Commentary | IT Matters

How the Internet of Things Impacts Supply Chains

Tags: Inventory Management, Logistics I.T.

Udaya Shankar is Vice President and Head of Internet of Things, Xchanging, 312-386-5914

When someone mentions the Internet of Things (IoT), most people think of electronics or wearables – the types of technologies that are driving adoption of a highly personalized “smart” consumer lifestyle. But there’s much more to the IoT story, and more specifically, its impact on the supply chain.

Research firm Gartner recently released a write-up highlighting what many supply chain professionals have been weighing for some time: the IoT trend is going to impact businesses, and in particular, it will disrupt the way we think about logistics. In the piece, Gartner says a thirty-fold increase in Internet-connected physical devices by the year 2020 will “significantly alter how the supply chain operates.” Specifically, it notes the impact will relate to how supply chain leaders access information, among other things.

ERP and supply chain management (SCM) have gone hand-in-hand for quite some time, but the IoT revolution will allow us to enhance those solutions by intelligently connecting people, processes, data, and things via devices and sensors. Think of it as SCM 2.0. This deeper intelligence can come to life in many different ways when it comes to supply chain data and intelligence – from automation of the manufacturing process to improved visibility within the warehouse.

Enhancing In-Transit Visibility

One area that will play a prominent role in the future supply chain, as it’s impacted by IoT, is in-transit visibility. The logistics ecosystem has many players, and thus, many moving parts. Products are handled and transferred between the manufacturer, suppliers, the distribution center, retailer, and customer. This many nodes in the supply chain calls for an agile and informed supply network in regards to product whereabouts and other specifications.

Key to in-transit visibility are cloud-based GPS and Radio Frequency Identification (RFID) technologies, which provide identity, location, and other tracking information. These are the backbone of IoT as it relates to the supply chain. By tapping the data gathered by these technologies, detailed visibility of an item is provided all the way from the manufacturer to the retailer. Data gathered from GPS and RFID technologies not only allows supply chain professionals to automate shipping and delivery by exactly predicting the time of arrival; they can monitor important details like temperature control, which impact the quality of a product in-transit.

IoT will bring all of this together in the following way: By putting an RFID chip in a pallet, for example, and a combined integrated device in the shipment vehicle, data is transferred into the cloud, and the devices can identify the pallet and not only share its position using GPS coordinates, but also bring in other data like weather conditions, traffic conditions, and driver-specific data (i.e., driving pattern, average speed).

Combining real-time sensor data with environmental data can provide intelligence of higher order to all the stakeholders in the ecosystem. This allows the stakeholders to be socially aware and make efficient decisions that drive overall productivity. This moves the supply chain process from a reactive mode to a proactive one by offering information well before any activity happens.

For example, providing information about a traffic jam and potential delay before the trip starts has much higher value than getting that alert when one is already stuck in the traffic. This context-aware intelligence can enhance the supply chain visibility by implementing IoT.

Clearly this scenario can be applied to others in the supply chain – from the manufacturer to the end user, the Internet of Things means richer data and deeper intelligence for all parties in a supply network. And that doesn’t just apply to product visibility. By allowing devices to “talk to each other” in the right way, IoT can help supply chain professionals:

  • Reduce asset loss. Know about product issues in time to find a solution.
  • Save fuel costs. Optimize fleet routes by monitoring traffic conditions.
  • Ensure temperature stability. Monitor the cold chain – according to the Food and Agriculture Organization of the United Nations, about one third of food perishes in transit every year.
  • Manage warehouse stock. Monitor inventory to reduce out-of-stock situations.
  • Gain user insight. Embedded sensors provide visibility into customer behavior and product usage.
  • Create fleet efficiencies. Reduce redundancies – deadhead miles account for up to 10 percent of truck miles, according to the EPA, and 28 percent for private fleet trucks, according to the National Private Truck Council.

As Gartner points out in its write-up on IoT’s impact on the supply chain, it should be noted that while IoT in this application is still nascent, supply chain management professionals should tune into the conversation now to consider its potential. Deeper intelligence into supply and demand will not only benefit manufacturers, distributors, and retailers, but also consumers, as their demands can be better met with this deeper level of intelligence. IoT for the supply chain and transportation industries is part of today’s larger-picture digital business landscape by which connected devices enable organizations to work smarter, plan better, and foster more intelligent decision making processes.