DOI: 10.1002/sres.

2712

RESEARCH ARTICLE

Intelligent supply chain performance measurement in

Industry 4.0

Yongping Xie1 | Yixuan Yin1 | Wei Xue2 | Hui Shi3 | Dazhi Chong4

1
School of Economics and Management,
Xidian University, Xi'an, China
Abstract
2
School of Foreign Studies, Xi'an The concept of Industry 4.0 has been widely recognized by the world since its
University, Xi'an, China introduction in 2011 Hannover Industrial Expo. Industry 4.0 strategy does not
3
Department of Computer Information only revolutionize the manufacturing system and processes but also lead to the
Systems, California State Polytechnic
University, Pomona, CA, USA
formation of the intelligent supply chain. Currently, Industry 4.0-based intelli-
4
School of Management, California
gent supply chain has attracted a lot of attention from academia; however,
Lutheran University, Thousand Oaks, CA, studies on performance measurement indicator of intelligent supply chain are
USA
still lacking. To fill this gap, this paper first introduces the impact of Industry
Correspondence 4.0 on supply chain management. After analysing key characteristics of intelli-
Yixuan Yin, School of Economics and gent supply chain, the paper proposes a performance measurement indicator
Management, Xidian University, Xi'an
framework consisting of seven indicators. This indicator framework enriches
710126, China.
Email: 540783849@qq.com the theoretical knowledge of supply chain performance evaluation and pro-
vides an efficient way to improve the operational performance of intelligent
Wei Xue, School of Foreign Studies, Xi'an
University, Xi'an 710065, China.
supply chain management.
Email: xuewei05@163.com
KEYWORDS
Funding information Industry 4.0, intelligent supply chain, performance measurement indicator, supply chain
Soft Science Research Project of Shanxi management
Province, Grant/Award Numbers:
2018KRM040, 2019KRM006; Humanities
and Social Sciences General Project of the
Ministry of Education of China, Grant/
Award Number: 0YJA790033; National
Natural Science Foundation of China,
Grant/Award Numbers: 71502090,
71972153, 71672143, 71804147, 71472144

1 | INTRODUCTION such as the Internet of things (IoT), cyber-physical sys-

The concept of Industry 4.0 has been widely recognized
by the world since its introduction in 2011 Hannover
Industrial Expo (Yli-Ojanperä, Sierla, Papakonstantinou, &
Vyatkin, 2019). Industry 4.0 strategy can not only revolu-
tionize the manufacturing system and processes but also
lead to the formation of the intelligent supply chain in
supply chain management (Bertoncel, Erenda, Bach,
Roblek, & Meško, 2018; Peruzzini & Stjepandic, 2017,
2018; Weyer, Schmitt, Ohmer, & Gorecky, 2015; Xu,
Xu, & Li, 2018). Under Industry 4.0, modern technologies
tems (CPSs), and artificial intelligence are able to seam-
lessly integrate into every link of the supply chain and
improve quality and efficiency in the supply chain process
(Lu, 2019). Supply chain systems can share information in
real time for firms to make flexible adjustments according
to the changes in demand or supply (Li, 2007, 2013, 2014;
Teixeira & Borsato, 2019; Zandieh & Aslani, 2019;
Zhang & Wang, 2019). Meanwhile, the introduction of
more intelligent processes and devices can effectively
break the heterogeneity among supply chain information
systems, maximize efficiency, and create an intelligent,

