The Internet of Things and Supply Chain Transformation

Stephen DeAngelis

September 24, 2018

Recent reports indicate Internet of Things (IoT) technology adoption is slowing down due to security concerns. As I noted in a previous article, caution is warranted.[1] Concerns about IoT security have been on the rise for years. Back in 2015, Irfan Saif (@irfansaif), a principal with Deloitte & Touche LLP’s Cyber Risk Services practice, wrote, “Internet of Things initiatives demand targeted strategies to combat the influx of new cyber risks that will invariably accompany them.”[2] That advice is as wise today as it was when it was initially given. As security concerns get addressed, the benefits of IoT adoption will prove too tempting to be ignored. Early IoT adopters in the transportation, retail, energy, agriculture, healthcare, and city management sectors are proving the IoT’s value every day. Journalists from TechNative conclude, “The IoT is expanding, and more industries will eventually incorporate the IoT paradigm into regular operations. Over time, more and more employees, managers, and planners will find themselves relying on IoT data as part of their daily jobs. Technological fads come and go, but the IoT idea is here to stay.”[3]

IoT Benefits for the Supply Chain

Brittany Martincic predicts, “IoT will eventually have some impact on all aspects of the supply chain. IoT technology embeds pallets, parts, packages, equipment, etc. with sensors, so they can be continuously monitored, automatically tracked and remotely controlled across networks. … Every supply chain business, from manufacturing to logistics, should be taking a close look at the Internet of Things now.”[4] When people discuss the Internet of things, they are really talking about an ecosystem of sensors connected to advanced analytics platforms. Strictly speaking, the IoT is what connects sensors to analytics, but connectivity alone does not generate the benefits noted in IoT discussions. Below are some of the ways the Internet of Things ecosystem will benefit supply chain operations.

Digital Transformation. Martincic asserts, “The Internet of Things is already starting the digital transformation of supply chains by improving efficiency, accuracy, and reducing costs. It is anticipated that many more benefits and opportunities will emerge in the future.” Most analysts agree digital supply chains are essential if companies are to compete successfully in the Digital Age.

Asset tracking. Knowing where your assets are (be they vehicles or products) is extremely important. In the case of perishable merchandise, in addition to knowing where they are, knowing what conditions they are experiencing is also critical. IoT-connected sensors can provide this kind of data. Manuel Nau explains, “At its most basic, asset visibility is having accurate information on the identity, location, movement, and status of units, equipment, materials, supplies, and personnel. … Thanks to the Internet of Things, more assets can be visible than ever before, and the process of tracking and controlling those assets is increasingly easy. Large machinery, individual products, vehicles, and more can be fitted with sensors that communicate with the central asset visibility system, providing comprehensive information on their status and location. If the future is asset visibility, then the IoT is bringing the future into [view] now.”[5] Martincic adds, “Asset tracking (RFID) allows a supply chain manager to know in real-time where a product, truck, or shipping container is located. RFID can enable tracking of goods whether they are passing through the Atlantic Ocean on a container ship or moving down an assembly line on a factory floor. When used with cloud computing and data analytics, these technologies can provide even more value.”

Transportation optimization. The IoT ecosystem can be used to optimize transportation routes and increase both efficiency and effectiveness. Because the IoT ecosystem includes cognitive technologies, data such as real-time traffic congestion and weather can be incorporated when optimizing routing. Christy Szoke (@ChristySzoke), Co-Founder of Fathym, asserts weather plays a significant role in transportation operations, but current weather forecasting is insufficient to meet the needs. She explains how the IoT can help. “Internet of Things (IoT) technology is now filling the void left by traditional weather forecasting efforts,” she writes. “With the ability to relay data from the cloud to the end user, and the ability for IoT integrated road weather solutions to extend a broad array of sensor nodes, IoT weather solutions offer enhanced levels of data coverage. IoT sensors are inexpensive compared to traditional weather capture and transmit systems, and can be placed on fleet vehicles and roadside points to grant increased coverage. Alongside increased coverage, an IoT-based weather mapping system also generates real-time data. This allows weather events to be seen and reacted to as they occur. By fusing multiple data sources together, IoT weather solutions also offer more comprehensive ground weather data. Forecasting algorithms can collect and interpret that data and push it to your dashboard in real-time. Taken together, these advances allow IoT systems to provide seamless, real-time, and complete hyper-local data.” Sensors can also be used to track vehicle performance.”[6]

