How fourth industrial revolution will transform traditional supply chains
The fourth industrial revolution, or industry 4.0 as it is popularly known, extends far beyond the factory floor and is affecting the way goods are made, marketed, bought, sold and consumed. The introduction of smart technology such as artificial intelligence, the internet of things (IoT), and big data analytics will usher in an era of mass customisation where people can order running shoes made to suit their exact foot measurements, while medical device companies will produce replacement joints and other prosthetics customised for individual patients.
“It’s quite hard to make general statements about how industry 4.0 and its enabling technologies like IoT are going to impact supply chains other than to say that it will eventually transform them completely,”says Enterprise Ireland senior innovation executive David Keeley.
“Not only will the way supply chains function change, but the nature of the materials and assets may change also,” he adds. “All of this makes significant value chain disruption inevitable. And with this will come associated risk and huge opportunity.”
The use of IoT and analytics in factories and supply chains will reduce waste and increase productivity, he continues. “The supply chain will become increasingly predictive and traceable,”says Keeley. “Suppliers of devices and equipment for inclusion in larger systems could use IoT to stay connected with their products throughout their life cycle. This opens up opportunities to extract much more value over the long term and may lead to the transformation of business models with an increasing focus on existing and new service offerings.
“Importantly, the traditional field service model will change from one that is reactive to proactive. Suppliers will be able to generate new types of high-value offerings to their customers that not only differentiate them from their competitors but also possibly change the way these types of devices are purchased.”
This closer integration of the supply chain is nothing new to Smurfit Kappa. “Industry 4.0 is almost an evolution of the things we have been doing for many years in a less automated manner in terms of partnering with customers and supply chain management,” says Smurfit Kappa Ireland chief executive John O’Loughlin. “It’s all about trust and partnerships with customers. We have been doing that since 1934 in different ways. This is not new for us.”
There has also been a change in the market and in shopper behaviour. “In the fast-moving consumer goods area, 70 per cent of purchase decisions are now made while the consumer is standing in front of the shelf. Packaging has evolved from a brown box in a warehouse to attractive six-colour, high-gloss packs displayed on the shelf. Nothing happens in isolation anymore. Industry 4.0 means everyone is integrated in the chain.”
Industry 4.0 is not the only issue affecting the packaging industry at the moment, O’Loughlin points out. “Environmental sustainability is another issue,” he says, noting that Smurfit Kappa brings a slightly different perspective to the current debate on plastics.
“We don’t see it as a war on plastic. Ultimately, we see plastic as a control issue – control of waste, recovery and excess use. We need to reduce excess and look at recyclable alternatives and viable recovery systems.”
He explains that plastic has its uses where transparency or waterproof qualities are required but that doesn’t mean that alternatives shouldn’t be explored. “Recyclable alternatives is where we come in,” he says. “There is a role for everything. We see plastic being used now for things like fruit punnets which were made of fibre or paper in the past. Consumers and retailers have dominated the debate up until now. We are seeing more of a balance of voices now. We provide multiple solutions to our customers and we use plastic where it is appropriate.”
Industry 4.0 and new omnichannel shopping systems are presenting challenges in terms of packaging. “Presentation of the product is king now. We are seeing growth in ecommerce channels and our box not only has to deliver the product in a good condition to the consumer, it has to have a personal connection to the brand and present it well. Sustainability is also important.”
Industry 4.0 is bringing the company closer than ever to customers. “We have to be part of the design process,” he says. In some cases, the company retains ownership of packaging lines in the customer’s premises and provides the staff to operate them.
“From our perspective we see our future as a trusted provider of solutions to problems for large and small customers. We are aware that many customers don’t want to produce their own products. They want to get their brand out there. Trend will be where there is more and more integration of supply partners. This will be driven and facilitated by industry 4.0.”
Smurfit Kappa’s experience centre, where customers can try out packaging designs
Smurfit Kappa has developed a range of smart tools to aid customers in the packaging design process. They allow reps to sit down with customers to design a box or other piece of packaging on screen selecting from thousands of different design templates and options. At the end of the process the customer can avail of the company’s inventive “3D Store Visualiser” to see their brand in a virtual shopping environment, visualising and positioning it for testing against various factors.
“They can see what their product will look like on a supermarket shelf in Poland if they like,”says O’Loughlin. “We also have an experience centre here where customers can come to play around with packaging designs and at the end of the process we digitally print the package for them to take away for further consideration. We have developed these tools to make the process faster and more efficient for our customers.”
This is an example of the ongoing evolution of the connected supply chain which Keeley believes will become much longer and comprehensive encompassing most if not all of the product life cycle. “Industry 4.0 will allow suppliers to refine and improve their offerings faster than ever before and they will be more heavily involved in what will be a more dynamic, iterative and responsive design process.”