Syst Res Behav Sci. 2020;1–8. wileyonlinelibrary.com/journal/sres © 2020 John Wiley & Sons, Ltd. 1
2 XIE ET AL.
networked, and automated supply chain system
(Nabhani, Uhl, Kauf, & Shokri, 2018; Ounnar, Pujo,
Mekaouche, & Giambiasi, 2007).
Currently, Industry 4.0-based intelligent supply
chain has attracted a lot of attention from academia
(Bicocchi, Cabri, Mandreoli, & Mecella, 2019).
Researchers investigate the relationship between vari-
ous optimal control models and Industry 4.0-based
supply chain system. Barreto, Amaral, and Pereira
(2017) analyse the challenges of intelligent supply
chain from the aspects of resource planning, ware-
house management systems, and information security.
Ghadimi, Wang, Lim, and Heavey (2019) research the
supplier evaluation and selection process of supply
chain system. They analyse key features of Industry
4.0 and propose multi-agent systems to address chal-
lenges in sustainable supplier evaluation and selection
process. While a lot of research focus on the analysis
of performance, processes, and implementation of
intelligent supply chain, studies on performance mea-
surement indicator of intelligent supply chain are still
lacking. To fill this gap, this paper analyses key char-
acteristics of intelligent supply chain and proposes a
performance measurement indicator framework that
enables monitoring and evaluation of supply chain per-
formance. This framework contributes to the theoreti-
cal knowledge of supply chain performance evaluation
and provides an efficient way to improve the opera-
tional performance of intelligent supply chain
management.
2 | I N D U S T R Y 4 . 0 AN D I T S I M P A C T
ON SUPPLY CHAIN
In the Industry 4.0, there are massive usage of modern
technologies in the automation of production processes
(Gorkhali & Xu, 2016; Li, 2018; Lu, 2016; Xie, Cai, Xu,
Jiang, & Bu, 2017). Industry 4.0 introduces higher
degree of digitalization by digitalizing and integrating
whole manufacturing processes (Chen, 2020; Ivanov,
Bokova, Muminova, & Katuhin, 2020; Ivanov,
Razumeev, Bokova, & Muminova, 2019; Kiel, Müller,
Arnold, & Voigt, 2017; Liao, Deschamps, Loures, &
Ramos, 2017; Xu, Wang, Bi, & Yu, 2012, 2013). Based
on technologies such as IoT, CPSs, and cloud comput-
ing (Cai et al., 2014; Chen, 2017; Xu, He, & Li, 2014;
Zheng, Martin, Brohman, & Xu, 2014), Industry 4.0
can form an intelligent network that enables the inte-
gration of the entire value chain in manufacturing.
The information sharing among operations, logistics,
marketing, and sales can create high level of flexibility
in the customization of the product and high-level
collaborative production (De Souza, Borsato, &
Bloemhof, 2017; Lee, Kao, & Yang, 2014; Li, 2012; Xu,
2011a, 2011b).
The innovation in Industry 4.0 era is directing the
rapid development of supply chain management towards
digitization and intelligence (Witkowski, 2017). The tra-
ditional supply chain is a series of discrete, independent
steps including marketing, product development,
manufacturing, and distribution to customers. Industry
4.0 can break down barriers in these steps and can make
the supply chain a complete ecosystem that is completely
transparent to all participants (Witkowski, 2017). In sup-
ply chain, the speed, efficiency, and order execution of
procurement will directly affect whether enterprises can
meet the needs of downstream customers quickly and
flexibly. The integration and information sharing in
Industry 4.0 (Xu, 2014, 2016) enable enterprises to opti-
mize decision making in procurement and establish a
complete procurement control system, which will
improve the procurement efficiency and reduce the pro-
curement cost. In manufacturing, Industry 4.0 enables
intelligent production in the manufacturing links, which
can improve the efficiency of enterprise management ser-
vices including enterprise inventory management, quality
management, and labour utilization (Hecklau, Galeitzke,
Flachs, & Kohl, 2016). The application of intelligent tech-
nologies makes it possible for enterprises to track raw
materials, components, semi-finished products, and fin-
ished goods in real time. The instant insight into the pro-
duction status can reduce error rates, strengthen the
control and tracking of product quality, and improve the
efficiency and effectiveness. Industry 4.0 also drives the
development of intelligent logistics. In Industry 4.0, intel-
ligent logistics, as the cornerstone of constructing intelli-
gent factory, is an important link connecting supply and
production (Witkowski, 2017). Intelligent logistics can
optimize the storage mode and transportation route of
products through the remote information processing.
Intelligent logistics has the ability of perceiving, learning,
reasoning, and solving logistics problems by itself, which
will improve the efficiency of modern logistics and
reduce logistics expenses. For instance, GPS data can be
used to plan more reasonable and efficient logistics
