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Alamsjah, F.; , . Supply Chain 4.0. Encyclopedia. Available online: https://encyclopedia.pub/entry/23392 (accessed on 15 November 2024).
Alamsjah F,  . Supply Chain 4.0. Encyclopedia. Available at: https://encyclopedia.pub/entry/23392. Accessed November 15, 2024.
Alamsjah, Firdaus, . "Supply Chain 4.0" Encyclopedia, https://encyclopedia.pub/entry/23392 (accessed November 15, 2024).
Alamsjah, F., & , . (2022, May 26). Supply Chain 4.0. In Encyclopedia. https://encyclopedia.pub/entry/23392
Alamsjah, Firdaus and . "Supply Chain 4.0." Encyclopedia. Web. 26 May, 2022.
Supply Chain 4.0
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This entry is adapted from the peer-reviewed paper 10.3390/joitmc8020083

The rapid development of information and communication technologies over the last few years has resulted in the emergence of the fourth industrial revolution—Industry 4.0—and had a significant impact on their integration into supply chains. Technology advancements such as the Internet of Things (IoT), big data analytics (BDA), and blockchains have accelerated the shift to Industry 4.0. Supply chains benefit from Industry 4.0 in three distinct ways: vertical integration, horizontal integration, and end-to-end engineering.

supply chain ambidexterity supply chain agility Supply Chain 4.0 maturity organizational culture open innovation

1. Introduction

The rapid development of information and communication technologies over the last few years has resulted in the emergence of the fourth industrial revolution—Industry 4.0—and had a significant impact on their integration into supply chains [1][2]. Technology advancements such as the Internet of Things (IoT), big data analytics (BDA), and blockchains have accelerated the shift to Industry 4.0 [3][4][5][6]. Supply chains benefit from Industry 4.0 in three distinct ways: vertical integration, horizontal integration, and end-to-end engineering [7]. These can be enabled by real-time data analysis, autonomous monitoring and control, and logistics and supply chain control towers, allowing dynamic product creation and development, improved visibility in supply networks, and increased process efficiency [1]. People, machines, and data can now be integrated to create supply chains that are more agile and responsive [8]. The technological advancements in supply chain, also known as Supply Chain 4.0 (SC4.0), have improved seamless interconnection in supply chain globalization, leading to improvements in the effectiveness and efficiency of their operations [3][9][10].
As the traditional supply chains will eventually shift to digital supply chains to support new production models, transportation modes, customer experiences, and relationships, the implementation of SC4.0 is somewhat influenced by the state of development of a country, and this is particularly apparent in developing countries. Despite the aforementioned benefits, traditional supply chains, especially in the developing world, have not been able to quickly keep up with escalating breakthrough innovations brought by the advancement in Industry 4.0 technologies [11]. This is because developing countries often have limited financial resources to subsidize the industry and do not have supportive incentive policies. Furthermore, recent research has also pointed at the lack of coordinated effort and the relatively weak institutional policies in developing countries as being barriers to the technological innovation that is needed to achieve SC4.0 maturity [8][12].
The International Monetary Fund (IMF) has positioned Indonesia as one of the newly industrialized countries (NICs), along with Brazil, China, India, Mexico, and Turkey [13]. Exacerbated by its social and geopolitical instability, particularly in the developing world including Indonesia, the growth of the nationwide SC4.0 has tended to be gradual, despite the fact that Indonesia is an inseparable part of the global supply chain.

2. Industry 4.0 Readiness and Maturity Assessment

Industry 4.0 is a large-scale initiative, both on a national and firm level. Tripathi and Gupta [14] assessed the “Global readiness assessment model for Industry 4.0 (GRAMI4.0)” at the country level in 126 nations. They determined that 75% of countries have an Industry 4.0 readiness score of less than 0.5 on a scale of 0–1 (fully prepared), indicating that the vast majority of countries are unprepared for Industry 4.0. Several firm level assessment tools have been proposed [15][16][17][18][19] and the common maturity dimensions used are strategy, leadership, people, and technology. Using case studies in Sweden, it was found that the majority of manufacturing industries are in the initial maturity levels in their Industry 4.0 readiness [16]. Therefore, there is no empirical evidence of Industry 4.0 readiness.

3. Industry 4.0 in Developing Countries

Industry 4.0 has changed the way businesses are conducted from their design, production, culture, business models, etc., and this will transform supply chains to be more digitally connected and transparent [6][20]. Compared to developed countries, where the process of the formation of Industry 4.0 started earlier and was aimed at marketing and social results, developing countries including Indonesia face institutional (absence of state policy on the formation of Industry 4.0) and financial barriers and seek economic goals. At the same time, the initial approach to the formation of Industry 4.0 in developing countries, within which the initiators of this process are economic subjects (companies), envisages higher flexibility and effectiveness compared to the directive approach (state initiative), which is applied in developed countries [21]. Furthermore, Raj et al. [8] reported that the difficulties in the diffusion of technological innovation resulting from a lack of coordinated national policies in developing countries may prevent firms from fully reaping the benefits of Industry 4.0.
In Indonesia, as one of the developing countries, more than 73.7% of the total population (more than 200 million users) are Internet users and this number grew by 16% in 2021 1, while e-commerce in Indonesia enjoyed a 37.4% growth in 2020 2. However, the problem is not in ordering the goods, but how to deliver them in a more responsive way and efficiently in a country with more than 17,000 islands. The Indonesian government is committed to increasing the adoption of Industry 4.0 technologies and is set to double the productivity to cost ratio, to increase exports to 10% of the gross domestic product (GDP), and to allocate 2% of GDP for technology research and development by 2030. A roadmap has been designed by the government to accelerate the adoption of Industry 4.0 by formulating the Making Indonesia 4.0 strategy 3, which is focused on selected industry sectors such as food and beverages, textiles and clothing, automotive, electronics, chemicals, pharmaceuticals, and medical devices. According to a report by AT Kearney 4, however, the level of preparedness of Making Indonesia 4.0 is considered to be ‘nascent’, and discussion on a system-based analysis of Industry 4.0 in Indonesia is close to absent. Therefore, Industry 4.0 is an opportunity for developing countries to be more efficient and innovative.

