PROMISES OF “INDUSTRY 4.0” AND THE FUTURE OF LOGISTICS SERVICE
the recent years, the way the businesses function has changed to a great
extent. Since 18th century, just as the mechanical production and
mass production with electricity revolutionized the different sectors, so now
the evolution of Industry 4.0 i.e., the fourth industrial revolution comprising
automation, artificial intelligence, robotics, data analytics and internet are
dramatically changing today’s business. The transition from “Mass customized
production” to “Customized individualized production”, was the factor for
Industrial 4.0. The principle behind the evolution of Industry 4.0 was to
create a resilient and responsive network where machines can exchange data with
one another and with people, otherwise called as Internet of Things (IoT).
Also, it can support decentralization, mobility, interoperability, modularity and
flexibility of operations. The fourth industrial revolution is characterized by
integration of the physical and virtual world that enables machines to collect
real time data, store, analyse and take autonomous decisions based on the data,
called as Cyber-Physical system.
far, the supply chain included siloed steps taken through marketing, production
and distribution and the links in the supply chain never had consistent data
which led to poor forecasting and disruption in the flow of the order. Now that
with the evolution of Industry 4.0, the supply chain will dissolve its silo and
every link in the supply chain will be transparent and have visibility on the
needs and challenges of others. The digital supply chain, as we envision it,
consists of eight key elements: integrated planning and execution, logistics
visibility, Procurement 4.0, smart warehousing, efficient spare parts
management, autonomous and B2C logistics, prescriptive supply chain analytics,
and digital supply chain enablers (Schrauf 2016). By integrating the key
elements, companies could enhance their interaction with all the stakeholders,
improve management decision and enable new business or operating models.
logistics” is one of the key element of digital supply chain. The elevating highly
personalized customer demands and expectations, changing market trend,
increasing competition and emerging start-ups has created a need for the logistics
industry to make intelligent decisions, maintain integrity and enhance supply
chain visibility. It has driven the logistics sector to make the warehouses,
products and services “smart” by adopting innovative technologies and new
business models. The products and services which are smart can perform any task
like people. It eliminates the non-value-added activities by giving way to the
people to perform tasks that requires more intelligence and smartness that the
smart product or service cannot provide. This enhances prominent level of
customer service, safety, reduction in cost, process and performance optimization.
However, the industry 4.0 raise various
questions to logistics service providers, that how would they identify an
appropriate digital strategy that could be integrated into the business and how
would they use the real-time data and maintain relationship with different
stakeholders. The promises of industry 4.0 will confirm the supply chain
process improvement, whereas logistics service providers should adopt the
surveillance of industry 4.0 to automate the inventory management, transportation
and keep updated as well. Industry 4.0 contains real-time information, sensor-based
and location-based services to make no latency responses towards unforeseen
situations and changing network conditions. In addition, there are certain
questions raised by the logistics service provider from industry 4.0, that how it
could be a threat for people losing jobs by the process of automation, that finding
a technically sound employee and adoption of technology might be complex. Also,
more consolidated work must be done to makes things simpler to connect with
suppliers and buyers. The technical understanding of the technology and
controlling parameters can create issues for the logistics service providers to
control on overall information (Twydell, 2017).
the other hand, the real fact is that only 28% of the Transportation &
Logistics companies are advanced in digitisation. The lack of a digitisation
and training is thus the biggest challenge for transportation and logistics
companies (Shifting patterns pwc 2016).
logistics service providers (LSPs) where contract logistics and warehouse
services play a key role, this leads to the question how warehousing may be
affected by “Industry 4.0”.
this thesis, which was suggested by a successful, fast growing Singapore based
LSP, will pursue the question of
What will the new
concepts and technologies of “Industry 4.0” mean to the future of warehouse
management? More specifically:
Which are the “Industry
4.0” key promises and trends which may affect warehouse operations within the
How would the adoption
of “Industry 4.0” concepts in warehouse management could save cost and alter
the design of the warehouse?
