 technology will ensure that Just-in-time processes are implemented thereby leading to a reduction in wastage of space or overutilization of space which may damage the inventory.
The company will be more responsive to the market demands since it can customize the order delivery according to each client’s taste and preference. This will definitely lead to happy customers and repeat business. The information stored in the cloud databases can be shared with other parties such as the insurance and the clients to optimize the recipients’ expectations.
In replicating Szozda model for Industry 4.0, Best Global Logistics will automate repetitive tasks such as order processing, arranging for transportation and post-delivery arrangements for payment by the client. This will relieve the staff at the company to pursue the core activities of the company such as identifying new avenues for business growth, seeking more efficient transport partners and identifying more efficient storage and warehousing solutions. This will lead to an increase in productivity since the workers will no longer be bogged down by non-core business activities (Szozda 2017).
Currently, Best Global Logistics depends on the most basic computer applications for communicating with clients and workers. The company will need to change its ICT infrastructure and its labor dynamics. The company will need to invest heavily in artificial intelligence to replace non-essential labor required in conducting repetitive tasks. This implies that the company will experience a change in terms of labor as human labor in non-core activities will be substituted with autonomous machine labor (Barreto et al. 2017).
The company will also replace some of its staff from departments such as order processing which is manual-based to talent-based staff with new innovative ideas and technical know-how to move the business into a new direction. This will most likely result in resistance to change and culture shock within the company in the earlier stages of adopting industry 4 concepts (Schwab 2016).
As industry 4 is mainly focused on the technical aspects of the company’s logistics operations, new roles that the machines cannot handle will emerge or require revamping within the company. As such, it is expected that there will be changes in company roles from technical to customer care or social care that machine learning or automation does not apply. This will require the company to revamp its social media presence and either hire more personnel to handle the new roles or shift employees whose roles are made redundant to social care responsibilities within the company (Ibarra et al. 2018).
As industry 4 evolves, so do the dynamics of conducting business. One integral part of any business is its financial processes. Currently, Best Global Logistics only accepts hard cash from bank transfers to fulfill their order delivery. With Industry 4, new financial capabilities take precedence. For instance, instead of traditional banking and wire transfer, industry 4 introduces new financing capabilities such as Blockchain technology and e-wallet payment options. For this reason, the company will have to change its traditional conventional financing options to new unconventional internet payment options (Marr 2018).
It is imperative that Best Global Logistics will require changing its work culture especially with respect to social media communication. The company has strict rules against using social media applications such as Facebook, Instagram, and Twitter during work hours. Regardless, social media has been identified as an integral component for industry 4 to succeed and has been found to affect productivity by strengthening workplace relationships as well as aiding in machine learning. Research points that social media has the potential to increase company productivity by 30-40 percent. In its bid to adopt industry 4, Best 4 has to change its workplace policy particularly with regards to social media (Muller et al. 2018).
Introduction of new technology in any workplace often disrupts the company operations for some time. This case applies to Best Global Logistics during the adoption of industry 4 concepts. There will be a transition as systems and people integrate together. Besides, machine learning takes time for automation to be seamlessly executed (Luthra & Mangla 2018).
Conclusion
This report explores the Industry 4 concept, its evolution over time and the current trends. The paper examines the opportunities the concept presents to a company in the logistics business in Singapore. Moreover, the paper identifies the challenges that the concept presents to the businesses. A replication of the industry 4 concept has been conducted on Best Global Logistics and the changes the concept brings to the company have been discussed.
References
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