Inventory Management in The Industry 4.

0 Era

1. Background (Adia)
2. Inventory management theories (Adia)
3. How industry 4.0 can enhance performance of inventory management (Cening)
Driven by the technology of artificial intelligent (AI), sensors, and Internet of Things (IoT),
a smart and data-driven distribution center can be developed (Wilkins, 2018).
 Inventory Level Efficiency
The AI technology would help in forecasting the demand of your suppliers, based
on data history. Related to inventory, the AI technology would help in making a
crucial decision to optimize stock levels. The AI software could analyze the order
point of an equipment of another distributor. Knowing this, if we also need the same
equipment, we could get ahead of ordering it to jump the queue.

 Cost of Goods Sold

The optimization of the inventory level would, the higher the efficiency of inventory
level, the lower the cost of goods sold (COGS) would be. Inventory monitoring and
replenishment systems could be done by using smart sensors (Tang & Veelenturi,
2019).
 Lead Times
The improved supply chain that Industry 4.0 empowered, would convey a faster
order management and shorten the lead-time for costumers.

There are some technologies that associated with the growth of Industry 4.0 that have the
relevance to inventory management, which are: (Tang & Veelenturi, 2019)
 Advance robotics
This advance technology provide a safe companion for human worker as the
communication technologies, sensor capabilities, and artificial intelligence went
advance.
 Internet of Things (IoT)
This system of device, which could be applicate on sensors or machine, can
communicate and interact with others over the internet. The monitoring and
controlling process could also be operated remotely. The cost reduction and the
increase speed of processing time, thus lead to the improvement in the operation.
  Artificial Intelligence (AI)
The AI works by mimicking the natural intelligence of human. It uses computers to
interpret external data, learns from it, and uses those learning to conduct
descriptive, predictive, or prescriptive analysis.

4. The practice of inventory 4.0 (Cening-Fika)

As stated on the previous sub, the main advantage of practicing industry 4.0 in inventory
are efficiency in inventory level, reducing cost of goods sold, and shorten the lead time.
Combining these benefits, provides an insight that could be: (Tang & Veelenturi, 2019)

 Advance robotics

For example, BMW has robots and human workers work alongside on its assembly
line in its plant in South Carolina. Also, wearable robotics with exoskeletons can
aid human workers to reduce repeated motion injuries due to lifting heavy boxes
in the warehouse or harvesting fruits in the field. Companies such as Caterpillar
and GE are exploring the adoption of wearable robotics to improve worker safety.
JD.com, the largest online retailer in China, has adopted various advanced robots
to stack products on shelves and pack merchandise in 500 warehouses (Marr,
2018). By 2019, JD.com implemented the world’s first automated warehouse in
Shanghai equipped with Mujin robots (Hornyak, 2019).

The assembly line of BMW in South Carolina, consist of robots and human worker.
The robots also beneficial in reducing the injuries in human’s works due to working
accidents in lifting heavy boxes in the warehouse of harvesting fruits in the field.
Along with that, Caterpillar and GE also exploring the benefit of safety
improvement of worker from robots application. The largest online retailer in China,
JD.com, implementing robots into their 500 warehouses to stack product and pack
merchandise (Marr, 2018 in Tang & Veelenturi, 2019). Also by 2019, JD.com levels
up by implementing the world’s first automated warehouse in Shanghai, equipped
with Mujin robots. (Hornyak, 2019 in Tang & Veelenturi, 2019).

 Internet of Things (IoT)

 Columbus (2018) reported that, by 2020, Discrete Manufacturing, Transportation
& Logistics and Utilities industries are projected to spend $40B each on IoT
platforms, systems, and services.

 Artificial Intelligence (AI)

For example, IBM Watson is an AI system that is capable of answering questions
posed in natural language. Also, GE uses sensors to collect data from its gas
turbines or windmills via its Predix Cloud (an online platform), and then use
machine learning and deep learning algorithms to conduct preventive maintenance
before a breakdown.
IBM Watson applied the AI system to answering questions, posed in natural
language. GE applied the AI system into sensors to collect data from its gas
turbines or windmills via Predix Cloud (an online platform). Next, the data collection
would be used to conduct a preventive maintenance using the machine learning
and deep learning algorithms. This machine learning would prevent the company
of having a loss from an unpredictable breakdown.

 Smart Sensors

The real time information about the inventory on the shelves in physical store, often
inaccurate. Obtaining an accurate inventory information is costly (DeHoratius et al.,
2008 in Tang & Veelenturi, 2019). The reduction in cost and the improvement in
capability of different sensors offer a new opportunity for stores to develop ‘smart
shelves’ using weight sensors that can monitor the existing quantity of items on
the shelves, notify stock room staff to refill inventory before the item gets depleted
from the shelf, and inform warehouse or vendor for immediate replenishment.
Another advance example, the inventory of a final end consumer in its house can
also be measured. Samsung’s smart fridges with cameras features in it, would
allow the owners to get full information about the inventory, expiration dates etc.

5. Conclusion/concluding remarks
We have explained before that the inventory management in the era of industry 4.0 emerge some
technologies that could benefited in that major topic. Advance robotics, Internet of Things (IoT),
Artificial Intelligent (AI), and smart sensors are some kind that transforming the inventory
management. However, these technologies may create some problems. The problems could be
social unrests, that may create other problems including social unrests due to job losses to
automation (e.g., autonomous vehicles, robots, drones, etc.). Another one could be the social
inequality due to the fact that these technologies often involve smart phones and smart devices
that are still inaccessible by the poor. The even more severe income inequality especially when
the technologies often create more benefits for the educated class Given all these challenges,
researchers should also examine the impact of these emerging technologies on the welfare of
different socio-economic classes of citizens (Sodhi and Tang, 2014 in Tang & Veelenturi, 2019).

Despite the recent advances of different technologies that support the Industry 4.0 movement,
companies also must take measures to mitigate several underlying risks, such as (Tang &
Veelenturi, 2019):

 Cyberattacks
As supply chains are becoming more digitalized and rely on real time
communication and coordination of many different devices (sensors, robots,
drones, etc.), there is a heightened concern about cybersecurity.
 Faulty data
Even though smart devices are capable of sensing, collecting, sharing, analyzing
data, etc. so that they can facilitate many supply chain operations smoothly, yet if
the system is being hacked or if the system is not functioned properly, disasters
ensue as we witnessed two crashed of Boeing’s 737 Max in 2019 due to faulty
readings of a key sensor.
 Safety regulations
Some standard safety guidelines and regulations must be developed to ensure
worker and public safety, as it have a possibility to disrupt the whole environment.
 Privacy issues
Many sensors record visuals and sounds of different movements of different
people in many places. The government must develop regulatory measures to
ensure companies collect and store this data properly for public safety.

In summary, companies should understand the implication beneath the benefits of Industry 4.0 to
inventory management. Beside gathering the benefits, companies also have to mitigate some
issues that could impact negatively.
References

Tang, C. S., & Veelenturi, L. P. (2019). The strategic role of logistics in the industry 4.0 era.
Transportation Research Part E 129, 1-11.

Wilkins, J. (2018, July 31). Inventory Management 4.0. Industrial Distribution (Online); Madison.