Logistics 4.

0
Digital Transformation of Supply Chain Management

Editors
Turan Paksoy
Department of Industrial Engineering
Konya Technical University
Konya-Turkey

Çiğdem Koçhan
Operations Research and Supply Chain Management
College of Business Administration
Ohio Northern University, USA
Sadia Samar Ali
Department of Industrial Engineering
King Abdul Aziz University
Jeddah, Kingdom of Saudi Arabia

p,
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Library of Congress Cataloging-in-Publication Data
Names: Paksoy, Turan, editor. | Koçhan, Çiğdem, editor. | Ali, Sadia
Samar, editor.
Title: Logistics 4.0 : digital transformation of supply chain management /
editors, Turan Paksoy, Department of Industrial Engineering, Konya
Technical University, Konya-Turkey, Çiğdem Koçhan, Operations
Research and Supply Chain Management, College of Business
Administration, Ohio Northern University, USA, Sadia Samar Ali,
Department of Industrial Engineering, King Abdul Aziz University,
Jeddah, Kingdom of Saudi Arabia.
Other titles: Logistics four point oh
Description: First edition. | Boca Raton, FL : CRC Press, 2021. | Summary:
“Manufacturing and service industry has been broadly affected by the
past industrial revolutions. From the invention of the steam engine to
digital automated production, the first Industrial Revolution and the
following revolutions conduced to significant changes in operations and
supply chain management (SCM) processes. Swift changes in manufacturing
and service systems caused by industrial revolutions led to phenomenal
improvements in productivity for the companies. This fast-paced
environment brings new challenges and opportunities for the companies
that are associated with the adaptation to the new concepts such as
Internet of Things and Cyber Physical Systems, artificial intelligence,
robotics, cyber security, data analytics, block chain and cloud
technology. These emerging technologies facilitated and expedited the
birth of Logistics 4.0. The Industry 4.0 initiatives in SCM has
attracted stakeholder’s attentions due to it is ability to empower using
a set of technologies together that helps to execute more efficient
production and distribution systems. This initiative has been called
Logistics 4.0 as the fourth Industrial Revolution in SCM due to its high
potential. Connecting entities, machines, physical items and enterprise
resources to each other by using sensors, devices and the Internet along
the supply chains are the main attributes for Logistics 4.0. The context
of the Internet of Things (IoT) enables customers to make more suitable
and valuable decisions due to the data-driven structure of the Industry
4.0 paradigm”-- Provided by publisher.
Identifiers: LCCN 2020027404 | ISBN 9780367340032 (hardcover)
Subjects: LCSH: Business logistics.
Classification: LCC HD38.5 .L6125 2021 | DDC 658.7--dc23
LC record available at https://lccn.loc.gov/2020027404

Visit the Taylor & Francis Web site at

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Preface

The past three industrial revolutions have not only brought the terms of “the steam engine, the age of science and mass
production, and the digitalization” to our lives but also imposed fundamental changes in our society. Manufacturing and
supply chain operations have been radically altered and transformed into a new shape as industrial revolutions progressed.
Rapid changes in manufacturing and service systems caused by industrial revolutions have led to improvements in business
productivity and efficiency for companies over the years.
Now, we are on the edge of the Fourth Industrial Revolution that is powered by the rapid technological improvements
and emerging technologies that are transforming the way companies do their business for decades. These fast-paced
technological changes impose unprecedented challenges and create opportunities for companies who adopt emerging
technologies such as the Internet of Things, Cyber-Physical Systems, Artificial Intelligence, Robotics, Cyber Security,
Data Analytics, The Block Chain, and Cloud Computing Systems.
In recent years, globalization, increasing global competition and technological growth rate, diversity in customer
demands, and increasing complexity in supply chain processes urged companies to adopt and intensely use emerging
technologies in their business operations. The Fourth Industrial Revolution, also known as Industry 4.0, was coined for
the first time in 2011 in Germany and it is an innovative paradigm that has the aim of intensely integrating technologies
into the production and distribution processes.
The birth of Logistics 4.0 is accelerated by the emergence of these innovative technologies. Logistics 4.0 is an emerging
logistics paradigm that can connect entities, machines, physical items, products, and enterprise resources by using sensors,
devices, and the Internet within supply chains. This paradigm enables more efficient production and distribution systems
which have attracted stakeholder’s attention due to its potential leading to high-performance supply chains.
The Internet of Things (IoT) is at the core of this digital transformation in SCM. The IoT’s ability to collect and analyze
real-time data and help supply chains to adapt rapidly changing markets add an unusual value to the SCM processes. The
IoT’s role on the collaboration between the supply chain partners and the coordination of supply chain activities enable
data-driven, flexible and agile, and operationally efficient supply chains. The merits of IoT can be applied from real-time
product tracking and warehouse condition monitoring activities to precise forecasting, and product delivery date and
delay estimation.
In this context, our book “Logistics 4.0: Digital Transformation of Supply Chain Management” presents the state-of-
art research in the digital transformation of supply chains. The book targets audiences who are interested in the history of
the past industrial revolutions and their impacts on our lives, while covering the most recent developments in disruptive
technologies used in the transformation process of today’s supply chains.
The contribution of our books includes but not limited to:
• A detailed literature review on the Fourth Industrial Revolution and the Digital Transformation in SCM
• The Role of the Internet of Things and Cyber-Physical Systems on the Digital Transformation of Supply Chains
• Decision Making with the Machine Learning Algorithms
• Smart Factories and the Transformation of the Conventional Production Systems
• The Use of Artificial Intelligence and Augmented Reality in SCM
• Advances in the Robotics and Autonomous Systems in SCM
• Smart Operations and Block Chain in SCM
This peer-reviewed book consists of 12 sections and 22 chapters, while bringing researchers together from all over
the world on Logistics 4.0 and Industry 4.0 tools in SCM. I am very pleased and honored to announce the release of our
book entitled “Logistics 4.0: Digital Transformation of Supply Chain Management”. I want to present my gratitude to
all expert authors in their fields from all over the world contributed to our book and also give my special thanks to the
wonderful team of CRC Press.
Turan Paksoy
Contents

Preface iii

SECTION 1: Introduction and Conceptual Framework

1. A Conceptual Framework for Industry 4.0 (How is it Started, How is it Evolving Over Time?) 1
Sercan Demir, Turan Paksoy and Cigdem Gonul Kochan

2. Logistics 4.0: SCM in Industry 4.0 Era (Changing Patterns of Logistics in Industry 4.0 and 15
Role of Digital Transformation in SCM)
Sercan Demir, Turan Paksoy and Cigdem Gonul Kochan

SECTION 2: Internet of Things and Cyber-Physical Systems in SCM

3. The Internet of Things in Supply Chain Management 27

Volkan Ünal, Mine Ömürgönülşen, Sedat Belbağ and Mehmet Soysal

4. The Impact of the Internet of Things on Supply Chain 4.0: A Review and Bibliometric Analysis 35
Sema Kayapinar Kaya, Turan Paksoy and Jose Arturo Garza-Reyes

5. The New Challenge of Industry 4.0: Sustainable Supply Chain Network Design with Internet of Things 51
Sema Kayapinar Kaya, Turan Paksoy and Jose Arturo Garza-Reyes

SECTION 3: Fuzzy Decision Making in SCM

6. Fuzzy Decision Making in SCM: Fuzzy Multi Criteria Decision Making for Supplier Selection 65
Belkız Torğul, Turan Paksoy and Sandra Huber

SECTION 4: Machine Learning in SCM

7. Supplier Selection with Machine Learning Algorithms 103

Mustafa Servet Kıran, Engin Eşme, Belkız Torğul and Turan Paksoy

8. Deep Learning for Prediction of Bus Arrival Time in Public Transportation 126
Faruk Serin, Suleyman Mete, Muhammet Gul and Erkan Celik

SECTION 5: Augmented Reality in SCM

9. Augmented Reality in Supply Chain Management 136

Sercan Demir, Ibrahim Yilmaz and Turan Paksoy

SECTION 6: Blockchain in SCM: The Impact of Block Chain Technology for

SCM-Potentials, Promises, and Future Directions

10. Blockchain Driven Supply Chain Management: The Application Potential of Blockchain Technology 146
in Supply Chain and Logistics
Yaşanur Kayıkcı
vi Logistics 4.0: Digital Transformation of Supply Chain Management

SECTION 7: AI, Robotics and Autonomous Systems in SCM

11. Artificial Intelligence, Robotics and Autonomous Systems in SCM 156

Sercan Demir and Turan Paksoy

SECTION 8: Smart Factories: Transformation of Production and Inventory Management

12. Smart Factories: Integrated Disassembly Line Balancing and Routing Problem with 3D Printers 166
Zülal Diri Kenger, Çağrı Koç and Eren Özceylan

13. Enterprise Resource Planning in the Age of Industry 4.0: A General Overview 178
İbrahim Zeki Akyurt, Yusuf Kuvvetli and Muhammet Deveci

14. Smart Warehouses in Logistics 4.0 186

Muzaffer Alım and Saadettin Erhan Kesen

SECTION 9: Smart Operations Management

15. Comparison of Integrated and Sequential Decisions on Production and Distribution Activities: 202
New Mathematical Models
Ece Yağmur and Saadettin Erhan Kesen

16. Profit-oriented Balancing of Parallel Disassembly Lines with Processing Alternatives 226
in the Age of Industry 4.0
Seda Hezer and Yakup Kara

SECTION 10: Maturity Models and Analysis for Industry 4.0 and Logistics 4.0

17. A Study of Maturity Model for Assessing the Logistics 4.0 Transformation Level of 253
Industrial Enterprises: Literature Review and a Draft Model Proposal
Kerem Elibal, Eren Özceylan and Cihan Çetinkaya

SECTION 11: Smart and Sustainable/Green SCM

18. Smart and Sustainable Supply Chain Management in Industry 4.0 284
Gökhan Akandere and Turan Paksoy

19. A Content Analysis for Sustainable Supply Chain Management Based on Industry 4.0 307
Yesim Deniz Ozkan-Ozen and Yucel Ozturkoglu

20. A New Collecting and Management Proposal Under Logistics 4.0 and Green Concept 320
Harun Resit Yazgan, Sena Kır, Furkan Yener and Serap Ercan Comert

SECTION 12: Management of Digital Transformation in SCM

21. The Roles of Human 4.0 in the Industry 4.0 Phenomenon 338
Nurcan Deniz

22. Lean Manufacturing and Industry 4.0: A Framework to Integrate the Two Paradigms 350
Batuhan Eren Engin, Ehsan Khajeh and Turan Paksoy

Index 361
 SECTION 1

Introduction and Conceptual

Framework

CHAPTER 1

A Conceptual Framework for Industry 4.0

(How is it Started, How is it Evolving Over Time?)
Sercan Demir,1,* Turan Paksoy2 and Cigdem Gonul Kochan3

1. Introduction

Manufacturing and service industry has been broadly affected by the past industrial revolutions. Swift changes in
manufacturing and service systems caused by industrial revolutions led to improvements in productivity for the companies.
This fast-paced environment brings new challenges for the companies that are associated with adaptation to the new
concepts such as industrial internet, cyber-physical systems, adaptive robotics, cybersecurity, data analytics, artificial
intelligence, and additive manufacturing. These emerging technologies facilitated and expedited the birth of Industry 4.0,
the latest industrial revolution era (Salkin et al. 2018).
From the invention of the steam engine to digital automated production, the First Industrial Revolution and the following
revolutions have led to significant changes in the manufacturing process. As a result, ever more complex, automated and
sustainable manufacturing systems have emerged. In the European Union, the industry is accountable for approximately
17% of the total GDP that creates 32 million jobs (Qin et al. 2016). The Industry 4.0 initiative has attracted stakeholder’s
attention due to its ability to apply a bundle of technologies to execute more efficient production systems. This initiative
has been accepted as the Fourth Industrial Revolution by many due to its high potential. Connecting physical items such
as sensors, devices, and enterprise resources to the internet are major attributes for industrial manufacturing in Industry
4.0. The context of the Internet of Things (IoT) enables customers to make more suitable and valuable decisions due to

1
Department of Industrial Engineering, Faculty of Engineering, Harran University, Sanliurfa, Turkey.
2
Department of Industrial Engineering, Faculty of Engineering, Konya Technical University, Konya, Turkey.
Email: [email protected]
3
Department of Management and Marketing, College of Business and Management, Northeastern Illinois University, Chicago, Illinois,
USA.
* Corresponding author: [email protected]
2 Logistics 4.0: Digital Transformation of Supply Chain Management

the data-driven structure of the Industry 4.0 paradigm. Besides that, the system’s ability to gather and analyze information
about the environment at any given time and adapt itself to the rapid changes adds significant value to the manufacturing
process (Alexopoulos et al. 2016).
The organization of the rest of this chapter is as follows. In the second section, the history of the first three Industrial
Revolutions and their impacts are presented. The framework of the Fourth Industrial Revolution and the newly emerging
technologies that are reshaping the manufacturing are discussed in the third section. Section four provides a review of
the relevant literature. The final section concludes the chapter with a discussion and suggests future research directions.

2. First Three Industrial Revolutions: Industry 1.0–3.0

In the literature, the term “industrial revolution” and “industrialization” are used interchangeably. The appearance of
many industrial revolutions throughout history raises questions related to their type, nature, and concept (Coleman 1956).
The Industrial Revolution refers to the rise of modern economic growth, such as a sustained and substantial increase of
GDP per capita in real terms, during the transition from a pre-industrial to an industrial society. The process of revolution
by its own nature is not abrupt and rapid, but it is deep and extensive. Great Britain was the first industrial nation, and its
transition took almost a century from the 1750s to the 1850s. However, the real per capita income has started growing after
the 1840s over one percent per year. Many new industrial sectors had reached significant increases in productivity at an
early stage. However bad harvests, frequent wars, a high population increase, and changes in the economic structure had
a negative effect on the growth rate, especially in the pioneer country, Great Britain. Countries that industrialized later,
overall, had a faster pace of development and a higher rate of growth (Vries 2008).
Although the industrial revolution is not considered a historical episode by itself, it was the most important development
in human history over the past three centuries. The phenomenon began about two and a half centuries ago. With new
methods for producing goods, the industrial revolution has reshaped where people live, how they work, how they define
political issues, and more. It continues to shape the contemporary world. While the oldest industrial nations are still
adapting themselves to its impact, the newer industrial societies, such as China, repeat elements of the original process
but extend its range in new directions (Stearns 2012).
Industrialization was the major force that brought changes in world history that began in the 19th and 20th centuries
and continues to shape the 21st century and our lives. Industrial revolutions took place in three waves. The first occurred in
Western Europe and the United States beginning with developments in Great Britain in the 1770s, while the second wave
hit Russia and Japan, some parts of eastern and southern Europe, plus Canada and Australia from the 1880s onward. The
most recent wave began in the 1960s in the Pacific Rim, and two decades later it reached Turkey, India, Brazil, and other
parts of Latin America. Each major wave of industrialization quickly engulfed other countries that were not industrialized
outright and converted their basic social and economic relationships (Stearns 2012).
The first three industrial revolutions stretched over nearly a 200-year time period. Starting with the steam engine
driven mechanical looms in the late 1700s, the fabric production moved to central factories from private homes causing an
extreme increase in productivity. Nearly 100 years later, Ohio marked the beginning of the Second Industrial Revolution
by using the conveyor belts in the slaughterhouses in Cincinnati. Following years saw the peak point of this era with the
production of the Ford T model in the United States. The introduction of the continuous production lines and the conveyor
belts led to the extreme increase in productivity due to the advantage of mass production. The breakthrough that enabled
the digital programming of automation systems came with presentation of the first programmable logic controller by
Modicon in 1969, marking the beginning of the third Industrial Revolution. The programming paradigm still governs
today’s modern automation system engineering that leads to highly flexible and efficient automation systems (Drath and
Horch 2014). Figure 1 presents an overview of the industrial revolutions.
The Fourth Industrial Revolution has emerged by means of CPS. These systems are industrial automation systems that
connect the physical operations with computing and communication infrastructures via their networking and accessibility
to the cyber world (Jazdi 2014).
The integration of physical operations in industrial production, information, and communication technologies
is called Industry 4.0. Industry 4.0 has recently gained more attention from academics. The term “Industry
4.0” is used for the next industrial revolution, which has been preceded by three other industrial revolutions in
history. The First Industrial Revolution started with the introduction of mechanical production facilities in the
second half of the 18th century and accelerated over the 19th century. Electrification and the division of labor
(i.e., Taylorism) induced the Second Industrial Revolution starting from the 1870s. The progress in the automation of the
production process with the help of advanced electronics and information technology started the Third Industrial Revolution
(the digital revolution) around the 1970s (Hermann et al. 2016).
 A Conceptual Framework for Industry 4.0 3

Cyber-Physical Systems

Complexity, Productivity
Internet of Things
Industry 4.0
Digitalization
Industry 3.0

Electrification
Industry 2.0

Mechanization
Industry 1.0
Manual Labor

1800s 1900s 1960s Today Time

Fig. 1: An Overview of the Four Industrial Revolutions.

2.1 How it began: The First Industrial Revolution

The Wealth of Nations was written by Adam Smith in 1776, at the very beginning of the First Industrial Revolution.
Smith’s ideas and the views were phenomenal; however, he did not conceive of the following events. As workers in the
industrializing countries shifted from farms to factories, societies were reformed beyond expectations in this fast-paced
environment. This transformation impacted the distribution of the labor force across economic sectors dramatically. For
instance, 84% of the U.S. workforce participated in agriculture, compared to an inconsiderable 3% in manufacturing in
1810. However, the manufacturing market share climbed to almost 25 percent while agriculture market share gradually
diminished to just 8 percent over the years until the year 1960. As of today, the agriculture market share is under 2 percent.
The revolution significantly impacted people’s lives, education, the organization of businesses, the forms and practices
of government (Blinder 2006).
There have been many important industrial innovations even before the First Industrial Revolution; however, the
innovations of the late eighteenth century (at the time of the First Industrial Revolution) can be differentiated from those
that affected the processes of production. The impact of these innovations was so profound because of the extensive
application of new sources of power and heat on the production processes. As a result of these innovations, fossil fuel
(coal) replaced the traditional power resources such as the power of man, wind, water, animals, and the heat of a wood
fire, etc. Coal became a major energy source that led to a tremendous increase in throughput and dropped the cost of basic
industrial processes (Chandler 1980).
Three basic technological innovations set the stage for the First Industrial Revolution. First, James Watt’s steam engine,
patented in 1769, which permitted the transformation of heat energy into steam and mechanical energy. Second, the spinning
machines of Arkwright and Crompton, which were patented in 1770 and 1779—were too large and cumbersome to be
moved by a man or an animal—made possible the mass production of thread and yarn. Third, Henry Cort’s reverberatory
furnace, invented in 1784, fabricated a high volume of iron, the most widely used industrial metal of all time. The impact
of these three fundamental innovations hit Great Britain at the same time during the last fifteen years of the eighteenth
century (Chandler 1980). Subsequently, a series of inventions began to shift cotton manufacturing toward a factory system
in the 1730s. The improved accuracy of the flying shuttle was one of the key developments in the industrialization of
weaving during the early industrial revolution. Flying shuttle was retouched over the next thirty years to make it possible
to work with new power sources other than human power. The Spinning Jenny device, the early multiple-spindle machine
for spinning wool and cotton invented by James Hargreaves in 1764, mechanically drew out and twisted the fibers into
threads. Similar to the flying shuttle, the Spinning Jenny device also utilized human power and not a new power source
when it was used for the first time (Stearns 2012). Richard Arkwright patented the Water Frame (aka. Arkwright Frame)
in 1769. This new machine used water as a power source and produced a better thread than the Spinning Jenny. The Water
Frame was a machine with a series of cogs linked to a large wheel that turned by running water. This invention led to the
building of a majority of mills in Britain (Newlanark.org 2019).
At first, the users of the Arkwright Frame and Crompton Mule relied on waterpower to run their machines. Therefore,
in order to operate those machines, mills were built at the spots where a powerful steady flow of water was located, and
these spots were not common in Britain. However, after James Watt and his associates had optimized the steam engine,
new spinning factories, with a central source of power, batteries of expensive machines, and large permanent working
force moved out of hills to lowland towns located close to markets, sources of supply, and labor. Manchester had its first
steam mill in 1787. By 1800 dozens of great mills were in operation. Manchester had already become the prototype of
4 Logistics 4.0: Digital Transformation of Supply Chain Management

the modern industrial city with dozens of mills in operation by the year 1800. Coal became one of the most important
sources for industrial power and heat that led to the swift spread of factories and industrial towns, causing the birth of an
enlarged urban middle class, an industrial bourgeoisie, and a much larger working class—an industrial proletariat in Great
Britain. Moreover, the route of international trade was remodeled, as Britain turned into the workshop of the world with
the help of new coal-powered factories. India was the larger exporter of cotton for Great Britain before the First Industrial
Revolution; however, it became the major market for the British textile industry after the advancements in production in
Britain. Another big impact of the First Industrial Revolution was on the economy of the United States. The country rapidly
turned into the most important buyer for British textile and hardware products. At the same time, the United States became
the largest supplier of the raw materials for the spinning and weaving mills in Britain’s industrialized cities (Chandler 1980).

2.2 How it Advances: The Second Industrial Revolution

The core of the industrial revolution was the application of new sources of power to the production by means of the
transmission equipment necessary to apply this power to manufacturing. This core also includes an increased scale in
a human organization that assisted the progress of specialization and coordination of work done at levels which the
preindustrial groupings had rarely achieved. As a result of the Industrial Revolution, the early power sources of production,
humans, and animals, were replaced with motors powered by fossil fuels. Watt’s steam engine enabled to harness the
energy potential of coal, which was considered as the essential invention for Europe’s industrial revolution. Electric
motors, internal combustion motors, developed by the 1870s, and petroleum products were used by the next industrial
revolutions later on (Stearns 2012).
The period of the second Industrial Revolution is usually assumed to be between 1870 and 1914. While many
characteristic events of this period dated back to the 1850s, the fast-paced rate of pioneering inventions of the First
Industrial Revolution era slowed down after 1825 until it picked up the speed again in the last quarter of the century. The
First Industrial Revolution and most technological developments preceding it had little or no scientific base. The natural
process involved in the production was not fully understood causing the difficulty in removing defects, improving quality,
and having user-friendly products and processes. On the other hand, the Second Industrial Revolution set the stage for
mutual feedbacks between science and technology (Mokyr 1998).
Many new revolutionary technologies, including electricity and the internal combustion engine, were invented during
the period from 1860 to 1900—the Second Industrial Revolution. These ground breaking inventions opened a door for a
transition that continued for decades and led to a swift technical change in production that brought a quick transformation
into the new economy. Many believe that the invention of electricity during the Second Industrial Revolution has helped
to advance technological developments even after the end of this revolution. The adoption of the electricity was very slow
among the manufacturers. Since it took time for manufacturers to fully conceive the best utilization of the electricity, the
use of electricity did not yield instant results in improving productiveness in the US manufacturing companies (Atkeson
and Kehoe 2001).
The First Industrial Revolution resulted in the integration of new energy sources into the process of production.
The Second Industrial Revolution brought a massive revision in production techniques with the presentation of modern
transportation and communication facilities, including the railroad, telegraph, steamship, and cable systems. These inventions
promoted mass production and distribution systems in the late 1800s and early 1900s (Jensen 1999).
It is argued by the researchers that the transition to a new economy brought by the Second Industrial Revolution had
three main characteristics. First, the time interval between the rise in the momentum of technological developments and the
increase in the growth rate of measured productivity during this period was long which was called productivity paradox.
Next, the adoption rate of new technologies by the manufacturers was slow. Finally, some manufacturers continued to
invest in old technologies instead of switching to new technologies during the transition period of the Second Industrial
Revolution. Interestingly, these characteristics of the transition period after the Second Industrial Revolution showed
similarities with the transition period that occurred after the Third Industrial Revolution (Atkeson and Kehoe 2007).
In the literature, many studies questioned the slow transition. Technological constraints were considered as main
challenges for the slow transition. First of all, plants were the entities that internalize new technologies, and they had to
go through a massive change in order to adopt new technologies and tools. However, improvements in these technologies
were continuous, and plants had required a reasonable time frame to learn and absorb these new technologies and use them.
Atkeson and Kehoe (2007) devised a quantitative model to measure the criticality of technological constraints when
transitioning to new technology and discovered that the learning curve is one of the major critical technological constraints. If
the learning process in the old technological revolution persisted, the productivity paradox was triggered when transitioning
to the next technology. Such a long learning process prompts firms to accumulate a large stock of knowledge of the new
technology from the beginning of the transition. Once a firm passes through this troublesome process, it would be less
 A Conceptual Framework for Industry 4.0 5

willing to adopt the new technology and will not quickly discard existing technology practice. Rather, the firm continues
to spend a long time learning about the existing technology before transitioning into new technology. This practice will
cause a long interval between the increase in the speed of the technological transformation and increase in the measured
productivity rate produced by this new technology.

2.3 Shifting from Mechanical Technology to Digital Electronics: The Third

Industrial Revolution

The sudden explosion of US companies beyond national limits led to the beginning of the Third Industrial Revolution
in the last half of the 1950s (Leighton 1986). The First Industrial Revolution’s impact lasted over two centuries, while
the Second Industrial Revolution has offered rapid diffusion of new technology and innovative techniques over a couple
of decades. The impact of the Third Industrial Revolution in terms of the time for adaptation was overwhelming. The
time available for the adaptation to the innovations was so short, and the pace of the change threatened both individuals
and institutions. According to Finkelstein (1984), six major changes in the production process and markets in the Third
Industrial Revolution era are inventions of microprocessors, computer-aided design and manufacturing (CAD/CAM),
fiber optics, biogenetics, lasers, and holography.
The invention of the integrated circuit, the processor, or the chip in 1958 is one of the technologies that shaped the
Third Industrial Revolution and is recognized as one of the essential inventions of the 20th century. The invention of
the microprocessor has reduced the cost of computers while gradually improving computing power. The affordability of
computing power accelerated the spread of computers. As the microprocessor has continually developed, Gordon Moore
made his world-famous observation, known as Moore’s Law: “the computing power of the microprocessor doubled every
18 to 24 months while the costs are halved” (Smith 2001). Figure 2 shows some of the Intel microprocessors, their year of
introduction, and the number of transistors on them. The number of transistors shows a positive trend year by year with
a monotonous increasing count of transistors.
The graphical explanation of the increase in the number of transistors demonstrated in Figure 3. The rate of change
in the number of transistors among each time interval has a positive increasing slope. Especially after the year 2000, the
increase in each year is tremendous.
In order to automate the production, water, and steam power were used in the First Industrial Revolution. Mass
production became widespread by the use of electric energy during the Second Industrial Revolution. The Third Industrial
Revolution took advantage of the rise of electronics and utilized electronics and information technology to automate
the production process. During this era, telecommunications and computer technology had stepped up to the next level.
Production of miniaturized device components followed, which later contributed to the advancements in space research and
biotechnology. In the second half of the 20th century, nuclear energy also took its place at the core of the Third Industrial
Revolution (Sentryo 2019). Subsequently, programmable logic controllers (PLCs) and robot technology boosted the high-
level automation in production during the Third Industrial Revolution era.
One of the most crucial technological changes in American manufacturing during the Third Industrial Revolution
was the debut of programmable automation. Programmable automation standardized machines and processes to perform
different operations. This technology introduced robots such as programmable machine tools that can manipulate and
move materials and parts through versatile motions; numerically controlled (NC) machine tools that shape or cut metal
according to programmed instructions; and automated materials handling, storage, and retrieval systems. Flexible
manufacturing systems controlled by a central computer system connect multiple workstations (e.g., NC machines with
transfer robots). Computer-integrated manufacturing was born as the integration of programmable automation with the
design, manufacturing, and management. The adaptation to computer-based manufacturing technology has brought benefits
such as improvements in product quality and reliability. A human being during work is not flawless since the accuracy
of the work being done varies throughout the day. However, a programmable machine iterates the same standardized job
impeccably. Increased productivity, reduced waste and cost, time-saving, safer and healthier workplaces are results of the
introduction of computer-based manufacturing technology. Flexible production systems that can respond to the market
demand shifts promptly was the greatest long-term benefit of computer-based manufacturing technology (Helfgott 1986).

3. The Industry 4.0 Framework

The Fourth Industrial Revolution is built upon the Third Industrial Revolution and the Digital Revolution, both of which
were initiated in the middle of the 20th century. The Fourth Industrial Revolution is a melting pot in which the physical,
digital, and biological areas are merged and promotes exponential growth tendency for industry worldwide. The Fourth
Industrial Revolution brought changes in production, management, and governance systems around the globe.
6 Logistics 4.0: Digital Transformation of Supply Chain Management

Fig. 2: Intel® Microprocessor Transistor Count Chart (Intel.com 2019).

Fig. 3: Moore’s Law Microprocessor Chart (Intel.com 2019).

 A Conceptual Framework for Industry 4.0 7

The provenance of the Fourth Industrial Revolution dates back to the emergence of the Internet at the dawn of the new
Millennium. The inception period of the first three industrial revolutions has started with the emergence of a new type of
energy; however, the Fourth Industrial Revolution is the first revolution that initiated a new technological phenomenon,
namely digitalization, rather than giving birth to a new type of energy (Sentryo 2019).
The concept of “Industrial 4.0” came into sight for the first time in an article published by the German government in
2011 to highlight Germany’s high-tech strategy for 2020. The fourth stage of industrialization was named “Industry 4.0”
after identifying the first three stages as mechanization, electrification, and information, respectively. The term “Industry
4.0” reappeared in 2013 at an industry fair in Hannover and subsequently, Industry 4.0 rapidly became a national strategy
for Germany. Currently, Industry 4.0 draws the attention of many global industries, and it is a hot topic worldwide. It is
predicted that Industry 4.0 will construct the foundation of the new industrial revolution and as such affect the international
industry on a large scale (Zhou et al. 2016).
Industry 4.0 (Industry 4.0 or I40) is a national strategic initiative from the German government through the Federal
Ministry of Education and Research (BMBF) and the Ministry for Economic Affairs and Energy (BMWI). Its goal is
to move (drive) the digital manufacturing forward by increasing digitization and the interconnection of products, value
chains, and business models. It also aims to support research, the networking of industry partners and standardization
(Digital transformation monitor 2019).
Industry 4.0 also refers to a network system that encloses smart components and machines that are part of a standardized
network based on the well-established internet standards. Industry 4.0 describes the thriving integration of Information
and Communication Technologies (ICT) into production. VDMA, Bitkom, and ZVEI, three leading German companies
of mechanical engineering, ICT, and electrical industry announced a definition of Industry 4.0 in spring 2014. According
to VDMA, Bitkom, and ZVEI, Industry 4.0 aims for the optimization of value chains by implementing an autonomously
controlled dynamic production (Kolberg and Zühlke 2015). The Industry 4.0 initiative is believed to change the design,
manufacturing, operation, and service of products and production systems entirely. The connectivity and interaction among
items, machines, and humans will expedite the pace of the processes in production systems up to 30 percent, increase the
efficiency of processes up to 25 percent, and improve mass customization (Rüßmann et al. 2015).
Many digital technologies such as IoT, autonomous robots, and big data analytics are at the heart of Industry 4.0,
and these technologies continue to revamp production and assist the progress of the digitalization of the basic production
processes. These technologies have been implemented by leading companies to facilitate operational development plans.
In order to build a quick momentum and achieve a strategic vision, implementation of these technologies by the companies
should generate quick returns and yield long-term gains by implemented. Many companies have already taken advantage
of implementing Industry 4.0. However,new ways to create values from the Industry 4.0 are still being explored. As new
methods and techniques are uncovered, the value generated from this new approach will rise. Figure 4 demonstrates nine
technologies that remodel the production process (Brunelli et al. 2017).
Industrial productivity has undergone an impressive development since the beginning of the Industrial Revolution.
Starting with the invention of the steam engine in the 19th century, other power sources and production methods such
as electricity-powered assembly lines in the first part of the 20th century and automated production in the 1970s led to
a dramatic increase in productivity. Over the years, technology innovations proliferated and transformed information
technology (IT), mobile communication, and e-commerce.
Industry 4.0, the newest digital industrial technology, is a ground breaking advancement powered by nine technology
pillars. The connected systems are at the core of this transformation. Sensors, machines, IT systems, and work pieces are
connected through the whole value chain, and these connected systems can analyze the data and communicate with each
other via internet-based protocols. Data analysis helps systems to predict failure, configure itself, and adapt to the sudden
changes. Industry 4.0 renders data collection and analysis across machines and enables a fast, flexible, and efficient system
that generates higher-quality products at a lower production cost. Consequently, Industry 4.0 improves manufacturing
productivity as the industrial growth rate increases. The improvement in productivity leads a company to gain a competitive
advantage compared to others (Rüßmann et al. 2015). Table 1 shows the foundational nine technologies of Industry 4.0
that revamp the production.
Some of the nine core Industry 4.0 technologies are already in use in today’s manufacturing systems. However, they
are designed to reconstruct the production process. For instance, isolated and optimized cells would come together to form
a fully integrated, automated, and optimized production flow that leads to greater productivity by altering the conventional
production relationships between suppliers, manufacturers, and end customers. Figure 5 demonstrates how Industry 4.0
changes the manufacturing process.
8 Logistics 4.0: Digital Transformation of Supply Chain Management

Autonomus
Robots
Big Data and
Simulation
Analytics

Horizontal
Augmented and Vertical
Reality System
Integration

The Industrial
Additive
Internet of
Manufacturing
Things

The Cloud Cybersecurity

Fig. 4: Nine Technologies that are Transforming the Industrial Production (Rüßmann et al. 2015).

