# Industry 4.0 and Supply Chain Integration: A Case Study in an Auto Parts Company in Brazil

Nilza Santos, Sergio Miele Ruggero, Marcia Silva

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Nilza Santos, Sergio Miele Ruggero, Marcia Silva. Industry 4.0 and Supply Chain Integration: A Case Study in an Auto Parts Company in Brazil. IFIP International Conference on Advances in Production Management Systems (APMS), Sep 2022, Gyeongju, South Korea. pp.93-100, 10.1007/978-3-031-16407-1_12. hal-05386035

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# Industry 4.0 and Supply Chain Integration:
A Case Study in an Auto Parts Company
in Brazil

Nilza Aparecida dos Santos<fnref n="1" />,<fnref n="2" />✉, Sergio Miele Ruggero<fnref n="1" />✉,
and Marcia Terra da Silva<fnref n="1" />✉

**Abstract.** The use of technologies embraced by Industry 4.0 drives integration and collaboration between companies in order to expand borders for other organizations, thus allowing the intelligent use of data and favoring integration throughout the supply chain. To carry out this article, the method used was a single case study in a medium-sized auto parts company, located in Greater São Paulo/Brazil. The results showed that data connectivity is important to enable the use of technologies in the automotive chain and strengthen the relationship between suppliers and customers and that greater efficiency can be obtained by the dissemination of technologies throughout the chain. It is noteworthy that the expectations of results to be obtained by the integrated use of technologies in the client-supplier relationship, can favor innovation and improve the efficiency of internal and external processes.

**Keywords:** Industry 4.0 · Integration · Collaboration · Automotive chain

## 1 Introduction

The concept of Industry 4.0 appears at the beginning of the 21st century, based on a productive structure with information, communication, automation, production, and business processes [1], which can transform traditional supply chains into chains of digital supplies [2].

Digital transformation can connect companies and customers, and provide transparency, reliability, and effectiveness through the intelligent use of data throughout the chain [3]. In this way, the technologies encompassed by Industry 4.0 can favor integration in order to make organizations smarter [4].

Considered one of the main mechanisms for industrial organization, integration [5] driven by advanced and connected technologies, can expand the boundaries of companies to other organizations and stakeholders [6].

<footnote n="1">¹ Programa de Engenharia da Produção – Universidade Paulista, São Paulo SP 04026-002, Brazil
nilzaasantos7@gmail.com</footnote>

<footnote n="2">² FATEC, Cotia SP 06702-155, Brazil</footnote>
In the context of Industry 4.0, integration, from an internal perspective, can enable information to be shared across different sectors and hierarchical levels within the company, while horizontal integration is established through collaboration between two or more companies in pursuit of common goals.

However, even if the relationship between customer and supplier can be favored by the use of new technologies so that everyone can benefit from a possible integration, it is necessary that smaller companies also have access to technological innovations.

Thus, even though larger companies have access to technologies, exclusive use within the company hampers the competitive advantage that could be unlocked and accelerated by sharing data along the supply chain [7].

In Brazil, it is considered that there are many challenges for companies to be able to use technologies related to Industry 4.0, such as investments in equipment with digital technologies, an adaptation of layouts, processes, relationships between companies, and management of the production chain [8].

Although the challenges are present in the different sectors of the Brazilian economy, the automotive chain, composed of automakers and auto parts, stands out for its participation in the GDP (Gross Domestic Product), for the generation of jobs, investments in innovation, and for significant linkages in its production processes [9], and therefore it is the sector chosen for study in this article.

The use of new technologies, of course, promotes relevant changes in how supply chains are managed and opens research gaps on this issue [10], since few studies explore the subject.

Seeking to fill part of these gaps, the study of this article consists of understanding how the use of Industry 4.0 technologies can facilitate the integration of the supply chain in auto parts companies in Brazil, aiming to analyze the conditions and challenges for the integration of the supply chain considering Industry 4.0 technologies, from the perspective of an auto parts company.

## 2 Literature Review

The use of Industry 4.0 technologies can provide the supply chain with the opportunity to trace materials and products, collect and analyze processes, collect data in real-time and improve production, storage and transport communication [11].

A supply chain is considered to be the aggregation of interdependent organizations that coordinate activities and share common adaptive challenges [12]. In this way, the integration of internal operations and the ability to coordinate between customers and suppliers can enable the efficiency of production processes [13].

The attributes of a digitized supply chain are real-time communication and collaboration between customers, suppliers, and partners based on shared and standardized data across platforms in a network of companies [14]. The concept of integration is considered one of the pillars of Industry 4.0 [15] added new technologies can make companies more intelligent and integrated [16].

