The Internet of Things and Supply Chain Operations

Stephen DeAngelis

February 21, 2018

The term “supply chain” was coined because it denoted key linkages from raw resources to finished products. Connecting those links has been the essence of supply chain operations since trading first began. Through the centuries there has also been a focus on making supply chains more efficient. This focus sharpened and became even more important with the rise of e-commerce and omnichannel operations. Analysts from Samsung observe, “As the omnichannel experience raises customer expectations to an all-time high, retailers must create supply chain-based operational efficiencies if they want to maintain strong customer service. As a result, they are leveraging innovations related to the Internet of Things (IoT) as a means of tightly merging the physical and digital worlds, optimizing supply chain operations and improving the customer experience throughout the value chain.”[1] Even though the word “chain” remains in wide use, professionals in the field understand the word “network” better describes how things work. That’s why the Internet of Things is poised to make a significant impact in supply chain operations.

Making the supply chain more efficient using the IoT

Omnichannel operations are all about fulfillment. Kelly Frey, Vice President of Strategic Solutions at Telogis, observes, “The internet of things has come a long way from the early 1980s when programmers were able to check drink availability by connecting to a Coca-Cola machine located at Carnegie Melon University via the internet. Today, far more wide-reaching uses for IoT have emerged. For businesses that play an active role in supply chain fulfillment, IoT benefits are significant.”[2] He suggests five ways the IoT can help supply chain operations. They are:

1. Providing a holistic view. “Using IoT technology, supply chain managers can connect their vehicles, equipment and devices to gain instant status updates on jobs. This can offer a full picture across the supply chain, from the warehouse to stakeholders and customers.” Daniel Newman (@danielnewmanUV), CEO of Broadsuite Media Group, calls this IoT capability “asset tracking.”[3] He notes, “Manufacturers can use these sensors to gain granular data like the temperature at which an item was stored, how long it spent in cargo, and even how long it took to fly off the shelf. The type of data gained from the IoT can help companies get a tighter grip on quality control, on-time deliveries, and product forecasting.”

2. Increasing collaboration. “When different components are sourced across disparate suppliers and locations, it’s easy for these centers within the supply chain to organize into silos. Using IoT across the supply chain gives decision-makers real-time details on job statuses across the entire chain and helps break down silos. Increased collaboration across business areas can help identify potential bottlenecks earlier, make smarter strategic decisions and boost productivity.” One area of collaboration Newman insists will be improved is with vendors. He explains, “The data obtained through asset tracking is … important because it allows companies to tweak their own production schedules, as well as recognize sub-par vendor relationships that may be costing them money. According to IBM, … up to 65% of the value of a company’s products or services is derived from its suppliers. That’s a huge incentive to pay closer attention to how your vendors are handling the supplies they’re sending you, and how they’re handling your product once it’s made.”

3. Optimizing operations and assets. “Supply chain managers can also optimize the operations of their fleets as a result of improved connectivity. … When multiplied across a fleet and the entire supply chain, this has the potential to bring a huge boost to a business’ bottom line; studies have shown more effective routing and utilization can reduce driver hours by almost 25%.” Newman adds, “As the supply chain continues to grow — upward and outward — it’s even more imperative to ensure that all your carriers — be it shipping containers, suppliers’ delivery trucks, or your van out for delivery — are connected.”

4. Delivering better customer service. “A more connected supply chain not only helps provide a boost to efficiency, it helps deliver better customer service. Businesses can access information in the office or on mobile apps to track exactly where an item is at any time, so that forecasting delivery times becomes more exact.”

5. Ensuring compliance. “The real-time visibility provided by IoT also allows supply chain managers to ensure their assets are performing as they should be and that their organizations remain compliant.”

Newman adds two more ways the IoT can benefit supply chain operations. They are:

  • Forecasting and Inventory. “IoT sensors can provide far more accurate inventories than humans can manage alone.”
  • Scheduled Maintenance. “The IoT can also use smart sensors on its manufacturing floors to manage planned and predictive maintenance and prevent down-time that can cost so much.”

IoT and cognitive computing

Both Frey and Newman make it implicitly clear that the IoT is actually an ecosystem consisting of sensors generating data, connectivity transmitting data, and analytics making sense of that data. Increasingly, analytics are provided by cognitive computing systems, like the Enterra Enterprise Cognitive System™ (Aila™) — a system that can Sense, Think, Act, and Learn®. Bernard Marr (@BernardMarr) notes, “As more and more devices become connected and capable of speaking to each other, AI … will help them to understand each other, and us.”[4] Although some analysts have predicted the rise of an autonomous supply chain, people remain the most critical resource today. Marr notes cognitive computing can enhance today’s workforce. He explains, “Augmentation is the keyword here — and the vision here is that smart, connected tech will continue to help humans in skilled and manual tasks. This will be done by giving them access to context-sensitive insights that answer specific questions about specific things at the right point in time.” Fredric Paul (@TheFreditor) adds, “Artificial intelligence and the Internet of Things are two hot trends that become even more powerful together.”[5] He explains, “Beyond the hype they share, combining IoT and AI can make a lot of sense. After all, as IoT scales to millions and millions of devices generating overwhelming amounts of information, many observers believe that AI offers the best chance of quickly and accurately making sense of all that big data and putting it to work solving real-world problems.”

Summary

Newman concludes, “The IoT is set to revolutionize the supply chain with both operational efficiencies and revenue opportunities made possible with just this type of transparency. In today’s market, supply chain isn’t just a way to keep track of your product. It’s a way to gain an edge on your competitors and even build your own brand.” Paul reminds us, however, there is still work to do before the ultimate vision of a super-efficient supply chain can be achieved. He explains, “Both AI and IoT are still in the early stages of their development cycles, saddled with immature technology, limited tooling, and still-emerging use cases often struggling to demonstrate enough real business value to justify their investments and live up to their advance billing. That’s why another link between AI and IoT may be just as important in the short term. It seems AI can help design more efficient IoT networks, ensuring there’s enough capacity without overbuilding and enhancing security. However way you slice it, though, a lot can happen when the tech industry’s two top trends work together.”

Footnotes
[1] Staff, “The Internet of Things Creates Supply Chain Operational Efficiencies,” Samsung Insights, 6 May 2016.
[2] Kelly Frey, “IoT ushers in a new era for supply chain fulfillment,” TechTarget Internet of Things Agenda, 25 October 2017.
[3] Daniel Newman, “How IoT Will Impact The Supply Chain,” Forbes, 9 January 2018.
[4] Bernard Marr, “The Internet Of Things (IOT) Will Be Massive In 2018: Here Are The 4 Predictions From IBM,” Forbes, 4 January 2018.
[5] Fredric Paul, “AI and IoT: Like peanut butter and chocolate?Network World, 29 August 2017.