Analyzing the effects of Industry 4.0 technologies and coordination on the sustainability of supply chains

Abstract

Industry 4.0 technologies, sustainability, and coordination are gaining more importance in today's competitive business environment. Motivated by these trends, our research problem is to analyze the effects of Industry 4.0 technologies and coordination on the sustainability of supply chains. We consider two supply chains with three stages. The first one uses classic methods to manufacture and distribute the products, whereas the second one uses Industry 4.0 technologies. Whether the supply chain invests in Industry 4.0 technologies or not and the investment level affect its economic, environmental, and social sustainability. We develop Nash bargaining based revenue-sharing contracts for coordinating the supply chains. The results indicate that even though a more coordinated classic supply chain can dominate the decentralized Industry 4.0 chain in terms of market demand and profitability, coordination is not enough for the classic supply chain to be considered sustainable. Moreover, although a decentralized Industry 4.0 supply chain has efforts in all three sustainability dimensions, its overall sustainability is not guaranteed based on the thresholds determined by the decision maker. On the other hand, when a supply chain uses the advantages of Industry 4.0 technologies in conjunction with coordination, this chain leads the market in terms of overall sustainability. This result shows the joint importance of Industry 4.0 technologies and coordination on the sustainability of a supply chain. Furthermore, as consumers become more sensitive to buy sustainable products, the supply chains are encouraged to invest in sustainability initiatives and Industry 4.0 technologies more, leading to a more sustainable world.