routes, so as to meet the requirements of rapid response
and reduce transport costs to the maximum extent. As an
important component of supply chain, sales is the link
connecting consumers and enterprises. Industry 4.0 pro-
vides new approaches for enterprises to deeply under-
stand and grasp consumer behaviours and market
demands. With cloud computing and big data analytics
(Hämäläinen & Inkinen, 2019; Zeng, Li, & Duan, 2012),
enterprises can accurately gain insights into customers'
purchase frequency and purchase preference, use
XIE ET AL.
dynamic pricing strategies, allocate shelf capacity, and
optimize product adjustment to maximize product sales.
In general, Industry 4.0 enables complete integration
and optimization of procurement, manufacturing, logis-
tics, and marketing in supply chain. An Industry
4.0-based intelligent supply chain will increase response
speed in supply chain processes, improve the whole sup-
ply chain value, and ultimately achieve supply chain
management innovation.
3 | I N T E L L I G E N T S U P P L Y C H A IN
The core of Industry 4.0 lies in the transformation of
supply chain into intelligent supply chain. Intelligent
supply chain is a comprehensive integrated system of
technology and management that combines CPS and
modern supply chain management theories to achieve
intelligent, networked, and automated supply chain
(Schmidt et al., 2015). The core of intelligent supply
chain is to eliminate asymmetric information in supply
chain and achieve seamless integration among procure-
ment, planning, production, logistics, and warehousing.
Intelligent supply chain can be analysed in aspects
such as visibility, leagility, personalization, information
governance, supply chain warning, green, innovation,
and learning.
3.1 | Visibility
The visibility of supply chain is the traceability and
transparency of all processes and operations of supply
chain (Nikander, 2017). Supply chain visibility enables
all parties in supply chain to monitor and track parts,
components, or products in a timely manner. Visibility
is a big challenge to the operation of traditional supply
chain. In a traditional supply chain, when problems
such as low inventory turnover, high inventory, or
misallocation of resources occur, the problem may get
worse and continue to spread along the chain. It is dif-
ficult to monitor, track, and manage these problems
due to the complexity of supply chain. The introduc-
tion of Industry 4.0 makes it possible for supply chain
stakeholders to track materials, products from the
beginning to the destination. A smart highly integrated
supply chain system supported by the IoT, CPSs, cloud
computing, and big data analytics (Zhang & Chen,
2020) can collect and analyse processes, logistics, and
warehouse data in real time; achieve more efficient
product traceability; and improve the communication
efficiency of product production, storage, transporta-
tion, and sales (Xu & Viriyasitavat, 2019). By
3
transforming the linear characteristics of supply chain
into more modular characteristics, intelligent supply
chain can not only improve the accuracy of demand
forecasting of the whole supply chain but also improve
coordination of the whole chain.
3.2 | Leagility
Leagility of supply chain is the combination of agility
(rapid response and service) and lean (total cost optimiza-
tion; Naylor, Naim, & Berry, 1999). In the past, lean and
agile were considered as two statuses of supply chain
operation, which are independent of each other. These
two statuses have different influences on the four ele-
ments of supply chain value as efficiency, cost, service,
and speed.
Lean and agile are not mutually exclusive in the intel-
ligent supply chain. Intelligent supply chain uses the
Internet, IoT, and cloud computing to timely identify,
process, and analyse the changes in all supply chain
links. The IoT-based intelligent supply chain system can
integrate the production activities within and between
enterprises, monitor the production status in real time,
adjust supply, and demand according to the production
schedule. In intelligent supply chain, the implementation
of leagility will ensure the service quality, low inventory
cost in the downstream, and stable and efficient
upstream production and operation.
3.3 | Personalization
In today's highly competitive markets, more and more
enterprises realize that whether they can timely meet the
increasingly personalized needs of customers will largely
determine the overall competitiveness of enterprises. In
the intelligent supply chain, the entire value chain can be
integrated into the product cycle. Customers will be con-
sidered as an inseparable part of the supply chain system.
The Industry 4.0-based intelligent system will connect
with customers throughout the life cycle, classify cus-
tomers based on many interactions, and provide cus-
tomers with reliable and personalized service solutions
(Witkowski).
3.4 | Information governance
