103
CHAPTER
5
Understanding Supply Chain 4.0 and its
potential impact on global value chains
Michael J. Ferrantino (World Bank Group) and Emine Elcin Koten (World Bank Group)
*
ABSTRACT
The reorganization of supply chains using advanced technol-
ogies, such as the Internet of Things (IoT), big data analytics,
and autonomous robotics, is transforming the model of supply
chain management from a linear one, in which instructions
ow from supplier to producer to distributor to consumer,
and back, to a more integrated model in which information
ows in an omnidirectional manner to the supply chain. While
e-commerce is uniquely suited to many of these techniques,
they also hold the promise of improving efciency in brick-
and-mortar stores. These technologies are generating enor-
mous benets through reducing costs, making production
more responsive to consumer demand, boosting employment
(employment in supply chain sectors where such technologies
are most likely to be applied has grown much more rapidly
than in other supply chain sectors and in the economy as a
whole) and saving consumers’ time. The impact of these tech-
nologies on the length of supply chains is uncertain: they may
reduce the length of supply chains by encouraging the reshor-
ing of manufacturing production to high-income economies,
thus reducing opportunities for developing countries to par-
ticipate in GVCs, or they may strengthen GVCs by reducing
coordination and matching costs.
• Digital technologies are transforming supply chain management from a linear model in which
instructions ow from supplier to producer to distributor to consumer, and back, to a more
integrated model in which information ows in multiple directions (sometimes referred to as Supply
Chain 4.0).
• Digital technologies offer huge benets in terms of inclusive patterns of growth, innovation and
entrepreneurial opportunities
• The impact of new digital technologies on GVCs is uncertain: they may reduce the length of supply
chains by encouraging the reshoring of manufacturing production, thus reducing opportunities for
developing countries to participate in GVCs, or they may strengthen GVCs by reducing coordination
and matching costs.
* We are grateful for helpful comments by Gary Hufbauer, Satoshi Inomata, Kalina Manova, William Shaw, Emmanuelle Ganne, and Lauren Deason. All
errors and omissions remain the responsibility of the authors.