Which are the resulting
challenges for warehouse management, and how should they possibly be met?
Smart warehousing being one of the key links in
the digital supply chain, Industry 4.0 is the need for every organization to
change the way of managing warehouse operations by digitally managing the inventory
from the point of receiving to the point of shipment. The objective of this
thesis is to provide an overview of the “Effects of Industry 4.0 which is an
overarching term for the concepts such as Internet of Things, Robotics, Data
analytics) and automation in warehouse management – challenges and future
An overview of Industry
4.0 concepts and future trends will be presented.
The key Industry 4.0
promises such as making autonomous decisions with real-time data visibility, interoperability,
flexibility, predictive analytics, productivity improvement, inventory accuracy
and safety will be presented. The latest trends of Industry 4.0 such as
Internet of Things, Autonomous mobile robots, augmented reality and additive
manufacturing and the opportunities where Industry 4.0 concepts would add an
advantage in warehouse management will be presented.
After discussion of the
opportunities of Industry 4.0 for warehouse management, the feasibility of
implementing the Industry 4.0 concepts in a warehouse will be presented by
doing a quantitative analysis that includes investment cost of the technology,
revenue and expenses of a logistics service provider for one customer, return
on investment, quantified benefits and cost savings. This would be compared
against the quantitative analysis made for a conventional warehouse which
doesn’t adopt Industry 4.0 concept.
Upon doing the
quantitative analysis of the Industry 4.0 concepts, the warehouse design
specifications for the new Industry 4.0 concepts would be benchmarked against
the conventional warehouse design specifications.
The challenges of
adopting Industry 4.0 concepts in warehouse management such as investment cost,
complexity, training of personnel, data security and privacy will be presented.
As a conclusion, based on the benefits, cost and risk, Industry 4.0 concepts
will be ranked for future implementation in the warehouse.
2. RESEARCH APPROACH:
industry is driven by operational demands. Therefore, innovation of
technologies solely depends on the customer requests. Realizing the importance
of innovative technologies and to remain competitive and improve the capacity,
the leading fast growing LSP named “Pan Asia Logistics” came up with list of
innovative technologies that has the potential to change the way of warehouses
being operated. Also, an added suggestion was to develop a vision of future warehouses which goes beyond
currently discussed 4th generation and 5th generation
concepts. The list of suggestions included automation, Internet of
Things, 3D printing, WMS.
Pan Asia Logistics is a holistic logistics
provider with its headquarters located in Singapore. The company provides
freight forwarding, fully integrated logistics and supply chain solutions.
Services include Air Freight, Ocean Freight, Contract Logistics, Project Logistics,
Heavy Lift, Time-Critical Solutions, and Value-Added Services. The organization
was founded in 2002 to meet the demand for a new type of logistics company
born-and-bred in Asia but with innovation and expertise of western logistics
Pan Asia Logistics Investments (PALI) is the
group’s property development subsidiary, which was established in 2014 with a
dedicated team of architects, engineers, designers, contract and risk managers.
The real estate development arm offers a full range of services that handles
all phases of industrial real estate development revolving around planning,
investing, designing, building, owning and operating the warehouses.
thesis topic was proposed based on the suggestions provided by Pan Asia Logistics,
an opportunity was given to work as an Intern at Pan Asia Logistics. During the
first 2 months of internship, I was attached to operations manager of a
warehouse to learn about the current practises, warehouse management system and
process flow of the warehouse. I learnt about the IoT enabled technologies
which are currently in operation at warehouse for stock identification, efficient
picking and storage of goods.
2.1 Methods of data collection and sources
this chapter, the methods used for collecting information from various sources
to find answers for the research questions will be presented. Qualitative and
quantitative research methods were followed. Qualitative research method is a
type of primary data collection method which includes interviews, focus groups,
personal observation, literature review and does not involve mathematical
calculations. This method provides higher depth of understanding. Quantitative
research method is also a type of primary data collection method which involves
mathematical calculations and are easy to make comparison.