“Intelligence” is the core feature of intelligent supply
chain. To enable the information collection, filtering,
analysis, and transmission in the whole process of the
supply chain, intelligent supply chain has to ensure that
4 XIE ET AL.
all participants produce high-quality process and data in
the supply chain process. In this case, a strategy is needed
to maximize the value of information and reduce risks
associated with information generation and sharing in
the supply chain. In intelligent supply chain, information
governance includes transaction management, rule estab-
lishment, information security, data flow management,
and information life cycle management. The goal of
information governance is to ensure information security
and information reliability (Donaldson & Walker, 2004;
Kooper, Maes, & Lindgreen, 2011) and make information
communication and information transfer more timely
and convenient.
3.5 | Supply chain warning
Because intelligent supply chain puts more emphasis on
the early problem identification and process bottleneck
warning, it can minimize risks and costs during the
whole process (Li, Wang, & Wang, 2014). Intelligent sup-
ply chain enables stakeholders in the supply chain sys-
tem to get real-time status of production, sales, and
inventory and make intelligent self-adjustments
according to the needs of upstream and downstream
enterprises. Intelligent supply chain uses a simulation
mode to run through the supply chain system for any
specific order. To quickly find the bottleneck in the pro-
cess, the system starts the virtual order process first. This
virtual process allows the system to detect the bottleneck
in the supply chain and send out an early warning alert.
The approach of supply chain warning ensures stable
supply chain processes and supports intelligent
production.
3.6 | Green
Green production and manufacturing of products is one
of the key characteristics of Industry 4.0 (Chen, Yao, &
Chong, 2019; Li, Wang, & Cook, 2014). An intelligent
supply chain supported by Industry 4.0 adopts ecological
design to achieve the goal of sustainable development.
Through close cooperation between departments and
enterprises, intelligent supply chain can support environ-
mental management in the supply chain process and
achieve system environmental optimization (Walton,
Handfield, & Melnyk, 1998). To minimize environmental
pollution and carbon emissions, intelligent supply chain
takes all types of businesses among supply chain as a
whole group and forms an integrated environmental
management system that optimizes the whole process of
product design, raw material procurement, product
manufacturing, and product sales for environment
protection.
3.7 | Innovation and learning
Innovation and learning, which add value to the product
or services, are good for the competitive advantage. The
technology wave brought by Industry 4.0 enables busi-
nesses to survive and develop in a continuous learning
environment. In intelligent supply chain, the innovation
and learning capability are evaluated by (1) the innova-
tion ability of members, (2) the adoption rate of new
technologies, and (3) the novelty of new services. This
innovation and learning capability will increase the effec-
tiveness and reduce the time cost of information commu-
nication between each link of supply chain and
contribute to the performance of other six aspects of
intelligent supply chain.
4 | I N T E L L IG E N T S U P P L Y CH A I N
PERFORMANCE M EASUREMENT IN
IN DU STRY 4 .0
The intelligent supply chain redefines the supply chain
with emergent and intelligent technologies. To provide
adequate management support, stakeholders in the sup-
ply chain need to employ a set of well-structured and
specified performance measures to reflect the operation
status of the entire supply chain. These measures should
be made based on key characteristics of intelligent supply
chain. Based on the characteristics discussed in the previ-
ous section, intelligent supply chain performance mea-
sures can be classified into the following indicators:
visibility, leagility, personalization, information gover-
nance, supply chain warning, green, and innovation and
learning. Table 1 shows these first-layer indicators and
corresponding second-layer indicators.
1 Visibility: The more complete the visibility process is,
the more effective it will be to monitor the operation
status of the supply chain and realize the efficient
management of the supply chain. As the first-layer
indicator of the performance measurement indicator
framework of intelligent supply chain, visibility indica-
tor can be evaluated by using three second-layer indi-
cators: process visibility, warehouse visibility, and
logistics tracking visibility. Process visibility refers to
the ability of order processing, order check, order reali-
zation, order to the whole process of visual monitor-
ing, and management. Warehouse visibility refers to
the classification and coding of storage units, the
XIE ET AL. 5