Table 1: The Nine Technologies that are Reshaping the Production (Brunelli et al. 2017).

Technology Impact and Contribution to Manufacturing

Advanced robots — Autonomous, cooperating industrial robots, with integrated sensor and standardized
interfaces
Additive Manufacturing — 3D printers, used predominantly to make spare parts and prototypes
— Decentralized 3D printing facilities, which reduce transport distances and inventory
Augmented Reality — Digital enhancement, which facilities maintenance, logistics, and SOPs Display devices,
such as glasses
Simulation — Network simulation and optimization, which use real-time data from intelligent systems
Horizontal and vertical system — Data integration within and across companies using a standard data transfer protocol
integration — A fully integrated value chain (from supplier to customer) and organization structure (from
management to shop floor)
The Industrial Internet of Things — A network of machines and products
— Multidirectional communications among networked objects
Cloud Computing — The management of huge volumes of data in open systems
— Real-time communication for production systems
Cyber Security — The management of heightened security risks due to a high level of networking among
intelligent machines, products, and systems
Big data and analytics — The comprehensive evaluation of available data (from CRM, ERP, and SCM systems, for
example, as well as from an MES and machines
— Support for optimized real-time decision making
 A Conceptual Framework for Industry 4.0 9

Integrated communication
along the entire value chain
reduces WIP inventory

Advanced automation substitute

M2M and M2H interaction
for least-skilled labor, but higher-
enables customization and
skilled labor are required for
Isolated and optimized cells small batches
managing the processes

From traditional manufacturing systems

To Industry 4.0 driven smart manufacturing systems

Fig. 5: Industry 4.0 Changing Traditional Manufacturing Relationships (Rüßmann et al. 2015).

4. A review of the Industry 4.0 Literature

Finkelstein (1984) discusses the dramatic changes experienced in new products, processes, and markets. The author
classifies six significant technological changes during the Second Industrial Revolution era. According to Leighton (1986),
changes in businesses after the second part of the 20th century could be depicted as the “Third Industrial Revolution”, and
the main feature of this revolution was the rise of corporations with extraordinary size, complexity, extent, and globalized
structure. Kanji (1990) investigates the relationship between the quality revolution after the 1950s and the Second Industrial
Revolution. The author concludes that the quality revolution through the process of “Total Quality Management” led to the
“Second Industrial Revolution” for the survival of the fittest. Atkeson and Kehoe (2007) study technological advancements
of the Second Industrial Revolution and adaptation problems to these technologies and devise a quantitative model to
capture the technological constraints that slow down the adaptation process. Their model discovers the critical technology
constraints that cause the delay between the new technological diffusion and measured productivity that is the result of
adapting to new technology.
Several studies compare industrial revolutions in terms of many aspects, including economic impact, adaptation process,
similarities, and differences. Mokyr (1998) exhibits the differences and the similarities of the First and the Second Industrial
Revolutions. The author states that the Second Industrial Revolution was the direct continuation of the first one in many
industries, and he discusses the important aspects that both revolutions differ from each other. Jensen (1999) investigates
similarities between the Second Industrial Revolution and the Third Industrial Revolution. The author acquaints the
readers with the dynamics of the Third Industrial Revolution in light of the outcomes of the Second Industrial Revolution.
Other studies investigate multiple industrial revolutions and their impact on economic, social, and technological
development. Von Tunzelmann (1997) explores the contribution of engineers and the field of engineering to the
industrialization process indifferent countries such as the UK, the United States, and Japan and investigates how
engineers helped to advance the technology during industrial revolutions. Blinder (2006) studies the first three industrial
revolutions and their impact on offshoring on today’s economy. Kasa (1973) explores the relationships between
macro-level technological improvements due to industrial revolutions and their negative impacts on the environment.
Stearns (2013) investigates the extent and the history of industrial revolutions. The findings of the Stearns’ (2012) study
explain the scope, social and economic impact of industrial revolutions on many different societies worldwide.
Recent studies focus on Industry 4.0 and technological advancements that mark the start of the Fourth Industrial
Revolution. Cooper and James (2009) present different types of data that increase the potential of the IoT and discuss the
challenges for database management in the IoT platform. The authors provide scenarios to demonstrate some cases that
will be possible through the use of IoT. Drath and Horch (2014) focus on the background and technical drivers of the new
industrial revolution and describe the levels that form CPS in Industry 4.0. Brettel et al. (2014) analyze the developments
of Industry 4.0 in the context of individualized production, end-to-end engineering in a virtual process chain and production
networks. They present managerial insights for adopting or refusing decisions for Industry 4.0.
10 Logistics 4.0: Digital Transformation of Supply Chain Management

Kolberg and Zühlke (2015) discuss lean automation technology while linking them to the Industry 4.0 foundations.
The authors claim that the collaboration of Industry 4.0 and lean production systems add value to the companies. Lee
et al. (2015) propose a unified 5-level architecture for Cyber-Physical Systems in Industry 4.0 manufacturing systems.
Roblek et al. (2016) present a theoretical framework for Industry 4.0 and discuss the influence of Industry 4.0 and the
Internet-connected technologies on organizations and society. Hermann et al. (2016) investigate four design principles
companies should take into account when implementing Industry 4.0 solutions, and authors consolidate these principles
with a case study review.
Schumacher et al. (2016) propose a novel model to assess the Industry 4.0 maturity phase of the companies that operate
in the field of discrete manufacturing. The authors extend existing readiness and maturity models, and tools discussed in
the literature by developing a new maturity model. Vuksanovic et al. (2016) explore the development paths of Industry
4.0 and the future perception of smart factories. The authors further discuss the fundamental technologies behind Industry
4.0 and the impact of the Internet on manufacturing technologies. Erol et al. (2016) offer a scenario-based Industry 4.0
Learning Factory concept to overcome challenges in industrial practice that slow down the transformation process of
Industry 4.0. They help in the understanding of abstract perception of Industry 4.0. Zezulka et al. (2016) explain two
models developed by three German companies (BITCOM, VDMA, and ZWEI) for Industry 4.0 platform, namely, the
Reference Architecture Model Industry 4.0 (RAMI 4.0) and Industry 4.0 component model.
Rojko (2017) discusses the concepts of Industry 4.0, its drivers and the Reference Architecture Model (RAMI 4.0) in
detail. Santos et al. (2017) review major European industrial guidelines, roadmaps, and scientific literature to evaluate the
Industry 4.0 vision. Ivanov et al. (2018) depict important issues that characterize the dynamics of supply chains, operations,
and Industry 4.0 networks. The authors assert that a comprehensive collaboration between control engineers and supply
chain experts may improve the performance of supply chains and Industry 4.0 networks. Kamble et al. (2018) review the
current status of the research in domains of Industry 4.0 and classify Industry 4.0 research categories. The authors propose
a sustainable Industry 4.0 framework based on the findings of their literature review.
Gunasekaran et al. (2019) examine improvements in quality management in the era of Industry 4.0 in terms of
economic, human and technological aspects. Verba et al. (2019) propose a novel approach to load and delay optimization
through application for migration between the edge, e.g., piece of hardware that controls data flow at the boundary between
two networks, and the cloud. The authors validate the effectiveness of their proposed model using an Industry 4.0 based
case study.
Table 2 summarizes research papers discussed in this section by their publication year, scope, type of research
(quantitative/qualitative), keywords and the industrial revolutions studied in the paper.

5. Conclusion and Future Research

This chapter aimed to present a comprehensive literature review of recent journal and conference papers that study the
first three industrial revolutions in the history of mankind and the last wave among all, Industry 4.0, and their impact on
production, living and working conditions, and economic growth.
Germany is the world’s third, Europe’s biggest commodity exporter, specifically in automotive, chemical, electronic,
and mechanical products. During Europe’s debt crisis, Germany had managed to manufacture outstanding products.
Germany became one of the leading global manufacturers, and the country gained a competitive advantage among the
other giant manufacturers by implementing Industry 4.0 (Wang 2016).
Today, we are at the Fourth Industrial Revolution era, and it was initiated by the improvement of ICT. Smart automation
of the CPS with decentralized control and IoT constitutes the core of Industry 4.0 paradigm. ICT allow reorganization of
classical hierarchical automation systems into the self-organizing cyber-physical production systems. CPS provide flexible
mass custom production and production quantity flexibility (Rojko 2017).
The basic concept of Industry 4.0 was first presented at the Hannover Fair in Germany in the year 2011. Industry 4.0
has gained popularity in many areas of academic research, and industry communities since its debut. The main idea behind
this phenomenon is to utilize the potential of emerging technologies and concepts. Some of which are;
- Availability and use of the Internet and the Internet of Things (IoT),
- Integration of technical processes and business processes in companies,
- Digital mapping and virtualization of the real world,
- ‘Smart’ factory, including ‘smart’ means of industrial production and ‘smart’ products.
 Table 2: Summary of the Literature Review.

Authors/Year Qualitative Quantitative Conceptual Survey/Questionnaire Case Mathematical Proposed Keywords Industrial
Framework /Interview Study Model New Model Revolution Studied
Finkelstein (1984) x Second
Leighton (1986) x Third
Kanji (1990) Second
Von Tunzelmann (1997) x x x First, Second, Third
Mokyr (1998) x First, Second
Blinder (2006) x x First, Second, Third
Atkeson and Kehoe x x x x Second
(2007)
Kasa (1973) x Internet, Internet of things, First, Second, Third
costumer behavior, Industry
4.0
Cooper and James x x Database management Industry 4.0
(2009) challenges, IoT, Road map,
Technical priorities
Drath and Horch x Industry 4.0
(2014)
Brettel et al. (2014) x x Industry 4.0
Kolberg and Zühlke x x I40, CPS, Lean Automation, Industry 4.0
(2015) Lean Production
Lee et al. (2015) x CPS, I40, Health management Industry 4.0
and prognostics; Time machine
Roblek et al. (2016) x Industry 4.0
Hermann et al. (2016) x x x Industry 4.0
Schumacher et al. x x x x Industry 4.0
(2016)
Erol et al. (2016) x x I40, smart manufacturing, Industry 4.0
learning factory, scenario-
based learning
Zezulka et al. (2016) x x RAMI 4.0, I40 component, Industry 4.0
administrative shell,
communication, virtual
A Conceptual Framework for Industry 4.0 11

Table 2 contd. ...

...Table 2 contd.

Authors/Year Qualitative Quantitative Conceptual Survey/Questionnaire Case Mathematical Proposed Keywords Industrial
Framework /Interview Study Model New Model Revolution Studied
Vuksanovic et al. x I40, factory of the future, Industry 4.0
(2016) smart factory, IoT,
augmented (virtual) reality
Rojko (2017) x x I40, CPS, ERP, First, Second,
Manufacturing Execution Third, Industry 4.0
System
Santos et al. (2017) x I40, technology roadmap, Industry 4.0
convergence
Kamble et al. (2018) x I40, Smart manufacturing, Industry 4.0
IoT, Process safety,
Augmented reality,
Sustainability Big data
Ivanov et al. (2018) x x x Control, SC, Operations, Industry 4.0
I40, Dynamics Planning,
Scheduling Optimal
program control Model-
predictive control
Adaptation, Resilience
Digital Supply Chain
Gunasekaran et al. x Quality management, I40, Industry 4.0
12 Logistics 4.0: Digital Transformation of Supply Chain Management

(2019) technology, quality culture,

behavioral aspects
Verba et al. (2019) x x x x Cloud computing, Fog Industry 4.0
computing, Application
model, Migration
 A Conceptual Framework for Industry 4.0 13

According to the McKinsey & Company’s (2016) report, many companies come across obstructions while
implementing Industry 4.0, such as coordination problems among the different organizational units, cybersecurity and data
ownership concerns with the third-party providers, resisting to a dramatic transformation, and lack of necessary capabilities
(Bauer et al. 2016). However, there are many advantages of Industry 4.0 including but not limited to, cost reduction for
production, logistics, and quality management, short launch time of products, improved customer responsiveness, custom
mass production capability, and flexibility in the working environment (Rojko 2017).
The Industry 4.0 concept emphasizes global networks of connected machines (aka. Cyber-Physical Systems) in a smart factory
environment that can communicate, autonomously exchange information, and send commands to each other. CPS and IoT enable
autonomously operated smart factories. Some of the digital technology advancements that are integrated in smart factories are:
(1) advanced robotics and artificial intelligence, (2) hi-tech sensors, (3) cloud computing, the Internet of Things, (4) data
capture and analytics, (5) digital fabrication including 3D printing, (6) software-as-a-service and other new marketing
models, (7) mobile devices, (8) platforms that use algorithms to direct motor vehicles including navigation tools, (9)
ride-sharing apps, delivery and ride services, and autonomous vehicles, and (10) the integration of all these elements in
an interoperable global value chain shared by many companies from many countries (Tjahjono et al. 2017).
Interconnected machines and smart devices are reshaping the way value is created in manufacturing and many other
areas and in advancing manufacturing and computer technologies. Companies are in search of the ways of adopting Industry
4.0 to enjoy a more productive, flexible and sustainable production systems. Companies realized that production, control,
and monitoring processes of smart and connected products will replace conventional labor centered production by fully
automated and computerized production (Salkin et al. 2018).

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CHAPTER 2

Logistics 4.0: SCM in Industry 4.0 Era

(Changing Patterns of Logistics in Industry 4.0 and Role of
Digital Transformation in SCM)
Sercan Demir,1,* Turan Paksoy2 and Cigdem Gonul Kochan3

1. Introduction

Supply chains and logistics operations experienced important and rapid changes during the 1990s and early 2000s.
These changes imposed significant challenges on the freight shipping industry. Just-in-time practices and the necessity
of customer responsiveness were two of the main challenges faced by the industry. As the economies and markets have
become globalized, the procurement and distribution of goods have been affected by this swift trend. Electronic Data
Interchange (EDI) and the Internet, Global Positioning Systems via satellites (GPS), and Decision Support Systems (DSS)
were the new information technologies that emerged as a response to these challenges in the logistics industry. Operations
capacity and real-time decision-making capability of freight forwarders were substantially increased as they adopted these
new technologies (Roy 2001).
The integration of physical and digital technologies, such as sensors, embedded systems, cloud computing, and the
Internet of Things (IoT) has launched the Fourth Industrial Revolution. The main idea behind the industrial revolution
is to increase resource utilization and productivity that leads to gaining a competitive edge for companies. The current
industrial transformation is not only reshaping core business processes but also uncovering novel concepts of smart and
connected technologies (Onar and Ustundag 2017).
Companies experience complex processes and incur high costs during their transformation to Industry 4.0 practices
due to the newly emerged technologies that affect process input and output. The support from the top management becomes
increasingly more important since Industry 4.0 transformation changes a company’s core methods of production and
requires a broad perspective on a company’s vision, strategy, organization, and products (Akdil et al. 2018).
The shift from computers to smart devices that use infrastructure services based on cloud computing was one of the
significant advances in the last decade. Computer-based automation systems become connected to the wireless network in
today’s internet era. The interconnection of humans, machines, and platforms that allow machines to communicate with
each other are the advancements that are emerging now as a merit of the Internet. The implementation of this technology
on production and business operations is described as Industry 4.0 (Tjahjono et al. 2017).
Industry 4.0 is imposing foundational changes in the current manufacturing process of companies. The integration
of digitalization and the Internet to the manufacturing process is leading to a global transformation of the manufacturing
industry. The factory of the future is envisioned as Cyber-Physical Systems (CPS) that connects machines and human
beings. These smart factories will come to existence as technological advancements are adopted and used in harmony

1
Department of Industrial Engineering, Faculty of Engineering, Harran University, Sanliurfa, Turkey.
2
Department of Industrial Engineering, Faculty of Engineering, Konya Technical University, Konya, Turkey.
Email: [email protected]
3
Department of Management and Marketing, College of Business and Management, Northeastern Illinois University, Chicago, Illinois,
USA.
* Corresponding author: [email protected]
16 Logistics 4.0: Digital Transformation of Supply Chain Management

to produce intelligent products in industrial processes. Some of the digital technologies include, but are not limited to,
advanced robotics and artificial intelligence, hi-tech sensors, cloud computing, the Internet of Things, digital fabrication
(including 3D printing), data capture and analytics (Tjahjono et al. 2017).

2.  Fundamentals of Logistics: Definitions and Terminology

Logistics is fundamentally a planning orientation, coordination or scheme that seeks to create an effective plan for the flow
of products and information through a business. Supply chain management builds upon this framework and attempts to
connect and coordinate the processes between entities in the pipeline, i.e., suppliers and customers, and the organization
itself (Christopher 2016).
The most common belief about the term “logistics” is that this term was used by the Swiss General Baron de Jomini
(1779–1869) for the first time. The word “logistics” has two roots, both of which are French in origin. “Logistique” comes
from military rank, and it addresses the organization of the military support troops. “Loger” refers to a spatial military
organization, i.e., camping. The US Army started to use the term “logistics” at the end of the nineteenth century, referring
to the practices of military support service, i.e., transport and supply for the Armed Forces. During the Second World
War, “logistics” was used to describe the planning and management process of providing, repopulating, and supplying the
Allied military. Logistics was first used in the civilian sector in the trade industry in the 1960s. Logistics means planning
and performing the physical distribution of goods in the US. Logistics was evolved into science by Hans Christian Pfohl
in 1974 when characteristic areas of logistics tasks were defined and its axioms conceptualized (Tepić et al. 2011).
Logistics comprises of a complex set of activities that require a collection of metrics to adequately measure performance
(Caplice and Sheffi 1995). The Seven R’s of Logistics is one of the commonly accepted definitions of logistics. Logistics
involves ensuring the availability of the right product, in the right quantity, and in the right condition, at the right place, at
the right time, for the right consumer, at the right cost. Logistics is defined as “part of the supply chain process that plans,
implements, and controls the efficient, effective flow and storage of goods, services and related information from point
of origin to point of consumption in order to meet customers’ requirements” by the Council of Logistics Management
(Rutner and Langley 2000).
As its functions and interest areas are diversified, the definition of logistics has evolved over time. Introduced into
the military for the first time, logistics eventually influenced many sectors in the economy. Transportation of agricultural
goods led to the introduction of a non-military logistics concept known as “physical distribution”. Advancements in
industry and IT technologies as wells as technological, economic, political, social or environmental factors also impact
the development of logistics. The need for fast action and rapid decision making, performing time-sensitive service, and
being flexible enough to meet customers’ needs are some of the main challenges that logistics operations experience.
Proper and efficient implementation of modern technologies can overcome the challenges mentioned above. Companies
are becoming more interested in these technological developments as they need to improve their business performance
and gain a competitive edge in the market through the implementation of these advancements (Szymańska et al. 2017).

2.1 Inbound and Outbound Logistics

Inbound logistics refers to the flow of raw materials from suppliers to manufacturers. Receiving, storing, and distributing
raw materials or goods that are coming into a business internally are inbound logistics activities. Freight consolidation,
selection of carrier and mode of transportation, materials handling, warehousing, and backhaul management are management
decisions associated with inbound logistics. Outbound logistics covers physical distribution activities of finished goods such
as collecting, storing and distributing products from manufacturers to buyers. Warehousing of finished goods, materials
handling, network planning and management, order processing, and vehicle scheduling and routing are all considered as
outbound logistics activities. The main difference between inbound and outbound logistics are product characteristics.
While materials handled in inbound logistics are raw materials or unfinished goods, the materials handled in outbound
logistics are finished goods. Outbound logistics includes more complex processes than inbound logistics due to the higher
production values and strict customer requirements such as on-time delivery (Wu and Dunn 1995).
Physical distribution is the area of business management responsible for the movement of raw materials and finished
products and the development of movement systems. Even though physical distribution is usually associated with outbound
product movements from a firm, it covers a broader concept that includes both inbound and outbound movements (Ballou
2007). Inbound and outbound logistics activities are shown in Figure 1 below.
 Logistics 4.0: SCM in Industry 4.0 Era 17

Suppliers Procurement Manufacturing Marketing Customer

Transport + Warehousing Operations Sales

Inbound Logistics Outbound Logistics

Fig. 1: Inbound and Outbound Logistics Activities.
Fig. 1: Inbound and Outbound Logistics Activities
2.2 Globalization and Liberalization and their Impact on Supply Chains

Globalization, trade liberalization, and opening borders to trade have generally led to an increased inflow of foreign
investment, the establishment of multinational companies in developing countries, and the integration of these countries
into global supply chains (Minten et al. 2007). Economic integration and progress of a nation are highly dependent on the
successful establishment of logistics service; hence, trade liberalization is increasingly supported by efforts to liberalize
logistics services. Trade liberalization of logistics services is an essential stage of a broader strategy to expand the potential
of exports and achieve economic development (Tongzon 2012).
Supply chain management cannot be thought of as a domestic phenomenon since today’s supply chains exceed
national boundaries and spread across different countries. The expanse of supply chains brings about new challenges of
globalization to companies who enjoy geographically distributed supply chains for their existing or new product lines
(Meixell and Gargeya 2005).
Globalization offers enormous opportunities as well as increased risks in the development of supply chains. While
some supply chains take advantage of these opportunities, some others are inflicted damage by the risks emerge from
globalization. Hence, both opportunities and uncertainties should be taken into account when designing a global supply
chain network. While globalization offers companies the opportunity of reaching new markets where they can advertise to
potential customers, it also presents significant cost reduction opportunities by letting them expand operations to low-cost
countries. However, these opportunities are usually accompanied by potential risks that might disrupt the flow in a supply
chain. Some of these risk factors are natural disasters, shortage of skilled resources, geopolitical uncertainty, terrorist
infiltration of cargo, volatility of fuel prices, currency fluctuation, etc. (Chopra and Meindl 2013). Spatial fragmentation
is considered as one of the main engines of globalization. Many companies break down their business operations into
various stages and move these stages across different regions. Several business activities that form a company’s supply
chain are organized and performed in distinct locations or different countries. Companies target to take advantage of
technology, wage, and other cost differences by adopting the spatial fragmentation that is accepted as one of the main
factors of economic globalization (Fujita and Thisse 2006).

3. Digitalization of Logistics and Challenges in Logistics 4.0

3.1 Inventory Control Systems (ICS)

The primary competitive edge was “cost” for manufacturers during the 1960s. Thus, companies predominantly focused on
high volume production and cost minimization during this period. Inventory control systems (ICS) such as computerized
reorder point (ROP) systems were sufficient for the basic manufacturing and planning needs of many companies. These
systems used to include economic order quantity (EOQ) and economic reorder quantity functions (Jacobs and Weston
2007). In addition, ICSs were designed to manage basic conventional inventory management process. ICSs were one
of the earliest business applications, which did not belong to the areas of finance and accounting. (Shehab et al. 2004).

3.2 Materials Requirement Planning (MRP)

The late 1960s witnessed the birth of Materials Requirement Planning (MRP) in response to the need for a state-of-art
system capable of planning and scheduling materials for the manufacturing of sophisticated products. Manufacturing
Resource Planning (MRP 2) and Enterprise Resource Planning (ERP) were derived from the MRP and were the successors
of it. The very first MRP solutions required large technical support officers to support the mainframe computers; thus, they
were costly, slow, and hard to handle. The development of more integrated business information systems was enabled by
the emergence of faster and higher capacity disk storage (Jacobs and Weston 2007).
18 Logistics 4.0: Digital Transformation of Supply Chain Management

In the late 1970s, the primary competitive edge of manufacturers shifted from cost towards “marketing”. At that
time, the manufacturers adopted unique target-market strategies by putting emphasis on production planning. In other
words, they focused on production integration while identifying their target market by focusing on a particular group
of consumers at which their product or service was aimed. MRP systems met the requirements of companies during the
late 1970s since they enabled the integration of core business functions, such as forecasting, master production planning,
procurement, production, and inventory control. Many software corporations, such as SAP, Oracle, J.D. Edward, who
would become the major ERP companies in the following decades, were founded during the mid-1970s as a response to
the need for enterprise technology solutions (Jacobs and Weston 2007).
MRP systems were production-oriented information systems based on a time-phased order release system. These
systems distribute activities, tasks, and resources over a planned time scale based on scheduled completion of a plan,
task, or project. Manufacturing work orders and purchase orders are scheduled and released based on a master production
schedule (MPS) in order to ensure that components and parts are received when they are needed in a production line.
Inventory reduction, customer service improvement, and increment in productivity and efficiency are some of the major
benefits of MRP systems (Shehab et al. 2004).

3.3 Manufacturing Resource Planning (MRP II)

The primary competitive edge of companies during the 1980s shifted to “quality” after the appearance of world-famous
Total Quality Management (TQM) founders, such as W. Edwards Deming, Joseph M. Juran, Philip B. Crosby, and Kaoru
Ishikawa. In this decade, manufacturing strategies of companies mainly focused on strict control of their processes, high-
quality manufacturing, and attempts to reduce overhead costs. The implementation of world-class manufacturing techniques
was the most important advancement in this decade. Companies wanted their goods, services, and processes to be ranked
among the best by their customers and industry experts. These changes in companies’ primary competitive edge brought
about the need for a revision in the scope of the existing enterprise technology solutions (Jacobs and Weston 2007).
As a result of increasing competition among the companies on the market and product sophistication, MRP was
developed and revised to capture more business functions such as product costing and marketing. The former material
planning and control system had become a company-wide system capable of planning all the resources of a company. This
new system was called Manufacturing Resource Planning (MRP II) at that time (Shehab et al. 2004).
A major purpose of MRP II was to integrate primary functions of a business such as production, marketing, and finance,
and other functions such as personnel, engineering, and purchasing into the planning process. MRP II was a company-wide
system, and it often had a built-in simulation that was capable of running “what-if” scenarios (Chen 2001). Manufacturing
Resources Planning (MRP II) systems integrated the financial accounting system and the financial management system
along with the manufacturing and materials management systems. This integrated business system enabled companies
to make robust decisions about the material and capacity requirements pertaining to planned operations, elaborate on the
activities and operations, and translate all activities into financial statements (Umble et al. 2003).

3.4 Enterprise Resource Planning (ERP)

Continuing improvements in technology allowed MRP II to be expanded to incorporate all resource planning activities
for the entire business by the early 1990s. Besides the existing main functionalities, some business areas such as product
design, information warehousing, capacity planning, human resources, finance, project management, and marketing are
integrated into the new system (Umble et al. 2003). These critical business areas impact the companies that seek to obtain
a competitive advantage by utilizing their assets, including information, effectively. Unlike previous versions, the ERP
software companies made it possible to implement these critical business systems to not only manufacturing companies
but also non-manufacturing companies (Ptak and Schragenheim 2003).
Enterprise Resource Planning (ERP) software systems are composed of a wide range of software products supporting
daily business operations and decision-making process of a corporation. ERP integrates and automates operations of supply
chain management, inventory control, manufacturing scheduling, and production, sales support, customer relationship
management, financial and cost accounting, human resources, and many other business processes (Hitt et al. 2002).
Historically, ERP systems derived from MRP II systems are designed to manage a company’s inventory orders,
schedule production plans, and organize inventories. In addition to these functions, ERP systems integrate inventory
data with financial, sales, and human resources data to enable an organization to price their products, generate financial
statements, manage the workforce, materials, and money efficiently (Markus et al. 2000). The expansion of MRP II into
ERP in the 1990s aspired to further improve resource planning by including the components of the supply chain in the scope
of the planning phase. Hence, the main difference between MRP II and ERP is that MRP II focuses on the planning and
 Logistics 4.0: SCM in Industry 4.0 Era 19

scheduling of a company’s internal resources, while ERP plans and schedules a company’s supplier resources in addition
to its internal resources, by taking the dynamic customer demands and schedules into account (Chen 2001).
ERP has added a new range of capabilities to the MRP II, including finance, distribution, and human resources
development, and all of these existing and newly added functionalities were integrated to handle global business operations.
These functionalities have been extended to cover many other “back-office” functions through the mid-1990s. Some of
these extensions include order management, financial management, warehousing, distribution production, quality control,
asset management, and human resources management. Later, the functionalities of ERP systems further broadened to
engulf “front office” jobs, e.g., sales force and marketing automation, electronic e-commerce, and supply chain systems
(Rao 2000). Figure 2 below presents the timeline of the development stages of ERP starting from the ICS.
System Integration

ERP 2
Real Time Data Collection
Industry Specific Applications
ERP
Better Flexibility
MRP 2 + finance + Web-Centric Application
marketing +shipping +
SCM + CRM+ HR

MRP 2
MRP+ machine
Inventory capacity scheduling
Control + demand forecasting
Systems (ICS) MRP + quality tools
ICS + Production
Planning Process
Early computers,
ROP systems

1970s 1980s 1990s 2000s

Time
Fig. 2: Evolution of Inventory Control Systems into Enterprise Resource Planning.

4.  Industry 4.0, Logistics 4.0 & Supply Chain 4.0

The importance of logistics in business has increased over time. Supply chain integration, being time-sensitive to customer
orders (quick response), and just-in-time applications on inventory management transformed companies’business strategies,
including their logistics strategies. Core business activities, such as customer and vendor selection, product design, and
strategic alliance have been affected by logistics strategies (Caplice and Sheffi 1995).
A company’s competency involves learning how to differentiate from competitors since a new trend can create progress
that improves business performance dramatically. An innovation that initiates a new business model by discarding the
current one is called a disruptive technology. The new technologies might not meet the immediate needs of a company’s
customers; however, the ability of these emerging technologies usually brings about performance improvement to the
companies over a period of time. Disruptive technologies have the ability to improve the business performance above the
performance levels of the incumbent technologies that are discarded. Hence, ignoring emerging technologies during their
earliest stages can result in serious consequences for companies (Angeleanu 2015).
Disruptive technologies are transforming the core competencies of many companies and the business models of many
industries. Digitalization in manufacturing processes and rapid growth in information technologies have been impacting
the supply chains dramatically during the era of the Fourth Industrial Revolution. These emerging technologies should
be comprehended thoroughly by the management in order to build a strong strategic path for the future. Industry 4.0 is
the sum of all disruptive technologies that are implemented in a value chain. The seven characteristics of Industry 4.0 are
discussed in Table 1 (Pfohl et al. 2015).
CPS are at the core of the Fourth Industrial Revolution. CPS are physical mechanisms that can be monitored, controlled
and coordinated by a communication system through the internet. The development of CPS and their integration into the
manufacturing systems has contributed to the birth of Industry 4.0. CPS enable the interaction with the physical world via
network agents such as sensors, actuators, control processing units, and communication devices. The high growth rate of
cyber technologies and the integration of digital devices into the supply chains contributed to the development of many
20 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 1: The Seven Characterizing Features of Industry 4.0 (Pfohl et al. 2015).

Characteristics Description
1. Digitalization Key aspects of the supply chain, such as internal processes, product components, communication
channels, are undergoing an accelerated digitalization process.
2. Autonomization Industry 4.0 technologies enables machines and algorithms to make decisions and perform learning-
activities independently. This autonomous decision-making and learning ability enables manufacturing
facilities to work with minimum human-machine interaction.
3. Transparency Industry 4.0 technologies are increasing the transparency of the value creation process of a firm that
results in a more collaborative and efficient decision-making mechanism, and transparency in corporate
partners’ and customers’ behavior.
4. Mobility The spread of mobile devices streamline communication and data sharing globally. The mobility of
the devices is modifying the interaction of customers and companies, and communication between
machines in the production process.
5. Modularization Industry 4.0 technologies enables the modularization of products and the whole value creation process.
Adjustable modular production facilities increases the flexibility of the production processes.
6. Network-Collaboration Companies’ processes will be defined and activities will be decided through the interaction of machines
and human beings within specific networks in and out of the companies’ organizational borders.
7. Socializing The collaboration in networks enables machines to start communicating and interacting with each other
and human beings in a socialized manner.

areas such as manufacturing processes, logistics sector, health services, and autonomous vehicles. The Internet of Things
(IoT) accelerated the integration of CPS into the manufacturing and service operations, leading to the revolutionary steps
into the production, service, and logistics sectors (Barreto et al. 2017).
The communication between products, machines, transportation systems, and humans is transforming the current
production systems. Smart factories will be the framework for future manufacturing systems. Smart factories are flexible,
cost-efficient, and individualized mass production systems where the products flow independently through the manufacturing
process with minimal human intervention (Hofmann and Rüsch 2017). Information and Communication Technologies
(ICTs) have become an important and inevitable component of industrial manufacturing in recent years. New challenges
have appeared in the logistics sector as a result of the rise of the Industrial Internet of Things (IIoT). These challenges
have required technological modifications such as transparency in supply chains, and integrity control that guarantees the
delivery of the right products to the right location at the right time. Logistics 4.0 concept is introduced and shaped by the
developments in ICT and IIOT (Barreto et al. 2017).