Internal interview with Pan Asia Logistics staff
interview was conducted with warehouse supervisors and managers of few key
customers. It was a one to one conversation with clear focus to understand the
warehouse process, challenges faced by the staff for each process and
suggestions for improvement.
With the information obtained from the internal
interview, warehouse was visited a couple of times to document the process flow
and to look for opportunities to implement IoT enabled technologies in the
warehouse. Also, time-study was done for value added services based on the
input given by the staffs. A Key client’s site was visited where the construction
of the warehouse was still on-going. From the site visit, got the impression that
the most effective warehouse design would improve the efficiency and
effectiveness of the logistics operation, at the same time balancing the cost
effectiveness of the design.
External interview with Industry experts
Industry 4.0 encompasses several technologies, it was narrowed down to Internet
of Things, Augmented Reality, Autonomous Mobile Robots and Additive
Manufacturing for thesis. Respective suppliers and industry experts of the above-mentioned
technologies were contacted for the interview. The following information were
gathered from the experts:
automatic storage retrieval system (Logimat) – SSI Schafer, a leading provider of
logistics solution was requested for a site-tour to have a look at the storage
solutions. The elements, performance characteristics of the storage solutions
were discussed. Also, suggestions for combining two different Industry 4.0
concepts were provided by the expert.
mobile robots – Automated Micron Assembly Pte Ltd, an exclusive distributor of
Fetch Robotics, was visited to know about the benefits and challenges of
implementing the robots at the warehouse. A demo of an exclusive Fetch core
software developed to control the robots was shown.
glasses – Picavi is a leading solution provider for vision picking with smart
glasses. A telephonic interview was conducted to understand the performance
characteristics and ways of improving productivity at the warehouse.
facilitated workshop was conducted for a group of people who were interested to
know about the innovative technologies and discuss about the future opportunities
of working with industry experts.
Alien technology who is one of the leading hardware suppliers of RFID tags and
readers and Tunity technologies who is an expert in providing solutions for
RFID technologies were called in to conduct a workshop to discuss about the
benefits upon implementation of RFID technology at the warehouse.
3D printer – Spare Parts 3D is
a 3D printing company which supports the digitalization of the inventory and
enables production on demand and rapid delivery of the spare parts. A group of
six people from Pan Asia Logistics were invited to Singapore University of
Technology and Design (SUTD) who is partnering with Spare Parts 3D for their
projects. Experts presented on how the feasibility of 3D printing can be
assessed in supply chain projects, ranging from warehouse operation to supply
chain management, including establishing an understanding of what type of
building infrastructure is needed to support the operation of an 3D printer.
insights of Industry 4.0 were gathered from the “DHL Trend Radar 2016” and the
key trends that would be impact the logistics industry within a decade were
sources of data include “Deloitte insights – Industry 4.0 overview”, “Pwc 2016”
and “Industry 4.0: the fourth industrial revolution – guide to Industrie 4.0
the above data sources, the following information was collected:
evolution of Industry 4.0
Industry 4.0 concepts
of Things (IoT) impacts on supply chain- Machado; Shah) provided information on
application of IoT
this thesis, profit and loss calculation was done to compare the operating cost
savings of an IoT enabled warehouse with the operating cost of a conventional
warehouse. The calculation included revenue, labor cost, lease and other
operating expenses which were based on the data provided by Pan Asia Logistics.
The investment cost of the IoT enabled technologies were based on the data
provided by respective suppliers.
Cost benefit analysis (CBA)
In this part of the thesis, cost benefit analysis
is explained. Cost benefit analysis is an approach which
considers “both quantitative and qualitative factors for analysis of the value
for money for a particular project or investment opportunity. Benefits to costs
ratio and other indicators are used to conduct such analysis”. The profit is estimated by considering the direct, indirect income and operating
expenses pertaining to a project.