4. Supply Chain 4.0

The introduction of Industry 4.0 in today’s factories, in fact, has created considerable impacts on the whole supply chain structure. The so-called Supply Chain 4.0 (SC4.0) [22][23][24][25][26] exploits new developments in digital technology including “advanced robotics and artificial intelligence, hi-tech sensors, cloud computing, the Internet of Things, data capture and analytics, digital fabrication, software-as-a-service and other new marketing models…” [27], providing supply chain actors with (almost) real-time information that improves visibility, transparency, and collaboration in supply chains. In this way, the potential disruption can be considerably mitigated while at the same time, the accuracy of demand forecast is increased and obsolete products lessened [24].
SC4.0 also allows the transformation of supply chains from a linear model in which instructions flow from the supplier to producer to distributor to consumer, to a more integrated model in which information flows in multiple directions [28]. McKinsey recently reported that digitization leads to SC4.0 becoming faster, more flexible, more granular, more accurate, and more efficient [29]. SC4.0 also makes the connections among supply chains become more flexible from upstream to downstream [6]. Furthermore, corporations with SC4.0 will improve their competitive advantage, product availability, and market share [30]. SC4.0 has therefore received considerable interest from scholars and practitioners working in various industry sectors [24][29][31].
Companies are investing heavily in developing their own SC4.0. In a recent PwC study on the advancement of Industry 4.0, a third of the respondents reported that their workplaces have embarked on digitizing their supply chains, while 72% are expected to do the same within five years 5. LaBerge [32] found that the COVID-19 pandemic has fast-tracked the utilization and adoption of digital technologies, and is expected to do so even when the crisis is over. In addition, McKinsey reported that the adoption of SC4.0 can reduce operational costs down to 30%, reduce lost sales by 75%, and produce a decrease in inventories of up to 75%. At the same time, the agility of the supply chains should increase significantly [29]. In summary, SC4.0 is an opportunity for developing countries because they are an integral part of the global supply chain.

5. Theoretical Lens: SC4.0 Maturity Model

Supply chain maturity is a measurable state of a supply chain, from its initial state to a more advanced state. The current state of supply chains is typically measured by using the total quality management indicators [33], the supply chain operations reference (SCOR) model [34][35], and the business process management approach [36]. Supply chain maturity cases are mostly reported by brick-and-mortar companies and demonstrate the positive impacts of being mature [34][35][37]. Recent empirical research has indicated a strong and positive relationship between supply chain maturity and performance in a developing country (e.g., [34][36]), in the context of small- and medium-sized enterprises (e.g., [38]). Understanding their maturity allows supply chains to be continuously improved [37].
A maturity model is a set of structured managerial capability levels that characterize organizational performance [39][40]. Maturity levels relate to identified managerial capability stages that can be executed in organizations [36][41]; each maturity level signifies gradational performance improvement. In practice, maturity models identify gaps in improvement and highlight weaknesses and strengths [37].
Frederico et al. [41] categorized SC4.0 maturity indicators into (1) managerial and capability support systems; (2) technological developments; (3) strategic outcomes; and (4) process performance requirements, which form the core or foundation of the proposed SC4.0 framework, along with their corresponding dimensions within four maturity levels: initial, intermediate, advanced, and cutting-edge. Managerial and capability supporters provide the organizational support, individual competency and skills, and collaboration with supply chain partners. Technological developments measure the ability of supply chains to take advantage of Industry 4.0 technologies to enhance supply chain processes, infrastructure, and information integration with suppliers and customers. Process performance requirements include process integration, collaboration, response rate, waste reduction, and man–machine–system interconnection. Finally, strategic outcomes signify the benefits the supply chains will accrue from the adoption of the above-mentioned technologies, which are typically indicated by cost reduction, positive customer experience, and strategic impacts. Therefore, researchers found a research gap on how to achieve SC4.0 maturity and its antecedents.

6. Agility, Ambidexterity, and Open Innovation

Digitalization has accelerated the adoption of Industry 4.0 technologies [42]. As they are required to be more agile, adaptive, and ambidextrous in order to boost innovation, many smart enterprises have embarked on digital innovation initiatives [43][44]. With these capabilities, they can respond quickly and be agile to market changes [45], and are able to share their knowledge, which in turn will drive an open innovation culture [46].
Puriwat and Tripopsakul’s recent study [47] found that organizational agility has a positive correlation to open innovation adoption. This also implies that the configurations of open innovation and organizational agility may explain the reasons for highs or lows in the levels of business model innovation [48]. Furthermore, open innovation leads to organizational ambidexterity, company success, and sustainability [49][50].

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