4.1 Development of Logistics

Logistics went through three revolutionary steps before reaching its latest breakthrough, Logistics 4.0. The first step
(Logistics 1.0) was launched by the “mechanization of transportation” starting in the late 19th and early 20th century.
In this period, ships and trains equipped with steam engines were the main mode of transport for moving goods and
containers, and they replaced human and animal power. The capacity of transportation grew significantly in the 20th
century marking the beginning of the mass transportation age. The second step (Logistics 2.0) was the result of “the
automation of handling systems” during the 1960s. This second innovation in Logistics was initiated by the invention
of electric power and the spread of the mass-production techniques in manufacturing and completed by the automation
of cargo handling. In this period, the automated warehousing and sorting systems, and automated loading and unloading
systems were substituted with the conventional warehousing, and the heaviest work was starting to be done by electrically
driven machines. At this time, container ships became dominant in ports, and they transformed the port cargo handling
system. The third step (Logistics 3.0) appeared as “the system of logistics management” in the 1980s. Computers and
Information Technology (IT) led the systemization of logistics activities and initiated the third innovation in logistics.
Automation and logistics management capabilities were significantly developed as a result of integrating IT systems, such
as Warehouse Management Systems (WMS) and Transport Management System (TMS), into logistics. The fourth step
(Logistics 4.0) is now in its early stages. Internet of Things and Internet of Services (IoT & IoS) are the main drivers of
Logistics 4.0 (Wang 2016). Figure 3 below presents the development process of logistics over time.
 Logistics 4.0: SCM in Industry 4.0 Era 21

Logistics 4.0

Degree of Complexity
(IoT&IoS)
Logistics 3.0
System of Logistics -Use of Internet
-RFID Systems
-Warehouse Management -Cyber Physical Systems
Systems -Data Mining
-Transport Management
Logistics 2.0
Systems
Automation of
-Information Technology
Handling Systems
Logistics 1.0
Mechanization of -Electric power
Transport -Automatic warehousing
and sorting
-Steam engine power -Mechanization of port
-Railway network cargo
-Steam ships

1800 1900 1960 1980 2000 Today

Time
Fig. 3: Development Process of Logistics (adopted from Wang 2016).

4.2 Logistics 4.0

Logistics 4.0 is a collective term for technologies and concepts of value chain organization. Many of the emerging
technologies take a crucial part in Logistics 4.0. For instance, CPS monitor physical processes, generate virtual copies of
the physical world and make decentralized decisions within the logistical processes while Data Mining (DM) discovers
the required knowledge to assist in decision-making processes. CPS communicate and cooperate with each other and
humans in real-time via the IoT. The collective use of barcodes, radio frequency identification technology (RFID), sensors,
global positioning systems (GPS), and other advanced network technologies for information processing and network
communication purposes compose the Logistics 4.0 concept. These advanced technologies are used extensively in logistical
operations, such as freight transportation, warehousing, distribution, packaging, handling, and related activities. Automated
logistical operations and carrying out efficient transportation processes increase the service level and customer satisfaction
and reduce the overall costs and the consumption of natural resources (Wang 2016).
The term Logistics 4.0 indicates the specific application of Industry 4.0 in the area of logistics. Logistics 4.0
is induced by new technologies and their application in logistics. Each information and communication technology
causes a novel solution in a specific area of logistics (Glistau and Machado 2018). Logistics 4.0 refers to logistics
systems consisting of independent subsystems where the behavior of the subsystems depends on other surrounding
subsystems. The Logistics 4.0 definition combines two aspects: processual (supply chain processes are a subject of the
Logistics 4.0 actions) and technical tools and technologies that support internal processes in supply chains (Szymańska
et al. 2017). Table 2 depicts important technologies and their application area within Logistics 4.0 in the form of a
morphological box.
The needs and complexity in the manufacturing industry show a monotonically increasing trend in recent years. The
fast-paced evolution of technology, harsh competition, fast-growing volatility on the international markets, rising demand
for highly individualized products, and products with short life cycles impose crucial challenges to firms. It is unlikely that
the current approaches will buildcost-efficient, flexible, adaptable, stable, and sustainable supply chains. Strong industrial
nations will be required to adopt Industry 4.0 to maintain their positions. Adjustment to this new initiative will introduce
highly flexible mass production, real-time system coordination and optimization, cost reduction, and new business models.
Major new trends in logistics are anticipated as a result of this new initiative, as well. Real-time monitoring of the material
flows, enhanced material handling, and risk management are some of the prospective applications of Industry 4.0 on
logistics (Hofmann and Rüsch 2017).
Some studies (e.g., Hofmann and Rüsch 2017; Strandhagen et al. 2017a) investigate the implication of Industry 4.0
on logistics management. Hofmann and Rüsch (2017) examine the two dimensions of logistical operations: (1) Physical
supply chain dimension and (2) Digital data value chain dimension. The physical dimension involves autonomous and
self-controlled logistics systems (e.g., autonomous trucks), automated material handling systems (e.g., piece picking
robots), and autonomous order processing systems (e.g., smart contracts on the blockchain technology) that are connected
and interacting with each other. The digital dimension, on the other side, encompasses sensor and machine data that are
22 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 2: Important Technologies of Logistics 4.0 (Glistau and Machado 2018).

Technology/Criterion Characteristics
Identification Smart card Bar code RFID Sensor Biometrics
technologies
Mobile Communication 5G network UMTS/LTE GSM/GPRS WLAN Satellite
communication
Localization Geo reference point 5G UMTS/LTE WLAN Satellite-based
based GSM/GPRS
Electronic Data Electronic data EDI XML Internet Telematics
Interchange processing medium
Terminals Smartphones Tablets Special hand-held On-board
units computer
Architecture Paradigm Centralized Decentralized, Decentralized,
Agent-based Blockchain
Architecture Network Hardware (Server, Software Database Virtualization
Cloud, Storage) (Operating system,
open-source)
Data Analysis Methods Descriptive Inferential (Point Explorative Regression,
and interval (Big Data) casual analysis
estimate)
Data Analytics Processing Data Access OLAP Data Mining

collected from the physical dimension of a supply chain and it is a crucial input for strategic business decisions. The
model proposed is shown in Figure 4.
Both inbound and outbound logistics have to comply with the rapidly changing market dynamics as the demand for
highly customized products and services is constantly increasing. Because of its complex nature, traditional planning and
control methods are not useful. The term “Logistics 4.0” signifies the integration of logistics and the emerging innovations
and applications of CPS. Logistics 4.0 is similar to the “Smart Products” and “Smart Services” in terms of technology-
driven approach. Smart products and services carry out tasks that are repetitive and do not require intelligence; therefore,
the employees can focus on tasks that require intelligence.
“Smart Logistics” is a system that has merits, such as improving the supply chain flexibility, quick adaptation to the
volatile markets, and the accuracy in meeting the customer needs. All these will lead to higher customer service levels,
production optimization, and reduced storage and manufacturing cost. The increasing use of the Internet that enables the

Fig. 4: A Logistics-oriented Industry 4.0 Application Model (Hofmann and Rüsch 2017).
 Logistics 4.0: SCM in Industry 4.0 Era 23

real-time interaction between man and machines and the rapid digitalization in recent years led to the birth of this new
concept (Barreto et al. 2017). An effective and resilient Logistics 4.0 requires to possess the technological applications
shown in Table 3.

Table 3: Essential Technological Applications for Logistics 4.0 (adopted from 1Barreto et al. 2017; 2Min 2018; 3Schuldt et al. 2010;
4
Coetzee and Eksteen 2011; 5Sun 2012; 6Strandhagen et al. 2017a).

Technological Application Rationale

1) Resource Planning Along with the adoption of Industry 4.0 and the implementation of CPS, a proper resource
planning management system improves the overall productivity, flexibility, and agility of a
supply chain. A capable resource planning system will build a robust forecasting model for
the resources of an organization (e.g., people, materials, and equipment). This will lead to
optimize resources and processes, reduce time to market, increase customer satisfaction.1
2) Warehouse Management Systems The introduction of smart systems and the implementation and integration of these
systems into the Warehouse Management Systems (WMSs) cause a radical transformation
in warehouse activities. The location and estimated arrival time of transporters can be
monitored by the intelligent WMSs through the use of CPS. Hence, intelligent WMSs will
be able to optimize just-in-time and just-in-sequence delivery by deciding and preparing
the proper docking area. At the same time, the delivery data (e.g., quantity, size, and price)
will be sent to the entire supply chain by the RFID sensors. In order to move the incoming
goods, the appropriate material handling equipment will be requested and available storage
space will be assigned immediately by the WMSs based on the specifics of the delivery.1
3) Transportation Management Transportation Management Systems (TMSs) facilitate the interaction between an order
Systems management system (OMS) and a distribution center (DC) or a warehouse. Advanced TMSs
can be integrated into other supply chain technologies such as Warehouse Management
Systems and Global Trade Management Systems. TMSs can communicate electronically
with customers, trade partners, and carriers. Logistics 4.0 utilizes real-time and inline data
to achieve efficient and effective logistics processes. A TMS allows a company to accurately
pinpoint the location of its transporters by the use of GPS technology while they’re on
the road, monitor and track the movements of goods, negotiate with carriers, consolidate
shipments, and interact with Intelligent Transportation Systems (ITSs). Therefore, a TMS
is one of the essential elements for Logistics 4.0 concept.1
4) Intelligent Transportation Systems Intelligent Transportation Systems (ITSs) provide solutions for a reliable platform for
transportation operations. ITSs interoperate in different fields of transportation systems,
such as transportation management, control, infrastructure, and operations. Computing
hardware, positioning system, sensor technologies, telecommunications, data processing,
virtual operation, and planning techniques are some of the technologies adopted by ITSs.
A fully operational ITS supports intelligent truck parking and delivery areas management,
multimodal shipping, i.e., planning and coordinating different transport modes during the
various logistics operations, CO2 emission calculation and monitoring, operations priority
and vehicle speed guidance (e.g., reduce fuel consumption, lower emissions and reducing
heavy vehicles operations in urban areas), and eco-drive support (e.g., less fuel consumption
and CO2 emission by embracing energy-efficient methods of driving).1
5) Information Security The way businesses are done by organizations has been affected by the emerging internet-
based technologies such as cloud systems, CPS, IoT, and Industry 4.0. Innovative
technologies with potential impact for businesses become more important day by day for
the companies that are interested in lowering their operating cost and gaining competitive
advantage in the market. This tendency brings information security issues. Unexpected
security risks are inherent in the new technologies. Therefore protecting IT infrastructure
and information assets is one of the main concerns for organizations.
Promoting the continuous attempt to build a security culture and acknowledging that all
technological devices, applications, and systems have their inherent vulnerabilities will
help organizations to reach the desired level of security and foster their business goals.
Companies should identify, implement, monitor, and control their desired security
requirements in order to achieve a required level of information security.1

Table 3 contd. ...

24 Logistics 4.0: Digital Transformation of Supply Chain Management

...Table 3 contd.

Technological Application Rationale

6) Blockchain Technology Blockchain Technology (BCT) can be applied to some specific areas of supply chains such
as smart contracts, asset tracking, secure and error-free order fulfillment, and cybersecurity.
Smart contracts help companies to exchange money property, shares, or anything valuable
in a reliable, transparent, and conflict-free way. Hence, the transaction time and costs will
be minimized.
One of the main functions of the BCT is to track and record all the supply chain activities
of a particular asset from its origin to its final destination. This is called the asset tracking
feature of blockchain. This feature of the BCT hedges companies against fake transactions
and make it easier to track goods throughout the supply chain. The asset tracking capability
of BCT reduces the risk of loss and damage during transit.
BCT can expedite the order fulfillment process with its merits such as rapid confirmation of
customer credit history, quick inventory status analysis, order/shipping status notification,
and offering transparency throughout the order fulfillment process.
Growing cybercrime threats in recent years imposes a high risk on supply chain networks.
BCT, with its visibility, privacy and, non-stop information verification features, is an
outstanding technology that mitigates the cybercrime risks in supply chain networks.2
7) Cloud Technology Cloud computing is a prominent technology in order to implement autonomous control in
logistics. Autonomous logistics solutions with intelligent software agents can be set up on a
scalable IT infrastructure that is offered by cloud service providers. Some services offered
by these providers may range from scalable hardware platforms to complete process control
of the logistics operations. Autonomous logistics control systems enable users to focus on
their core business operations and they are no longer require to invest in IT infrastructures.3
8) Internet of Things (IoT) The Internet can connect physical objects to each other and create smarter services for the
environment. These benefits of the Internet are considered as the main drivers of the IOT.4
The IoT enables companies to track their goods at each stage of the logistics process in real-
time, and manage their logistics architecture. While the flow of goods is being monitored, a
company can analyze the data generated at each stage of the logistics process and distribute
data to all parties in the process. The use of real-time data in forecasting allows companies
to realize future trends and the probability of unexpected events. Therefore, preventive
measures or policies can be adopted in advance. Thus, companies gain a competitive edge
since they become more responsive to the market.5
9) Augmented Reality Augmented reality (AR) systems can take part in logistics, manufacturing, training, and
maintenance operations. AR combines computer-generated data with the physical world
to help workers. For instance, pick-by-vision is one of an innovative order picking method
based on AR technology. This logistics solution offers a fast and effective way of picking
of products while reducing operating time.6

5. Conclusion and Future Direction

This chapter introduces an extensive review of logistics, its changing patterns within the Industry 4.0 era, and its role in
the digital transformation in SCM. The historical development of ICSs, the evolution of logistics, the interaction between
Industry 4.0 and smart logistics, and potential challenges of Logistics 4.0 are broadly discussed.
Logistics is one of the core pillars in the value chain for suppliers, manufacturers, and retailers since they cannot be
competitive in the market without getting the right good at the right time in the right place. It is getting more difficult to
fulfill these requirements as logistics networks become uncertain and volatile. New methods, technologies, and services are
required by companies as the complexity increases in logistics networks. Many challenges and opportunities for logistics
emerge as a result of today’s consumer behavior. Therefore, the shift from traditional logistics to new logistics solutions is
inevitable. Industry 4.0 will transform and improve the traditional logistics and its self-perception (Wang 2016). Logistics
4.0 is a complex system composed of many emerging technologies that are connected and able to communicate with
each other, and it is responsible for fulfilling customers’ needs and meeting the requirements of increasing complexity in
logistical operations. Logistics 4.0 is an element of Industry 4.0 and these two cannot be thought of as independent from
each other (Wang 2016).
As an element of Industry 4.0, Logistics 4.0 creates possibilities for new business models. Instantaneous information
exchange, computerized business solutions, and real-time big data analysis capability are some of the features that companies
enjoy as a result of adopting Logistics 4.0. The combined use of all these features of Logistics 4.0 is changing the way
 Logistics 4.0: SCM in Industry 4.0 Era 25

companies do their business. Today, service-oriented businesses, where the customer involvement starts at the product or
service design stage, are at the focus of the companies. This transformation is expedited by the Industry 4.0 technologies
such as CPS, IoT, IoS, smart products and smart processes (Strandhagen et al. 2017b).
Traditional logistics will undergo a transformation as Industry 4.0 takes over today’s conventional production process
in use. This change in logistics will not be easy or effortless. However, it will substantially change the way companies
perform their logistics operations and improve process efficiency, productivity and customer satisfaction. Companies who
embrace Logistics 4.0 will gain a competitive advantage since Logistics 4.0 will equip them with a flexible, sustainable, and
highly responsive supply chain. Transforming conventional logistics systems into smart logistics systems and optimizing
the logistics process will lead to agile supply chains, improved cost-saving, higher customer service levels, and satisfaction.

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 SECTION 2

Internet of Things and Cyber-Physical

Systems in SCM

CHAPTER 3

The Internet of Things in Supply Chain

Management
Volkan Ünal,1 Mine Ömürgönülşen,2 Sedat Belbağ3,* and Mehmet Soysal2

1. Introduction

Supply chain management (SCM) is the management of the flow of materials, services and information among the
partners (e.g., suppliers, manufacturers, retailers, etc.) along the supply chain. In a traditional supply chain management,
companies are confronted with various challenges such as reducing cost, improving efficiency, ensuring coordination
and managing uncertainty. Rapid advances in technology lead companies to integrate new technological developments
into supply chains to maintain their competitive advantage. The concept of Industry 4.0 has the potential to change the
structure of today’s traditional production and transportation processes to a great extent. Real-time collaboration can be
built among the partners in the supply chain utilizing the recent technologies introduced by Industry 4.0 such as radio
frequency identification (RFID), cyber-physical systems and internet of things (IoT).
Among these new technologies, IoT is a dynamic network system where each technological device has an identity,
physical attribute and virtual personality with self-configuring capabilities based on standard and communication protocols
(van Kranenburg 2008). That is to say, IoT is a connectivity network of smart devices at anytime and anywhere, which
will affect the structure of any industry, as well as daily life. IoT provides an opportunity to attach technology to regular
devices (e.g., home appliances, microwave oven, home theatre, etc.) and make them online (Whitmore et al. 2015). IoT
offers considerable potential to public and private sectors by enabling innovative applications to overcome common
challenges faced in many industries and is capable of gathering and transporting information from all devices that can
connect internet via Wi-Fi, sensors, Bluetooth, cellular networks, Global Positioning System (GPS) and RFID technologies.

1
Senior Software Engineer, STM Savunma Teknolojileri Mühendislik ve Ticaret A.Ş., Email: [email protected]
2
Assoc. Prof. Dr., Hacettepe University, Emails: [email protected]; [email protected]
3
Ankara Hacı Bayram Veli University.
* Corresponding author: [email protected]
28 Logistics 4.0: Digital Transformation of Supply Chain Management

Morgan Stanley’s report predicts that there will be nearly 75 billion smart devices connected by 2020 (Danova
2013). These devices will generate trillions of bytes per day that should be collected, stored, analyzed and transmitted.
IoT offers companies to make smart devices more visible, traceable, adaptable and flexible in a data-driven environment.
Furthermore, IoT enables (i) to monitor and control the manufacturing system, (ii) to analyze the big data accurately,
and (iii) to share necessary information between people and things (Lee and Lee 2015). Several IoT applications can be
observed in agriculture, food processing, retailing, healthcare, home appliance, security, recycling, and manufacturing
industries (see, e.g., Li et al. 2012; Xu et al. 2014).
IoT related applications will inevitably lead companies to redesign their supply chains. Along with providing smart and
dynamic manufacturing processes, IoT technologies can contribute to forecast and rapidly react to unexpected changes that
occur throughout the supply chain (Fatorachian and Kazemi 2018). IoT enables more visibility and real-time information
among partners in a supply chain with horizontal integration of business processes (e.g., inbound logistics, production,
and outbound logistics). Particularly, enhanced visibility and up-to-date information provide significant improvements in
logistics and supply chain management (Flügel and Gehrmann 2008). The mitigation of bullwhip effect (Yan and Huang
2009) and advances in product traceability can be given as examples for such improvements (Zhengxia and Laisheng 2010).
In line with the increasing awareness of Industry 4.0 related technology practices, there has been a growing interest in
studies related to IoT applications in SCM. The current study aims to reveal the tendencies and interests in the integration
of IoT into the SCM. To the best of our knowledge, this study will be the first attempt to address the potential effects of
IoT applications in SCM.

2. The Internet of Things

The first industrial revolution began with the implementation of steam power into production processes at the end of the
18th century. This revolution was immediately followed by the second one with the introduction of electricity which, in
turn, leads to a division of labor at the beginning of the 20th century. During the early 1970s a new industrial era, namely
the third industrial revolution, has been started with the integration of information technologies into operational processes.
Robots, Computer Numerical Control (CNC) machines, computer-aided manufacturing, and electronic devices facilitate
the automation of manufacturing processes, as machines have taken over not only a substantial proportion of the labor
work but also some of the brainpower (Yin et al. 2018).
In recent years, a new industrialization stage has begun, as the industry evolves even faster with remarkable advances
in the internet, computer and software technologies. Industry 4.0 was firstly introduced by German practitioners during the
Hannover Fair event in 2011. The developments introduced by Industry 4.0 had been published in a report by a working
group in 2013 (Kagermann et al. 2013). The philosophy behind the Industry 4.0 is twofold that can be summarized as
follows: (i) to change the current manufacturing devices with the fully automated ones and (ii) to minimize human interaction
and control for gaining advantages in a highly competitive business environment. Several countries have started to initiate
similar attempts in their industries. A smart system, “Society 5.0” was suggested by the Japanese Government that aims
to integrate smart technologies into the industry and the community to meet the needs of each individual (Government
of Japan, Public Relations Office, 2019).1 China established a strategic initiative, “Made in China 2025”, which aims to
attain self-reliance for the key components in the selected high-tech industries including new energy vehicles, industrial
robotics, and semiconductors (European Chamber Report 2017).2
The concept of Industry 4.0 is based on the emergence of new digital technologies. As a consequence of the latest
technological improvements, each device becomes “smart” over time with the integration of the internet. The internet
provides instant communication among these smart devices without human control and interaction. When smart devices
communicate with each other, transactions generate a large amount of data, which needs to be stored and processed.
Industry 4.0 includes technologies of many disciplines and makes extensive use of the big data, artificial intelligence, cyber-
physical systems, smart factories, system integration, RFID, sensors, simulation, robots, 3-D printers, cloud computing,
cyber-security, simulation, and IoT.
IoT is a technological term that provides a connection among many devices, at anytime and anywhere. According
to the definition of the European Commission Information Society3 (2008), IoT is defined as “things having identities
and virtual personalities operating in smart spaces using intelligent interfaces to connect and communicate within
social, environmental, and user contexts”. According to a definition, IoT is a network of digitally connected devices to
communicate with each other and facilitate planning, control, and collaboration of supply chain processes among supply
chain partners (Ben-Daya et al. 2019).
1
https://www8.cao.go.jp/cstp/english/society5_0/index.html, Online accessed: September 2019.
2
https://www.europeanchamber.com.cn/en/china-manufacturing-2025, Online accessed: September 2019.
3
https://ec.europa.eu/digital-single-market/en/internet-of-things, Online accessed: August 2019.
 The Internet of Things in Supply Chain Management 29

IoT is one of the fastest developing technology related to the Industry 4.0 concept (Szozda 2017). It is estimated that
the value of IoT will be between $4 trillion and $11 trillion globally by 2025 (Bauer et al. 2015). IoT is capable of collecting
information by detection technologies and allows all physical objects to be connected by using the internet, RFID, and
sensors. IoT has great potential to affect both daily life and the industrial environment. Different types of communication
protocols and the internet allow end-users to connect to the corresponding systems. IoT related technologies have already
been used in various areas, such as sensors, GPS, Wi-Fi and Bluetooth in mobile devices.
IoT related technologies lead companies to incorporate smart devices into production systems. In smart production
systems, these devices enable real-time data flow and generate a large amount of data. As a consequence, IoT related
technologies help companies to collect, store and analyze big data emitted from smart devices. Big data is defined as a
large volume of complex and variable data set that requires advanced techniques and technologies to get, store and analyze
raw data (TechAmerica Foundation’s Federal Big Data Commission, 2012). IoT related technologies enable decision-
makers to discover and control several issues in business such as changes in customer behavior and providing valuable
services (Lee and Lee 2015).
Although IoT is an important component of the Industry 4.0 concept, it is also related to various new technological
improvements, such as cyber-physical systems, machine learning, and cloud computing. These technologies can be briefly
explained as follows. Cyber-physical systems refer to a system where computer-based algorithms monitor and control
the physical and software components (Lee 2008). Lu (2017) states that IoT is integrated into a complex cyber-physical
system by using various devices equipped with the detection, identification, processing, communication and networking
capabilities. Machine learning is an important factor in the integration process between cyber-physical systems and IoT
in recent years. Machine learning enables smart devices to learn without human intervention and perform autonomously
(Mahdavinejad et al. 2018). Cloud computing is an on-demand network system that can be reached by one or many users
(Mell and Grance 2011). Cloud computing enables users to reach IoT applications by providing a network with unlimited
storage and computation capacity (Atlam et al. 2017).
As a result of recent advances in IoT, the structure of industrial systems rapidly adapts new technological improvements.
IoT does not only focus on the structure of the factory itself but also is adapted into various processes such as distribution
and customer service. For instance, machine learning-based approaches support and improve the decision-making process
in distribution utilizing proper big data mining. These IoT embedded systems directly affect the structure of production
planning, maintenance scheduling, inventory planning and control (Upasani et al. 2017). IoT based data has been transmitted
by wired or wireless networks into the industrial cloud systems. Manufacturers store and analyze IoT based data to optimize
the production process and produce high-quality products.

3. Challenges of The Internet of Things

Companies are confronted with new challenges in their organizational structures with the integration of the IoT process.
Installing new technologies into a fully working IoT-based system requires a considerable amount of investment, effort
and time. Any delay or malpractice during the integration process of new technologies into production lines may result in
a heterogeneous network system (including both wired and wireless connections). Furthermore, the new network system
connects various smart devices by using a wide range of applications. Such event-oriented sensors and augmented reality
displays increase system complexity and reveal additional challenges in the management of the network (Pereira et al. 2018).
The number of interconnected physical devices will significantly increase the system complexity and these devices
will constantly interact with each other. Smart production systems will obtain, understand and convert machine-generated
data into a piece of meaningful information in the decision-making process. Storing and analyzing big data is a major
challenge, although big data create valuable business opportunities in terms of providing a competitive advantage. Besides,
analyzing big data in the IoT environment requires different types of structures, processes, and technologies. Companies
should allow fundamental changes in the production systems and make all the necessary adjustments. Specific technologies,
such as big data analytics (i.e., a method for collecting and analyzing a large amount of data to solve real-world problems)
and cloud computing may help companies to extract relevant information from big data (Fatorachian and Kazemi 2018).
Monostori et al. (2016) state that security is an important problem related to IoT related technologies. The security
system should be considered as an independent process in the smart production system. Wireless sensors and RFID devices
may cause problems for security systems. For instance, a vulnerable production system can be a subject of a cyber-attack
by hackers. Many companies are not aware of the security threats against their smart production systems. Economic and
production losses are the possible outcomes of these cyber-attacks (Tuptuk and Hailes 2018). Other potential outcomes
of security breaches would be injuries, loss of life, damage to physical infrastructure, equipment, and the environment,
unauthorized access, data modification and forgery (Cardoso et al. 2017). Cybersecurity deserves more attention to decrease
vulnerability against industrial espionage and sabotage.
30 Logistics 4.0: Digital Transformation of Supply Chain Management

Although wireless network devices (e.g., sensors, RFID, etc.) may cause vulnerable production systems, various
security devices provide additional protection to these wireless technology embedded systems. Growing technological
advances in security systems decrease the number of potential cyber-attacks to IoT related technologies with highly secure
wireless network technologies. Cybersecurity aims to alter the intended behavior of these networks or connected devices
to protect them from malicious interventions (Abomhara and Køien 2015). Thus, all smart devices are connected by the
integration of secure cloud systems.
Connected smart devices require international communication protocols and standards. Several organizations (e.g.,
International Organization for Standardization and International Electro-Technical Commission) develop technical standards
to improve the effectiveness of the IoT-based systems (Li et al. 2015). Standardization supports the integration process
of IoT-related technologies in smart production systems (Trappey et al. 2017). However, different standards or lack of
common international standards may cause serious problems such as incompatibility among IoT-related technologies.
Another important problem is to transform the traditional factory layout into a technological one that enables the deployment
of a huge amount of data from numerous smart devices (Lin and Yang 2018). Cloud computing helps smart production
systems to handle processing loads and big data for avoiding long delays in production processes.
The major challenges of transformation in production systems related to IoT related technologies can be summarized
as (i) difficulties in technical integration, (ii) difficulties in storing and analyzing big data, (iii) challenge of enabling
consistent cybersecurity, (iv) different international standards, and (v) challenge of redesigning the traditional layout.

4. Changes in Business Models and Production Processes

The total integration of IoT related technologies into production systems will deeply change the way of the business
environment soon (Lee et al. 2018). The IoT has a major impact on the business models of manufacturing companies
in various industries. It will be the key factor in the transformation process of traditional production systems into smart
production systems by facilitating the transfer of knowledge. Therefore, IoT-related technologies may reveal business
opportunities to work with a significant amount of real-time data (Kumar et al. 2018). IoT affects the structure of the
industrial environment concerning five key factors; (i) design and innovation, (ii) asset utilization and revenue planning,
(iii) supply chain and logistics design, (iv) resource efficiency and (v) stakeholder experience (Kamble et al. 2019).
Traditional production systems become less efficient with new technological developments. Lee (2008) states that
customer expectations are no longer met by traditional production systems within a short period. However, IoT enables
better control over smart production systems by transmitting and analyzing big data. IoT provides remote access and control
over the production system from all over the world. Companies can easily obtain the necessary data related to production
processes with the wide usage of sensors and wireless devices. Big data are transferred to the super-computers to be analyzed
for potential product improvements (Gierej 2017). Digital simulation models (e.g., augmented reality) analyze the collected
data to improve the quality of processes and products. In conclusion, the productivity of manufacturing systems increases,
when the cycle times and the number of defects decrease. IoT provides efficiency in resource usage and reducing cycle
time. Especially, resource inefficiency is a major problem for food supply chains due to the mismanagement of resources
such as food losses and waste (Jagtap and Rahimifard 2017).
Core competencies of a company evolve to satisfy customer expectations in a better way. IoT related applications
provide control over resources and core competencies to develop capabilities in the product development process. The
IoT enables manufacturers to create valuable, flexible and customized products. Customers might have a chance to be
involved in the decision-making process regarding the product design process with IoT related technologies (Lu 2017).
Manufacturing companies can greatly benefit from the IoT by developing value-added applications. For instance, a cement
manufacturing company has implemented an IoT related technology to estimate the energy consumption trend. Along
with optimizing energy consumption amounts, IoT application reduces the energy consumption of the company by 10%
(Xu and Li 2018).
IoT mainly improves the effectiveness of production processes. Moreover, it is also a useful tool for companies to
deal with changes in customer behavior, product design, packaging, and distribution. IoT directly affects the distribution-
related decisions (e.g., delivery plans and delivery times) in a highly dynamic, uncertain and complex environment (Wang
2016). To maintain a competitive advantage, companies focus on responsiveness and delivery times. Accordingly, IoT has
the potential to bring significant changes and improvements in traditional logistics systems. Smart machines can detect
real-time data, be sensitive to the content of data and provide value-added information to help managers to make better
decisions in logistics.
Investment in new technologies and the employment of a highly skilled and flexible workforce will also provide
a competitive advantage to the companies (Strange and Zucchella 2017). IoT related technologies create specialized
departments and jobs in human resources management. Additional technical assistance by smart devices will also decrease
 The Internet of Things in Supply Chain Management 31

the routine workload of the employees. Qualified workers are required to operate smart devices, especially in planning,
monitoring and controlling production processes. The integration of IoT related technologies allows employees to work in
safe conditions and to boost employee productivity. For instance, drones are commonly used in the inspection of oil zones
and natural gas pipelines that prevent workers from potential exposure of hazardous gases or chemicals (Sissini et al. 2018).
Even though IoT offers numerous benefits for companies, it should be carefully integrated into the existing system.
It will be easier for a warehouse management system to cope with the changes in production orders and there can be an
increase in the efficiency of operations with the integration of new technologies. In a classical warehouse management
system, the main problem of a worker is the high workload. The entire process is considerably time-consuming and the
workload is relatively higher compared to the workload in an automatic warehouse (Lee et al. 2018). A worker may
randomly place a product and the collection process typically depends on the employee’s memory and experience. There
is always a possibility to miscalculate the correct amount of the inventory. However, IoT related technologies, such as
RFID, make inventory more visible and significantly decrease the workload in the entire system.
Due to technological advances, global competition evolves into an IoT-based competition. Many companies face
serious challenges during the transformation process of traditional production systems into the IoT embedded ones. Proper
integration requires close cooperation among companies to increase the effectiveness of the supply chain. Inter-company
integration and collaboration among supply chain partners will result in more visible and controllable storage and distribution
systems. IoT helps decision-makers to analyze the current state and the structure of the company by enabling more visibility
through connection among smart devices. Especially, the structure of the production systems is completely differentiated
from the traditional ones with the integration of IoT related technologies. The smart production systems provide autonomy
for the entire system rather than the autonomy in the manufacturing floor alone (Kusiak 2018). Therefore, all partners in
the supply chain should adapt their processes to maximize the benefits of new technologies for the end-users.