The cost factors are weighed over the
benefit factors. To assess whether spending on a technology is a worthy
investment, all the costs pertaining to the technology are considered such as
investment, training, staff, operations and maintenance. A profit and loss
calculation is done with the income and expenses. The benefits such as improved
productivity, inventory accuracy and reduction in space are converted into
monetary equivalents. Increase in savings and faster return on investment shows
the benefit of investing in a technology.
analysis is done for the IoT
enabled warehouse and conventional warehouse to assess the savings made before and after
automating a warehouse.
Industry 4.0 concepts, basic warehousing process, current practices and
opportunities, functional compatibility, quantitative analysis, ranking)
“INDUSTRY 4.0”: AN OVERVIEW OF THE RELATED CONCEPTS AND
this chapter, an overview of the Industry 4.0 and its related concepts starting
with the definition, components of Industry 4.0, design principles and ending
with benefits will be presented.
“Industry 4.0” definition
The term “Industry 4.0” is a German government
initiative that was announced in 2011, comprised of representatives from business,
politics, and academia. The Industry 4.0 concept was developed to stay much ahead
and competitive in the manufacturing industry (Kagermann, Lukas, &
Industry 4.0 is a new phase in the organization
and management of the entire value chain throughout a product’s lifecycle. Customer’s
increasing demands for customization shortens the lifecycle of a product starting
from design, development, manufacturing, delivery, repair and recycling (Kagermann,
Anderl, Gausemeier, Schuh, Wahlster 2016). Networking of people, products and
processes creates value to the supply chain by providing real-time data and
optimal value stream in the link of the value chain at any point of time. With
the connected network, the process can be optimized taking into consideration
of cost, resource consumption and availability.
“Industry 4.0” is defined as “the integration of physical
devices, people and processes
with networked sensors and software, used to predict,
control and plan to make decentralized decisions” (Industrial Internet
Components of Industry 4.0
4.0 concept was initiated to optimize the production in a smart factory, while Internet
of Things focuses on the utilization of digitized and connected devices and
products (Leisenberg 2017). It has been identified that there are four key
components of Industry 4.0: Cyber-Physical Systems, Internet of Things,
Internet of Services and Smart Factory (Mario, Tobias, Boris, 2015). However, big
data and cloud computing are not considered as components of Industry 4.0 as
they utilize and analyse the data generated by Industry 4.0 technologies to
provide smart services (Kagermann, 2014). Machine to machine communication and
smart products are also not considered as components of Industry 4.0, as
machine to machine communication acts as the enabler of Internet of Things and
Smart products are the sub-component of Cyber-Physical Systems. In this
chapter, the four key components of Industry 4.0 will be presented.
Cyber physical systems (CPS)
main component of Industry 4.0 is the integration of the physical and information
world where machines can collect real time data, store, analyse and take
autonomous decisions based on the data, called as Cyber-Physical system. The
physical objects, equipments, buildings etc. are embedded with computer system
that has the capability of communication via internet and use internet
services. CPS has sensors that gathers data from the environment, stores,
analyses and makes necessary changes to the physical world through actuators.
is characterized into four phases. The first phase includes identification
technologies like RFID tags that allows unique identification. However, this
CPS system does not store or analyse the data. The storage and analysis of the
data must be done by a centralized service. The second phase includes sensing
and processing capabilities to perform limited functions. The third phase of
CPS has a network-enabled intelligent sensing and processing capability that
could store and analyse the data. The final phase of CPS is completely
autonomous and intelligent where the system self-configures its parameters
based on its previous analysis of data (Bauernhansl,
Internet of Things (IoT)
The IoT enables the Cyber Physical Systems such
as RFID tags, sensors, actuators to interact with each other and with other
smart components through unique identifying entity. IoT is otherwise defined as
the connection of smart devices and enabling them exchange data with each other
and other smart components and environment. The internet enabled communication
between the smart devices provides the ability to gather information, analyze
and provide support from a remote location (Giusto, Lera, Morabito,