Industry 4.0 challenges to IE paradigms: A pilot study in materials handling

Industrial engineering practices are expected to be affected by, and most likely adapt to, the new paradigms of Industry 4.0. Early indications in practice, as well as extrapolations from the current technology trends, point toward a few fundamental features. Among these are further integration, leaner and hence more agile practices, and the use of real-time data. The final objective is to reduce complexity while striving for real-time supply- and production-chain optimization. We argue that the optimization of highly integrated production systems cannot be sought by simply aggregating the known operations management tools of industrial engineering. Specifically, we present evidence, gleaned from a recent industrial project, that indicates how as the systems become more integrated, the concept of operations optimization needs to be revisited. Our work has two distinct contributions to the literature. We develop and present a state-of-the-art optimization model for a joint materials handling, inventory, and scheduling model. The model incorporates aspects of the knapsack, bin packing, vehicle routing, and inventory control formulations. Further, we show that simply collecting existing industrial engineering models into larger aggregations, albeit in line with the current best practices of our profession, will not necessarily suffice to completely fulfill the ambitions of Industry 4.0