Connecting the Supply Chain through the Internet of Things

Stephen DeAngelis

August 14, 2020

Mandated isolation during the coronavirus pandemic forced many people to work from home. The enormous shift of work from office to home demonstrated the value of connectivity. Since its inception, the Internet has been the primary means of connecting the world — mostly people connections. Today, a larger Internet — the Internet of Things (IoT) — is connecting machines. Admittedly, the distinction between the Internet and the IoT is graying — people and things are being connected at a record pace. When experts discuss the IoT, they are really discussing an ecosystem with sensors on one end and analytics on the other end connected via the IoT. Analysts from 20Cube explain, “IoT or Internet of Things is a gathering of interconnected devices (physical) that can monitor, report and send and exchange data. The information compiled via IoT provides manufacturers and other stakeholders with abundant information for updated business insights.”[1]

 

Many economic sectors will eventually be affected by IoT implementation, including supply chains. The IoT will significantly impact how supply chains function. Business journalist Craig Guillot (@cguillot) observes, “The Internet of Things is already offering the potential to recast entire supply chains in the manufacturing industry. IoT strategies not only can help companies cut costs and improve efficiencies, but also can help them transform supply chains to offer manufacturers greater product differentiation and innovation.”[2] Ajay Rane, vice president of business development at Sigfox, adds, “With greater visibility up and down the supply chain, organizations can set themselves on the path to operational efficiency, superior customer experiences, and a healthy bottom line. Whether retailers are adjusting to evolving demands stemming from the coronavirus, or trying to maintain their competitive standing, IoT can provide the insights needed to adjust course, while still delivering exceptional service at an affordable price.”[3]

 

Benefits of IoT in the supply chain

 

Every supply chain is unique; which means generalizing is the only way to paint a picture of how IoT implementation might benefit a specific supply chain. Below are some of the ways subject matter experts assert IoT implementation can benefit supply chains.

 

Better asset management. Analysts at Leverege insist, “IoT can greatly enhance supply chain management and associated processes. Some of the biggest difficulties revolve around knowing the quality and location of assets throughout supply chain processes. Leveraging sensors that provide the real-time location, temperature, motion, g-force, and other important data can transform a business’s supply chain immensely.”[4]

 

Improved goods location. Closely associated with asset management is goods location. Leverege analysts note, “Not only can the final product/good be tracked, but individual components can be tracked throughout their supply chain as well. With location data unlocked, suppliers, distributors, and wholesalers alike can benefit from a more transparent supply chain. Knowing the location of goods along the supply chain can solve a variety of problems, including: Locating goods that are in storage; verifying exactly when goods arrive at the subsequent step along the supply chain; and tracking the speed of delivery and route of deliveries.” Analysts from 20Cube add, “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.”

 

Better validation of goods quality. Locating and tracking of goods is not sufficient when the quality of goods is essential (such as in cold chain operations). Leverege analysts note, “Another area where IoT improves the supply chain is unlocking the ability for different companies along the supply chain to validate and ensure the quality of the goods being produced and transported. Cold Chain Management Solutions are a great example of managing quality throughout the supply chain. Many different types of food and medicine need to be maintained at specific temperatures throughout the supply chain in order to ensure quality.”

 

Improved decision-making. 20Cube analysts note, “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.” Bain analysts, Michael C. Mankins and Lori Sherer (), assert if you can improve a company’s decision making you can dramatically improve its bottom line. They explain, “We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”[5]

 

Better customer service. 20Cube analysts assert, “A strong supply chain not only helps to resolve much of logistics issues but also help in delivering the best customer service. As the managers can easily access information through devices and mobile apps to track the complete journey details and real-time reports, it becomes easy to identify issues, contact the customer to manage their expectations or make necessary arrangements.”

 

IoT challenges that need to be overcome

 

Although there are many upsides to implementing IoT solutions, decision-makers must be aware of existing challenges as well. John Boruvka (@JBoruvka), vice president for Iron Mountain’s Intellectual Property Management group, 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.’ … Don’t get me wrong. I truly believe there is tremendous promise in the IoT, consumer and commercial, but in particular in the Industrial Internet of Things (IIoT) 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.”[6] Chief among those risks are security and privacy. Boruvka reports, “[A] study by Altman Vilandrie and Company reported that, ‘nearly half of all companies in the United States that use an Internet of Things network have been affected by a security breach that has hurt annual revenue.'”

 

In addition to revenue losses, the loss of reputation is also a concern. Boruvka explains, “Ultimately, you want the ability to control your future. By this, I mean you want to minimize the risk of being forced to ‘rip and replace’ any part of your IoT ecosystem if uncontrollable events take place. For some organizations, this may be an acceptable for building a knowledgebase and experience, however, this won’t fly on fully funded efforts with big promises and ROI expectations. The worst-case scenario would be if the failures from third-party risk ended in litigation or brand damage.” Data breaches have become a way of life and can cause significant losses both monetarily and in brand reputation. W. David Stephenson (@data4all), principal of Stephenson Strategies, explains, “As someone who interacts frequently with angry and perturbed consumers citing anything from concerns about their phone’s privacy to fears about Russia tampering with our elections, I can tell you the level of public paranoia is increasing and they are conflating every kind of privacy and security violation into an amorphous fear.”[7] Boruvka suggests a few strategies companies should focus on to mitigate IoT risks. They include:

 

  • Identifying critical points in your IoT ecosystem.
  • Defining where proprietary code, algorithms, intelligence, and data exist in the ecosystem.
  • Making a risk assessment and evaluation.
  • Developing contingencies in your critical supply chain that include identifying alternate providers.
  • Collaborating with Legal and Risk Management to assure contract terms and address known risks.

 

Concluding thoughts

 

Boruvka 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.” Stephenson agrees. He writes, “Companies and individuals can’t afford to abandon the IoT: the benefits and technological inevitability are simply too great.” At the same time, he agrees with Boruvka that privacy and security issues must be dealt with. “It can, and must be, done,” he states.

 

Footnotes
[1] Staff, “IoT — Internet of Things: Moving Supply Chain Logistics Ahead,” 20Cube, 24 February 2020.
[2] Craig Guillot, “IoT can Help Manufacturers Create the Supply Chain of the Future,” Chief Executive, 1 March 2017.
[3] Ajay Rane, “Why IoT Is Key to a Seamless Supply Chain,” Supply Chain Brain, 13 April 2020.
[4] Leverege, “Transforming Supply Chain Management with IoT,” IoT for All, 4 June 2020.
[5] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.
[6] John Boruvka, “Evaluating Risks in the IoT Supply Chain,” Lexology, 13 December 2019.
[7] W. David Stephenson, “Could Privacy and Security Scandals Scuttle the IoT’s Many Benefits?” IndustryWeek, 10 October 2019.