How the Internet of Things Will Change the Supply Chain

Stephen DeAngelis

October 22, 2014

“A huge increase in the number of devices making up the Internet of Things (IoT) will have a significant impact on how the supply chain will operate,” writes Stu Robarts (@StuRobarts). At least that’s the conclusion of a report published by Gartner. [“Gartner predicts Internet of Things will spark supply chain reaction,” Techradar.pro, 24 March 2014] Even though the IoT remains in its formative stages, most analysts believe it will spark an industrial revolution not just a reaction. However, given how difficult it has been to generate supply chain collaboration, the IoT might prove to be more reactionary and less revolutionary in the area of the supply chain. As supply chain analyst Lora Cecere (@lcecere) notes, “Collaboration is evasive. Today, it is more talk than action.” [“Getting Down to Brass Tacks: Can We Really Collaborate?Supply Chain Shaman, 30 September 2014] As the IoT develops, Robarts indicates, “Factors such as access to information about the supply chain and exposure to cyber-risk will become increasingly pertinent.”

 

It’s really too early in the IoT maturity cycle to know how it will eventually unfold. Robarts writes, “Despite the huge rise in numbers of connected devices, Michael Burkett, Gartner’s managing vice president, has argued that it’s important to important to keep IoT maturity in perspective.” The most mature part of the IoT involves things like “commercial telematics now used in trucking fleets to improve logistics efficiency.” Robarts continues:

“Gartner predicts that the rise of the IoT will allow supply chains to provide, ‘more differentiated services to customers more efficiently.’ This will be made possible as a result of a highly interconnected network of devices communicating with each other. In particular, marketers and product designers are expected to see changes in their supply chain roles. Digital marketing will benefit from increased customer data and the ability to segment audiences to a greater extent. Designers, meanwhile, will be required to find ways to embed technology into products that will enable them to communicate with other devices.”

That all sounds very hopeful, but, Cecere remains skeptical. “Today, we have collaborative data sharing, and collaborative processes, but we seldom have what I term true collaboration.” The question is: Will the Internet of Things change the way that supply chain stakeholders collaborate? Richard Sherman (@guruofscm), the Principal Essentialist at Trissential, believes that the IoT will have a significant impact on the supply chain. “Sherman says the Internet of Things will combine with Web 3.0 technology to create what he calls ‘Smart Supply Network 3.0.'” [“Smart Supply Network 3.0: The Next Big Thing?SupplyChainBrain, 24 July 2014] The article continues:

“It is the natural follow-on to Web 1.0, ‘which was mostly static web pages,’ and Web 2.0, ‘which was more interactive and collaborative,’ he says. ‘Now we have this network of interconnected nodes that gives us unprecedented ability to connect people and things and all of the data in the supply chain.’ Instead of a linear supply chain where things don’t work together, ‘we can now create an optimally performing network that I call the smart supply network – or, taking it one step further, Smart Supply Network 3.0,’ he says.”

Frankly, supply chains haven’t been linear for quite a while. What’s new about Web 3.0, which is sometimes referred to as the “Semantic Web,” is its ability to use cognitive computing to create understanding not just connections. I agree with Sherman that the IoT can use that capability to produce a collaborative network of machines that could revolutionize supply chain operations. Sherman told the SupplyChainBrain staff that one can already see glimpses of this bold new world. “Procter & Gamble is talking about updating S&OP on a daily basis,” he stated, “and they are using real-time data and business intelligence to take corrective actions twice daily for some for high-volume products. That takes lot of the cost and uncertainty out of the supply network.”

 

Steve Banker (@logisticsviewpt) agrees with Sherman that the IoT will change supply chain operations in fundamental ways. “The Internet of Things (IoT) will make our operations more efficient by combining smart sensors, cameras, software, databases/business intelligence, and the Internet (primarily in the form of private clouds) together in diverse ways,” he writes. “[The] IoT is already evident in several places across the supply chain, but pundits are predicting that it will become so deeply part of our environment that it will become like electricity, something we are all but unaware of because we take it so much for granted.” [“The Internet of Things will Change the Face of Supply Chain Management, but it will require a Revolution in Analytics First,” Logistics Viewpoints, 14 July 2014] Banker’s headline is profound. As I noted in a previous article about the Internet of Things [“To Succeed the Internet of Things Will Require Machines, Analytics, and People“], “Just connecting a bunch of things together doesn’t really change the world. The IoT only becomes revolutionary when it is complemented by Big Data analytics that allow you to do practical and meaningful things with the data that is generated.”

 

To really change the world, the IoT must include stakeholders in emerging and frontier market economies. In study entitled “Industrial Internet: Pushing the Boundaries of Minds and Machines,” Peter C. Evans and Marco Annunziata (@marcoannunziata), write, “How quickly the benefits of the Industrial Internet can be leveraged across the global economy will depend on the speed of adoption of the new technologies. And since emerging markets have already grown to account for about one half of the global economy, the speed at which they will adopt the new technology will matter much more than it did during the Internet Revolution, and incomparably more than in the Industrial Revolution.” They continue:

“A positive factor in this respect is that emerging markets still have enormous need to increase infrastructure investment, a priority for generating rapidly rising levels of production and incomes. If emerging markets could this time around prove to be early adopters of the new technologies, rather than late adopters, the Industrial Internet Revolution could have a much more powerful and rapid impact on the entire global economy. Its impact in alleviating the constraints in sustainable global growth, for example in terms of commodities consumption and environmental impact, would be that much more significant.”

Tony Kontzer (@tkontzer) agrees that the IoT could have a significant impact on sustainability efforts. “Using sensors to monitor manufacturing equipment and environments is nothing new,” he writes, “But using those sensors to talk to other equipment and automatically feed data into plant and energy management applications is one of manufacturing’s newest frontiers.” [“IoT’s supply chain benefits becoming clearer,” TechTarget, July 2014] Dave Meyer, a senior consultant at Environmental and Occupational Risk Management Inc., told Kontzer, “The Internet of Things offers possibilities for businesses to manage resources better from an operational efficiency perspective, as well as from a regulatory and permit compliance perspective.” Josh Noble, an Account Executive at TAKE Supply Chain, asserts, Machine-to-machine networks (M2M) can add new competitive advantages across the supply chain.” [“How the Internet of Things Can Transform Your Mid-market Supply Chain,” SupplyChainBrain, 25 September 2014] He lists “a few ways IoT and [Cloud of Things (CoT)] solutions can be implemented across the manufacturing and supply network to improve visibility, efficiency, quality and safety.” They include:

  • Manufacturing maintenance and product quality
  • Monitoring the cold chain
  • Asset accounting and tracking
  • Forecasting and inventory

Noble concludes, “The Internet of Things offers one of the most disruptive technologies of the decade that both distribution and manufacturing companies need to evaluate for competitive advantage.” He stresses that now is not the time for complacency or inaction. The Internet of Things is coming fast and companies that don’t move with it are bound to get run over.