Using IoT to Move From Push to Pull
Customers want more and they want it now. If you are unable to meet expectations, they will go elsewhere. The supply chain model often used in retail distribution is outdated and broken. Using Internet of Things (IoT) and vertically integrated order processes can achieve a leaner supply chain and help you say goodbye to out of stocks.
Instead of the supply chain starting with the manufacturer, it now needs the end customer to trigger the process at the order point. Each stage of the process pulls from its respective supplier. Such a system can ensure that only what is ordered is built and shipped.
Before tackling the technicalities of vertical integration, every part of the supply chain has to be on board. But that won’t happen unless it can be proven to be worth the time, effort, and cost. For all parts of the chain except the consumer, this means a lot of data collection, flow mapping, and analysis. Easy work for a computer or network of intelligent devices.
IoT can help both plan and realize a pull-based supply chain. One obvious example is tracking inventory to establish lead times for initial process mapping and to show where and when stock sits around. Sensor networks can also monitor inventory and calculate the cost of standing stock. Simple tracking can map the entire material flow process from raw materials to finished product arriving at the customer’s door.
Asset tracking provides the visibility to identify inefficiencies that could be quickly fixed. Assuming a scenario where every step of the material flow has a different owner, an end-to-end pull system could be extremely advantageous.But it’s not a magic bullet and it won’t necessarily work for everyone.
Not an Easy Move
Getting a whole supply chain to go from push to pull will probably meet plenty of resistance. Your suppliers have other customers and your customers have other suppliers; the same is true throughout the chain. Gradually upgrading parts of the supply chain based on IoT and analytics could improve efficiencies in the overall process as well as provide forecasting data that could be useful to the overall supply chain.
Push processes begin with manufacturing a product. Pull systems are triggered by an order. In a truly vertically integrated system, the customer’s order would be processed by the retailer’s e-commerce system, which would then generate an order from the wholesaler. Likewise, the wholesaler would pass this order on to the manufacturer.
In a perfect world, only the right amount of product would be made to meet customers’ needs. Using intelligent decision-making at the device level means that stock levels can be kept to a minimum.
Likewise, the manufacturer may find that some processes need to be batch-based due to high costs of single unit processing. Edge computing could help by ensuring that batches are processed efficiently, only drawing upon resources or issuing parts from stock at the right time.
As well as the benefits passed down to the customer by the supply chain, the incumbent tracking can give customers information about product location from the moment they order.
The supply chain is one of many areas where IoT can not only improve operations, but also underpin a complete reimagining of how business works. We don’t fully know the scope of what IoT will bring to business, but until we ask the right questions, we will never find out.