5. The Effects of The Internet of Things on Supply Chain Management

Today’s highly competitive environment leads companies to integrate Industry 4.0 related technologies into their supply
chain management. The structure of supply chains needs to be redefined with these radical changes. According to Pereira
et al. (2018), Industry 4.0 enables self-organized supply chains by implementing IoT. Through Industry 4.0 related
technologies, supply chain management evolves into a “smart supply chain management” or “SCM 4.0”.
IoT redesigns both the structure of the supply chain and the relationship among suppliers, manufacturers and
customers. The structure of the new supply chain becomes more transparent, flexible and customer-oriented. Dunke et
al. (2018) state that IoT related technologies positively affect supply chain performance and help supply chain partners
to cope with real-time challenges such as uncertain demand and lead time. IoT provides numerous advantages to supply
chain partners, such as increased visibility, improved collaboration among supply chain partners, additional agility and
adaptability and reduced supply chain risk.
Real-time visibility allows companies to observe and control both internal and external processes through the supply
chain. IoT focuses on each phase of the supply chain from production to distribution and contributes to the increased
operational efficiency. The flow of goods, services, information, and funds can be monitored by IoT-based technologies
which could enable higher supply chain performance (Sun et al. 2018). Furthermore, increased order visibility enables
companies to track items through the entire supply chain. Due to the real-time visibility and instant communication among
smart devices, supply chain partners will rarely need to keep additional inventory for unexpected demands. IoT related
technologies will also help to decrease inventory costs in each stage of a supply chain.
More visibility increases communication among supply chain partners. IoT related technologies are appropriate for
effective communication tools between transmitter and receiver partners in a supply chain. Smart communication tools
provide a more visible network among the partners in a supply chain. The IoT forces companies to work collaboratively
to increase supply chain surplus. Better information sharing and improved foresight lead a company to develop a new
collaboration with its suppliers. As a result, more valuable goods and services are offered to customers (Zheng and Wu
2017). Although IoT related technologies promote strong collaboration among supply chain partners, these technologies
increase infrastructure costs (e.g., reader, tag, and server costs) and operational costs (Bardaki et al. 2012).
Along with providing more visible structure and strong collaboration, IoT related technologies may also transform the
structure of companies into more agile ones and make them adaptable against unexpected changes in the environment.
Instant communication among smart devices provided by IoT leads companies to quickly respond to customer requirements
at an acceptable cost (White et al. 2005). Thus, the adaptation performance of companies becomes more efficient to market-
driven changes (Shen and Liu 2010). An agile supply chain provides superior value to all partners as well as manages and
mitigates supply chain risk (Braunscheidel and Suresh 2009).
32 Logistics 4.0: Digital Transformation of Supply Chain Management

Supply chain risk may arise from environmental, organizational and network-related factors and these factors may
deeply affect the structure of the supply chain (Jüttner et al. 2003). However, the emergence of IoT related technologies
makes it possible to mitigate the negative effects of supply chain risk by providing well-developed communication channels
and visible processes. Instant information exchange and strong collaboration among supply chain partners strengthen
companies against unforeseen events.
In addition to connecting all physical entities involved in a supply chain (Kiel et al. 2017), IoT also provides the
opportunity of having smart production lines and considerable cost savings for manufacturers (Sun et al. 2018). The smart
machines are inter-communicated to each other and able to transfer real-time data. IoT is a necessary element of the new
production systems to collect and manage a large amount of information obtained from smart devices (Canizares and
Alarcon 2018). Zheng and Wu (2017) propose a model which horizontally integrates IoT into the production system. The
model uses real-time and available orders to predict the amount of spare parts usage.

6. Conclusion

Rapid advances in technology lead companies to integrate new technological developments into supply chains to maintain
a competitive advantage. IoT has the potential to significantly change the structure of today’s traditional production and
transportation processes. Many industries (e.g., retailing, automobile, electronics, etc.) will integrate IoT related technologies
into production systems. The structure of supply chains has the potential to be altered with the new technologies and
become more visible, agile and risk-free.
Traditional supply chains become more “smarter” with the integration of Industry 4.0 based technologies. IoT, which
is one of the technologies introduced by Industry 4.0, has the potential to be used in companies and may easily cope with
complexities confronted by traditional supply chains. Although companies may encounter various challenges throughout
the integration process of IoT related technologies into their supply chain systems, these technologies provide considerable
opportunities to outperform the competitors. Recently, IoT has been applied in numerous industries including agriculture,
healthcare, retailing, manufacturing, and logistics.
IoT applications in SCM is a new research area which requires interest from both academics and practitioners. IoT
provides an effective and real-time communication system among supply chain partners. A better communication network
enables to present innovative products to customers within a short period that contributes to the supply chain responsiveness.
For instance, a proper big data analysis may have a huge impact on strategic decisions such as mass customization (Saniuk
and Saniuk 2018). Furthermore, smart devices enable to plan and control of the entire supply chain system, which prevents
the supply chain partners from serious problems (e.g., reduction in the amount of inventory due to bullwhip effect). IoT
helps supply chains to cope with uncertain changes in demand, to improve product quality, to design new products, to
prevent production failures and to deliver products on time. Some other benefits include increased visibility, traceability,
transparency, adaptability and flexibility in a supply chain.
Although companies can obtain numerous benefits from IoT technologies, IoT may complicate supply chain
management. Obtaining and analyzing processes of the machine-generated big data requires a considerable amount of time
and effort. Additionally, a supply chain system may become more vulnerable to the cyber-attacks with potential security
holes by the integration of Wi-Fi and RFID technologies, if necessary protection has not been provided.

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CHAPTER 4

The Impact of the Internet of Things on Supply

Chain 4.0
A Review and Bibliometric Analysis
Sema Kayapinar Kaya,1,* Turan Paksoy2 and Jose Arturo Garza-Reyes3

1. Introduction

Supply Chain (SC) has a very extensive and dynamic structure that incorporates new business models, new customer
expectations, market searches, and technological developments. With the emergence of Industry 4.0, SC had to bring
about some changes to keep up with the innovations that Industry 4.0 has brought. Industry 4.0 has relocated the SC and
logistics into a digital environment and restructured it. All the processes in SC have been restructured within the framework
of Industry 4.0, from raw material procurement to production line and till the last step that the product reaches the final
customer. With the Industry 4.0, SC is digitized and renewed with more advanced technological equipment. Today, 28%
of SC companies seem to have advanced digital technology. Digital Supply Chain (DSC) and logistics sectors have a
share of 41%, particularly in the automotive industry and 45% in the electronics sector. Within the framework of Industry
4.0, many SC companies have planned to invest 5% of their annual revenues in technological investments until the year
2020 (Zuberer 2016).
The most significant change in SC has occurred with the tracking of objects throughout SC. This new concept, called
IoT, shortly Radio Frequency Identification System (RFID), is defined as objects that communicate and share information
with each other through sensors and various communication protocols. It is assumed that the camera system was the first
step in IoT. This camera system was set up for the first time in 1991 by about 15 researchers at Cambridge University to
monitor the coffee machine from their rooms. Then, in 1999, with Kevin Ashton using RFID technology in the Auto-ID
Laboratory of Massachusetts Institute of Technology (MIT), the IoT was used for the first time (Ashton 2009). Procter &
Gamble implemented IoT technology in the SC industry for the first time in 1999. Thanks to RFID placed on the products,
product tracking was made instantaneously throughout the SC. On this topic, DHL (logistics service provider) and Cisco
(Information server provider) prepared a new trend report on the IoT. According to this report, by the year 2020, 50 billion
devices will be connected via the internet, which is expected to lead to a significant development in business technology.
According to Cisco’s economic analysis, IoT will generate $ 8 trillion in worldwide revenues over the next decade, with
revenue of $ 1.9 trillion for supply chains and SC activities. According to Cisco’s report, the number of devices connected
to the IoT is estimated to be 3.47 million in 2015, while the number of devices connected per capita is expected to be 6.58
million in 2020 (Cisco 2015). The number of devices connected per capita is shown in Figure 1.
With the IoT, SC operators, corporate customers, and end consumers can be provided with remote access. Thus,
problems arising in operational services, transportation safety, customer satisfaction, and new business models can be
easily detected. The IoT in the SC Sector has been examined in four different structural processes as production design,
customers, suppliers, and equipment procurement, which are shown in Figure 2.

1
Department of Industrial Engineering, Munzur University, Tunceli, Turkey.
2
Department of Industrial Engineering, Konya Technical University, Konya, Turkey.
3
Centre for Supply Chain Improvement, University of Derby, Derby, United Kingdom.
* Corresponding author: [email protected]
36 Logistics 4.0: Digital Transformation of Supply Chain Management

2003 2010 2015 2020

World 6.3 Billion 6.8 Billion 7.2 Billion 7.6 Billion
Population
Connected
500 Million 12.5 Billion 25 Billion 50 Billion
Devices

Connected
Devices per 0.08 1.84 3.47 6.58
person
Fig. 1: Number of devices connected to the IoT.

Digital
Digital LogisticsManagement
Logistics Management

Business-to-business (B2B)
Business to customer
iness-to-business (B2C)
(B2B) Product
Product designer
designer
iness to customer (B2C)

• Highflexibility
High flexibility • Built-in
Built-inintelligence
intelligence
• Intuitiveoperation
Intuitive operation • Real-time
Real-timecapacity
capacity
• Human-robot
Human-robotcooperation
cooperation • Traceability
Traceability
• Intelligent
Intelligentcontrol
control • Completeness
Completeness

• Cyber
Cyber security
security • Complete
 Completecross-linkage
cross-linkage
• Cloud
Cloud computing
computing • Cyber-physical
 Cyber-physicalsystem
system
• Big data
 Big data • Self-configuration
 Self-configuration
Equipment • Wireless
Wireless technology
technology • Addive
 Addivemanufacturing
manufacturing
Product designer
suppliers Suppliers
Suppliers

Fig. 2: IoT Logistics Management (Sadıkzade 2016).

Together with the IoT, companies will have a low-cost opportunity in storage, transportation, and all other SC
activities. In following the storage, pallets, and vehicles in communication with each other, there can be a smaller, more
efficient storage policy. International transport, tracking, and monitoring of products can be faster, more precise, more
reliable, and errors can automatically be detected with the product tracking system. The material flows within the SC are
monitored instantaneously, making transportation and handling processes easier, minimizing the risks in transportation.
With the IoT, SC will be digitized, which will significantly contribute to the delivery of the products to the customer at
the right time, the right place, and the right quality, and the SC process will be facilitated in all its aspects.
This study begins by asking how Industry 4.0 affects SC and what kind of roles IoT and big data play in SC industry.
Section 2 presents the Industrial Revolution and its historical development and the emergence of Industry 4.0. Section
3 offers the work-study and application areas of Supply Chain 4.0. Then, the literature review of IoT and Supply Chain
within the scope of Industry 4.0 are included in Section 4. The finding of Bibliometric mapping and clustering analysis
are presented in the Section 5. Finally, Section 6 concludes the results and provide some directions of the future studies.

2. Historical Development of the Industrial Revolution and The Emergence of

Industry 4.0

Four different industrial revolutions have emerged up until today. The first Industrial Revolution began with the
mechanization of weaving looms in England in the early 1760s. The most important source of energy in the transition from
 The Impact of the Internet of Things on Supply Chain 4.0 37

simple workshop production to factory production was coal and steam power. Textile, steam machine, and iron are the
three most important elements of this period. During this period, steam machines started to be used in the textile industry,
and raw materials were supplied with steam trains and ships. With the increase in transportation means, the spread of the
Industrial Revolution to Europe gained speed. The First Industrial Revolution, based in England, contributed to the increase
in national income in these countries by creating new wealth holders in the USA, especially in Europe. With the increase
in labor and capital needed, migration from rural to urban areas increased, and urbanization was accelerated (Jensen 1993).
The Second Industrial Revolution covers a period starting from 1870 up until 1914. This period began with the
widespread use of cheap steel production methods invented by British Inventor H. Bessemer. In this period, steel, electricity,
petroleum, and chemical substances were started to be used instead of steam and coal in manufacturing. Henry Ford, who is
known as the father of mass production, left his mark on this period and enabled the widespread use of the manufacturing
assembly line system in the automotive sector. During the same period, electronic computers were used for the first time,
and Graham Bell expanded the communication network with the invention of the telephone. Railway transportation and
trade accelerated by using steel instead of iron in production. The use of electricity in factories and cities began with
Edison in 1882. Then, electric machines took part in production (Engelman 2018).
The Third Industrial Revolution covers the period starting from 1970 until a decade ago. During this period, automation
in production began with the development of a Programmable Logic Controller (PLC). The production process has been
enriched with computer-aided machines and automation-based systems. The automobile industry, mobile phone, internet,
aviation and space technologies, computer-aided design, computer-aided machinery (CNC), and robots have started to
be used in production. With the development of scientific fields such as telecommunication, nuclear energy, laser, fiber
optics, and biogenetics, many innovations have emerged in the field of production (Jacinto 2015). The increase in fossil
energy resources and the rapid depletion of world resources have brought about the issue of environmental awareness and
the use of renewable energy sources. New technologies related to the use of sustainable energy resources (solar, wind,
geothermal, hydraulic energy, etc.) in production have been introduced.
The Fourth Industrial Revolution, known as the “Industry 4.0”, was introduced for the first time at the Hannover
Fair in Germany in 2011. Supported by the German Government, this technology has received the support of many
countries, especially the USA and Japan (Pfeiffer 2017). Industry 4.0 has become increasingly concrete and has been
implemented in many areas, such as production, in particular, supply chain, food, health, etc. With the transition to the
Fourth Industrial Revolution, rapid automation in production, robotic systems, and digitization has positively affected the
global economy. The biggest goal of the Industry 4.0 is to develop a robotic-based manufacturing system in which various
machines within a factory can communicate with each other, detect ambient conditions (heat, humidity, energy, weather,
etc.), and by analyzing the data they gather, detects the needs of the system. In this way, it aims to make high quality,
more flexible, and low-cost production in a swift manner. Industry 4.0 has created an impact on cost, human resources,
management efficiency, and benefit in terms of technology for the ever-evolving and growing SC sector. Industry 4.0 is
the fourth industrial revolution that consists of many innovations such as the transfer of the production process entirely
to the robots, the development of artificial intelligence and Internet technology, the use of three and four-dimensional
printers in production, the sorting out and evaluation of massive data by data analysis, and smart objects communicating
with each other. Industry 4.0 brings many benefits, such as higher degrees of integration, facilitation of transmission,
higher throughput in a given time delay, and greater process transparency in the entire system for production, inventory
management, SC, and a quality economic system. Although Industry 4.0 provides many advantages to production, business
models, and technology, it has a negative effect on employment, economic conditions, and data security. Kovacs (2018)
has analyzed the dark corners of the development of Industry 4.0 and its effects on the digital economy.
Cyber-Physical Production System (CPPS) provides the integration of the physical environment with the virtual
environment (Hermann et al. 2016). CPPS is the complex dimensional structure that works together with the IoT.
Industry 4.0 consists of nine main components, which are given in Figure 3. Industry 4.0 is a comprehensive
Industrial Revolution comprising all these components. The main components forming the Fourth Industrial Revolution
is illustrated in Figure 4. Industry 4.0 is a collection of systems consisting of many different technological components
(Hermann et al. 2016).

2.1 Industry 4.0 Components

Cyber-Physical Production Systems (CPPS): CPPS aims to connect the physical world to the virtual information system
with the help of sensors and actuators. Data is communicated between computer terminals, wireless devices, and cloud
systems. Thanks to the complex and dynamic CPPS, production process activities (planning, analysis, modeling, design,
implementation, and maintenance) can work together. With CPPS, the physical work environment and the virtual information
system are synchronized with each other. In this way, the monitoring and control of the production process can be more
38 Logistics 4.0: Digital Transformation of Supply Chain Management

Industry 2.0 Industry 4.0

*Serial production *Electronic devices *Cyber-Physical

*Mechanical *Use of assembly *Computer-based production systems
production facilities lines automation *Internet of Things
were working with *Electricity *CNC workbenches *Smart Factories
water and steam generation *Robots Automation
power. *The invention of the *Autonomous Robots
* Programming *Cloud computing
*The first mechanical phone artificial intelligence
*Electronic machines *Big Data Analysis
computers

Industry 1.0 Industry 3.0

Fig. 3: Historical Development of Industrial Revolution (Industry 4.0 2015).

Internet of
Things
Cyberphysical Smart
Factory

Cloud
Simulation
computing
Industry 4.0

3D Augmented
Printing reality

Autonomous
robots Big data

Fig. 4: Industry 4.0 Components (Hermann et al. 2016).

transparent and effective. The development of CPPS is evaluated in three major stages. In the first stage, identifying
technologies, such as RFID tags, are developed. Thus, a centralized service provider does the storage and analysis of the
data. In the second stage, dynamic data can be collected in a limited range with sensors and actuators. In the third stage of
development, the data are stored and analyzed with multiple sensors and actuators, and a smarter network system can be
received. CPPS fulfills active and dynamic requirements in manufacturing and plays a major role in the overall efficiency
of the industry (Lu 2017).
Internet of Things:The term IoT, which emerged in the early 21stcentury, is the most important technological component of the basic
philosophy of Industry 4.0. The IoT is also referred to as the communication network in which physical objects are interconnected
with each other or with larger systems. The IoT and “smart products” are two terms that are used interchangeably (McFarlane
et al. 2003). Smart products can communicate with each other with the help of embedded RFID or sensors and store and
analyze the data they receive from the environment. Different researchers have defined smart products over time. Accordingly,
McFarlane and others (2003) defined smart products as both physical and information-based products. Tags and RFID readers
do the data flow between physical products and information. Venta (2007) refers to smart products as products with the
ability to make decisions. Smart products can interpret and analyze the data they have. They interacts with the environment
and can present the information in their environment to the user as instant visual information, when necessary. Today, smart
products supported by new technologies can inform the user about all the processes from production to final consumption.
 The Impact of the Internet of Things on Supply Chain 4.0 39

 PEID (Data device

Embedded
embedded product) product
 Product with RFID
Data / Information
 Data processing
 Memory
 Power Notification
 Communication unit Information
 Unit Sensor

Information
demand
 PEID reader
 PDA
 Fixed reader with antenna
reader with
antenna
Fig. 5: Product lifecycle process (Kiritsis 2011).

Hribernik et al. (2011) illustrated the working principle of smart products as the product life-cycle process (Figure 5).
RFID and sensor-embedded devices collect information from their environment wirelessly, with the help of readers and
wireless technology. These devices monitor the entire life-cycle process from product assembly to the final use stage.
The product has a built-in driver, display screen, main unit, ISDN modem, processor, and motherboard. Each item can be
monitored independently, and the instantaneous information is collected and stored. Product tracking and storage are done
using Electronic Code Information Services (EPCIS) or PROMISE Message Interface (PMI). EPCIS and PMI devices
record the production time, location, assembly, and disassembly processes of the product. Product lifecycle information
is collected with personalized mobile devices and product information readers installed in computers. The collected
information is sent to the product life-cycle system from each point (retailer, distributor, recycler, etc.) via the internet.
With this system, product life-cycle information can be supplied individually or collectively at any time (Kiritsis 2011).
Smart Factories: Smart Factories are digital-based factories that emerge at the point where data processing meets with
the production process. The manufacturing process envisaged by Industry 4.0 is a fully automated production system
that can run fully automatically without human intervention. In these factories, smart robots carry out production. These
robots recognize the materials that are moving on the traditional production line with RFID and sensor tags. They also
know which processes they need to go through (Thoben et al. 2017). Machines can communicate with each other and can
obtain any data via a central computer. In this way, a product can be processed on the same production line and tracked
without any error. IoT technology plays an important role in establishing smart factories. The virtualized factory with the
Internet of objects is integrated into the system digitized with CPPS. The IoT platform acts as a cloud computing system
that collects real-time data and can track the data in the factory at any moment (Lee and Lee 2015).
Big Data: Big data is the general name for voluminous, gigantic, defined or undefined data. Vast amounts of data that are
beyond imagination are produced daily in a variety of sectors, such as health, management, social networks (Facebook,
MSN, etc.), marketing, finance, and so on. Since this collected data is nothing but piles of data, unless interpreted, it is
extremely important to analyze this data quickly and in a comprehensible way. Previously, businesses did not prefer retaining
their data in their archives for long periods, and they did not analyze their data sets. However, with new technological
developments, data can be analyzed, stored and made available in a safe environment. In this way, companies can see the
important competitive data, develop new insights, and customize the services they provide to their customers (Mazzei
and Noble 2017). As an example of the work done on big data in the SC sector, the data from the vehicle that is tracked
using sensors, the wireless adapter, and the GPS is collected in an internet environment. Thanks to this data, the Supply
chain department can monitor drivers and guide them by determining the shortest route. In addition, bus companies can
analyze the data they receive from the passengers, design a more efficient transportation plan, and determine the travel
frequency and optimum travel time. With big data mining method, they can categorize the estimated number of passengers
and make more accurate predictions about the estimated demands (Oussous et al. 2017).
Cloud Computing: Cloud computing is the general name for Internet-based computing services that provide computing
resources that can be used at any time and shared among users, for computers and other devices. It is the general name of
the system that users can access from anywhere with an internet (Schouten 2014). The most well-known cloud-computing
example is the Office 365 service that organizes and stores MS office documents.
40 Logistics 4.0: Digital Transformation of Supply Chain Management

Autonomous Robots: Autonomous robots are robotic systems with a certain intelligence, supported by artificial intelligence
technology. Based on artificial intelligence, these autonomous robots, which can detect the environment, that can be
implemented very comfortably in production systems and which can make their own decisions with this technology, are
the key technology for Industry 4.0. With autonomous robots, production benches that can be positioned at any point within
the factory on demand will replace the stationary benches in the factories of future and humanoid robots will emerge,
perceive the environment and become able to talk to each other (Yazıcı 2016).
3D Printers: Three-dimensional printers are the production tools of the new era that work with laser or inkjet printer logic,
transforming products from digital media into a solid three-dimensional object in a “layer-based” structure defined as
“additive manufacturing” (Berman 2012). For example, a free-moving ball bearing can be produced in a 3D-printer as a
single piece with its balls. Additive manufacturing, unlike the subtractive production process, allows production without
resorting to any cutting, drilling or grinding process. This means that even producing complex objects becomes much
easier (Berman 2012). The technology that most manufacturers use in prototype production, especially since it provides
flexibility, low cost and time saving, has now initiated a revolution that will enable final consumers to manufacture in
their homes (Çallı and Taşkın 2015).
Simulation and Virtual Reality: Simulation is the imitation of the operation of a real-world system or process in a computer
platform. Simulation enables the generation of an artificial history of the system and the observation of that artificial
history to draw inferences concerning the operating characteristics of the real system. Simulation or Virtual Reality began
in 1962 with a device called Sensora, developed by Morton Heilig, and it has been extended to the daily Google Glass
project. Virtual reality is a term used for computer-aided 3D environments where users experience the feeling of being in
the designed environment. With Industry 4.0, a virtual copy of the smart production facilities is made in 3D, and the data
coming from the sensors is transferred into the simulation environment. In this context, the dark factories of Siemens,
HTC’s virtual reality glasses, and Caterpillar augmented reality demo can be given as examples. With virtual reality and
simulation, the physical systems of the factories will be monitored through web-based systems, and smart technology
applications will proliferate (History of Virtual Reality 2017).

3. Towards Supply Chain 4.0

Although Industry 4.0 first emerged as a manufacturing-based approach, it has also affected many industries associated
with manufacturing. Considering that manufacturing and SC form an inseparable whole, it is envisaged that Industry
4.0 will also reshape the SC Sector and bring a different perspective to it. The fact that machines and objects are in
communication with one another with instant access to data within Industry 4.0 makes SC services more efficient.
In the SC and manufacturing sector, computer-aided team systems and autonomous robots will decrease the time
spent on production, and the resources will be used more efficiently. Remote-controlled vehicles and products will
be able to reach the customers in a shorter time. Especially the IoT technology, one of the components of Industry
4.0, leads to great innovations in transportation and the SC Sector. The IoT contributes positively to all stages of SC,
starting from production to the delivery of the final product to the customer. With the aid of RFID, sensors, Global
Positioning Systems (GPS), data collected during the SC process can be tracked through an internet-based system.
In this way, SC activities can be faster, more flexible, and transparent (Tadejko 2015). There are many kinds of
research on the use of IoT in the supply chain industry in various fields. Kong et al. (2018), Leng et al. (2018), Accorsi
et al. (2018), Tian (2018), Pal and Kant (2018), Yan et al. (2017), Zhang et al. (2017), and Yan (2017) focused on the
perishable and fresh agricultural food supply chain by combining IoT technologies. Tsai et al. (2018), Lue et al. (2016),
and Chan et al. (2014) developed an intelligent tracking system to enhance the cold supply chain.
Supply Chain 4.0 (also known as Digital Supply Chain) came out with the emergence of Industry 4.0 for factories.
Mainly IoT and Big Data drive it. With the mix, complementary technologies such as RFID, sensors, GPS, Electronic Data
Interchange (EDI), and information-sensing equipment, can be easily tracked throughout SC activities. It is important for
them to have seven major requirements that are the right quality, at the right time, at the right place and the right good
with the right quantity and in the right condition and at the right price for SC management. By estimating the information
from the products and materials, the accidents that can occur in the SC process can be predicted, and the warning can be
given ahead (Gnimpieba et al. 2015).
IoT is used in all processes from supplier supply to material handling, transportation of materials, production to
reaching latest customers (Figure 6). IoT can optimize whole process of Transportation Management System (TMS). By
integrating GPS technology placed into transport vehicles, it can monitor and learn all the relevant information (e.g., route,
shipping conditions, and status of shipment) related to the smart goods being transported. The Internet of Objects detects
 The Impact of the Internet of Things on Supply Chain 4.0 41

Suppliers
Big
Data
Sensor Advanced
manufacturing Big Data
system

GPS
Sensor
3D Printing Advanced Real time robot
materials

Fig. 6: Supply Chain 4.0 configuration.

return errors and reduces return and damaged product costs (Macaulay et al. 2015). The material coming to the factory
starts the production process with real-time production plan. IoT technologies make decisions that are more optimistic
and faster than the other producers and can make these decisions faster for both their staff and their employees. When the
machines are connected to each other (M2M), the generated data is rapidly transferred to each other through high-speed
internet support via software that generates the data of each device, and it is possible to make faster and more effective
decisions by looking at the results obtained from the data. These decisions are transferred both to the staff at work and
the manager who follows the job and to all the devices, and thus a synchronized working environment is provided. IoT
plays a big role in the customer relations after the product reaches the customer. It provides data and information that
can be used to enhance the consumer experience, provide insight into consumer behavior, which would result in a better
understanding of the consumers and help enhance interaction and engagement with consumers. The application areas of
Supply Chain 4.0 are presented in Table 1.

4. Literature Reviews of Supply Chain 4.0 based on IoT

The potential use of IoT technology across the supply chain is huge. The IoT enabled supply chain can be visualized as a
smart interconnected network that binds together many levels of suppliers, manufacturers, service providers, distributors,
and customers physically located across different areas of the world.
In this section, we categorized literature reviews of IoT and SC, and present several summary statistics into five
categories based on sources, publications type, published place, journals and conferences type, application fields, and
authors. As part of the expansive concept of Industry 4.0, “Supply Chain 4.0” is called a new paradigm by numerous authors
and experts. In this review, these keywords are “Internet of Thing”, “IoT”, and “Supply Chain”, respectively. The search
was performed in the Scopus Database on 10 November 2018. It was possible to download the “title”, “key-words”, and
“abstract” from all the 806 documents, including article, conference paper, book chapter, etc., between 2007–2018 years.
The reviewed literature included journal articles, conference papers, and edited volumes.

4.1 Literature Review over time

The distribution of papers based on publication year is presented with respect to the years in Figure 7 from 2007 to 2018,
the number of relevant publications gradually increased, except for the year 2015. This analysis indicates that while the
research area is still in the stage of development, the concern of this research has progressively grown in recent years. In
the following sections, all articles are summarized and reviewed based on various criteria including; literature sources,
publication type, geographic location, journals and conference type, application fields, and most cited authors.
42 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 1: Contributions and applications of the IoT to Supply Chain 4.0.

Field Applications
Manufacturing  With the IoT, real-time Material Requirements Planning is done by obtaining real-time information from
the operator, pallet, material, machine, etc., in the manufacturing process. Since the material order time
is known, the procurement period can also be estimated from the supplier.
 Production lines are synchronized by sending information to each other, failures, delays, and errors are
minimized in the production process. Reduction of waste, loss, and scrap is aimed.
 Multiple and different kinds of products can be produced at the same time with manufacturing line
systems that are able to exchange information with the other components; thus customer satisfaction will
be increased (Shariatzadeh et al. 2016).
Vehicle tracking  With the information collected by sensors, GPS, and RFID, vehicles can be monitored instantaneously.
In this way, transportation time and transportation routes are optimized. With Google Maps and API
smartphone, the image of the car and its location will be visually recorded by logistics providers (Lee et
al. 2009).
Warehouse  The quantity and amount of raw materials remaining in the warehouse are monitored instantaneously,
Management and the movement of the objects can be monitored easily. In this way, the quantity of the remaining
product, the number of products ordered, the number of products and materials needed can be obtained
in an up-to-date and swift manner.
 Smart heat and lighting systems are added to the warehouse to save energy and expenses.
 The speed of the forklift used in product transport in the warehouse can be controlled with sensors, and
the risk of accidents can be minimized.
 With intelligent conveyor and separating systems, products and materials can be easily separated, and
components are placed in the places where they belong more easily and in a shorter time (Lee 2015).
Risk  Tracking of products carried throughout the Supply Chain is done with embedded RFID and sensors.
Management With the signals coming from these devices, it is easy to know at which stage and where the product is.
This will reduce the loss of value of the products that are perishable and have a short lifetime. The risk
share from deterioration will be minimized, and the risk cost will be minimized (Lee 2015).
Reverse Logistics  By managing all the data about the product lifecycle, many uncertainties in logistics activities are
Activities eliminated. Thanks to RFID, sensors, and similar devices, it will be possible to determine which
recycling stage (repair, disassembly, waste, etc.) the expired product should be exposed to. In this way,
most of the uncertainties in reverse logistics activities will be eliminated, and the logistics cost will be
minimized (Gu and Liu 2013).
Informatics  It prevents the loss of information by providing all kinds of information about the products that move
through the Supply Chain processes and by making it possible for the products to be stored and shared
by the Supply Chain elements. As the information obtained is up to date, the bullwhip effect in the
Supply Chain is decreased.
Fleet  Trucks and containers can be monitored with sensors. Thanks to effective fleet management and sensors,
Management it is an important factor in increasing profitability by providing substantial fuel savings (Sadıkzade
2016).
Environmental  With the IoT, the carbon footprint of the products is easily recorded. This allows access to the
Awareness commercial history record of the carbon loan that provides compliance with environmental regulations.
This is an important step in terms of Green Supply Chain (GSC) (Gu and Liu 2013).

Fig. 7: Published papers between 2007–2018 from Scopus database.

 The Impact of the Internet of Things on Supply Chain 4.0 43

4.2 Contribution to the Literature from Various Sources

This review will help us determine the significant concern of research areas where gaps are obvious. As shown in Figure 8,
much of the work being done on the IoT and SC is widespread among conference papers (50.5%). Most of these papers
were presented at technical and engineering conferences that were abstracted by the IEEE Xplore Library. Such papers
are much more commonplace and encouraged in engineering than they are in other fields. Many of the articles are
published in information and computer fields. These papers were reviewed and presented the most common sources that
are represented in Figure 9. The most contributed sources are Applied Mechanical and Materials, Advanced Materials
Research, Communications in Computer and Information Science. After an in-depth analysis of the case articles, the
studies carried out in the field area of SC is present in Figure 9, in which the most studied subjects are “RFID” and “SC
and supply chain operations”, and the least studied subjects are production, cold SC, and inbound SC activities.

Fig. 8: Review literature by publication type.

Fig. 9: Papers per year by sources.

4.3 Distribution of Papers by Geography

Investigation of the geographic location for academic research containing IoT and SC is presented in Figure 10. According
to this study, the vast majority of the IoT and SC focused articles and conference papers are held in China, the United
States, and the United Kingdom. Although the Industry 4.0 concepts emerged for the first time in Germany, many studies
on this field have been published mostly in China. Most papers are published in Far East Asia and Europe, with very
limited representation in South America, the Middle East region and Africa.
44 Logistics 4.0: Digital Transformation of Supply Chain Management

Fig. 10: Country ranking based on publication numbers.

4.4 Distribution of Paper by Approaches and Application Fields

This corresponds to the disproportionate representation of engineering conferences and journals that are currently developing
the IoT literature. Based on datasets, we classified articles into sixteen approaches and application fields, which are the most
published fields presented in Figure 11. The most popular fields are computer sciences, engineering, business management
and accounting, mathematics, decision sciences, social sciences, physics, and astronomy.

Fig. 11: Distribution of papers with the highest contributions in publishing IoT and logistics topics.

4.5 Citation Report of Authors

One of the most important criteria of the research is the impact of the paper on other scientific environments. The author’s
analysis can be a good measure to evaluate the impacts of the publications. Figure 12 represents the most contributing
authors in the fields. According to results, Li Rang Zheng, George Huang is the most productive authors in this field.
Zheng reviewed the highest number of papers according to other literature reviews. Zheng and Han cooporate together,
and they work on the food supply chain, agriculture, IoT. George Q. Huang focuses on IoT, Big data, decision making,
and production Supply Chain system; Yang’s studies are related to IoT, RFID, and agriculture supply chain.
 The Impact of the Internet of Things on Supply Chain 4.0 45

Fig. 12: Document counts for top authors.

5. Bibliometric Mapping and Clustering Analysis

Analysis has a similar property, that it provides an insight into the structure of a network, which is used in bibliometric
research. These techniques are based on similar principles and play a significant role in identifying and classify groups of
publications, terms, authors, and journals. When we deal with a great number of data, the clustering and mapping solution
can easily analyze and interpret many millions of publications and their related terms. Clustering analysis is the classification
of a set of elements into subsets so that elements in the same cluster are in common. It is a statistical method and can be
efficiently used in many fields, such as big data, machine learning, text mining, pattern recognition, image analysis, and
bioinformatics (Van Eck and Waltman 2018). In this study, VOS viewer 1.6.9 software was used to construct and illustrated
for bibliometric networks based on keywords, and all information was exported in the CSV file in Excel data analysis.