TABLE 1 Intelligent supply chain performance measurement if the supply chain can provide customers with unique
indicator framework in Industry 4.0 products while meeting their basic needs. Service per-
First-layer indicator Second-layer indicator
sonalization refers to retaining customers by analysing
customer service data. Customer satisfaction refers to
Visibility Process visibility
the evaluation of customer satisfaction in each link of
Warehouse visibility the supply chain.
Logistics tracking visibility 4 Information governance: Information governance is
Leagility Agile the core of intelligent supply chain (Kooper et al.,
Lean 2011; Li & Warfield, 2011). This indicator is composed
Flexibility of three second-layer indicators: information controlla-
bility, information sharing, and information sensitiv-
Personalization Product personalization
ity. Information controllability refers to the ability of
Service personalization
keeping information safe and ensuring its reliability.
Customer satisfaction Information sharing refers to the extent to crucial
Information Information controllability information is available to supply chain members. The
governance Information sharing information sharing among the members of the supply
Information sensitivity chain is important for improving the supply chain per-
formance. Information sensitivity refers to the timeli-
Supply chain warning Risk management
ness of information communication and the
Controllable cost
convenience of information transfer in the process of
Quality management supply chain management.
Green Environmental pollution 5 Supply chain warning: In an intelligent supply chain,
Resource utilization and early warning is essential in every link of the supply
recyclability chain. The supply chain warning consists of three sec-
Innovation and Members' innovation ability ondary indicators: risk management, controllable cost,
learning Adoption rate of new technologies and quality management. Risk management refers to
Development intensity of new
the process of supply chain management in which
services enterprises take effective measures to minimize risks.
Controllable cost refers to the ability of controlling the
cost of each link of the supply chain with a predefined
definition of attributes, and the comprehensive moni- target. Quality management refers to the management
toring of storage units' storage and delivery. Logistics activities such as command and control for achieving
tracking visibility refers to the real-time tracking and quality objectives.
timely response of all information involved in the 6 Green: Green is the quantification for environmental
product logistics process (Mohanty & Shankar, 2019; impact, which is mainly evaluated from three aspects:
Shi, Li, Yang, Li, & Choi, 2012; Yang & Yu, 2019). environmental pollution, resource utilization, and
2 Leagility: Leagility is the combination of lean and agile recyclability (Lin & Zhang, 2020). Environmental pol-
(Donaldson & Walker, 2004). In the supply chain per- lution is evaluated using particulate measure, such as
formance measurement framework, leagility indicator emissions of PM2.5, SO2, NOX, and CO2, occurring
is composed of three second-layer indicators including along the activities in the supply chain. Resource utili-
agility, lean, and flexibility. Agile refers to the ability zation and recyclability measures the extent to which a
of quick response to R&D, production, replenishment, resource is being used to produce a good or service
and timely delivery. Lean refers to the ability of achiev- and the proportion of machines, raw materials, and
ing overall cost optimization of the supply chain. Flexi- tools being reused in the whole supply chain.
bility refers to the flexibility and adaptability of the 7 Innovation and learning: Intelligent supply chain is
supply chain, which allows the supply chain to become driven by innovation and learning, which plays an
demand chain. important role in the development of visibility,
3 Personalization: Personalization indicator assesses the leagility, personalization, information governance,
degree to which customer needs are met. Personaliza- supply chain warning, and green of intelligent supply
tion consists of three second-layer indicators: product chain. Innovation and learning consist of three second-
personalization, service personalization, and customer ary indicators: members' innovation ability, adoption
satisfaction. Product personalization is a horizontal rate of new technologies, and development intensity of
extension built on conventional products. It evaluates new services. The innovation ability refers to the
6 XIE ET AL.
supply chain member's ability of continuously develop-
ing and exploring new processes, product, and ser-
vices, to adapt to the rapidly changing needs. The
adoption rate of new technology refers to the speed of
acceptance, integration, and use of new technologies
in supply chain. The development intensity of new ser-
vices refers to the extent to which member enterprises
in the supply chain effectively integrate information
resources and customer participation to improve ser-
vice quality for customer needs.
5 | C ON C L US I ON
The core of Industry 4.0 lies in the transformation of sup-
ply chain to intelligent supply chain. Intelligent supply
chain can effectively improve the performance of supply
chain and solve many problems in supply chain manage-
ment. The construction of intelligent supply chain perfor-
mance measurement is an important way for enterprises
to enhance their core competitiveness in Industry 4.0.
After incorporating the characteristics of intelligent sup-
ply chain, this paper conducts analysis from seven
aspects: visibility, leagility, personalization, information
governance, supply chain warning, green, and innovation
and learning. The proposed performance measurement
indicator framework enriches the theoretical knowledge
of supply chain performance evaluation and provides a
novel way to improve the operational performance of
intelligent supply chain management.
Future studies can further quantify the second-layer
indicators to form more systematic and comprehensive
third-layer indicators. An evaluation model can be
established through mathematical analysis to (1) improve
the measurement effectiveness and (2) apply theoretical
research in the practical management process.
ACK NO WLE DGE MEN TS
This paper is supported by National Natural Science
Foundation of China (NSFC: 71472144, 71804147,
71672143, 71972153, and 71502090), Humanities and
Social Sciences General Project of the Ministry of Educa-
tion of China (20YJA790033), and the Soft Science
Research Project of Shanxi Province (2019KRM006 and
2018KRM040).
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Shi H, Chong D. Intelligent supply chain
performance measurement in Industry 4.0. Syst Res
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