The Internet of Things and the Supply Chain: Serious or Just Flirting?

Stephen DeAngelis

May 19, 2020

Numerous supply chain experts insist supply chain processes are experiencing a revolution thanks to emerging technologies. The Internet of Things (IoT) is generally found on the list of technologies fomenting the revolution. Tom Ryan (@retailwire) explains, “While IoT is promising to reinvent the in-store experience with smart shelves, robots and other connected devices, the big early payoff appears to be back in the supply chain.”[1] While some experts believe the combination of IoT and supply chain is a marriage made in heaven, others believe the two entities are just getting to know each other — they’re dating or at least flirting. Hannah Bernard, a Global Marketing & PR Director at Avery Dennison, explains, “The IoT is really a bundle of ideas and conceptual possibilities that arrives ahead of any later reality. Like most ideas, particularly those in the technology space, it is presently a half-invention — partly happening, but mostly yet to happen, an idea that invites others to latch onto and riff off. Sometimes the invitation inspires, and mainstream embrace follows, sometimes the ideas don’t take hold.”[2] Although Bernard believes the IoT and the supply chain are just getting to know each other, she adds, “IoT isn’t going away any time soon.”

The dating game

The reason Bernard calls the IoT “a bundle of ideas” is because it’s really an ecosystem rather than a technology. The ecosystem consists of sensors at one end creating data and on the other end are analytics platforms making sense of the data. The IoT is technically the connection between the two ends. Whenever new concepts are introduced, there is a “getting-to-know-you” process involved. Analysts at 20cube explain, “IoT is one such innovation that is transforming the complex supply chain into a seamless process. IoT innovations like Sensor data and RFID (Radio Frequency Identification) provide information to enable real-time tracking and alerts for better decision making. Such data can be converted into vital information to help business improve operations and businesses.”[3] Bernard agrees the current IoT/supply chain dating game could turn into a blossoming romance and eventual marriage. She writes, “Sustainability, ethical sourcing, corporate responsibility, brand safety and product integrity are vast, complex, down-the-rabbit hole [supply chain] concerns. But they could be addressed through a combination of old-fashioned supply chain best practices combined with intelligent labels, transforming the supply chain into an IoT ecosystem that can be tracked, traced, interrogated and held to account.” 20cube analysts suggest the following advantages could be accrued by a marriage of the IoT and supply chain.

  • Improved visibility. “IoT enables supply chain logistics to connect vehicles, equipment and devices to obtain approximate real-time status updates of a shipment. It offers the stakeholders a comprehensive report across the supply chain from warehouse to destination of delivery, instead of showing the shipment in transit; it shows the exact location of the shipment. With all the information consolidated and analyzed, the business can make timely decisions according to the business logic.”
  • Enhanced collaboration. “IoT provides decision-makers with the control to access near real-time tracking status across the supply chain and also helps break it down to details to derive at strategic decisions and maximize productivity.”
  • Optimized assets. “Physical assets like fleets and vehicles can be optimized with improved connectivity, smarter routes can be planned as well as assets can be identified that are delayed due to traffic or held up due to any previous jobs.”

Ryan reports some supply chains are well into the IoT engagement period. He writes, “According to PWC’s ‘2019 Internet of Things Survey,’ … almost half (49 percent) of retail respondents indicated they are already benefiting from using IoT solutions to improve their supply chain. Thirty-eight percent expect to see value within two years.” Ryan also quotes Simon Ellis, Vice President of global supply chain strategies at IDC, who stated, “Supply chains that do a better job of leveraging the data available to them, I believe, will outperform the ones that do not.” Louis Columbus (@LouisColumbus), a Principal at IQMS, believes another technology, blockchain, will make the IoT/supply chain even stronger. He explains, “Combining blockchain’s distributed ledger framework with the Internet of Things’ proven real-time monitoring and tracking capability is redefining supply chains. Blockchain shows potential for increasing the speed, scale, and visibility of supply chains, eliminating counterfeit-goods transactions while also improving batching, routing and inventory control. … Blockchain and IoT are defining the future of supply chains based on the initial success of Proof of Concept pilots focused on the logistics, storage and track-and-trace areas of supply chains across manufacturing.”

The IoT is not without risks

Anyone in a committed relationship understands there are risks involved. John Boruvka (@JBoruvka), a technologist with Iron Mountain, believes IoT immaturity presents a risk to supply chains. He explains, “The Internet of Things is still at a nascent stage. That, among other things, means significant risk exists in the IoT supply chain — and much of that stems from the software that proliferates in devices, sensors, controllers, networks and other ‘things’.”[5] Nevertheless, Boruvka isn’t put off by the risks. “Don’t get me wrong,” he writes. “I truly believe there is tremendous promise in the IoT, consumer and commercial, but in particular in the Industrial Internet of Things sector. However, as you explore the opportunities, I urge you to do so fully aware of where the potential pitfalls lie, and what you can do about them.” Benjamin Franklin once stated, “Keep your eyes wide open before marriage, half shut afterwards.” While that bit of wisdom may be good for human marriages, I agree with Boruvka companies need to keep their eyes wide open all the time. Boruvka suggests a number of things companies can do to mitigate IoT risks. They are:

  • Identify critical points. “It’s key to identify connected devices, along with knowing the function of those devices, and if (and how) data is collected and transmitted. Define where proprietary code, algorithms, intelligence, and data exist in the ecosystem.”
  • Structure a risk assessment and evaluation. “Many companies are creating a discrete function within Enterprise Risk Management for the IoT discipline — and then deciding how best to evaluate what is deployed.”
  • Develop contingencies in your critical supply chain. “[Contingencies should] include alternate providers as well as taking over the responsibility to maintain.”
  • Legal and risk management collaboration. “Collaborate with Legal and Risk Management to assure contract terms and address known risks.”
  • Assess your expertise and access. “Decide if your access to ‘know how,’ source code, IP, and other forms of trade secrets give you leverage. If it does, establish a way to access this information in case of contingencies. If something ultimately does go wrong, you’ll have the right to step in and either maintain that technology yourself or find someone that can.”

Concluding thoughts

20cube analysts conclude, “IoT is displaying a lot of promise, but the implementation is in the primary stage in the supply chain. Steps being taken by organizations will certainly see benefit in the near future as technology advances.” Despite current risks, Boruvka agrees. He concludes, “The IoT offers tremendous opportunity to help companies improve quality and/or performance, improve decision making, and lower operational cost, regardless of whether your endeavor is consumer-based or industrial.”

Footnotes
[1] Tom Ryan, “Will IoT reinvent the supply chain?RetailWire, 26 November 2019.
[2] Hannah Bernard, “IoT and the supply chain revolution,” Business Reporter, 19 February 2020.
[3] Staff, “IOT – Internet of Things: Moving Supply Chain Logistics Ahead,” 20cube, 24 February 2020.
[4] Louis Columbus, “Top 10 Ways Internet Of Things And Blockchain Strengthen Supply Chains,” Forbes, 13 January 2019.
[5] John Boruvka, “Evaluating Risks in the IoT Supply Chain,” Lexology, 13 December 2019.