Improving Supply Chains with IoT Implementation

Stephen DeAngelis

May 1, 2019

Improving supply chain visibility produces a number of beneficial results and Internet of Things (IoT) implementation has the potential to improve visibility dramatically. I deliberately use the word “potential” because the Internet of Things (sometimes referred to as the Industrial IoT) remains in its infancy. Alan Griffiths (@cambashi_alan), a principal industry analyst of industrial IoT and digital transformation at Cambashi, underscores the fact that supply chain IoT implementation has not yet matured but “will” play an important future role. He writes, “The industrial IoT will play an important part in the evolution of supply chains from linear ‘point to point’ models to network or circular models.”[1] Companies have a steep learning curve when it comes to IoT implementation and application; but, the learning has already begun. Derek Bryan, Vice President EMEA at Verizon Connect, reports, “Many forward-looking organizations are beginning to experiment with Internet of Things devices to transform complex supply chains into fully-connected and homogeneous networks.”[2] Despite its name, the Internet of Things is not a single network. It is a network of ecosystems with each ecosystem consisting of sensors (the things), connectivity (the IoT), and analytics (e.g., cognitive computing platforms). Remove any of those elements and the IoT ecosystem fails to function.

The elements of the IoT are not new. Griffiths explains, “There is nothing new about IoT; companies have been using sensors to obtain and act on information from product and devices for years. What’s changing is that it’s becoming possible to deploy IoT technology cost-effectively and to integrate it with existing systems and processes.” When fully implemented, Bryan notes, “Sensor data and Radio Frequency Identification (RFID) information from these devices can enable near real-time asset tracking, monitoring, and alerts that help streamline tasks and minimize disruption. More broadly, the data generated by these devices can help produce actionable insights that inform business intelligence and can help businesses improve operations.” One reason IoT implementation remains in its infancy is because of complexity. Each node added to a network increases complexity — as well as increasing the amount of data needing to be analyzed. Only recently have cognitive systems (aka artificial intelligence (AI)) matured sufficiently to handle this complexity. Amy Wunderlin observes, “As the Internet of Things becomes more ubiquitous throughout the supply chain, more useful data is being captured. The challenge is applying the intelligence and analytics to produce measurable results.”[3]

Benefits of IoT implementation

Many pundits predict enterprises will be motivated to become more sustainable in the years ahead. One of the goals of the sustainability movement is adoption of a circular economy model. A leading proponent of the circular economy, the Ellen MacArthur Foundation, defines the circular economy this way:

“The circular economy refers to an industrial economy that is restorative by intention; aims to rely on renewable energy; minimizes, tracks, and hopefully eliminates the use of toxic chemicals; and eradicates waste through careful design.”

Griffiths asserts IoT implementation will be essential to a circular economy. He explains, “Designing products to include IoT technology can support circular supply chains. Products can be tracked through their lifecycle — including through the supply chain — and re-used (or recycled) at the end of the loop. IoT technology will also support regulatory compliance, where it is necessary to know the source of all components, who has handled them and the conditions they have been held in.” Bryan identifies four other significant benefits enterprises can enjoy following successful IoT implementation. They are:

1. Increased visibility. Bryan writes, “IoT allows supply chain managers to connect their vehicles, equipment and devices to gain near real-time status updates on jobs. This can offer a full picture across the supply chain, from the warehouse, to different stakeholders and customers.”

2. Enhanced collaboration. “The rise of IoT,” Bryan explains, “helps organizations to take a much more holistic view of how their supply chain impacts business. It is particularly important for more complex supply chains, where different parts or components are sourced across disparate suppliers and locations.”

3. Asset maximization. According to Bryan, “Improved connectivity allows supply chain managers or logistics teams to optimize fleets. They can provide smarter route planning and identify assets that are delayed in traffic or held up at a previous job. They can also track utilization rates to monitor the efficiency of assets, enabling managers to schedule the optimal number of jobs for each asset.”

4. Improved customer service. Bryan explains, “A more connected supply chain not only helps boost efficiency, it also helps deliver better customer service. Managers can access information in the office or on mobile apps to track where an item is in near real-time, so that forecasting delivery times becomes a more exact science. Managers can then identify any potential issues sooner, contact the customer to manage their expectations, or make alternative arrangements to ensure Service Level Agreements (SLAs) are met.”

Security remains an issue

In the rush to jump aboard the IoT bandwagon, some companies have failed to ensure their IoT ecosystems are secure. IT-Online reports, “Enterprises across the global supply chain recognize their approaches to cybersecurity must be strengthened, but are not yet taking the practical steps to safeguard their industrial Internet of Things deployments.”[4] Companies are already aware how costly cybersecurity breaches can be. A recent ransomware attack cost one manufacturer over 40 million dollars. Vulnerable IoT ecosystems can be costly in a number of ways. Tara MacLachlan, vice-president for industrial IoT at Inmarsat Enterprise, explains, “While Industrial IoT presents immensely exciting possibilities for Enterprises across the global supply chain, it also increases the risk that they will face cybersecurity issues, and our research suggests that they are unprepared for these risks.”[5] She continues:

“A network is only secure as its weakest point, and with Industrial IoT increasing the potential surface area for cyberattacks, enterprises must ensure that they harden every element of their IoT deployments. Without secure Industrial IoT networks, enterprises may leave themselves open to cyberattacks designed to cripple industrial machinery, ransomware or industrial espionage. Truly secure Industrial IoT deployments must have security built-in from the ground up. This must include secure access management, secure execution environments, enhanced data encryption, and smart validation and authentication between sensors, gateways, and the software orchestration platform. … Not every enterprise has the skills or technology capabilities to ensure an IoT solution is secure from end-to-end. Enterprises need to collaborate with specialist providers who can offer a fully managed IoT service that considers security at every stage, from the edge sensors, to the gateways and orchestration platforms, to the connectivity and networks themselves.”

Needless to say, cybersecurity is important for consumers as well as supply chain stakeholders. Wunderlin explains, “Arguably, the biggest challenge facing IoT data today, however, is one of security. … The IoT marketplace has already realized the importance of building trust into the ecosystem, which include all elements of an IoT system: the device, the network, the data and the cloud.”

Concluding thoughts

“While IoT shows a lot of promise,” Bryan asserts, “its implementation is only in its infancy. For supply chain managers or operations directors, however, there are steps they can take now to start seeing the benefits of the technology revolution.” Those steps begin with planning and design. Griffiths explains, “Suppliers will improve their success if their products are designed with IoT capability to comply with advanced supply chains’ procurement and transportation models.” Implemented correctly IoT has the potential to improve supply chain operations and provide a significant return on investment.

Footnotes
[1] Alan Griffiths, “How Industrial IoT Impacts Today’s Supply Chains,” SupplyChainBrain, 7 February 2019.
[2] Derek Bryan, “Four ways to help improve the supply chain with the Internet of Things (IoT),” Supply Chain Digital, 17 February 2019.
[3] Amy Wunderlin, “Show Me the Money: IoT and the Supply Chain,” Supply & Demand Chain Executive, 11 September 2017.
[4] Staff, “IoT and the threat to global supply chains,” IT-Online, 1 February 2019.
[5] Ibid.