5.1 Keywords Co-occurrence Analysis

Keywords co-occurrence can effectively indicate the hot research topics in the discipline fields. All the 806 Supply chain
and IoT–related publications have a total of 176 keywords; among them, only 59 selected keywords appeared in Figure 13.
The node with the same color belongs to the same cluster; therefore, the VOS viewer divided the keywords of publications
into three clusters. The node size expresses the magnitude of the occurrence of keywords, and the line between two
keywords represents that there is a relationship between them. The length of the link between the two keywords indicates
the intensity of the relationship between them. A shorter distance means a stronger relationship (Perianes-Rodriguez et
al. 2016). A qualitative index indicates the occurrence of the use of keywords. The most used keywords include “Internet
of Things” (243), “RFID” (115), “Supply Chain” (89), “IoT” (80), “Industry 4.0” (28), “big data” (27), “traceability”
(26), and “cloud computing” (25). According to the keywords network, the relationships between “supply chain”, “big
data”, and “blockchain” reflect that development trends in security and transparency in supply chain management. The
relationships between “blockchain”, “cryptography” and “privacy” show that researchers are greatly interested in how
blockchains might convert the supply chain management. “IoT”, “big data”, “industry 4.0”, “industry IoT”, and “cyber-
physical systems” have an increasing importance on supply chain management for the last two years. Researchers focus
on how the “industrial” application of the Internet of Things (IIoT) is transforming supply chains.

5.2 Co-authorship Analysis

Country co-authorship analysis can help to understand the degree of communication between countries and as well as the
influential countries in “Supply chain” and “IoT” fields. The collaboration network of publishing during the period from
2007 to 2018 is presented in Figure 14. Node size indicates the publication rate by each country, and lines represent the
level of cooperation among countries (Reyes et al. 2016). The top research center in the field is in China and the United
States. The link strength between China and The United States is 20, between the USA and Germany it is 6, between the
46 Logistics 4.0: Digital Transformation of Supply Chain Management

Fig. 13: Combined mapping and clustering publications of keywords.

Fig. 14: Co-authorship analysis based on the country.

USA and the UK it is 7, between Australia and China, it is 6. This result shows that countries that have the same geographic
do not affect the authors’ collaboration. The researchers located in South-America, the Middle East, and Africa have an
inadequate publication based on these fields.
 The Impact of the Internet of Things on Supply Chain 4.0 47

5.3 The Cited Publication Analysis Based on Supply Chain and IoT
Table 2 indicates the most cited or influential papers in terms of the author’s name, publication year, publication title,
and citation numbers. Two highly cited papers are related to the “Internet of Things” and its challenges. All these papers
were made individually. Overlay visualization of cited authors is shown in Figure 15, node size represents the number of
citations, and the proximity of the nodes is related to the partnership of the authors.

Table 2: The top-cited articles.

Authors Year Publications name Citations number

Weber 2010 Internet of Things-new security and privacy challenges 492
Lee 2015 The internet of things (IoT): applications, investments, and challenges for enterprises 212
Xu 2011 Information architecture for supply chain quality management 166
Wolfert 2017 Big data in smart farming—a review 95
Theisse 2009 Technology, standards, and real-world deployments of the epc network 81

5.4 Co-citations Analysis Based on Sources

The co-citations analysis reveals the total strength of the co-citation links with other sources. Figure 16
presents the journal co-citations network with 69 nodes. These node sizes represent the greatest link strength and the number
of published papers. The distance between the nodes indicates the citation frequency. According to co-citation analysis,
all these journals are divided into six clusters having different colors. While the green cluster represents information and
computer journals, the red cluster consists of operational and production journals. International journal of production
economics has the most links (62) to other journals and citations (277).

6. Conclusion and Future Studies

This summation will point out some of the most important findings of the research and show some directions for further
studies. Studies on the IoT in the SC industry have gradually increased over years. Since the concept of IoT emerged in
2009, literature studies have increased by almost 20 times. The accelerated growth in IoT in the SC sector means SC 4.0
will continue to spread to every part of business operations, especially in the field of the SC.
With the introduction of IoT in the SC industry, major changes have emerged in almost all areas, especially in
computer science, engineering, and business management. There are few studies focused on the field of reverse SC, social
and business sciences, especially on application studies. There is a need for case studies focusing on sustainable and eco-
friendly concepts for reverse SC management.
While studies on RFID, sensors, and SC activities are emphasized, this chapter identifies four research gaps in the
literature of the digital supply chain, which are a cold chain, food and beverage supply chain, and inbound supply chain.
Through the IoT, all processes and operations in SC will interact with each other by connecting to a network. In this
way, by creating a smart SC, it is possible to increase efficiency and productivity in the supply processes to provide the
products/services demanded by the customer, to gain customer satisfaction, to reduce costs and to keep the quality high.
IoT affects all SC processes. It provides more efficient use and optimization of the Supply Chain 4.0. With the Internet
of objects, SC data management is made more transparent so that processes can be monitored instantaneously. With the
digitalization of the SC industry, unnecessary SC activities will be eliminated, the efficiency of processes will increase,
and the costs will be reduced. Customers’ purchasing behavior will be examined, and the individual expectations and
customer changes will be responded to more quickly. The feedback from customers will be received quickly, and after-sales
services will develop. With real-time data, SC performance can be better monitored, and problems that can be experienced
in processes can be detected quickly. With the devices used within the IoT, transportation and distribution costs will be
reduced. IoT will be ensured in sustainable SC, and the negative effects on the environment will be reduced.
In the upcoming years, the transportation and SC industry is predicted to have vehicles without drivers, ships without
captains, and planes without pilots. With SC 4.0, smart-talking systems, and new technologies will closely affect our
lives and the existing SC system will leave its place to integrated new systems digitized with state-of-the-art technology.
48 Logistics 4.0: Digital Transformation of Supply Chain Management

Fig. 15: Most cited authors.

Fig. 16: The journal co-citations network.

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CHAPTER 5

The New Challenge of Industry 4.0

Sustainable Supply Chain Network Design with Internet of
Things
Sema Kayapinar Kaya,1,* Turan Paksoy2 and Jose Arturo Garza-Reyes3

1. Introduction

Today, environmental pollution is considered one of the major reasons that may lead to the extinction of humanity.
Consequentially, “environmental awareness” has developed environmental control consciousness within the industrial
cycles of enterprises. One force encouraging or forcing enterprises to implement green policies is the state power and
laws; another force is the negative financial and legal results that they might experience because of wrong administrative
approaches in terms of the environment. As economic and technological developments increased environmental values
degenerated or were destroyed, which led to problems such as famine, hunger, greenhouse effect, global warming. Although
the urban communities developed in the particular second half of the 20th century, attentions were drawn increasingly on
environmental issues, and green management concept has emerged.
“Supply-chain Sustainable” becomes an important issue by force of not only economic effects but also environmental
and social effects, as one of the most important factors causing global warming disaster is that carbon emission, CO2,
has reached higher rates. It can be said that supply chain activities are the main source of carbon emissions. Logistics
and transportation industries have a great part in the Carbon emission cake. According to the IPCC-2007 study, logistic,
including passenger transportation, has a big part. Similarly, logistic constitutes 24% of global greenhouse gas emissions.
It is accepted that even reducing the carbon footprints of commercial customers of big logistics companies will play a key
role in reducing the general CO2 emission.
An important part of the ecological problem is ineffective transportation methods in modern Supply Chain Management
(SCM). The report by “Eyes for transport” showed that around 75% of a company’s carbon footprint results from
transportation and logistics alone. To tackle the environmental problems in the supply chain, enterprises have implemented
Sustainable Supply Chain Management (SSCM), which involves environmentally and financially viable practices into the
complete sustainable chain lifecycle, from product design and development, manufacturing, transportation, consumption,
return and disposal.
By increasing our digital sophistication, sustainable supply chain management can lead to innovation during the digital
transformation. Emerging sensor-embedded products can transform SSCM to future levels. In reverse flow, the EOLP can
be recovered with various processes such as reuse, recycle, repair, or dispose. Reverse flow leads to many uncertainties.
The products are returned from customers because they do not meet definite standard requirements. Their amount, their
date of expiration, the number of recyclable components of the product, and the model of the product are uncertain.
This condition always causes changes and uncertainties in developing options for the returned products. Ambiguities are
largely resolved with the sophisticated digital applications such as the Internet of Things (IoT); products are followed up

1
Department of Industrial Engineering, Munzur University, Tunceli, Turkey.
2
Department of Industrial Engineering, Konya Technical University, Konya, Turkey.
3
Centre for Supply Chain Improvement, University of Derby, Derby, United Kingdom.
* Corresponding author: [email protected]
52 Logistics 4.0: Digital Transformation of Supply Chain Management

along different stages of the supply chain by means of the planted devices (Vermesan and Friess 2013). Radio-Frequency
Identification (RFID) and sensor labels integrated with the products follow the life cycle of critical parts in products when
the lifetime of the products expires. They include not only static information such as the price of products, their serial
numbers, place, repair instructions, but also dynamic information such as the working conditions of products, their error
rates, environmental effects, etc. (Ondemir and Gupta 2014a). Parlikad and McFarlane (2007) stated that RFID-based
descriptive technologies have positive effects for the retrieval options of the returned products and that they provide
sufficient information. Therefore, the decision about which improvement option a product which has expired should be
subject to is taken more precisely and within a shorter time, and it makes it possible to decrease the expensive processes
such as preliminary examination or full mounting, which are required for the quality level of the returned products.
This chapter presents a novel mathematical model that developed an environmental impact on SSC design via the
Internet of Things. IoT provides information about a product when they return and plays a significant role in the recovery
process of SCM. This information by reducing and eliminating uncertainty regarding the condition and remaining lives
of components in EOLPs IoT technologies such as asset tracking solutions, has become one of the biggest trends in SSC
network configurations. Using sensors, RFID, tags, and other IoT devices to track goods through the global supply chain
is one of the first use cases for the IoT. Due to the uncertainty of reverse logistics, we creatively provide a new forecast
application by using IoT.
The rest of the paper is organized as follows. In the next section, we outline the literature review of Sustainable Supply
Chain Management and Reverse supply chain based on IoT. Problem definition and model assumptions are presented in
Section 3. In Section 4, a case study illustrates a computation experiment and then, model results are discussed in Section
5. Finally, the conclusion and future studies suggested in the Section 6.

2. Literature Reviews

In this section, we probe the literature and categorize studies into two. The first one is the SSCs, and the second one is the
Internet of Things, using the reverse supply chain.

2.1 The Sustainable Supply Chain Management

SSCM is considered a subtopic of SCM and has been gaining in importance day by day. For that reason, many scientific
types of research have been carried out in this field.
Bouzembrak et al. (2011) developed a green supply chain network configuration by considering environmental concerns
and proposed a multi-objective decision optimization model that trade-off between the total cost and environmental cost.
The environmental aspect of the issue is related to the total CO2 emission in all the supply chain. Coskun et al. (2016)
presented an integrated model that combines the Analytic Network Process (ANP) and multi-objective programming
methodology by considering the green partner selection. ANP methodology is capable of balancing between green and
business criteria to select favorable green partners.
Elhedhli and Merrick (2012) proposed a concave minimization model that takes CO2 emissions into account. This
model was solved by a Lagrangian relaxation that generates a feasible solution for each iteration. The objective of this
model is to minimize logistics costs and the environmental cost of carbon emissions simultaneously. Paksoy et al. (2010)
designed a green supply chain network that includes suppliers and recycle centers. That model deals with CO2 gas emission,
the different recyclable ratio of raw materials and the opportunity price to sell recyclable products. They developed a
multi-objective model whose first objective is to minimize the total cost of transportation via different trucks. In addition,
the second objective is to minimize transportation costs. Paksoy and Özceylan (2013) focused on the environmental
issue for the optimization of supply chain configurations and constructed an integer non-linear programming model. The
main purpose of their model was to consider gas emissions, the noise of vehicles, fuel consumption between facilities,
transportation times of vehicles and road roughness. They concluded that consumed fuel, produced noise, transportation
time, and emitted carbon emission are affected by vehicle speed when designing a supply chain network. Pinto et al. (2010)
addressed the trade-off between profit and environmental impacts on the design of the supply chain network to maximize
the annual profit. Profit and environmental impacts are balanced with an optimization approach adapted from Symmetric
Fuzzy Linear Programming (SFLP) and formulated a mixed-integer linear programming model using the Resource-Task-
Network application. Memari et al. (2015) developed a novel mathematical model in green supply chain management. The
objectives of the model was to minimize the total costs and also to minimize the environmental impact on the logistics
network. The model determines the green economic production quantity by using Just-in-Time logistics. Cao and Zhao
(2014) proposed a green supply chain network considering healthy, low-carbon transportation systems. The penalty function
 The New Challenge of Industry 4.0 53

coefficient helped convert a multi-objective optimization problem consisting of objectives such as profitability, service
level, and environmental protection into a single objective. Chibeles-Martins et al. (2016) proposed a mixed linear multi-
objective programming model in which the first objective minimizes the sum of all environmental impacts from diesel and
electricity consumption, while the second objective function maximizes the total profit. This problem was tested for large
problems which take a long time to find a solution. Thus, Simulated Annealing (SA) algorithm was adapted to improve the
algorithm’s efficiency and effectiveness. Memari et al. (2015) designed a supply chain network for multi-manufacturers,
distribution centers, multi-products and multi-periods. They developed a multi-objective mathematical model in which
the first objective aimed to minimize the total cost including production cost, holding cost of the distribution center, and
transportation costs between echelons, while the second objective function is to minimize the total carbon emission in the
whole network. Multi Objective Genetic Algorithm (MOGA) and Goal attainment technique was used to solve for their
proposed model. Govindan et al. (2015) formulated a mixed-integer programming model which consists of five echelons:
suppliers, plants, distribution centers, cross-docks, and retailers. Their study takes the pollution rate of CO2, CFC, NOx
gases into account as the most harmful emission. There are three types of environmental impacts; the impact of shipping
the products among the network, the impact caused by opening facilities and manufacturing impacts of plants related to
technology. A hybrid multi-objective metaheuristics algorithm was proposed to solve this model and some experimental
designs were analyzed and tested. According to the result show that the Multi-Objective Hybrid Approach (MOHEV) is
a better solution approach compared with the others.

2.2 Usage of the Internet of Things in Reverse Supply Chain

Since the emerge of IoT by the Massachusetts Institute of Technology in 1999, the field in “Internet of Thing” has got
significant attention from practices and researchers. IoT is the configuration of physical devices, mechanical and electronic
machines, and the other items embedded with RFID, sensor, chip, network connectivity that provide these objects to
identify, collect and transfer data over this network. IoT technology is the new communication platform including the
number of mobile devices and network connected equipment that can communicate with each other simultaneously (Torğul
et al. 2016). It offers communications of each object by covering a variety of protocols, domains, and applications. IoT
has positively influenced supply chain management and this revolutionary technology allows to control the external and
internal environment of the supply chain. With IoT, a smart product produced by a factory can be easily monitored during
each echelon of the supply chain process, such as production, distribution, inventory, and consumption. IoT also has
many advantages for SSCM. In reverse logistics information resources, it plays a vital role in the enterprise’s operation,
because there are some uncertain and inaccurate data about the property of products in reverse logistics management. All
general processes such as collection, inspection, re-processing, disposal associated with reverse activity include uncertain
information. Thanks to IoT technology, the enterprises can get more accurate information, which incorporates data ranging
from production in the factory to consumption of final users. The devices of IoT embedded into the product’s components
in the production process can record information during its whole life recycling period. Lifecycle information is collected
and stored into RFID, sensor, or PML server. It challenges uncertainty in the return of reverse logistics and gets a more
accurate prediction about reverse logistics operations related to the reuse of products and materials.
Reverse supply chain (RSC) management, which is oriented towards the entire lifecycle of products, has been concerned
with the emerging of green production. With the rapid development of IoT and supply chain digitization, a smart reverse
supply chain (SRSC) will be formed based on RFID, sensors, high-performance computing, intelligent technologies. These
technologies have been widely used by many researchers in the reverse supply chain.
Kiritsis et al. (2008) developed models and RDIF application closed the gap of information in closed cycle supply
chain. Kiritsis (2011) categorized product life management into three-stage: Beginning of the stage (BOL), Middle of
the life cycle (MOL) and last cycle life (LCL). By using IoT, all information can be collected and analyzed at every life-
stage. Hribernil et al. (2011) put PEID in the returned plastic automotive parts and conducted a sample study in order to
follow up the life cycle of the products. Ilgın and Gupta (2011) used sensors in order to measure the performance values
in dismantling lines in the control of kanban, and they concluded that the sensor led to a decrease in cost and an increase
in profit. Gu and Liu (2013) adapted IoT application to information management in reverse logistics. In conclusion, they
suggested that precise and accurate information is an important means for the success of reverse logistics management.
Ondemir et al. (2012) investigated how RFID and sensors estimate the demands for products, components and returning
behaviors. In this way, they collected static and dynamic information from IoT and developed a mixed-integer linear model,
which was to minimize the total cost. Ondemir and Gupta (2014a) developed the linear physical programming model.
They determined that one objective function is to minimize the total cost and amount of disposed of wastes while the other
objective is to maximize product sale profit and total quality level, and solved it using lexicographic goal programming.
Ondemir and Gupta (2014b) developed a multi-purpose model, in the products having a sensor embedded, for minimization
54 Logistics 4.0: Digital Transformation of Supply Chain Management

of total cost and amount of wastes and maximization of sale profit and customer satisfaction level, considering the mounting
and repair recycling options. The relationship between environmental consciousness, cost and satisfaction as well as sale
profit are taken into consideration.

3.  Problem Definition and Assumptions

The problem being analyzed concerns a producer who meets sales and collection center demand with new, repaired and
remanufactured products. It is assumed that the factory, distribution center, repair center, sales, and collection center in
the sustainable supply chain network belong to one enterprise.
The sales and collection center sell the products it receives from the factory and purchases EOLPs from customers.
IoT provides information about a product when they are returned and plays a significant role in the recovery process and
backup. This information reduces and eliminates the uncertainty of the condition and remaining lives of components
in an EOLP. The price paid for EOLPs is based on their level of value. The returned products are processed via one of
three recycling procedures: repair, disassembly, or disposal. The products that have little damage and can be reused are
repaired. The broken components of these products are replaced with new components received from the factory, and the
products are sent to the distribution center as needed to meet demand. If the returned products cannot be repaired, they are
disassembled. The components salvaged from disassembly are sorted by value and sent to the sales and collection center
to be sold to the factory for use in new products or to the waste center for disposal. The factory must outsource for new
components to meet the demand for products and components and optimize total production costs by making the correct
recycling decision for each returned product.
New parts and spare parts are also sold in the sales and collection center. When the demand is high for spare parts,
it is met with new parts. Sales and collection centers bear the cost of stocking new parts.
This present model is a single product, the multi-stage model that includes the cost and recycling evaluation process
of CO2 emission for different types of vehicles. It is a linear mathematical model. This network supply chain network
design presents in Figure 1.
Model Assumptions
1. This product is modular and contains lifecycle information.
2. There is no difference between new products and recovered products.

re

Fig. 1: Sustainable Supply Chain Network Design with the Internet of Things.
 The New Challenge of Industry 4.0 55

3. All cost and sale prices are known.

4. End-of-life products (EOLPs) contain both functional and non-functional components.
5. The components of the product have importance weights that range from new to one, and the sum of them is 1.
6. It is assumed that the product value level is calculated according to the current component value levels as follows:
Product value rate (diotj) = ∑ Component value level (diot)j * Importance weight of component
7. New products and components are sold in the sales and collection center.
8. Inventory costs exist and no shortage cost is allowed.
9. Sales and collection centers have the capacity for the product/components.
10. The factory has a production and modular capacity.
11. Sales from the inventory of the sales collection center are not allowed.
12. For a single product type, a dynamic, multi-stage, and mixed linear model has been developed.
13. Carbon emission amounts of the vehicles were considered, and it was punished by a penalty coefficient.
14. It is assumed that vehicle capacities are limitless.

3.1 Model Indices and Parameters

Based on the above assumptions, a uniform product (automobile, computer, phone, etc.) is selected that is modular. A
multi-stage, single-product and mixed whole number model was developed by considering environmental factors.
Notations
i Returned products (i = 1, 2, …, I)
j Parts (j = 1, 2, …, J)
l Returned product value range (l = 1, 2, …, L)
s Number of supplier (s = 1,……, S)
p Number of factory (p = 1,…..., P)
d Number of distribution centers (d = 1,……..D)
st Number of sales and collection center (st = 1,……..,ST)
t Vehicle types (t = 1, 2, …, T)
Model Parameters
aj : Assembly cost of component j in factory and sales collection center
d1j : Disassembly cost of component j
ej : Waste cost of component j
g2j : Unit transportation cost of component j
p1sj : Ordering cost of component j from s. supplier
ppj : Purchasing value of j component obtaining by disassembly
rrl : Purchasing cost of an l-level product from sales and collection center
fst,j : Cost of replacing the j used component in st. sales center
h2st,j : Unit sales price of j. original component in st. sales collection center
h3st,j : Unit sales price of j. used component in st. sales collection center
rcj : Number of component j in a product
Rst,l : Amount of used product in the l-level are purchased from sales and collection center
broij : 1 if component j of the returned product I is the quality deficit in period t, zero otherwise
Ci : Value level of the returned product
aast,i : 1 if the returned product i is purchased, 0 otherwise in period t
dmst : Product demand of st. sales and collection center
dmsst,j : j. new component demand of st. sales and collection center
56 Logistics 4.0: Digital Transformation of Supply Chain Management

dmcst,j : j. used component demand of st. sales and collection center

Capmaxst,j : j. the component capacity of st. sales and collection center
CapmaxUst : Capacity of st. sales and collection center for product
Capp1s : Capacity of s. supplier
Capp2p : Capacity of p. factory
Capp3d : Capacity of d. distribution center
Capp4dj : j component capacity in d distribution center
K1spt : Unit transportation cost of t vehicle from s supplier to p factor
K2sdt : Unit transport cost of t vehicle from s supplier to p factory
K3pdt : Unit transport cost of t vehicle from s supplier to p factory
K4d,st,t : Unit transport cost of t vehicle from d distribution center to p factory
CC1spt : Amount of CO2 emission of truck t during the transportation of s supplier to p factory
CC2sdt : Amount of CO2 emission of truck t during the transportation from s supplier to d distribution center
CC3d,st,t : Amount of CO2 emission truck t during the transportation from p factory to d distribution center
CC4d,st,t : Amount of CO2 emission truck t vehicle the transportation from d distribution center to st sales
collection center
h1st : Unit product sales price in the sales collection centers
Qst : Amount of products repaired in the sales collection center
Mjt : Amount of components can be disposed
g1 : Transportation cost of unit product
rwj : Weight of j component per product
tetaj : Rate of the material to can be recycled for j component (%)
tww : recycling rate for product one another (%)
Weight : Unit weight of a product (kg)
Recycling : Amount of product can be recycled
Recyj : Return gained in recycling of sale of j component
Recy1 : Unit recycling return of a product
Wcost : Unit disposal cost of a product
pn : Unit penalty cost of CO2 emission
Expression of some parameters
Binary parameters broijt determine how to process components according to their value levels. Accordingly, components
whose value level is sufficient are refurbished and reused after the disassembly process. If the value level of a component
is insufficient, the component is sent for disposal. The threshold value to determine if components should be refurbished
is represented by n.

1 if component j is non − functional, 0 ≤ diot j ≤ n

broijt  "i and 0 < n (1)
0 component j is functional ( Again used ) , diot j ≥ n

Assuming the value level of components and their importance weights of return are known, there are three value ranges
that can be calculated for product value levels (dioti). Ci (the product value range) is determined where n1 and n2 represent
value range limits. According to the information on which recovery process (repair, disassembly or disposal) is applied
for each EOLP, the parameter Ci can be calculated as follows:

{
1 (Disposal) 0 ≤ dioti < n1

Ci = 2 (Disassembly) n1 ≤ dioti < n2 "i and 0 < n1 < n2 (2)

3 (Repair) dioti ≥ n2

(Ondemir and Gupta 2014b)

 The New Challenge of Industry 4.0 57

Returned products are repaired in sales and collection points if they are purchased in t period and at 3rd level of importance.
Therefore;

Ci.α–st,i = 3 then yyst,i = 1 (3)

If returned products are purchased in t period and at 2nd importance value, they are disassembled. Disassembled products
are determined in sales and collection centers and they are brought to decomposition centers. Then, they are subjected to
the disassembly process. Therefore;

Ci.α–st,i = 2 then xxst,i = 1 (4)

If returned products are in 1st importance value, they are directly eliminated. Product parts are eliminated during disassembly
and repair. Therefore;

Ci = 1 then Σt xxst,i + yyst,i = 0 (5)

Amount of total renewed parts after disassembly (rfcjt ) is calculated as the following:

rfcst,j =
∑ xxst,i.(1 – broij) (6)
{i∊I| –ast,i = 1}

Amount of product repaired in sales and collection centers;

Qst = ∑ yy st,i
(7)
i

Components with inadequate levels came out of repair and disassembly periods are directly sent to waste in decomposition
centers.

Mj – ∑∑ bro . (xx ij st,i

+ yyst,i) = 0 ∀j (8)
i st

Geridonj : Amount of material of j component to be sent to recycling in kg;

Geridonj = Mj . rwj . tetaj (9)

Amount of product to be recycled;

Recycling = ∑∑ TW st,i
. weight.tww (10)
st i

Model Decision Variables

bj : Auxiliary decision variable used to decide the value of SSst,j precisely (takes the value 0 or 1)
Xspjt : Amount of j. new component transported by t truck from s supplier to p factory
Ysdjt : Amount of j. unused component transported by t truck from s supplier to d distribution
center
Zpdt : Amount of component transported by t truck from p factory to d distribution center
Wd,st,j,t : Amount of j. component transported by t truck from d distribution center to st. sales and
collection center
Vd,st,t : Amount of product transported by t truck from s supplier to p factory
SSst,j : Amount of j. used component transported from st. sales and collection center to dismantling
center
58 Logistics 4.0: Digital Transformation of Supply Chain Management

Npj : Amount of j. renewed components transported from p factory to dismantling center

Iccst,j : Amount of j component stored in the st. sales and collection center

3.2 Objective Functions

The objective function is the Maximization of the total revenue. Total revenue (TR) and Total Cost (TC) and Objective
Function (Z) is shown below:

Z = TR – TC

Total Revenue (TR): Companies regard the sale of a brand-new product, original components and used components as
income for the company. The sales of used components, which are in good condition after the disassembly process, returns
to the company as revenue.

TR= ∑∑ dm
st t
t,st .h1st + ∑∑∑ (dms t,st,j + dmc t,st,j − SSst, j,t ).h2st, j + ∑∑∑ SSst, j,t .h3st, j +
t st j st j t
(11)
∑∑ N
p j
pj .pp j + ∑∑ Geridon jt .recy j + ∑ recy1.recyling t
j t t

Total Cost (TC): Total cost consists of total purchasing cost (TPC), total manufacturing cost (TMC), total transport cost
(TTC), Total Waste Cost (TWC), Total Renting Car cost (TRC), total emission Cost (TCC), and Total Fixed Cost (TFC).
TC = TPC + TMC + TTC + TWC + TRC + TCC + TFC (12)

Total Purchasing Cost (TPC): Purchasing cost is defined as the sum of purchasing costs made in order to meet the demand
of factory and sales collection centers in original components from the suppliers and purchasing costs of the products
returned from customers to sales collection centers.

TPC = ∑∑∑∑ p1 X
s p j t
sj spjt + ∑∑∑∑ p1sj Ysdjt + ∑ rrl ∑∑ R st,l,t
s d j t l st t
(13)

Total Manufacturing Cost (TMC): In factories, manufacturing costs are composed of repair costs in sales and collection
centers and assembly costs in disassembly centers and remanufacturing costs in the plant.

=TMC ∑ a rc ∑∑∑ Zj j pdt + ∑∑∑∑ (d1j + a j + ∑ p1sj )broijt yyst,i,t

j p d t st i j t s
(14)
+ ∑∑∑ xx st,i,t ∑ d1j + f j (1 − broijt ))
st i t j

Total Transport Cost (TTC): Transport costs consists of both product and component cost. Products are transported from
factory to distribution centers and from distribution center to sales collection center.

TTC =∑∑∑ Zpdt .g1 + ∑∑∑ Vd,st,t .g1 + ∑∑∑∑ w d,st, j,t .g2 j + ∑∑ SSst, j .g (15)
p d t d st t d st j t st j

Total Waste Cost (TWC): Original components are disposed if they are broken in the repair and disassembly processes.
These original components are sent to the disposal center.

TWC = ∑∑ e jbroij (16)

i j

Total Renting Truck Cost (TRC): Renting costs of trucks associated with the amount of transported products and components.

TRC
= ∑∑∑∑ X spjt .K1spt + ∑∑∑∑ Ysdjt .K2sdt + ∑∑∑ Zpdt .K3pdt +
s p j t s d j t p d t
(17)
∑∑∑ Vd,st,t .K4d,st,t +∑∑∑∑ Wd,st, j,t .K4d,st,t
d st t d st j t
 The New Challenge of Industry 4.0 59

Total Emission Cost (TCC): Carbon emission cost varies by the type of trucks and it is multiplied by a penalty cost
coefficient as well.

TCC = ∑∑∑∑ X spjt .CC1spt + ∑∑∑∑ Ysdjt .CC2sdt + ∑∑∑ Zpdt .CC3pdt
s p j t s d j t p d t
(18)
+ ∑∑∑ Vd,st,t .CC4d,st,t + ∑∑∑∑ Wd,st, j,t .CC4d,st,t
d st t d st j t

Total Fixed Cost of Facilities (TFC): The fixed cost of facilities includes the selection cost of suppliers, the opening cost
of plant and distribution centers.

TFC =∑ f1s k11s + ∑ f 2p k12p + ∑ f 3d k13d (19)

s p d

3.3 Constraints

The number of original components coming from factories to distribution centers and the number of original components
going from distribution centers to sales and collection centers should be equal to each other.

∑∑ Ysdjt
=
s t
∑∑ Wst t
s,st, jt "d, j (20)

The number of products coming from factories to distribution centers and the number of products going from distribution
centers to sales and collection centers should be equal.

∑∑
= Z ∑∑V
p t
pdt
st t
d,st,t "d (21)

Products are disassembled in decomposition center and then useable parts are sent to sales and collection centers in order
to meet the demand of usable components.

∑ rfc
st
st, jt = ∑ SSst
st, j,t + ∑ N pjt "j
p
(22)

A certain part of components used in the factory to remanufacture is supplied by the dismantling center and the other
parts are supplied by suppliers. Therefore, the sum of the parts that arrived should meet the need for the component of
the factory.

∑∑ X
s t
spjt + N pj − rc j ∑∑ Zpdt =0,"p, j
d t
(23)

Product demand of sales and collection centers supplied by final products in distribution centers.

∑∑V= d t
d,st,t dmst ,"st (24)

The customer has two different demands as an original component and used components. The amount of original
components coming from distribution centers to sales and collection centers is equal to original component stock remaining
from the previous period in sales and collection centers, demand in original component and stock amount remain at the
end of the period.

Sst, j + ∑∑ Wd,st, jt = dmsst, j + dmcst, j "st, j (25)

d t

Certain components are renewed after the dismantling process is sent to sales and collection centers in order to meet the
demand in usable and new components are send to remanufacture in the factory. As priority is to meet the demand in used
component, it must be as either total amount of refurbished components after the disassembly or used component demand.

∑=
SS ∑ rfc
st
st, j,t
st
st, j,t .b jt + ∑ dmcst, j,t (1 − b jt ),"j, t
st
(26)
60 Logistics 4.0: Digital Transformation of Supply Chain Management

Capacity constraints for sales and collection centers are considered for each product and component.

∑∑ V
d t
d,st,t ≤ Cap max U st ,"st (27)

∑∑ W
d t
d,st, j,t + SS jt ≤ Cap max st, j ,"st, j (28)

Capacity constraint for each supplier.

∑∑∑Z p d t pdt ≤ Capp2p , "p, t (29)

Capacity constraint both product and components in the distribution center.

∑ ∑V st t d,st,t ≤ Capp3d , "d (30)

∑ ∑W st t d,st, j,t ≤ Capp4djt , "d, j (31)

The variables should be greater than zero.

X spjt ,Ysdjt , Z pdt , Wd , st , jt , Vd , st ,t ,SSst , j , N pj , Icc st , j ≥ 0, "s, p, j,t, d, st (32)

4.  A Computation Experiment

4.1 General Information

We proposed a sustainable supply chain network design based on hypothetical data. A small example illustrates the
properties of this problem and this model. This network design is divided into two parts; the first part is forward logistics
and consist of four suppliers, two factories, three distribution centers, four sales and collect centers, while the reverse
direction of this network includes in four sales and collections centers (collection proses), dismantling and recycling and
disposal center. And, network configurations consider on environmental focused on CO2 gas emission released by trucks
and recycling process of end-of-life products. It is assumed that outsourcing is used only for transportations. The third-
party logistics (3PL) firms provide service with two types of trucks for transportation, which is between 0–5 years, 5–10
years old, respectively. As aging trucks, rental free will be cheaper. Thus, choosing the oldest trucks is a good option for
the firms, but CO2 emission also increase because the engines are old. Rental costs of all trucks according to their ages,
are given in Table 2, Table 3 and Table 4, respectively. The added deterrent penalty cost (pn CO2 = 10.5 $/ gr than more
2000 kg CO2) in model puts the decision maker into another trade-off situation which is penalty cost versus CO2 emissions
(Table 5, Table 6 and Table 7). Suppliers, factories and distribution centers have their own components and product
capacities, which give in Table 1. In addition, the demand for new parts and components of the sales and collection center
are given in Table 8.
The CO2 gas emissions from all trucks between each echelon have demonstrated in Tables 5, 6, and 7, respectively.