In this way, communication within the same company at different hierarchical levels can occur through vertical integration, which can provide more flexible production systems, while horizontal integration facilitates cooperation between different companies [17].
The collaboration between companies is an element of integration capable of providing joint work between organizations to create a competitive advantage [18]. Thus, for collaboration to occur throughout the chain, vertical integration is first necessary, followed by horizontal integration [19].

The use of new technologies can give companies a competitive advantage [20], including in the automotive industry. However, some companies will only walk the path of transition when this reality is also relevant to smaller companies [21].

It is also noteworthy that a closer relationship between customer-supplier can bring a positive result for the success of manufacturing companies since suppliers can provide new knowledge, skills, and working methods [22]. In addition, new business models require industries to think about the internal and external environment [23].

In this way, the shared understanding of concepts related to Industry 4.0 among different companies can boost innovation strategies [24], since knowledge about technology beyond their companies can improve process efficiency [25].

## 3 Method

To carry out this article, the methodology used was exploratory, through a single, longitudinal case study. Because it is characterized by the “how” and “why” questions about a set of contemporary events, it allows for in-depth investigation and preservation of the holistic and meaningful properties of real-life events [26].

The case chosen was a medium-sized auto parts company, supplier to the main vehicle manufacturers operating in Brazil. In order to maintain confidentiality regarding the identity of the company and to maintain the research protocol, throughout this article it will be referred to as “Company X”.

Data collection was carried out through an open semi-structured interview with the supply chain director of “Company X”. The interview was divided into two blocks: 1) Use of Industry 4.0 technologies in the automotive chain; 2) Integration and collaboration in the automotive chain.

Data were also collected during a technical visit with on-site observations and physical artifacts about a project developed by “Company X”, which was pointed out by the respondent during the interview.

The main aspect addressed in this article refers to two links in the studied chain: the customer and the supplier. It is worth explaining that auto parts within the automotive chain are suppliers of automakers, but they also assume the role of the customer with regard to their raw material suppliers.

## 4 Results and Discussions

The results obtained are presented in the following tables and figures. Tables 1 and 2 present the syntheses of the interview, in which the respondent puts his perceptions as a supplier of the automakers and as a customer of sub-suppliers.
<table><caption>**Table 1.** Use of Industry 4.0 technologies in the automotive chain</caption><thead><tr><td>Questions</td><td>Finds</td></tr></thead><tbody><tr><td>1 Why is it important for your customer to have access to Industry 4.0 technologies?</td><td>To enable data connectivity and streamline information</td></tr><tr><td>2 How important is your supplier to these technologies?</td><td>Strengthen customer-supplier relationships and establish partnerships</td></tr><tr><td>3 Is it possible to automate the data collection at different stages of the chain?</td><td>Possible with the use of specific technologies and real-time control</td></tr><tr><td>4 Is it possible to exchange information in real-time, speed up sharing, and track the product along the chain? And what would be the expected results?</td><td>It will only be possible if the different links have access to technology and connectivity. Agility, data accuracy, delivery reliability, and traceability</td></tr><tr><td>5 Regarding the supply chain, do you consider it to be customer-centric?</td><td>Yes, because the customer will guide the demand and service deadlines</td></tr></tbody></table>

Source: Prepared by the authors

In the analysis of this group of questions, it was found that the customer is the central object of the supply chain, and data connectivity is important to enable the use of technologies in the automotive chain and to strengthen the relationship between suppliers and customers.

He also highlighted that the interest in the use of new technologies is linked to the possibilities of results of the investment made, which corroborates with research [8] that indicate that the level of investment in Brazil continues to be oriented toward obtaining productivity gains and cost reduction.

Another important aspect pointed out in the interview refers to the access and dissemination of technology along the chain, in line with the very conception of the supply chain, which is configured as the aggregation of interdependent organizations that coordinate activities and share common challenges of adaptation [12].

The other group of issues analyzed concerns the integration and collaboration in the automotive chain, as shown in Table 2.

<table><caption>**Table 2.** Integration and collaboration in the automotive chain</caption><thead><tr><td>Questions</td><td>Finds</td></tr></thead><tbody><tr><td>1 How your company institutionalizes collaboration on Industry 4.0 topics with external partners, suppliers, and customers</td><td>Some clients consider carrying out joint projects, as long as there is a possibility of earnings</td></tr><tr><td>2 How do you assess the degree of integration of your horizontal value chain, in which aspects is this integration important?</td><td>The horizontal integration allows the proximity between the customer's needs and what is being produced by the supplier</td></tr></tbody></table>

(continued)
<table><caption>**Table 2.** (continued)</caption><thead><tr><th>Questions</th><th></th><th>Finds</th></tr></thead><tbody><tr><td>3</td><td>How do you assess the degree of integration of your vertical value chain?</td><td>Partial in production processes</td></tr><tr><td>4</td><td>Is it important for customers, suppliers, and partners to communicate and collaborate in real-time based on shared and standardized data across platforms in a network?</td><td>Yes, the company is also developing a project with the supplier to share data with a view to reducing the storage area and the material stock started in 2021</td></tr><tr><td>5</td><td>Can the use of new technologies along the chain generate new forms of integration and collaboration among chain members?</td><td>Technology makes integration and collaboration more agile, efficient, and reliable</td></tr></tbody></table>

Source: Prepared by the authors

The answers to this group of questions denote the importance of the client-supplier relationship, but the development of common projects is suggested through the possibility of gains for both parties.