Inventory and logistics monitoring. Martincic notes, “Introducing sensors and other technology into the warehouse creates opportunities for integration of physical objects into computer-based systems. Initial supply chain benefits of IoT technologies include improved monitoring of inventory and logistics processes. Use of IoT improves asset tracking and controls inventory automatically and much more comprehensively. Shipments can be tracked and traced through manufacturing and transportation processes in real-time. This results in improvements in delivery accuracy as well as customer service to enhance overall customer experience.” According to Martincic, the IoT will eventually provide companies a way to “automatically re-route items based on customer changes [and] pro-actively replenish inventory based on exact data and the forecasted demand.” This will go a long way towards eliminating the dreaded bullwhip effect. Better inventory tracking and automated replenishment will also reduce out-of-stock situations reducing lost sales.

Automation and process improvements. Martincic notes, “Automation and process improvements can dramatically reduce inefficiencies and costs and preserve profit margins helping businesses to remain competitive.” Robotic Process Automation (RPA) is one method companies are using to automate and improve processes. For many routine tasks, RPA is an excellent solution. In my discussion with clients, however, they say, in certain circumstances, they want to do more than simply automate routine tasks. They want Cognitive Process Automation™ (CPA) rather than Robotic Process Automation. Cognitive Process Automation can go beyond accomplishing routine tasks and can actually help improve processes.

Preventive maintenance. Dmitri Tcherevik (@cherevik), Chief Technology Officer at Progress, writes, “In the industrial sector, machine downtime and asset failure can be some of the biggest costs that companies incur. … Anomaly detection is the silver bullet that enterprises need to maximize their uptime and nip machine failures in the bud.”[7] The secret to effective anomaly detection, Tcherevik asserts, is cognitive computing. He explains, “With thousands or even millions of sensors deployed across their equipment, all generating data in real-time, today’s companies are in dire need of the ability to cognitively spot anomalies. Cognitive computing can help companies keep up with the flood of sensor data by intelligently automating the data science that powers anomaly detection. This means the machines themselves can begin to identify trends and patterns, enabling them to spot and predict anomalies in advance to prevent asset failure. Through cognitive anomaly detection, companies are better positioned to truly begin capitalizing on the value of anomaly detection and prediction. With this wealth of data available at their fingertips, businesses can address any problems before they spiral out of control — or manifest at all in the first place.”

Summary

There are still a lot of challenges needing to be worked out before IoT implementation is ubiquitous. Rigorous efforts are being made to address those challenges and, as a result, most analysts predict the IoT will eventually play a significant and beneficial role in the business world. The supply chain will likely be the area benefiting most.

Footnotes
[1] Stephen DeAngelis, “Security: A Big Challenge for the Internet of Things,” Enterra Insights, 2 August 2018.
[2] Irfan Saif, “Cyber Risk in an IoT World,” The Wall Street Journal, 19 November 2015.
[3] Staff, “Which industries are IoT’s early adopters?TechNative, 6 September 2017.
[4] Brittany Martincic, “How IoT is Driving Supply Chain Innovation,” datex, 2018.
[5] Manuel Nau, “The Future Is Asset Visibility,” IoT Business News, 10 January 2018.
[6] Christy Szoke, “Optimize Fleet Management Using IoT to Predict Weather,” EBN, 20 February 2017.
[7] Dmitri Tcherevik, “The Dollar Value Of Downtime,” Manufacturing Business Technology, 8 January 2018.