Table 1: The component and product capacities of Suppliers-Factory- Distribution Centers (DC)-Sales and collection center (SCC)

SCC Capacity Suppliers Capacity F Capacity DC Capacity

1 497 1 1520 1 127 1 1075
2 480 2 1500 2 142 2 1045
3 370 3 1530 3 1032
4 315 4 1450
 The New Challenge of Industry 4.0 61

Table 2: The rental costs ($/unit) of each truck during the transportation between Suppliers (S) – Factories (F) – Distribution centers
(DC).

Truck-1 Truck-2 Truck-1 Truck-2

S F1 F2 F1 F2 DC1 DC2 DC3 DC1 DC2 DC3
1 16 11 24 15 8 11 10 9 15 10
2 23 14 16 16 12 15 14 12 15 13
3 23 11 16 16 8 8 10 11 9 11
4 20 15 18 18 12 10 10 9 15 14

Table 3: The rental costs ($/unit) of each truck during the transportation between factory and distribution centers and sales collection
centers.

Truck-1 Truck-2
F DC1 DC2 DC3 DC1 DC2 DC3
1 18 25 28 17 30 21
2 29 27 16 25 22 25

Table 4: The rental costs ($/unit) of each truck during the transportation between distribution centers and sales and collection centers.

Truck-1 Truck-2
DC SCC1 SCC2 SCC3 SCC4 SCC1 SCC2 SCC3 SCC4
1 8 12 12 15 14 12 10 8
2 8 18 7 14 7 16 11 10
3 8 8 11 7 14 9 8 14

Table 5: The CO2 gas emissions (gr/unit) during the transportation between factories and distribution centers.

Truck-1 Truck-2 Truck-1 Truck-2

S F1 F2 F1 F2 DC1 DC2 DC3 DC1 DC2 DC3
1 1.87 1.32 1.64 0.09 1.84 1.74 0.7 0.6 1.37 0.66
2 0.74 0.78 0.24 1.59 1.18 0.59 0.23 1.9 0.87 1.52
3 2 0.85 1.34 0.1 0.17 0.4 1.53 1.29 1.29 0.08
4 1.49 0.26 1.94 0.38 0.37 1.55 0.64 0.56 1.13 1.39

Table 6: The CO2 gas emissions (gr/unit) during the transportation between factories and distribution centers.

Truck-1 Truck-2
F DC1 DC2 DC3 DC1 DC2 DC3
1 1.52 1.51 0.21 1.72 1.01 0.22
2 0.9 0.94 1.29 0.15 1.66 1.66

Table 7: The CO2 gas emissions (gr/unit) during the transportation between distribution centers and sales and collection centers.

Truck-1 Truck-2
DC SSC1 SSC2 SSC3 SSC4 SSC1 SSC2 SSC3 SSC4
1 0.27 1.44 0.27 0.06 0.55 1.06 0.92 1.38
2 1.78 0.07 0.79 1.56 0.82 1.84 1.47 0.98
3 0.98 1.07 0.17 1.51 0.09 0.15 0.57 1.2
62 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 8: The demand for new components (nc) and used components (uc)

SSC nc1 nc2 nc3 nc4 nc5 uc1 uc2 uc3 uc4 uc5
1 5 12 11 6 12 18 15 17 15 13
2 12 11 9 5 7 13 18 13 14 16
3 8 6 5 4 8 17 17 16 14 17
4 4 7 5 6 7 16 14 14 16 16

4. Model Result

The mathematical model is solved by using GAMS—Cplex 24.3 solver subroutine in 0.047 second. All the experiments
are conducted on a notebook with Intel Pentium i7-55000 CPU 2.40 GHz and 8 GB Ram. The following result indicates
below tables.
According to result, as shown in Table 10; the total revenue is 1332558.10 $, the total cost is 128324.54 $ and the
optimal objective is 1204233.56 $. Renting cost and fixed cost of facilities have one of the highest costs in the total cost
and objective values are shown in Figure 2. CO2 emissions of all trucks are totally 11931.04 $ during the all transportation
in forward logistics. According to data obtained GAMS package program, objective function values are given Table 9 and
result of decision variables presents below Table 9.

Table 9: The Optimal solution of numerical example.

Table 10: Objective Function values (OBJ).

Objective Function 1204233.56

Total Revenue (OBJ1) 1332558.1
Total Cost (OBJ2) 128324.54
Purchasing Cost (OBJ21) 12102
Manufacturing Cost (OBJ22) 11756.5
Assemble Cost (OBJ221) 5451
Repair Cost (OBJ222) 5918
Disassemble Cost (OBJ223) 387.5
Transportation Cost (OBJ23) 1164.3
Waste Cost (OBJ24) 58.7
Renting Cost (OBJ25) 48542
Carbon emission Cost (OBJ26) 11931.04
Fixed Cost (OBJ27) 42770
 The New Challenge of Industry 4.0 63

Fig. 2: Total costs of each objective functions.

5.  Conclusion and Future Studies

IoT influences in the sustainable supply chain is still at the initial stage where the study suggests that supply chain industry
should step up to extract the benefits of next-generation technologies.
This study introduces an SSC network design with respect to the Internet of Thing application. IoT devices monitored
and collected static and dynamic information about the product life cycle. Sensor and RFID embedded products are
emerging communication and data storage technology products that have provided an advantage in SSC operations,
including disassembly, remanufacturing and repair process. These devices eliminate ambiguous information due to the
uncertainty involved in the reverse flow of the returned products.
We proposed a multi-components, multi-echelon, and capacitated linear mathematical model to solve the SSC problems
which consider the sustainable impact on SCN design. The effectiveness of the generated optimization model is tested by
solving an example. It was solved using the GAMS/CPLEX 23.3 optimization tool. Both environmental and economic
objectives can be achieved with the same system by utilizing a sustainable supply chain model.
In this chapter, we contribute a new sustainable supply chain model considering carbon emission during transportation
and IoT applications, which provide exact recovery information. The contributions of this study are:
 Minimizing the transportation costs, purchasing costs of components from suppliers, dismantling costs/remanufacturing
cost, opening costs of facilities, disposal cost of products, renting costs of trucks,
 Minimizing the total CO2 emission costs,
 This study discusses the importance of digitalization and the influence of IoT in the overall SSCM.
 In the sustainable supply chain network, it was the first mathematical model established using the IoT.
Further researches indicate that this proposed model will be a more complex network by adding a new supplier,
distribution center and plants. Therefore, Metaheuristics such as genetic algorithms can be developed to solve this mixed-
integer-programming model in a reasonable time with increasing problem sizes. Also, this model can be enhanced with a
fuzzy modeling approach to overcome uncertainty in customer demands. The multi-objective mathematical model should
be applied to solve this model by considering maximizing the customer satisfaction level.

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supply chain network strategic design with stochastic demand using a novel robust hybrid multi-objective metaheuristic.
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 SECTION 3

Fuzzy Decision Making in SCM

CHAPTER 6

Fuzzy Decision Making in SCM

Fuzzy Multi Criteria Decision Making for Supplier Selection
Belkız Torğul,1,* Turan Paksoy1 and Sandra Huber2

1. Introduction

In recent years, mindfulness of the essential role of purchasing has increased for protection of competition by a company.
The most important task of the purchasing process is the selection of an innovative supplier with high quality, low cost,
on-time delivery capabilities (Tidwell and Sutterfield 2012). In the new global market, managers have recognized the
importance of selecting the most suitable suppliers among alternatives and emphasized it is a critical factor for the success of
companies (Galankashi et al. 2016a). This decision significantly affects an organization’s overall supply chain performance.
Selecting the right suppliers will reduce purchasing costs, enhance sustainable relationships, decrease production lead-
time, increase customer satisfaction, profitability and quality of products and competitiveness in the market. Consequently,
selecting the right suppliers requires much more than scanning a set of price lists and depends on a wide range of factors,
both quantitative and qualitative (Wang and Yang 2009; Ho et al. 2010; Mavi et al. 2016).
Actually, two types of supplier selection are prevalent; single supplier and multiple supplier. In the single supplier
type, a supplier meets the needs of all buyers, so the buyer selects only the best supplier.
In the multiple suppliers’ type, which is more common, more than one supplier is selected. Therefore, businesses
should select the best suppliers and determine how much to order from each of the suppliers to create a stable competitive
environment (Kannan et al. 2013). Supplier selection requires multiple goals and criteria to be considered, so it is a complex
multi-criteria decision-making (MCDM) process that takes into account both quantitative and qualitative factors (Junior
et al. 2014; Govindan et al. 2015).
However, many decision makers choose suppliers based on their experience, knowledge and intuition. In a real
situation, many inputs are not exactly known. In the evaluation of criteria for supplier selection, fuzzy logic approach is
used in cases where it is not possible to determine the uncertainty of information and judgments by deterministic methods.

1
Konya Technical University, Department of Industrial Engineering, Konya, Turkey.
Emails: [email protected]
2
Operations Research Institute, Planungsamt, München, Germany, Email: [email protected]
* Corresponding author: [email protected]
66 Logistics 4.0: Digital Transformation of Supply Chain Management

Uncertainty in critical information creates problems in reflecting the real situation to the model. Supplier selection in a
fuzzy environment is the case where there is no fuzziness in the set of decision-makers and alternatives, but the objectives
and decision criteria may contain fuzziness. The decision maker may determine the access level of the objective function
as fuzzy. In addition, parameter values (profit, cost, etc.) can be defined in fuzzy numbers. Fuzzy set theory in combination
with MCDM methods have been widely used to deal with uncertainty in supplier selection decision-making, because it
provides a suitable language to handle fuzzy criteria that can integrate the analysis of qualitative and quantitative factors
(Amid et al. 2006; Kumar et al. 2006). The most popular Fuzzy MCDM approaches adopted in the supplier evaluation
and selection literature are, Fuzzy AHP, Fuzzy TOPSIS, Fuzzy ANP, Fuzzy VIKOR, Fuzzy DEA, Fuzzy mathematical
programming and their hybrids.
The current literature on supplier selection is extensive. Previous studies focused on defining the criteria used in
supplier selection, such as Dickson (1966), which is one of the earliest studies in supplier selection, identified 23 supplier
criteria. Weber et al. (1991) reviewed 74 articles from 1966 to 1991 on supplier selection criteria and methods. Stamm
and Golhar (1993) identified common supplier evaluation criteria. Taherdoost and Brard (2019) provides a comprehensive
picture of research relating to supplier selection criteria and supplier evaluation methods.
Further studies generally focused on the MCDM approaches and mathematical models supporting decision-making used
in the supplier selection process. Such as De Boer et al. (2001), Ho et al. (2010), Chai et al. (2013), Wetzstein et al. (2016),
etc. Among these, Lee et al. (2011), Genovese et al. (2013), Igarashi et al. (2013), Govindan et al. (2015) and Jenssen and
de Boer (2019) focus only on green supplier selection. Zimmer et al. (2016) focus only on sustainable supplier selection.
Karsak and Dursun (2016), Keshavarz Ghorabaee et al. (2017a), Simić et al. (2017), Ozkok and Kececi (2019)
reviewed fuzzy set theory and models, MCDM approaches and mathematical models in fuzzy environments for supplier
selection. Karsak and Dursun (2016) reviewed stochastic methods too.
All of the papers where we have found from review studies made so far on supplier evaluation and selection are
listed in Table 1.
The main aim of this chapter is to provide a detailed overview of Fuzzy Logic and Fuzzy Decision Making models
for the supplier selection process. Moreover, we aim to analyses the articles with respect to date of publication, the journal
title, studied industry, supplier type and fuzziness type.
The remainder of this chapter is organized as follows: Section 2 presents classification of literature review with
research methodology. This section provides a detailed literature review on the single and hybrid fuzzy decision-making
approaches for selecting suppliers. In Section 3, some analyses of reviewed papers are made to show the most frequent
approach, the dates of publication and distribution of papers by journals in this field. Section 4 provides observations and
discussions about the results of this study and conclusions are presented in Section 5.

2. Classification of Literature Review

This paper extends existent literature reviews and provides an up-to-date version by surveying the supplier evaluation and
selection literature from 2000 to 2019 while focusing on fuzzy logic and fuzzy decision making in SCM. In this paper,
only English written 310 scientific papers (225 Journal paper, 18 Book Chapter and 67 Conference paper) published in
refereed journals, books and conference proceedings between 2000 and 2019 are reviewed. There is a remarkable growth
in the number of papers published between 2008 and 2019, and 96% of the papers considered in this survey were published
during about the last 10–year period of the review. Data were sought through various sources including Web of Science,
Science Direct, Springer, Scopus, Taylor & Francis, IEEE Explore Digital Library and Google Scholar database. The
following keywords were used in some form: supplier evaluation, supplier selection, vendor selection and fuzzy. After
collecting the literature, the published papers were categorized into two main categories based on the type and frequency
of fuzzy MCDM approaches and other methods; single and hybrid approaches. Then some subcategories were defined
for these two categories.
As found in literature, the single approaches (242 papers—78%) were slightly more popular than the hybrid approaches
(68 papers—22%). The next two sub-sections present single fuzzy approaches and hybrid fuzzy approaches in detail.

2.1 Single Approaches

Researchers have developed many multi-criteria decision-making (MCDM) and mathematical programming (MP)
approaches in fuzzy environment. In this section, single fuzzy approaches applied to supplier selection are reviewed. The
Fuzzy AHP, Fuzzy ANP, Fuzzy TOPSIS, Fuzzy VIKOR, Fuzzy MOORA, Fuzzy ELECTRE, Fuzzy DEMATEL, Fuzzy
DEA, Fuzzy PROMETHEE, Fuzzy BWM, Fuzzy QFD and Fuzzy MP, which appear more frequently in the literature, are
 Fuzzy Decision Making in SCM 67

Table 1: Existent literature reviews on supplier selection.

S. no Author(s) Year Number of Time Type of Research subject

reviewed articles range publication
1 (Dickson) 1966 - - Journal paper Vendor selection systems and decisions

2 (Weber et al.) 1991 74 1996–1990 Journal paper Vendor selection criteria and methods

3 (Stamm and Golhar) 1993 56 – Journal paper

Supplier evaluation criteria
4 (Degraeve et al.) 2000 - ?–1999 Journal paper
Vendor selection models
5 (De Boer et al.) 2001 - ?–2000 Journal paper
Methods supporting supplier selection
6 (Aissaoui et al.) 2007 - ?–2005 Journal paper
Supplier selection and order lot sizing
modeling
7 (Jain et al.) 2009 - ?–2007 Journal paper Methods supporting supplier selection
8 (Thanaraksakul and 2009 76 ?–2009 Conference Supplier evaluation framework based
Phruksaphanrat) paper on balanced scorecard with integrated
corporate social responsibility perspective
9 (Ho et al.) 2010 78 2000–2008 Journal paper MCDM approaches for supplier evaluation
and selection
10 (Wu and Barnes) 2011 140 2001–2011 Journal paper Decision-making models and approaches
for partner selection
11 (Deshmukh and 2011 49 1992–2007 Book Chapter Supplier selection criteria and methods
Chaudhari)
12 (Lee et al.) 2011 20 1997–2009 Journal paper Key criteria for green supplier selection
13 (Genovese et al.) 2013 28 1987-2010 Journal paper Greener supplier selection: state of the art
and some empirical evidence
14 (Chai et al.) 2013 123 2008–2012 Journal paper Analyzing the process of supplier selection
criteria and methods
15 (Igarashi et al.). 2013 60 1991–2011 Journal paper Requirements on greener supplier selection
and conceptual model development
16 (Govindan et al.) 2015 33 1997–2011 Journal paper MCDM approaches for green supplier
evaluation and selection
17 (Kocken and Ozkok) 2015 - – Book Chapter Multi criteria decision making approaches
18 (Wetzstein et al.) 2016 221 1990–2015 Journal paper A systematic assessment on supplier
selection
19 (Zimmer et al.) 2016 143 1997–2014 Journal paper Models supporting sustainable supplier
selection
20 (Karsak and Dursun) 2016 149 2001–2013 Journal paper Non-deterministic analytical methods for
supplier selection
21 (Keshavarz 2017a 339 2001–2016 Journal paper MADM approaches in fuzzy environments
Ghorabaee et al.) on supplier evaluation and selection
22 (Simić et al.) 2017 54 1966–2016 Journal paper Fuzzy set theory and models for supplier
assessment and selection
23 (Taherdoost and 2019 - ?–2017 Conference/ Analyzing the process of supplier selection
Brard) Journal paper criteria and methods
24 (Jenssen and de 2019 39 2001–2018 Journal paper Implementing life cycle assessment in green
Boer) supplier selection
25 (Ozkok and Kececi) 2019 - ?–2019 Book Chapter Supplier selection problem methods under
uncertainty

considered individually, and the other single approaches are reviewed in a separate section. The most popular individual
approach is FAHP, followed by FTOPSIS and F-MP.

2.1.1 Fuzzy AHP (Analytic hierarchy process)

Bottani and Rizzi (2005) defined relevant criteria added to the traditional one in an e-procurement environment for
supplier selection and used FAHP to rank raw materials, maintenance, repair and operating suppliers for a major Italian
68 Logistics 4.0: Digital Transformation of Supply Chain Management

company operating in the food industry. Pang (2006) and Pang (2007) provided a comprehensive evaluation method which
combines both fuzzy sets and FAHP for evaluating suppliers of a process plant whose main product is graded pig iron.
Four decision criteria of suppliers are selected and five potential suppliers are evaluated in the case study. Chan and Kumar
(2007) presented FAHP to select the best supplier selling one of the most critical parts for a manufacturing company. To
this end, they had discussed and identified some critical decision criteria, including risk factors, for the development of
an effective global supplier selection system. Similarly, Chan et al. (2008) presented FAHP to effectively address both the
quantitative and qualitative decision criteria involved in the selection of global suppliers for a manufacturing company.
Kong et al. (2008) presented a fuzzy decision-making approach to deal with the supplier selection problem. They
determined the weighting of subjective judgments with FAHP and evaluated suppliers with the grey relation model. Yang
et al. (2008) proposed an integrated fuzzy multiple criteria decision making method which consists of interpretive structural
modeling, FAHP and non-additive fuzzy integral for a vendor selection problem. Lee et al. (2009a) applied the Delphi
method to differentiate the criteria of traditional suppliers and green suppliers and then they exploited the fuzzy extended
analytic hierarchy process to evaluate green suppliers for an anonymous TFT–LCD manufacturer in Taiwan. Similarly, Lee
(2009) propose a FAHP model which incorporates the benefits, opportunities, costs and risks concept to select backlight
unit’s suppliers for the largest TFT-LCD manufacturers in Taiwan. Şen et al. (2010) presented a methodology, which
consists of two steps for the supplier selection problem of Audio Electronics, a company in Turkey’s electronics industry.
Pre-defined supplier selection criteria (developed in Şen et al. (2008)) are weighted using the FAHP in the first step. 10
alternative suppliers are evaluated using a combination of a max–min approach and a non-parametric statistical test and
finally, five effective suppliers are determined in the second step.
Based on the opinions of 15 Taiwanese companies that are well-known electronics manufacturers investing in China
and other countries, Chiouy et al. (2011) prioritized various performance evaluation criteria for sustainable supplier
selection and evaluation in the Taiwanese electronics industry by the FAHP method. Çifçi and Büyüközkan (2011)
presented a decision framework based on group decision making and FAHP for a green supplier selecting problem.
Kilincci and Onal (2011) investigated the supplier selection problem of a white good manufacturer in Turkey and
applied FAHP to select the best supplier firm for one its critical parts used in the production of washing machines. Ertay
et al. (2011) proposed an integrated decision support system methodology for supplier selection and evaluation and applied
it for a real-life supplier-selection problem of a pharmaceutical company. They used Fuzzy AHP to weight criteria and
ELECTRE III to rank suppliers. Punniyamoorthy et al. (2011) developed a new composite model which examines the
supplier selection criteria and rank the suppliers using structural equation modeling and FAHP technique, based on the
results of a survey of 151 respondents and demonstrated applicability of the model by evaluating five suppliers of a public
sector company in the southern part of India whose main product of manufacture is boiler.
Azadnia et al. (2012) proposed an integrated approach for clustering and selecting suppliers. They used self-organizing
map as a kind of neural network method in order to cluster suppliers. Moreover, they used FAHP in order to determine the
weights of sustainable criteria and applied TOPSIS to select the best cluster of suppliers and the best of them. Rezaei et al.
(2014) proposed a two-phased methodology for the supplier selection problem. In the first phase, they used a conjunctive
screening method, which aims to reduce the initial set of potential suppliers and in the second phase, they used FAHP, in
which suppliers are evaluated by the main and sub-criteria. Finally, they applied the methodology for choosing the best
supplier of one of the largest airlines in Europe, the Royal Dutch Airlines. Gold and Awasthi (2015) proposed a two-stage
fuzzy AHP approach for sustainable global supplier selection that also considers sustainability risks from sub-suppliers.
They performed more than one experiment at each stage and tried to observe whether the order of the supplier changed
according to the results. Kar (2015) presented the application of a hybrid approach using fuzzy AHP for prioritizing
evaluation criteria and subsequently using fuzzy NN for selecting the suppliers in the supplier selection problem. He tested
the group decision-supported model with an iron and steel manufacturing company based out of India.
Galankashi et al. (2016) developed an integrated Balanced Scorecard–FAHP model for the supplier selection problem
in the automotive industry. They gathered measures using a literature survey and qualified them using the Nominal Group
Technique. Finally, they used FAHP to select the best supplier. Büyüközkan and Göçer (2017a) proposed a new integrated
methodology that consists of intuitionistic fuzzy analytic hierarchy process (IFAHP) and intuitionistic fuzzy axiomatic
design (IFAD). They used IFAHP to determine the weights of supplier evaluation criteria and IFAD to rank supplier
alternatives for five-alternative supplier selection process of an international sporting goods group operating in Turkey.
Then they compared their own approach with IFTOPSIS, integrated IFAHP and IFTOPSIS, and integrated IFAHP and
IFVIKOR. Lu et al. (2019) established a decision-making framework based on the Cloud model, possibility degree and
Fuzzy AHP for green supplier selection problems. They applied the model to evaluate four alternative suppliers of a straw
biomass industry in China by identifying four main and 13 sub-criteria.
Above, some of the studies implementing the FAHP approach are presented. Table 2 presents all articles in which
the FAHP method as a single approach to supplier selection is investigated.
 Fuzzy Decision Making in SCM 69

Table 2: Review summary of supplier selection studies using Fuzzy AHP method.

S. no Author(s) Year Type of publication Type of paper Type of fuzziness

1 (Bottani and Rizzi) 2005 Journal paper Real case study Classical sets
2 (Li et al.) 2006 Conference paper Theoretical study Classical sets
3 (Pang) 2006 Conference paper Real case study Classical sets
4 (Pang) 2007 Conference paper Real case study Classical sets
5 (Chan and Kumar) 2007 Journal paper Theoretical study Extended classical sets
6 (Chan et al.) 2008 Journal paper Theoretical study Classical sets
7 (Kong et al.) 2008 Conference paper Theoretical study Classical sets
8 (Yang et al.) 2008 Journal paper Real case study Classical sets
9 (Bai) 2008 Conference paper Theoretical study Classical sets
10 (Pang) 2008 Conference paper Real case study Classical sets
11 (Xi and Jiang) 2008 Book Chapter Real case study Classical sets
12 (Zhao and Xu) 2008 Conference paper Theoretical study Classical sets
13 (Lee) 2009 Journal paper Real case study Classical sets
14 (Lee et al.) 2009a Journal paper Real case study Extended classical sets
15 (Şen et al.) 2010 Journal paper Real case study Classical sets
16 (Kahraman and Kaya) 2010 Book Chapter Real case study Classical sets
17 (Kang et al.) 2010 Conference paper Theoretical study Classical sets
18 (Koul and Verma) 2011 Journal paper Theoretical study Classical sets
19 (Azadnia et al.) 2011 Conference paper Real case study Classical sets
20 (Chiouy et al.) 2011 Journal paper Theoretical study Classical sets
21 (Ertay et al.) 2011 Journal paper Real case study Classical sets
22 (Aktepe and Ersoz) 2011 Journal paper Real case study Classical sets
23 (Kilincci and Onal) 2011 Journal paper Real case study Classical sets
24 (Punniyamoorthy et al.) 2011 Journal paper Real case study Classical sets
25 (Çifçi and Büyüközkan) 2011 Journal paper Real case study Classical sets
26 (Rahman and Ahsan) 2011 Conference paper Real case study Classical sets
27 (Tang and Fang) 2011 Conference paper Real case study Classical sets
28 (Li et al.) 2012 Journal paper Theoretical study Axiomatic Sets
29 (Azadnia et al.) 2012 Journal paper Real case study Classical sets
30 (Pitchipoo et al.) 2013 Journal paper Real case study Classical sets
31 (Alinezad et al.) 2013 Journal paper Real case study Classical sets
32 (Harnisch and Buxmann) 2013 Conference paper Theoretical study Classical sets
33 (Rezaei et al.) 2014 Journal paper Real case study Classical sets
34 (Gold and Awasthi) 2015 Journal paper Theoretical study Classical sets
35 (Kar) 2015 Journal paper Real case study Classical sets
36 (Nikou and Moschuris) 2015 Book Chapter Real case study Classical sets
37 (Yadav and Sharma) 2015 Book Chapter Real case study Classical sets
38 (Liu) 2015 Conference paper Real case study Classical sets
39 (Yasrebdoost) 2015 Book Chapter Real case study Classical sets
40 (Deepika and Kannan) 2016 Conference paper Theoretical study Intuitionistic sets
41 (Galankashi et al.) 2016b Journal paper Theoretical study Classical sets
42 (Büyüközkan and Göçer) 2017 Journal paper Real case study Intuitionistic sets

Table 2 contd. ...

70 Logistics 4.0: Digital Transformation of Supply Chain Management

...Table 2 contd.

S. no Author(s) Year Type of publication Type of paper Type of fuzziness

43 (Sarwar et al.) 2017 Conference paper Theoretical study Classical sets
44 (Chaising and Temdee) 2017 Conference paper Real case study Classical sets
45 (Krishankumar et al.) 2017 Conference paper Real case study Intuitionistic sets
46 (Zafar et al.) 2018 Conference paper Theoretical study Classical sets
47 (Ayhan) 2018 Journal paper Theoretical study Hesitant fuzzy axiomatic design
48 (Diouf and Kwak) 2018 Journal paper Real case study Classical sets
49 (Lu et al.) 2019 Journal paper Real case study Classical sets
50 (Deshmukh and 2019 Conference paper Real case study Classical sets
Vasudevan)
51 (Deshmukh and 2019 Conference paper Real case study Classical sets
Sunnapwar)
52 (2019) 2019 Conference paper Real case study Classical sets
53 (Hu et al.) 2019 Journal paper Real case study Double quantitative fuzzy rough sets
54 (Mondragon et al.) 2019 Journal paper Real case study Classical sets
55 (Li,Sun, et al.) 2019 Conference paper Theoretical study Classical sets
56 (Wang et al.) 2019 Journal paper Real case study Classical sets
57 (Buriticá et al.) 2019 Journal paper Real case study Classical sets
58 (Agrawal and Kant) 2019 Book Chapter Real case study Classical sets

2.1.2 Fuzzy ANP (Analytic network process)

Razmi et al. (2009) developed a framework based on FAHP to evaluate and select the potential suppliers and augmented
a non-linear programming model to the model to elicit the relative weights from fuzzy comparison matrices. Wei and Sun
(2009) and Wei et al. (2010) showed the evaluation process of supplier selection with FANP calculating the weights of
each criteria of the model. Büyüközkan and Çifçi (2011) used a new fuzzy MCDM framework based on fuzzy ANP for a
sustainable supplier evaluation problem and analyzed the evaluation model in a real-life problem of a main producer of a
Turkish white goods industry. Vinodh et al. (2011) used fuzzy ANP approach for the supplier selection process and carried
it out in Salzer Electronics Limited, which is an Indian electronics switches manufacturing company.
Kang et al. (2012) proposed a FANP model to evaluate various aspects of suppliers and presented a case study of IC
packaging company selection in Taiwan. Pang (2009) and Pang and Bai (2013) developed a supplier evaluation approach
based on FANP and fuzzy synthetic evaluation for choosing a supplier in the supply chain. Sinrat and Atthirawong (2013)
developed a conceptual framework model based on an integrated of FANP model and TOPSIS for evaluation procurement
risk, production risk, deliver risk, and environment risk of suppliers.
Dargi et al. (2014) proposed a framework comprising of the most critical factors for the aim of a reliable supplier
selection for an Iranian automotive industry. They deployed the Nominated Group Technique to summarize the most
critical factors and then used FANP to weight the extracted eight criteria and determine their importance level. Galankashi
et al. (2015) deployed the Nominal Group Technique to extract the most important performance measures (both classical
and green) and then deployed FANP to weight these measures. Zhang et al. (2015) developed a fuzzy extended ANP
methodology to deal with supplier selection problems. Ayağ and Samanlioglu (2016) proposed an intelligent fuzzy ANP-
based approach to supplier selection problem and presented a case study in a leading company in the automotive sector
that is in Turkey-Europe, which needs a practical evaluation system to rank supplier alternatives.
Parkouhi and Ghadikolaei (2017) proposed combination of BOCR model of Lee (2009) and the model introduced
by Rajesh and Ravi (2015) and applied it for evaluating resilient suppliers of a large industrial unit in the Wood and Paper
Industry. They employed FANP to weigh criteria and used grey VIKOR to identify the most resilient suppliers. Wang et
al. (2018) collected data from 25 potential suppliers of the rice supply chain in Vietnam, and the four main criteria within
contain 15 sub-criteria to define the most effective supplier. They used FANP to evaluate these criteria and DEA to rank
suppliers. Chen et al. (2018) proposed a hybrid model that combines total interpretive structural modeling and FANP to
determine the most appropriate supplier from a social responsibility perspective and illustrated an application using a case
study from the Chinese food industry.
 Fuzzy Decision Making in SCM 71

Sennaroglu and Akıcı (2019) presented FANP to select the best supplier among three alternatives in terms of ten
decision criteria for the raw material requirement of a company in the chemical industry. Liao et al. (2019) proposed a
model integrating the social participatory allocation network and the ANP under the hesitant fuzzy linguistic environment
for low carbon supplier selection problem of a solar power company. Wang et al. (2019a) proposed a fuzzy MCDM model
for the selection process of wind turbine supplier. They identified main criteria for selection of the wind turbine supplier by
the SCOR metrics and literature review, applied Fuzzy ANP for identifying the weights of criteria, and then used TOPSIS
to rank all potential suppliers. Finally, they considered the Wind Power Plant project in the Binh Thuan Province, Vietnam
for application. Wahyuni et al. (2019) determined the criteria most influential in the choice of supplier PT Putra Gunung
Kidul Company, which produces noodles and ranked three alternative suppliers using FANP.