The interviewee states that technology can make integration and collaboration more agile, efficient, and reliable, but on the other hand it is important to note the challenges regarding the choice of appropriate technology for each company [27].

The closer relationship between customer-supplier makes it possible to obtain positive results for companies since suppliers can provide new knowledge, skills, and working methods [22], corroborating the interviewee's position in which horizontal integration it promotes the approximation between the customer's needs and what is being produced by the supplier, in addition to facilitating the logistics service.

Another important finding of this analysis was to identify that “Company X” has been developing a project with one of its suppliers to share data to reduce the storage area and material stock, as illustrated in Fig. 1.

Based on the data collected, it was possible to identify the steps taken by the company studied to implement a project to optimize inventories. The motivations that generated the need to develop this project refer to problems related to the level of stock, physical space, movement of materials, and various risks.

The project originates from real problems that involved actors from different companies. In this case, “Company X” becomes the client and the other company participating in the project becomes the sub-supplier. The common problems faced by the two companies, as depicted in Fig. 1, led to the need to use new technologies and opened up opportunities for collaboration between them.

The choice of sub-supplier to carry out this partnership was guided by the identification of common problems, the number of items supplied to “Company X”, the high added value of the products, and the location of the sub-supplier.

The project aimed to optimize and make stock levels more flexible and was structured using Industry 4.0 technologies. Based on the analysis of the problems faced by the two companies, a strategy was drawn up to create an integrated system for programming and controlling materials, which would meet mutual needs.
<figure><img src="image_3.png" /><figcaption>**Fig. 1.** Project topics “Company X” and sub-supplier (Source: Prepared by the authors)</figcaption></figure>

To operationalize the project, the two companies started to make use of an inter-
mediary database, together with dedicated software to organize, control, and monitor
in real-time the processes related to material management. The system used through
digitalization allows greater integration of processes throughout the supply chain.

This integrated system allowed the customer to have direct access to the supplier’s inventory data in relation to scheduled material, while the supplier has access to the customer’s scheduling needs in real-time.

The preliminary results signaled the direction of meeting the expectations of the companies, which can be confirmed by the continuous monitoring and control since the project started in 2021. The preliminary signaling of the results can be reinforced by the fact that the use of new technologies can give companies a competitive advantage [20].

The analysis of the case in question, combined with the interviewee's statements, evidence the importance of Industry 4.0 technologies to promote integration between customer and supplier, corroborating the view that sharing the use of these technologies between different companies can boost innovation strategies [24], and improve the efficiency of internal and external processes [25].

**5 Conclusion**

In the search to answer how the use of Industry 4.0 technologies can facilitate the integration of the supply chain in auto parts companies in Brazil, this article aimed to analyze the conditions and challenges for the integration of the supply chain considering the technologies of Industry 4.0.

From the perspective of the auto parts company, the importance of connectivity was
verified to enable the use of technologies in the chain and to strengthen the relationship
between suppliers and customers. In the case studied, integration appears as a collabo-
rative process that began with the identification of difficulties common to participating
companies about inventory management, which culminated in the development of a
project for optimization.

What triggered the process to develop the project was the problems common to the companies, whose solution was based on collaboration between customer and supplier for the use of new technologies that provided better management and optimization of inventories in the participating companies.

It was found that this type of initiative opens the way for the process of horizontal integration to occur more broadly, in the sense of propagating itself in the supply chain. However, for this to happen, access to technology must be disseminated along this chain.

The main contribution of this article was to verify how the use of technologies can facilitate the integration of the supply chain in auto parts companies in Brazil, as well as the integration and collaboration in the chain can enable the participating companies to face the challenges for the use of technologies related to the Industry 4.0.

The present research does not conclude conclusions on the proposed question, especially as it is a single case study. Thus, the results obtained cannot be generalized to all companies. As a proposal for future studies, it is recommended to verify the conditions and challenges for the supply chain integration of other links in the automotive chain.

**Acknowledgment.** This study was financed in part by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior - Brasil (CAPES) - Finance Code".

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