2.1.3 Fuzzy TOPSIS (Technique for order of preference by similarity to ideal solution)
Chen et al. (2006) proposed a systematic approach based on FTOPSIS to solve the supplier-selection problem under
a fuzzy environment. They considered five candidate suppliers and five criteria with three decision-makers for a high-
technology manufacturing company. Boran et al. (2009) presented a multi-criteria group decision making model for supplier
evaluation using intuitionistic fuzzy TOPSIS. Büyüközkan and Arsenyan (2009) proposed an axiomatic design based
fuzzy group decision making approach for evaluating and selecting suppliers. They verified proposed approach through
a case study of XYZ company known as a pioneering producer of the Turkish Apparel Industry. Firstly, seven main agile
supplier evaluation criteria and four alternative suppliers are determined and then weights of criteria are determine using
FTOPSIS. Fuzzy axiomatic design and FTOPSIS technique is applied separately for ranking the supplier alternatives.
Finally, the results obtained were compared. Awasthi et al. (2010) presented a fuzzy multi-criteria approach consisting of
three steps for evaluating environmental performance of suppliers. The first step involves identification of environmental
criteria. The second step involves weighting selected criteria by experts and rating alternative suppliers against each of
the criteria through fuzzy TOPSIS. The third step involves performing sensitivity analysis to determine the influence of
criteria weights on the decision making process. Soner Kara (2011) proposed an integrated methodology based on a two
stage stochastic programming model and fuzzy TOPSIS for supplier selection problems. Firstly, she evaluated 20 potential
suppliers by using fuzzy TOPSIS and performed the two-stage stochastic programming method under demand uncertainty
for a company whose application area is paper production.
Kilic (2013) developed a novel integrated approach including FTOPSIS and a mixed integer linear programming
model to select the best supplier in a multi-item/multi-supplier environment. He used the importance value of each supplier
obtained via FTOPSIS as an input in the mathematical model for determining the suppliers and the quantities of products
to be provided from the related suppliers. Finally, he performed the proposed methodology in the air filter company, which
is located in Istanbul. Roshandel et al. (2013) evaluated four suppliers of imported raw material ‘‘Tripolyphosphate’’
used to produce detergent powder for one of the largest producers of health products in Iran. They used the hierarchical
FTOPSIS to rank four suppliers from South Korea, Spain, China and India based on 25 effective criteria with 10 experts.
Rouyendegh and Saputro (2014) presented an integrated Fuzzy TOPSIS and Multi-Choice Goal Programming Model for
supplier selection and allocation order. They suggested the best suppliers sourcing of white clay for a company producing
fertilizers using the proposed method. Haldar et al. (2014) developed a quantitative approach for strategic supplier selection
under a fuzzy environment and applied the FTOPSIS method to rank the suppliers of an automobile giant.
Azizi et al. (2015) discussed the selection of the best supplier in automotive industries using FTOPSIS. They
considered five main criteria and 18 sub-criteria based on four alternative suppliers. Arabzad et al. (2015) developed a two-
phase model for the supplier selection and order allocation problem of Gassouzan Company, which produce gas pressure
regulator in Iran. In the first phase, they identified candidate suppliers and defined the evaluation criteria by considering
strategic viewpoint. Then, they used SWOT to categorize criteria into two groups of external and internal. In the second
phase, they utilized FTOPSIS to evaluate suppliers based on the criteria and then, they used results from FTOPSIS as an
input for linear programming to allocate orders. Chatterjee and Kar (2016) developed an Interval valued FTOPSIS based
method for handling supplier selection problem in uncertain Electronics Supply chain with six risk based criteria and four
battery suppliers. Finally, they compared the results with some existing methods.
Fallahpour et al. (2017) determined the most important and applicable criteria and sub-criteria for sustainable supplier
selection through a questionnaire-based survey and proposed a hybrid model incorporated Fuzzy Preference Programming
used to weigh the criteria and FTOPSIS used for ranking the suppliers for identifying the best one with respect to the
determined attributes using an Iranian textile manufacturing company as case study. Gupta and Barua (2017) proposed a
novel three-phase methodology for supplier selection framework. The first phase involves the selection of criteria of green
innovation through literature review and interviews with decision makers, the second phase involves ranking of selection
criteria using best worst method, and third phase involves ranking of suppliers with respect to selection criteria weights
using FTOPSIS. They applied the proposed approach in a leading automobile company adopting green practices. Hamdan
72 Logistics 4.0: Digital Transformation of Supply Chain Management

and Cheaitou (2017) proposed a three stages approach—fuzzy TOPSIS, AHP, and a bi-objective integer linear programming
model—to solve a multi-period green supplier selection and order allocation problem with all unit quantity discounts
in which the availability of suppliers differs from one period to another. They solved the proposed mathematical model
by MATLAB R2014, a software using the weighted comprehensive criterion method and the branch-and cut algorithm.
Kumar et al. (2018) applied the FTOPSIS model to evaluate suppliers of an iron and steel manufacturing unit in eastern
part of India and then performed sensitivity analysis to investigate the effect of criteria weights on selection of supplier.
Li et al. (2019) developed an extended FTOPSIS method for sustainable supplier selection, which integrates the
advantage of cloud model theory in manipulating uncertainty of randomness and the merit of rough set theory in flexibly
handling interpersonal uncertainty without extra information. Additionally, they proposed an integrated weighting method
to determine weights of criteria. Finally, they conducted selection of a sustainable photovoltaic modules supplier for A
Chinese state-owned energy company. Memari et al. (2019) presented an intuitionistic FTOPSIS to select the best sustainable
supplier for an automotive spare parts manufacturer and conducted a FTOPIS with nine different scenarios to measure the
sensitivity of the proposed method. Mohammed (2019) presented an integrated fuzzy TOPSIS-possibilistic multi objectives
model to solving a two-stage sustainable supplier selection and order allocation problem for a meat supply chain. He
determined sustainable performance of suppliers by using the FTOPSIS based on traditional, green and social criteria and
then integrated into the possibilistic multi objective model for obtaining the optimal order allocation in quantity. Finally,
he applied LP-metrics approach to reveal a number of Pareto solutions based on the developed model. Yu et al. (2019)
proposed a group decision making sustainable a supplier selection approach using interval-valued Pythagorean FTOPSIS
and conducted experiments to verify the feasibility and efficiency of the proposed approach.
Above, some of the studies implementing the FTOPSIS approach are presented. Table 3 presents all articles in which
the FTOPSIS method as a single approach to supplier selection is investigated.

2.1.4 Fuzzy VIKOR (VIšeKriterijumska Optimizacija I Kompromisno Resenje—Multicriteria

optimization and compromise solution)
Shemshadi et al. (2011) extended the fuzzy VIKOR method with a mechanism to extract and deploy
objective weights based on the Shannon entropy concept for supplier selection processes. Zhao et al.
(2013) presented a novel performance evaluation method based on combining the Interval-valued intuitionistic fuzzy
VIKOR method and the cross-entropy measure for vendor selection problems and compared it with the TOPSIS method.
You et al. (2015) proposed the Interval 2-tuple linguistic VIKOR method for supplier selection problems and demonstrated
feasibility and practicability of the proposed approach through three realistic examples and comparisons with the existing
approaches. Awasthi and Kannan (2016) presented an integrated approach for evaluating and selecting best green supplier
development programs using a fuzzy Nominal Group Technique to identify criteria and FVIKOR to rank green suppliers.
Wu et al. (2016) proposed an extended VIKOR based on cloud model for supplier selection in the nuclear power industry.
They verified this method on supplier evaluation of a nuclear power plant in China and then compared it with fuzzy VIKOR.
Bahadori et al. (2017) provided a combined model for selecting the best supplier in a hospital using artificial neural
network and FVIKOR. It was conducted for a military hospital in three phases in 2016. Zhou and Xu (2017) and Zhou
and Xu (2018) proposed an integrated decision-making model for supplier selection. DEMATEL and ANP are used to
find the criteria weights. Furtheron, an extended FVIKOR method is used to rank alternatives. Finally, they compared
this model with FTOPSIS. Sarkar et al. (2017) proposed a multi-criteria decision making method using DEMATEL based
on ANP, i.e., DANP, with FVIKOR to select the best supplier of a manufacturing company. Krishankumar et al. (2018)
proposed a new two-stage decision-making framework for solving the supplier outsourcing problem. First stage; simple
hesitant fuzzy-weighted geometry operator that uses hesitant fuzzy weights for better understanding the importance of
each decision maker. Second stage; hesitant fuzzy statistical variance method that estimates criteria weights and three-way
hesitant fuzzy VIKOR that ranks supplier outsourcings. Sharaf (2019) proposed a novel flexible multi-attribute group
decision-making method for supplier selection based on interval-valued fuzzy VIKOR. Song and Wang (2019) proposed
an interval intuitionistic fuzzy VIKOR method and applied this method to an automobile enterprise for selection of best
auto parts supplier. Alikhani et al. (2019) proposed a multi-method approach based on the extended super-efficiency DEA
model and Interval type-2 fuzzy VIKOR and illustrated this approach on the supplier selection of Shahrvand Goods &
Servicing Company, which is the most advanced supermarket chain in Iran.

2.1.5 Fuzzy DEA (Data envelopment analysis)

Alem et al. (2009) presented three types of vendor selection models consisting of DEA, FDEA, and Chance Constraint
DEA and a decision making scheme for choosing the appropriate method for supplier selection under certainty, uncertainty
 Fuzzy Decision Making in SCM 73

Table 3: Review summary of supplier selection studies using Fuzzy TOPSIS method.

S. no Author(s) Year Type of publication Type of paper Type of fuzziness

1 (Chen et al.) 2006 Journal paper Theoretical study Classical sets
2 (Fan et al.) 2008 Conference paper Theoretical study Classical sets
3 (Xiao and Wei) 2008 Conference paper Theoretical study Interval-Valued
Intuitionistic sets
4 (Boran et al.) 2009 Journal paper Theoretical study Intuitionistic sets
5 (Büyüközkan and Arsenyan) 2009 Journal paper Real case study Axiomatic sets
6 (Yadav and Kumar) 2009 Conference paper Theoretical study Interval-Valued
Intuitionistic sets
7 (Awasthi et al.) 2010 Journal paper Theoretical study Classical sets
8 (Guo et al.) 2010 Conference paper Theoretical study Intuitionistic sets
9 (Sevkli et al.) 2010 Conference paper Real case study Classical sets
10 (Soner Kara) 2011 Journal paper Real case study Classical sets
11 (Aghajani and Ahmadpour) 2011 Journal paper Real case study Classical sets
12 (Liao and Kao) 2011 Journal paper Real case study Classical sets
13 (Wang et al.) 2012 Conference paper Theoretical study Classical sets
14 (Zhang and Huang) 2012 Conference paper Theoretical study Intuitionistic sets
15 (Roshandel et al.) 2013 Journal paper Real case study Hierarchical sets
16 (Kilic) 2013 Journal paper Real case study Classical sets
17 (Shen et al.) 2013 Journal paper Theoretical study Classical sets
18 (Haldar et al.) 2014 Journal paper Real case study Classical sets
19 (Rouyendegh and Saputro) 2014 Journal paper Real case study Intuitionistic sets
20 (Kannan et al.) 2014 Journal paper Real case study Classical sets
21 (Kar et al.) 2014 Conference paper Real case study Classical sets
22 (Arabzad et al.) 2015 Journal paper Real case study Classical sets
23 (Azizi et al.) 2015 Journal paper Theoretical study Classical sets
24 (Bhayana et al.) 2015 Conference paper Theoretical study Classical sets
25 (Awasthi) 2015 Book Chapter Real case study Classical sets
26 (Igoulalene et al.) 2015 Journal paper Real case study Classical sets
27 (Orji and Wei) 2015 Journal paper Real case study Classical sets
28 (Hamdan and Cheaitou) 2015 Conference paper Theoretical study Classical sets
29 (Chatterjee and Kar) 2016 Journal paper Real case study Interval valued sets
30 (Wood) 2016 Journal paper Theoretical study Intuitionistic sets
31 (Wątróbski and Sałabun) 2016 Conference paper Real case study Classical sets
32 (Lima-Junior and Carpinetti) 2016 Journal paper Theoretical study Classical sets
33 (Mavi et al.) 2016 Journal paper Theoretical study Classical sets
34 (Nag and Helal) 2016 Conference paper Real case study Classical sets
35 (Solanki et al.) 2016 Conference paper Theoretical study Intuitionistic sets
36 (Fallahpour et al.) 2017 Journal paper Real case study Classical sets
37 (Gupta and Barua) 2017 Journal paper Real case study Classical sets
38 (Hamdan and Cheaitou) 2017 Journal paper Theoretical study Classical sets
39 (Mousakhani et al.) 2017 Journal paper Real case study Type-2 sets
40 (Mohammed et al.) 2017 Conference paper Real case study Classical sets

Table 3 contd. ...

74 Logistics 4.0: Digital Transformation of Supply Chain Management

...Table 3 contd.

S. no Author(s) Year Type of publication Type of paper Type of fuzziness

41 (Wu et al.) 2017 Conference paper Theoretical study Hesitant sets
42 (Kumar et al.) 2018 Journal paper Real case study Classical sets
43 (Kumar and Singh) 2018 Book Chapter Theoretical study Classical sets
44 (Tian et al.) 2018 Journal paper Real case study Intuitionistic sets
45 (Cengiz Toklu) 2018 Journal paper Real case study Type-2 sets
46 (Dewi and Al Fatta) 2018 Conference paper Real case study Intuitionistic sets
47 (Yucesan et al.) 2019 Journal paper Real case study Interval Type-2 sets
48 (Liet al.) 2019 Journal paper Real case study Extendend rough sets
49 (Memari et al.) 2019 Journal paper Real case study Intuitionistic sets
50 (Mohammed) 2019 Journal paper Real case study Classical sets
51 (Yu et al.) 2019 Journal paper Theoretical study Interval-valued
Pythagorean sets
52 (dos Santos et al.) 2019 Journal paper Real case study Classical sets
53 (Bera et al.) 2019 Journal paper Real case study Classical sets
54 (Rouyendegh et al.) 2019 Journal paper Real case study Intuitionistic sets
55 (Yadavalli et al.) 2019 Journal paper Real case study Z-numbers sets
56 (Chen) 2019 Journal paper Real case study Intuitionistic sets
57 (Abdel-Basset et al.) 2019 Journal paper Real case study Type-2 neutrosophic sets

and probabilistic conditions. Costantino et al. (2012) presented a novel cross efficiency FDEA technique for the supplier
selection problem of an SME located in Southern Italy that provides, installs and maintains hydraulic plants. Ahmady et
al. (2013) developed a novel fuzzy DEA approach with double frontiers to handle ambiguity and fuzziness for selecting
suppliers. Amindoust and Saghafinia (2014) used an Affinity Diagram to obtain the criteria constituent a supplier should
possess and then proposed a FDEA model based on α—cut approach to evaluate candidate suppliers according to the
obtained criteria. Awasthi et al. (2014) presented a hybrid approach based on the Delphi technique, AHP and FDEA for
supplier performance evaluation. First, they obtained supplier selection criteria using Delphi technique, and then determined
hierarchy of criteria and relations between them using AHP, and last performed supplier performance evaluation using FDEA.
Azadi et al. (2015) developed a fuzzy DEA enhanced Russell measure model for evaluation of efficiency and
effectiveness of suppliers in sustainable supply chain and presented a case study of a resin production company in Iran
to exhibit the efficacy of the method. Zhou et al. (2016) developed a novel type-2 fuzzy multi-objective DEA model to
evaluate and select the most appropriate sustainable suppliers and compared the model to the enhanced Russell measure
DEA model and the type-1 DEA model. Azadeh, Rahimi et al. (2017) presented a decision-making scheme containing
three techniques (DEA, FDEA, and stochastic DEA) for selecting an appropriate method for supplier selection under
certainly, uncertainly, and stochastic conditions. Amindoust (2018) proposed a FDEA model for the supplier selection
process and validated the model through its application on one of the largest suppliers of automotive parts in the Middle
East and comparing it with another method. Wu, Zhang, et al. (2019) developed the DEA model in the interval-valued
Pythagorean fuzzy environment for green supplier selection problems.

2.1.6 Fuzzy DEMATEL (Decision-making trial and evaluation laboratory)

Dalalah et al. (2011) presented a modified FDEMATEL model to deal with the influential relationship between the
evaluation criteria and a modified TOPSIS model to evaluate the criteria against each alternative. They applied the
hybrid model for the selection of four feasible cans suppliers at the Nutridar Factory in Amman-Jordan. Six experts and
17 critical criteria were suggested for the case study. Chang et al. (2011) used the FDEMATEL method to find effective
criteria in selecting suppliers. Keskin (2015) proposed an integrated model composed of two steps for increasing the
quality of supplier selection and evaluation for Cam Elyaf incorporate which is a part of the Şişecam Group. At the first
stage, FDEMATEL is used to compute weight of criteria. At the second stage, fuzzy c-means clustering algorithm is used
 Fuzzy Decision Making in SCM 75

to assess supplier performances. Mirmousa and Dehnavi (2016) presented an integrated fuzzy Delphi, FDEMATEL and
CFCS algorithm approach in order to identify factors affecting the selection of supplier in Islamic Azad University of
Yazd. Firstly, they recognized 43 important criteria through literature studies and then confirmed a number of 14 criteria
by using the fuzzy Delphi method. 11 of the experts and members of the universities evaluated the confirmed criteria by
DEMATEL questionnaire. Ultimately, they examined the level of relationship and intensity of this relationship among
factors affecting supplier selection by using the CFCS algorithm and FDEMATEL method.
Gören (2018) presented a decision framework that consists of three integrated components for sustainable supplier
selection and order allocation problem of an online retailer company located in Canada, which sells different flooring
and building materials. First, she used the FDEMATEL approach to calculate the weights of criteria; second, she used the
Taguchi Loss Functions with these weights to rank all supplier, third she used the bi-objective optimization model by taking
the ranking values as inputs to determine the optimal order quantities of each suppliers. El Mariouli and Abouabdellah
(2018) developed a new mathematical model by using a hybrid approach FDEMATEL for the supplier selection problem
of Moroccan company. They began with the selection of the most relevant criteria in the literature and then used the
FDEMATEL to classify and calculate the weight of the selected criteria. They finished with calculating the sustainability
index of each supplier using the mathematical model. Kiriş et al. (2019) proposed an integrated approach (SCOR model
and FDEMATEL method) for supplier performance evaluation.

2.1.7 Fuzzy QFD (Quality function deployment)

Bevilacqua et al. (2006) suggested the fuzzy QFD method for supplier selection process of an industry that manufactures
complete clutch couplings. Dursun and Karsak (2013) developed a fuzzy multi-criteria group decision-making approach
that used QFD concept for the supplier selection process. They computed bounds of the weights of criteria and ratings of
suppliers by using the FWA method. Similarly, Dursun and Karsak (2014) and Karsak and Dursun (2015) proposed a fuzzy
multi-criteria group decision-making approach integrating fusion of fuzzy information, 2-tuple linguistic representation
model, and QFD for supplier selection problems. Lima-Junior and Carpinetti (2016b) proposed a multi criteria decision-
making approach based on fuzzy QFD for choosing and weighting criteria for supplier selection process. Babbar and Amin
(2018) proposed a novel two-phase model based on fuzzy QFD and stochastic multi-objective techniques. In the first phase,
they used a two-stage fuzzy QFD process to assess the suppliers. In the second phase, they developed a multi-objective
mixed-integer linear programming to find order quantity using three methods (weighted-sums, distance, and ɛ-constraint
methods) considering five objectives (cost, defect rate, carbon emission, weight of suppliers, on-time delivery). Liu, Gao
et al. (2019) proposed a novel green supplier selection method by combining QFD with the Partitioned Bonferroni Mean
operator in the context of interval type-2 fuzzy sets and used a bike-share case to illustrate the applicability of the method.

2.1.8 Fuzzy ELECTRE (ELimination Et Choix Traduisant la REalite—Elimination and

choice expressing reality)
Sevkli (2010) compared crisp and fuzzy ELECTRE methods for supplier selection by applying them at Akkardan, which is
a manufacturing company in Turkey. Kumar et al. (2017) evaluated the performance of suppliers based on green practices
using the FELECTRE approach. Zhong and Yao (2017) extended the ELECTRE method using interval type-2 fuzzy
numbers for a supplier selection application. They also conducted a sensitivity and comparative analysis to demonstrate
the strength and practicality of the proposed method. Gitinavard et al. (2018) proposed an interval-valued hesitant fuzzy
extended ELECTRE and verified this method using a case study of the automobile manufacturing industry to evaluate
the candidate suppliers regarding environmental competencies from the recent literature. In addition, they prepared a
comparative analysis, sensitivity analysis and few simulation-based experiments to sensitiveness and validation of the
proposed method, respectively. Shojaie et al. (2018) analyzed green health suppliers of effective raw materials for Tehran
Chemie Pharmaceutical Company by using 18 green criteria via fuzzy ELECTRE method and then, they classified suppliers
via the Pareto chart using results of fuzzy ELECTRE. Komsiyah et al. (2019) proposed the fuzzy ELECTRE method for
Cement Vendor Selection problem of a construction company in Indonesia.

2.1.9 Fuzzy BWM (Best-Worst Method)

Aboutorab et al. (2018) developed the ZBWM method by integrating Z-numbers into the BWM method to deal with
uncertainty and applied it to a supplier development problem. According to the experimental results, ZBWM method
presented a more consistent approach compared to BWM and Fuzzy BWM. Wu, Zhou et al. (2019) provided an integrated
methodology based on the interval type-2 fuzzy BWM and VIKOR for green supplier selection. Similarly, Qin and Liu
76 Logistics 4.0: Digital Transformation of Supply Chain Management

(2019) presented an integrated interval type-2 fuzzy BWM and COPRAS approach for emergency material supplier selection
problem. Gan et al. (2019) proposed a hybrid method based on the combination of fuzzy BWM and the modular TOPSIS
in random environments for group decision-making (GMo-RTOPSIS) to solve resilient supplier selection problem. Liu,
Quan et al. (2019) proposed an innovative MCDM model integrated BWM and alternative queuing method (AQM) within
the interval-valued intuitionistic uncertain linguistic setting for sustainable supplier selection problems and demonstrated
the applicability and effectiveness of the model with an example of a watch manufacturer.

2.1.10 Fuzzy MOORA (Multi-objective optimisation by ratio analysis)

Dey et al. (2012) presented the fuzzy MOORA in selection of alternatives in a supply chain (warehouse location selection
and vendor/supplier selection). They utilized this approach to three suitable numerical examples and compared the results
with those of previous research works. Pérez-Domínguez et al. (2015) presented intuitionistic fuzzy MOORA for the
selection of suppliers. Büyüközkan and Göçer (2017b) presented an interval valued intuitionistic fuzzy MOORA method
for supplier selection problem in a Digital Supply Chain environment. They demonstrated this method on a Turkish
company, which is a global brand in airport operations. Arabsheybani et al. (2018) applied fuzzy MOORA to evaluate the
overall performance of supplier, implemented failure mode and effects analysis to evaluate the risks of a supplier and also,
developed a novel multi-objective mathematical model to consider supplier’s order allocation. The proposed approach is
implemented to a real-world case study for one of the electronic companies in Iran.

2.1.11 Fuzzy PROMETHEE (Preference ranking organisation method for enrichment of

evaluations)
Wang et al. (2008) presented the fuzzy PROMETHEE method to evaluate four potential suppliers based on seven criteria
and four decision makers by using a case study of a bank in Taiwan. Senvar et al. (2014) used the fuzzy PROMETHEE
method for multi-criteria supplier selection problems. Krishankumar et al. (2017) presented a new two-tier decision-making
framework. In the first tier, they used a linguistic based aggregation to aggregate linguistic terms directly without making
any conversion. In the next tier, they used an intuitionistic fuzzy PROMETHEE to rank each alternative supplier. Finally,
they tested the practicality of the framework by using supplier selection problem for an automobile factory.

2.1.12 Fuzzy Mathematical Programming

Kumar et al. (2004) formulated a fuzzy mixed integer goal programming vendor selection problem with multiple objectives;
minimizing net cost, net rejections and net late deliveries subject to realistic constraints regarding demand, capacity, quota
flexibility, purchase value, budget allocation, etc. (Amid et al. 2006) developed a fuzzy multi objective linear model
applying an asymmetric fuzzy-decision making technique to assign different weights to various criteria. Amid et al. (2009)
formulated a fuzzy multiobjective model to determine the order quantities to each supplier based on price breaks. The model
minimizes the net cost, rejected items and late deliveries, and meets capacity and demand requirement. They developed a
fuzzy weighted additive with mixed integer linear programming to solve the problem. Wang and Yang (2009) introduced
fuzzy compromise programming for allocating order quantities among suppliers in quantity discount environments. Wu et
al. (2010) proposed a fuzzy multi-objective programming model to decide supplier selection by considering risk factors.
Amin et al. (2011) proposed a decisional model consists of two phases for supplier selection. In the first phase, they
applied SWOT analysis for evaluating suppliers. In the second phase, they applied a fuzzy linear programming model to
determine the order quantity. Finally, they utilized a case study of S.G. Company, which is a designing, engineering and
supplying company of auto parts in Iran to show the efficiency of the model.
Nazari-Shirkouhi et al. (2013) introduced an extended mixed-integer linear programming model for the supplier
selection and order allocation problem under multi-price level and multi-product and developed an interactive two-phase
fuzzy multi-objective linear programming method for solving this problem with multiple fuzzy objectives and piecewise
linear membership functions. The proposed methodology attempts to minimize the total cost and the number of defective
and late delivered units simultaneously. Tiwari et al. (2013) utilized AHP to weight supplier selection criteria and modeled
a multi objective program with multi-product, quantity-discounted environment to determine promising suppliers and
the ordered quantities. Finally, they devised a single objective fuzzy linear program to solve the proposed model. Arikan
(2013) transformed a typical multi objective (minimization of costs, maximization of quality and on-time delivery) supplier
selection model into convex fuzzy programming models with a single objective function for reducing the dimension of
the system and computational complexity and proposed a novel solution approach (fuzzy additive and augmented max–
min model) to solve the problem. Aghai et al. (2014) outlined a fuzzy multi-objective programming model for supplier
 Fuzzy Decision Making in SCM 77

selection taking quantitative, qualitative, quantity discount and risk factors into consideration and used a real-life study
from the Airplane Company to validate the proposed model. Hu and Wei (2014) proposed fuzzy multi-objective integer
programming model for the supplier selection problem with multi-product purchases. Moghaddam 2015 developed a
fuzzy multi-objective mathematical model for the supplier selection and order allocation in a reverse logistics system
and for Pareto optimal solutions of the proposed model, they developed a Monte Carlo simulation integrated with fuzzy
goal programming.
Erginel and Gecer (2016) presented a systematic approach for a calibration supplier selection problem, represented the
criteria with a questionnaire and proposed the fuzzy multi-objective linear programming model for selecting the calibration
supplier for a firm that manages the calibration of medical measurement devices in Ankara, Turkey. Warranties and complaint
policy, Communication, Service features, Quality and Performance history are the important criteria they dealt with. Kaur
and Rachana (2016) formulated a vendor selection and order allocation problem as an intuitionistic fuzzy multi objective
optimization, which minimize net price, maximize quality and on time deliveries subject to supplier’s constraints. Govindan
et al. (2017) designed an eco-efficient CLSC and proposed a fuzzy multi-objective, multi-period model, which incorporates
the firm’s economic and environmental concerns for extending the existing supply chain of an Indian firm that assembles
inkjet printers. They used AHP for supplier evaluation and a weighted max–min approach for generating a fuzzy, properly
efficient solution. Mirzaee et al. (2018) formulated supplier selection and order allocation problem with multi-period, multi-
product, multi-supplier, multi-objective, quantity discount subject to budget and capacity limitations by a mixed integer
linear programming model and then solved this model by a preemptive fuzzy goal programming approach. Finally, they
compared it with three other alternatives; max–min, weighted fuzzy goal programming and classical goal programming. Mari
et al. (2019) proposed a possibilistic fuzzy multi-objective approach and developed an interactive fuzzy optimization
solution methodology. They demonstrated effectiveness of the proposed resilient supplier selection model and solution
methodology on a realistic situation of a garment-manufacturing sector. Torres-Ruiz and Ravindran (2019) presented
a three-phase method for the management of suppliers of an auto parts manufacturer located in central Mexico. They
proposed an interval DEA method for aggregation of environmental and economic supplier performance criteria into a
single score and these scores were incorporated as goals of the three solution approaches; preemptive goal programming,
non-preemptive goal programming and fuzzy goal programming for supplier order allocation.
Above, some of the studies implementing the F-MP approach are presented. Table 4 presents all articles in which the
F-MP method as a single approach to supplier selection is investigated.

2.1.13 Other single fuzzy approaches

Chou and Chang (2008) applied a fuzzy SMART to evaluate the alternative suppliers/vendors for a famous manufacturer
company in the Taiwanese IT industry. Aydın Keskin et al. (2010) proposed Fuzzy ART method to select the most appropriate
supplier(s) and cluster all of the vendors according to chosen criteria. To test the contribution of the approach, they solved a
real-life supplier evaluation and selection problem of an automotive manufacturing company. Deng and Chan (2011) developed
a new fuzzy dempster MCDM method based on the main idea of the FTOPSIS to deal with the supplier selection problem.
Keshavarz Ghorabaee et al. (2014) presented a new method for fuzzy multiple criteria group decision-making based on COPRAS
method within the context of interval type-2 fuzzy sets for supplier selection problems. Bai et al. (2014) proposed a dynamic
fuzzy multi-attribute group decision making new method for supplier evaluation and selection process. Keshavarz Ghorabaee
et al. (2016) proposed an integrated approach based on the WASPAS method to deal with multi-criteria group decision-
making with interval type-2 fuzzy sets for green supplier selection problems.
Qin et al. (2017) developed an extended TODIM method to solve green supplier selection problems under interval
type-2 fuzzy sets. Keshavarz Ghorabaee et al. (2017b) proposed a new multi-criteria model based on EDAS method and
interval type-2 fuzzy sets for evaluation of suppliers with respect to environmental criteria in a tissue paper manufacturing
company. Li and Wang (2017) used an extended QUALIFLEX method with probability hesitant fuzzy information to solve
green supplier selection problems. Kannan (2018) provided a decision support system for the sustainable supplier selection
problem in a real world textile industry located in the emerging economy of India. He used Fuzzy Delphi Method to select
critical success factors of suppliers. Chang (2019) proposed intuitionistic fuzzy weighted averaging (FWA) method and
the soft set for identifying the best supplier in a supply chain. Xu et al. (2019) proposed AHPSort II method based on
interval type-2 fuzzy information for sustainable supplier selection problems. Davoudabadi et al. (2019) used interval-
valued intuitionistic fuzzy COPRAS method for resilient supplier selection problems. Mishra et al. (2019) developed a
novel hesitant fuzzy WASPAS method for assessment of green supplier problem and found that the most significant criteria
for the problem were management commitment, environmental management system and green product. In addition, they
demonstrated a sensitivity analysis and compared and validated the developed method with existing approaches.
78 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 4: Review summary of supplier selection studies using Fuzzy Mathematical programming.

S. no Author(s) Year Type of MP Type of solution Type of Type of paper

approach publication
1 (Zarandi and Saghiri) 2003 F–MOP - Conference paper Theoretical study
2 (Kumar et al.) 2004 F–MIGP (fuzzy Max–min approach Journal paper Real case study
mixed integer goal
programming)
3 (Kumar et al.) 2006 F–MOIP Zimmermann approach Journal paper Real case study
4 (Amid et al.) 2006 F–MOP Asymmetric fuzzy- Journal paper Theoretical study
decision making
technique
5 (Amid et al.) 2009 F–MOP Fuzzy weighted additive Journal paper Theoretical study
method with MILP
6 (Wang and Yang) 2009 Fuzzy compromise weighted additive- max– Journal paper Theoretical study
programming min approachs
7 (Rui et al.) 2009 F–MOIP Max–min -weighted Conference paper Theoretical study
additive approachs
8 (Wu et al.) 2010 F–MOP Α–cut technique Journal paper Theoretical study
9 (Díaz-Madroñero 2010 F–MOLP S–curve membership Journal paper Real case study
et al.) function
10 (Amin et al.) 2011 F–LP SWOT–Verdegay (1982) Journal paper Real case study
method
11 (Shahrokhi et al.) 2011 Intuitionistic F–MOLP Zimmermann approach Journal paper Theoretical study
12 (Ozkok and Tiryaki) 2011 F–MP Compensatory fuzzy Journal paper Real case study
aggregation operator
13 (Amid et al.) 2011 F–MOP Weighted max–min Journal paper Theoretical study
approach
14 (Haleh and Hamidi) 2011 F–LP - Journal paper Theoretical study
15 (Kavitha and 2012 F–MOIP Weighted additive–α – Journal paper Real case study
Vijayalakshmi) cut approachs
16 (Tiwari et al.) 2013 F–LP Weighted additive Conference paper Theoretical study
approach
17 (Arikan) 2013 Convex fuzzy Fuzzy additive and Journal paper Real case study
mathematical model augmented max–min
model
18 (Nazari-Shirkouhi 2013 Interactive two-phase Max–min approach Journal paper Theoretical study
et al.) F–MOLP
19 (Aghai et al.) 2014 F–MOP Chance-constrained Journal paper Real case study
an innovative methods
20 (Hu and Wei) 2014 F–MOIP (fuzzy Zimmerman approach Conference Theoretical study
multi-objective integer paper
programming model)
21 (Sheikhalishahi and 2014 Soft lexicographic - Journal paper Real case study
Torabi) F–GP
22 (Moghaddam) 2015 F–MOP Monte Carlo simulation Journal paper Theoretical study
integrated with fuzzy
goal programming
23 (Fatrias et al.) 2015 F–MOP weighted additive Book Chapter Theoretical study
aggregation function
24 (Arikan) 2015 F–MOLP Fuzzy additive Journal paper Theoretical study
-augmented max–min-
Chen and Tsai’s fuzzy
models
25 (Darestani et al.) 2015 F–MOP Compensatory fuzzy Journal paper Theoretical study
model

Table 4 contd. ...

 Fuzzy Decision Making in SCM 79

...Table 4 contd.

S. no Author(s) Year Type of MP Type of solution Type of Type of paper

approach publication
26 (Memon et al.) 2015 F–MP - Journal paper Theoretical study
27 (Erginel and Gecer) 2016 F–MOLP α–cut technique Journal paper Real case study
28 (Kaur and Rachana) 2016 Intuitionistic F–MOP - Journal paper Real case study
29 (Nasseri and Chitgar) 2016 F–MOP Augmented weighted Conference paper Theoretical study
Tchebycheff norm
30 (Suprasongsin and 2016 F–LP Function principle – Conference paper Theoretical study
Yenradee) pascal triangular graded
mean approachs
31 (Afzali et al.) 2016 Interval-valued Zimmermann– Tiwari Journal paper Theoretical study
Intuitionistic F–MOLP approachs
32 (Gupta et al.) 2016 F–MOILP Weighted possibilistic Journal paper Real case study
programming approach
33 (Govindan et al.) 2017 Fuzzy multi-objective, Weighted max–min Journal paper Real case study
multi-period model approach
34 (Mirzaee et al.) 2018 Preemptive F– Additive–max–min Journal paper Theoretical study
GP (fuzzy goal approach
programming)
35 (Sutrisno et al.) 2018 Expected value based - Journal paper Theoretical study
fuzzy programming
model
36 (Mari et al.) 2019 Possibilistic F–MOP Interactive fuzzy Journal paper Real case study
optimization solution
methodology
37 (Torres-Ruiz and 2019 Preemptive F–GP - Journal paper Real case study
Ravindran) Non-preemptive GP
F–GP
38 (Safaeian et al.) 2019 F–MOP Zimmermann approach– Journal paper Theoretical study
Genetic Algorithm(GA)–
Non-dominated Sorting
GA

2.2 Hybrid Approaches

There are various integrated approaches for supplier selection in the literature. Based on the popularity of the approaches,
we classified them into five categories: (1) FAHP-FTOPSIS; (2) Other FAHP-based approaches; (3) Other FTOPSIS-based
approaches; (4) Hybrid F-MCDM and F-MP; Other fuzzy hybrid approaches (5). It was noticed that the integrated FAHP-
FTOPSIS is more prevalent due to its simplicity, ease of use. In addition, F-MCDM have been studied quite a lot with F-MP.

2.2.1 Fuzzy AHP-TOPSIS

Wang et al. (2009) revised and improved the FTOPSIS and proposed fuzzy hierarchical TOPSIS as a method of analyzing
the lithium-ion battery protection IC supplier selection problem. They also used FAHP to calculate the fuzzy weight of
each criterion. Chen and Yang (2011) proposed a new fuzzy decision making method by comprehensively utilizing the
constrained FAHP, FTOPSIS, the extent analysis technique and other transformation skills. They demonstrated advantages
of method by applying to two supplier selection problems. Zeydan et al. (2011) introduced a new methodology based on
FAHP-FTOPSIS-DEA and applied in the biggest car-manufacturing factory in Turkey for the selection and evaluation of
quality suppliers. Jolai et al. (2011) proposed a two-phase approach for supplier selection and order allocation problem. In
the first phase of the approach, they used FAHP and FTOPSIS to obtain the overall ratings of alternative suppliers and in
the second phase, they constructed a multi-objective mixed integer linear programming model using the goal programming
technique to determine the order quantities of each selected supplier for each product in each period. Zouggari and Benyoucef
(2011) and Zouggari and Benyoucef (2012) used FAHP and FTOPSIS for evaluate supplier through four classes that are
Performance strategy, Quality of service, Innovation and Risk.
80 Logistics 4.0: Digital Transformation of Supply Chain Management

Büyüközkan (2012) proposed an integrated fuzzy group decision-making framework on fuzzy AHP and fuzzy
axiomatic design to evaluate green suppliers effectively, and applied the approach in a Turkish company. Then, she
compared the outcome of fuzzy axiomatic design with the outcome of fuzzy TOPSIS. Ghorbani et al. (2013) proposed a
three-phase approach based on the Kano model and fuzzy Multi Criteria Decision-Making for supplier selection problem
of an agricultural machinery company in Iran. In the first phase, they calculated the importance weight of the criteria
using a fuzzy Kano questionnaire and FAHP. In the second phase, they used FTOPSIS technique to screen out in capable
suppliers. In the third phase, they evaluated filtered suppliers, once again by FTOPSIS for the final ranking. Lima Junior et
al. (2014) presented a comparative analysis of FAHP and FTOPSIS methods in the context of supplier selection decision
making. Beikkhakhian et al. (2015) and Lee et al. (2015) used interpretive structural model to rank and categorize the
criteria of agile suppliers, FAHP to measure the weight of the evaluation criteria and FTOPSIS to evaluate agile suppliers.
In addition, Lee et al. (2015) introduced approximate Pareto fronts of the resulting supplier chains for the weights of the
agility criterion.
Mukherjee (2017) developed mathematical models with fuzzy analytic hierarchy process (FAHP), fuzzy TOPSIS, and
multi-objective genetic algorithm for traditional supplier selection process. Görener et al. (2017) proposed a three-phase
hybrid approach comprising Interval Type-2 FAHP and Interval Type-2 FTOPSIS to address the supplier performance
evaluation problem in the aviation industry and presented an application at Turkish Technic Inc. Venkatesh et al. (2018)
used FAHP-FTOPSIS for supply partner selection in continuous aid humanitarian supply chains. Alegoz and Yapicioglu
(2019) developed a hybrid approach based on FTOPSIS, trapezoidal type-2 FAHP and goal programming for supplier
selection and order allocation problems. They examined efficiency of the proposed framework in different cases and
discussed the obtained results. Liu, Eckert et al. (2019) developed a fuzzy decision tool, which is a FAHP-FTOPSIS
model to evaluate the sustainable performance of suppliers according to economic, environmental and social aspects
and illustrated the effectiveness of the proposed tool with a sustainable agrifood value chain application. Karabayir
et al. (2019) analyzed the problem of selecting the most convenient supplier for a construction company using Fuzzy
AHP and Fuzzy TOPSIS.

2.2.2 Other Fuzzy AHP-based approaches

Dai et al. (2008) used a fuzzy MCDM framework based on FAHP and FVIKOR to solve the problem of supplier selection.
Again, Mohammady and Amid (2011) combined FAHP method with developed FVIKOR for supplier selection in an agile
and modular virtual enterprise and Awasthi et al. (2018) also presented an integrated FAHP-FVIKOR approach-based
framework for multi-tier sustainable global supplier selection. Kuo et al. (2010) develop a novel performance evaluation
method, which integrates both FAHP and FDEA for assisting organizations to make the supplier selection decision and then
proved that the method is very suitable for practical applications by applying a case study of an internationally recognized
auto lighting OEM company. Yücenur et al. (2011) used FAHP and FANP methods for selecting of the global supplier
and then compared their results. Hashemian et al. (2014) proposed a hybrid fuzzy group decision-making approach for
supplier evaluation integrating F-AHP and F-PROMETHEE group decision support system method and used it to evaluate
the suppliers of a dairy company. PrasannaVenkatesan and Goh (2016) developed a multi-objective mixed integer linear
programing model to determine the choice of suppliers and order quantity allocation under disruption risk. They evaluated
and ranked suppliers using a hybrid FAHP-FPROMETHEE and then applied Multi-Objective Particle Swarm Optimization
to yield a set of Pareto optimal solutions for the choice of suppliers and their order allocation. Khorasani (2018) evaluated
green suppliers by integrating fuzzy AHP and fuzzy Copras.

2.2.3 Other Fuzzy TOPSIS-based approaches

Önüt et al. (2009) developed a supplier evaluation approach based on FANPand FTOPSIS methods to help a telecommunication
company in the GSM sector inTurkey. Rabbani et al. (2009) applied a ranking procedure using FDEAand FTOPSIS and then used
a goal programming supplier selection model to perform the trade-offs between conflicting objectives of cost, time and quality.
Zhao et al. (2013) presented comparative analysis between TOPSIS and VIKOR under interval-valued intuitionistic
fuzzy sets for vendor selection problems. Kuo et al. (2015) developed a framework of the supplier evaluating process for
carbon management by integrating fuzzy ANP and fuzzy TOPSIS approaches and then employ an electronic company
that is a pioneer in the LEDs industry to demonstrate the proposed method. Sarkar et al. (2018) proposed an integrated
multi-attribute decision-making and mathematical programming-based model by combining DANP (DEMATEL-based
on ANP) that evaluates the weights of the criteria, FTOPSIS and multiple segment goal programming that ranks the
suppliers. They also used DANP-based FVIKOR to validate the result of proposed method, as a result, sensitivity analysis
of FTOPSIS and FVIKOR are supported the findings of the best supplier. Liu, Zhang et al. (2019) presented a two-stage
 Fuzzy Decision Making in SCM 81

fuzzy MCDM model combining fuzzy QFD and improved fuzzy TOPSIS to select the optimum E-commerce supplier
for aquatic product companies. Rashidi and Cullinane (2019) applied FTOPSIS and FDEA for sustainable supplier of
logistics service providers in Sweden and then presented a comparative analysis of the outcomes. The results show that
FTOPSIS performs better than FDEA in terms of both calculation complexity and sensitivity to changes in the number
of suppliers. Sasikumar and Vimal (2019) used FVIKOR and FTOPSIS methods to select the suitable green supplier for
a textile manufacturing company in southern part of India.

2.2.4 Hybrid Fuzzy MCDM approaches and Fuzzy Mathematical programming

Razmi et al. (2008) presented an integrated framework that involves FTOPSIS and F-LP for suppliers’ evaluation and
order allocation problem. Lee et al. (2009b) developed a fuzzy multiple goal programming (FMGP) model to select thin
film transistor liquid crystal display suppliers for downstream companies. They used FAHP first to obtain the weights of
the criteria and then used Multi-choice goal programming (MCGP) to find the optimal solution of allocation to suppliers.
Chamodrakas et al. (2010) presented a Fuzzy Preference Programming method based on the FAHP for supplier selection
processes in electronic marketplaces. Yücel and Güneri (2011) developed a new weighted additive fuzzy programming
approach to capture the vagueness of the problem and preferences of decision makers. They obtained weights of factors
by applying the distances of each factor between Fuzzy Positive Ideal Rating (FPIR) and Fuzzy Negative Ideal Rating
(FNIR). Then, they developed a fuzzy multi-objective linear model integrating constraints, goals and weights of criteria
for assign optimum order quantities to each supplier.
Yu et al. (2012) investigated a fuzzy multi-objective vendor selection program under lean procurement for a Taiwanese
stereo manufacturer. They used FAHP to find the decision preferences for the objective functions and constraints and used a
soft time-window mechanism to incorporate time based performance metrics for vendor evaluation. Lin (2012) proposed an
integrated FANP–FMOLP model for supplier evaluation and selection. Shaw et al. (2012) presented an integrated approach
for supplier selection, addressing the carbon emission issue, using FAHP and fuzzy multi-objective linear programming.
Kannan et al. (2013) presented an integrated approach; fuzzy multi attribute utility theory and fuzzy multi-objective
programming for selecting the best green suppliers and allocating the optimum order quantities among them and applied
this approach in an Iranian automobile manufacturing company. Firstly, they used FAHP to obtain the relative importance
weights of criteria. Next, they used FTOPSIS to determine the best green suppliers. Finally, they used a weighted max–min
method to solve FMOLP model considering various constraints and objectives for assigning order quantities. Kar (2014)
proposed an approach for the supplier selection problem by integrating FAHP and fuzzy goal programming.
Çebi and Otay (2016) developed a two-stage fuzzy approach (FMULTIMOORA to evaluate and select suppliers—
fuzzy goal programming to determine the amount of order allocation) for supplier selection and order allocation problem.
Govindan and Sivakumar (2016) proposed a two-phase hybrid approach for selection of the best green supplier and order
allocation among the selected suppliers. They used, in the first phase, FTOPSIS to select potential suppliers and then, in
the second phase, F-MOLP to determine order allocation by minimizing cost, material rejection, late delivery, recycle
waste and CO2 emissions in the production process. Bakeshlou et al. (2017) presented a hybrid algorithm including FANP,
FDEMATELL, and F-MOLP to evaluate a green multi-sourcing supplier selection model. Azadeh, Siadatian et al. (2017)
presented an integrated customer trust and resilience-engineering algorithm composed of standard questionnaires, fuzzy
mathematical programming, statistical methods, and verification and validation mechanism to select optimum suppliers
for an auto parts (bolt and nut) manufacturer in Iran. They further applied FDEA method to rank and analyze the selected
suppliers. Bodaghi et al. (2018) presented a new weighted F-MOLP model for supplier selection, order allocation and
customer order scheduling problem and used FANP to evaluate suppliers. Mohammed et al. (2019) proposed integrated
FAHP-FTOPSIS is to assess and rank suppliers and developed a Fuzzy Multi-Objective Optimization Model (F-MOO)
for allocating the optimal order quantities.
Above, some of the studies implementing the Hybrid Fuzzy MCDM-Fuzzy MP approaches are presented. Table 5
presents all the articles addressing the combination of F-MCDM and F-MP in which as a hybrid approach to supplier
selection is investigated.

2.2.5 Other hybrid fuzzy approaches

Büyüközkan and Çifçi (2012) suggested a novel hybrid MCDM approach combines FDEMATEL, FANP and FTOPSIS
to evaluate green suppliers and implemented it in Ford Otosan, one of the pioneering companies about environmental
subjects in Turkey. Karsak and Dursun (2014) proposed a novel fuzzy multi-criteria group decision-making framework
integrating FWA, FQFD and FDEA for supplier selection in a private hospital in Istanbul. Shafique (2017) developed
a hybrid multi criteria decision-making approach based FDEMATEL, FANP and FTOPSIS and focused to develop the
criteria for green supplier selection.
82 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 5: Review summary of supplier selection studies using Hybrid F-MCDM and F-MP approaches.

S. no Author(s) Year Type of Fuzzy Type of solution Type of Type of paper

approaches approach publication
1 (Razmi et al.) 2008 FTOPSIS Max–min approach Journal paper Real case study
F–LP
2 (Pang) 2009 FANP - Conference Theoretical study
FPP paper
3 (Lee et al.) 2009b FAHP - Journal paper Real case study
Fuzzy multiple
goal programming
(FMGP)
4 (Lin) 2009 FANP - Journal paper Theoretical study
FPP
5 (Chamodrakas 2010 FAHP - Journal paper Theoretical study
et al.) Fuzzy Preference
Programming
6 (Kaur et al.) 2010 FAHP α–cut approach Journal paper Theoretical study
FPP
7 (Ku et al.) 2010 FAHP Max–min method Journal paper Real case study
FGP
8 (Yücel and Güneri) 2011 FPIR–FNIR Weighted additive Journal paper Theoretical study
F-MOLP model
9 (Lin) 2012 FPP Zimmermann (1978) Journal paper Theoretical study
FANP Chen and Chou (1996)
F–MOLP approaches
10 (Shaw et al.). 2012 FAHP Max–min -weighted Journal paper Real case study
F–MOLP additive approaches
11 (Yu et al.) 2012 FAHP Max–min approach Journal paper Real case study
F–MOP
12 (Sepehriar et al.) 2013 FELECTRE - Journal paper Theoretical study
F–LP
13 (Kannan et al.) 2013 FAHP, FTOPSIS Max–min method Journal paper Real case study
F–MOLP
14 (Kar) 2014 FAHP - Journal paper Real case study
F–GP
15 (Çebi and Otay) 2016 FMULTIMOORA Augmented max–min Journal paper Real case study
F–GP model
16 (Govindan and 2016 FTOPSIS Weighted additive Journal paper Real case study
Sivakumar) F–MOLP model
17 (Bhayana et al.) 2016 FAHP - Conference Real case study
F–GP paper
18 (Azadeh,Siadatian, 2017b FDEA α–cut Journal paper Real case study
et al.) F–MP
19 (Bakeshlou et al.) 2017 FANP, FDEMATELL Weighted max–min Journal paper Theoretical study
F–MOLP approach
20 (Bodaghi et al.) 2018 FANP Max–min operator Journal paper Theoretical study
Weighted F–MOLP
21 (Gunawan et al.) 2018 FAHP, FTOPSIS Weighted preservative Conference Theoretical study
F–MOLP model paper
22 (Lo et al.) 2018 FTOPSIS Augmented max–min Journal paper Real case study
F–MOLP model

Table 5 contd. ...

 Fuzzy Decision Making in SCM 83

...Table 5 contd.

S. no Author(s) Year Type of Fuzzy Type of solution Type of Type of paper

approaches approach publication
23 (Mohammed et al.) 2018 FAHP, FTOPSIS ε-constraint method Journal paper Theoretical study
F–MOP LP-metrics method
24 (Mohammed et al.) 2019 FAHP, FTOPSIS ε-constraint Journal paper Real case study
F–MOOM LP-metrics approaches

25 (Çalık et al.) 2019 FAHP Zimmermann, Tiwari, Book Chapter Real case study
F–MOLP Fuzzy weighted
additive max-min
approach with group
decision-making (F–
WAMG)
26 (Torğul and 2019 FAHP, FTOPSIS Weighted additive Book Chapter Real case study
Paksoy) F–MOLP method

Singh et al. (2018) developed a novel framework based on big data cloud computing technology for eco-friendly
cattle supplier selection. They applied FDEMATEL and FAHP for obtaining the importance weight of each criteria and
used FTOPSIS to evaluate the available suppliers with respect to the criteria. Kafa et al. (2018) proposed a hybrid approach
that combines F-AHP, F-PROMETHEE and F-TOPSIS and illustrated through a case example for sustainable partner
selection problem in a real light bulbs manufacturing company located in the region of Île-de-France. Banaeian et al. (2018)
provided a comparison between the performance of FTOPSIS, FVIKOR and FGRA then utilized them for a green supplier
evaluation and selection study of an actual company from the agri-food industry. The comparative analysis indicated that
the all three methods arrive at identical rankings, yet FGRA requires less computational complexity. Sen et al. (2018)
applied three decision-making approaches; intuitionistic-FTOPSIS, intuitionistic-FMOORA and intuitionistic-FGRA to
facilitate supplier selection in sustainable supply chain and obtained similar ranking order of candidate suppliers in three
approaches, which proves consistency of these methods. Jahan and Panahande (2019) presented Fuzzy QFD/M-TOPSIS
integrated method for supplier selection problem of Semnan Regional Power Company. Petrović et al. (2019) tried to find
the appropriate method for evaluation and selection of suppliers in the case of procurement of THK Linear motion guide
components by the group of specialists in the “Lagerton” company in Serbia. Firstly, they determined weight of criteria by
fuzzy SWARA and then, used fuzzy TOPSIS, fuzzy WASPAS and fuzzy ARAS separately and compared results obtained
from three different approaches.

3. Analysis of the Reviewed Papers

3.1 Frequency Analysis of DM Approaches

Frequency of the approaches was analysed for single approaches and hybrid approaches.
Many of the reviewed papers (78%) used a single technique and 68 papers (22%) used a hybrid approach in their
analysis. Table 6 shows the frequency of all approaches. According to the Table, FAHP with 24% (58 paper) and FTOPSIS
with 24% (57 paper) are the most popular approaches in the single approach category. These are followed by F-MP with
16% (38 paper), FANP with 8% (20 paper), FVIKOR with 5% (13 paper), FDEA with 4% (10 paper), FDEMATEL and
FQFD with 3% (seven paper), FELECTRE (six paper), FBWM (five paper) and FMOORA (four paper) with 2%, and
FPROMETHEE with 1% (three paper).
In the hybrid approach category, F-MP based approaches are the most popular with 38% (26 paper). In terms of MCDM
alone, the FAHP‒FTOPSIS approach is the most frequent with 25% (17 paper). This is followed by Other FAHP-based
approaches and Other FTOPSIS-based approaches with 12% (eight paper) equally. 13% (nine paper) of hybrid approaches
are studies using more than two methods (such as FDEMATEL-FANP-FTOPSIS or FSWARA-FTOPSIS-FWASPAS-
FARAS). Therefore, FAHP and FTOPSIS can be considered the most popular approaches in hybrid approaches too.
In terms of total percentages, the ranking is as follows; FAHP with 19%, FTOPSIS with 18%, F-MP with 12%,
Hybrid F-MCDM & F-MP approaches with 8%, FANP with 6%, FAHP‒FTOPSIS with 5%, FVIKOR with 4%, etc. Total
percentages show that using FAHP (19%) and FTOPSIS (18%) methods, as a single approach constitutes a considerable
number of papers on the evaluation and selection of suppliers in the fuzzy environment, therefore we can say they are the
84 Logistics 4.0: Digital Transformation of Supply Chain Management

Table 6: Frequency of approaches in the reviewed studies.

Categories Approaches Journal Book Conference Total in its in total

paper Chapter paper category
FAHP 30 6 22 58 24% 19%
FANP 14 0 6 20 8% 6%
FTOPSIS 39 2 16 57 24% 18%
FVIKOR 11 0 2 13 5% 4%
FMOORA 3 0 1 4 2% 1%
FELECTRE 6 0 0 6 2% 2%
Single FDEMATEL 5 0 2 7 3% 2%
FDEA 6 2 2 10 4% 3%
FPROMETHEE 1 1 1 3 1% 1%
FBWM 4 1 0 5 2% 2%
FQFD 6 1 0 7 3% 2%
F-MP 31 1 6 38 16% 12%
Other single fuzzy approaches 13 0 1 14 6% 5%
FAHP‒FTOPSIS 14 1 2 17 25% 5%
Other FAHP-based approaches 7 0 1 8 12% 3%
Other FTOPSIS-based approaches 6 1 1 8 12% 3%
Hybrid
Hybrid F-MCDM and F-MP
21 2 3 26 38% 8%
approaches
Other hybrid fuzzy approaches 8 0 1 9 13% 3%

most popular approaches in this research area. In addition, it is important to underline that F-MP is used in a significant
number of papers in supplier selection problems both as a single approach and in hybrid approaches, since it is used to
determine the amount of the order allocation after supplier selection.

3.2 Distribution Analysis of Publications by Years

The distribution of the 310 papers between 2003 and 2019 is shown in Table 7 and Figure 1 shows the graphical
representation of the distribution. As can be seen, the general trend in the total number of papers, except for 2011, shows
the increase in the number of studies to implement fuzzy MCDM approaches in the evaluation and selection of suppliers
despite fluctuations in some years. In 2011, there was a noticeable increase in the number of papers compared to previous
and following years. While the number of Journal papers showed the same tendency as the number of total papers, there
is a continuous fluctuation of Conference papers by years and Book chapters started to reflect such studies after 2010.
Figure 2 provides the distribution of used approaches by years. As previously mentioned, the FAHP and FTOPSIS
methods dominate other F-MCDM approaches in both single and hybrid approaches. FAHP is studied most in 2011 and
2019, and FTOPSIS is studied most in 2015, 2016 and 2019.
As a result, as can be seen from Figure 1 and 2, it is observed that there is a growth in the studies of the supplier
evaluation and selection problem as type of both used approaches and papers (journal, chapter and conference) in recent
years especially 2019. It is estimated that the number of studies will continue to increase in the coming years due to the
importance and popularity of the issue.

3.3 Distribution Analysis of Papers by Journals

The reviewed papers were also analysed based on journals, books, conferences and publishers.
Figure 3 shows the journals with two and more than two papers on supplier selection and evaluation problems using
F-MADM approaches. 73% of reviewed articles (164 articles) were published in 25 journals given in Figure 3.
 Fuzzy Decision Making in SCM 85

Table 7: Distribution of papers by years.

Years Journal paper Book Chapter Conference paper Total

2005 and before 2 0 1 3
2006 4 0 2 6
2007 1 0 1 2
2008 4 1 8 13
2009 11 0 7 18
2010 10 1 4 15
2011 27 0 4 31
2012 11 0 3 14
2013 15 0 3 18
2014 12 4 3 19
2015 20 5 3 28
2016 19 0 7 26
2017 18 1 9 28
2018 30 1 4 35
2019 41 5 8 54

Distribution of papers by years

60

50

40

30

20

10

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Journal paper Book Chapter Conference paper Total

Fig. 1: Distribution of papers by years.

According to this analysis, Expert Systems with Applications ranked first by publishing more articles with 39 (17%)
papers. The second is Journal of Cleaner Production with 15 (7%) articles and then respectively, Computers & Industrial
Engineering with 13 articles (6%), International Journal of Production Economics with 12 articles (5%), Applied Soft
Computing and International Journal of Production Research with nine articles (4%), The International Journal of Advanced
Manufacturing Technology eight articles (4%), Information Sciences with six articles (3%), Applied Mathematical Modeling
and Journal of Intelligent Manufacturing with five articles (2%) are listed in the top 10 journals with the highest number
of articles and contained more than half of all articles (121 articles—54%).
Except for one (in Emerging Applications in Supply Chains for Sustainable Business Development Book by IGI
Global Publisher) of reviewed 18 Book chapters, others are in the books published by Springer. Two Book chapters are
in Performance Measurement with Fuzzy Data Envelopment Analysis Book and others are in separate books.
In this study, 67 Conference papers presented in 50 different conferences were examined. One conference proceeding
is published by IOP, 16 conference proceedings are published by Springer and the rest are published by IEEE. Figure 4,
shows the conferences whose two and more papers were reviewed in this study.
86 Logistics 4.0: Digital Transformation of Supply Chain Management

Distribution of used approaches by years

60

50

40

30

20

10

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

FAHP FANP FTOPSIS FVIKOR FMOORA FELECTRE

FDEMATEL FDEA FPROMETHEE FBWM FQFD F-MP
F-O.S.A. FAHP‒FTOPSIS FAHP‒based FTOPSIS-based F-MCDM/F-MP F-O.H.A

Fig. 2: Distribution of used approaches by years.

Distribution of Articles by Journals

Journal of Purchasing and Supply Management 2
Journal of Manufacturing Systems 2
International Journal of Fuzzy Systems 2
IEEE Access 2
Fuzzy Information and Engineering 2
Computers & Operations Research 2
Sustainability 3
Soft Computing 3
Journals Title

Procedia Computer Science 3

Opsearch 3
Mathematics 3
Procedia - Social and Behavioral Sciences 4
IFAC Proceedings Volumes 4
European Journal of Operational Research 4
Annals of Operations Research 4
Journal of Intelligent Manufacturing 5
Applied Mathematical Modelling 5
Information Sciences 6
The International Journal of Advanced Manufacturing Technology 8
International Journal of Production Research 9
Applied Soft Computing 9
International Journal of Production Economics 12
Computers & Industrial Engineering 13
Journal of Cleaner Production 15
Expert Systems with Applications 39
0 5 10 15 20 25 30 35 40 45

Number of Articles
Fig. 3: Distribution of Articles by Journals.

Distribution of Papers by Conferances

International Conference on Wireless Communications, Networking and Mobile Computing 2
International Conference on Industrial Engineering and Engineering Management 2
International Conference on Management and Service Science 2
2
Conferans Title

International Conference on Fuzzy Systems and Knowledge Discovery

International Conference on Industrial Engineering and Engineering Management (IEEM) 2
International Conference on Mechatronics and Automation 2
Proceedings of International Conference on Intelligent Manufacturing and Automation 2
International Conference on Fuzzy Systems (FUZZ-IEEE) 3
International Conference on Management Science and Engineering Management 3
International Conference on Intelligent and Fuzzy Systems 4
Chinese Control And Decision Conference (CCDC) 4
0 1 2 3 4 5
Number of reviewed conference papers

Fig. 4: Distribution of Conference papers by Conferences.

 Fuzzy Decision Making in SCM 87

4. Observations and Discussions

According to our observations, most of the reviewed publications (176 papers–57%) examined the real case studies. The
remaining papers are theoretical-assumption studies.
If we look at the most studied real cases in terms of industry: manufacturing industry, automobile industry, white goods
industry, iron and steel industry, plastic products industry, air filter industry, battery industry and electronics industry;
information systems outsourcing industry and telecommunication industry; building materials industry and construction
industry; textile industry, garment industry and apparel industry; health industry, hospital industry, pharmaceutical
distribütör industry, emergency material industry, chemical industry and detergent production industry; food industry and
agri-food industry; wind power industry, solar power industry, nuclear power industry and petroleum industry has been
mostly studied. Therefore, it may be suggested to concentrate on different sectors in the upcoming studies.
In addition, 93 (30%) of the papers examined focus on different types of suppliers with various qualifications, while
the remaining studies are classical supplier selection studies. In Figure 5, the different types of supplier classes studied and
the amount of papers by years are given in detail. Accordingly, green supplier with 41 papers and sustainable supplier with
34 papers have been mostly studied, especially in recent years. In the early years, it can be said that the global suppliers
were focused on. For this reason, the authors are advised to study on smart supplier or hybrid supplier selection such as
smart & sustainable supplier in future studies, since we are in the Industry 4.0 era.
We have witnessed the classic fuzzy sets of Zadeh developing rapidly over the past decade. Many studies can be found
that apply fuzzy MCDM approaches to various fields of science and engineering (Keshavarz Ghorabaee, Amiri, Zavadskas
and Antucheviciene 2017). Likewise, different fuzzy environments were used in these studies for supplier selection and
evaluation. Reviewed 69 papers (22%) used different fuzzy sets rather than classical sets in fuzzy decision making. As
can be seen in Figure 6, TOPSIS method with 27 papers, has been applied the most in different fuzzy environments. The
TOPSIS method with 12 papers is overwhelmingly expanded under Intuitionistic Sets. Then comes AHP method with
10 papers and VIKOR method with seven papers. Therefore, evaluating suppliers by integrating other decision-making
methods with different fuzzy sets can be a direction for future studies. Figure 7 shows the distribution of different fuzzy
environments other than the classic sets by years. Accordingly, 23 papers reviewed in 2019 used different fuzzy sets for
decision making. This is followed by 2016 with 11 papers and 2017 and 2018 with eight papers. Apart from the classic
sets, the most used type of fuzziness is Intuitionistic Sets with 20 papers, the second is Interval Type-2 Sets with 12
papers and the third is Interval-Valued Intuitionistic Sets with nine papers. Intuitionistic Sets has been used the most in
2016 and 2018; Interval Type-2 Sets has been used the most in 2017 and 2019. It is anticipated that further studies based

42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0

2019 2018 2017 2016 2015 2014 2013

2012 2011 2010 2009 2008 2007 TOTAL

Fig. 5: The amount of papers studied on different supplier types by years.

88 Logistics 4.0: Digital Transformation of Supply Chain Management

15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
AHP BWM MP MOORA QFD TOPSIS VIKOR OTHERS
Axiomatic Sets Hesitant Sets Hierarchical Sets
Interval-Valued Sets Intuitionistic Sets Rough Sets
Type-2 Sets 2-Tuple Sets Z-Numbers Sets
Extended Classical Sets Extendend Rough Sets Interval Type-2 Sets
Interval 2-Tuple Sets Interval-valued Hesitant Sets Interval-Valued Intuitionistic Sets
Interval-Valued Pythagorean Sets Type-2 Neutrosophic Sets

Fig. 6: The amount of papers studied by fuzzy decision-making approaches in different fuzzy environments.

7
6
5
4
3
2
1
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Axiomatic Sets Hesitant Sets Hierarchical Sets
Interval-Valued Sets Intuitionistic Sets Rough Sets
Type-2 Sets 2-Tuple Sets Z-Numbers Sets
Extended Classical Sets Extendend Rough Sets Interval Type-2 Sets
Interval 2-Tuple Sets Interval-valued Hesitant Sets Interval-Valued Intuitionistic Sets
Interval-Valued Pythagorean Sets Type-2 Neutrosophic Sets

Fig. 7: The amount of papers studied on different type of fuzziness by years.

on Neutrosophic, Pythagorean and Z-Numbers Sets and new fuzzy sets that have not been studied yet will increase for
supplier selection and evaluation.

5. Conclusions

Supplier selection requires to consider multiple goals and criteria. Supplier selection problem is in the class of problems
that are difficult to solve because, it is very difficult to regulate the criteria in the supplier selection problem, some of these
criteria are expressed qualitatively and some are quantitatively and sometimes there are contradictory or complementary
criteria and also, there are a large number of alternative suppliers. For this reason, determining the method to be used in
supplier evaluation is of great importance. The MCDM approaches have been the most widely used to deal with supplier
selection problems. Fuzzy set theory, in conjunction with MCDM methods, has been widely used to deal with the uncertainty
in the very complex real-world supplier selection decision process, because it provides a language that is suitable for
processing uncertain criteria that can integrate the analysis of qualitative and quantitative factors.
This chapter presents how fuzzy set theory, fuzzy decision-making can be used in the diverse models for supplier
evaluation and selection in approximately the last 20 years. We compiled the existing supplier selection literature by
identifying, categorizing and examining supplier selection issues, in this context we reviewed 310 papers in this field and
classified them in two categories, individual and integrated approaches, according the applied fuzzy MADM approaches.
The analyses showed that the number of studies used fuzzy MCDM approaches is gradually increasing in the
evaluation and selection of suppliers and the FAHP and FTOPSIS methods dominate other F-MCDM approaches in both
single and hybrid approaches. In addition, in analysis of journals, Expert Systems with Applications, Journal of Cleaner
Production, Computers & Industrial Engineering and International Journal of Production Economics has been identified
 Fuzzy Decision Making in SCM 89

as the leading journals in this field. In general, the reviewed book chapters and conference papers were mostly published
by Springer and IEEE respectively. According to our observations, the majority of the reviewed articles worked on real
case studies and the manufacturing industry (automobile, white goods, etc.) has been mostly studied. When looking at the
supplier qualifications discussed in the studies, the green and sustainable suppliers, except for traditional suppliers, have
been mostly studied, especially in recent years. In addition to the classic sets in fuzzy decision-making, Intuitionistic Sets,
Interval Type-2 Sets and Interval-Valued Intuitionistic Sets are the leading fuzzy environments in this field and it has been
observed that these different fuzzy sets have been used in recent years, especially in 2019. As methods in the reviewed
papers, the TOPSIS, then AHP and VIKOR methods were most expanded in different fuzzy environments.
Increasing interest in supplier selection due to the impact on business performance will continue both academically
and practically in the future. Especially, they will focus on qualified suppliers that keep up with the needs of the age rather
than traditional suppliers. We expect that more publishing will continue to increase in the coming years since both MCDM
methods and fuzziness go towards new extensions.
In summary, this chapter provides a systematic literature review on papers published on the application of Fuzzy
MCDM techniques for supplier selection between 2000 and 2019. In addition to its methodological value, this study
contributes explicitly to this research area by providing suggestions as to what additional implementations should be
done on the subject as well as the current situation, therefore it will help academics, and practitioners effectively solve
the supplier selection and evaluation problem.

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