IoT Benefits for Supply Chain Operations

Stephen DeAngelis

August 18, 2021

Many experts believe the Internet of Things (IoT) is poised to revolutionize supply chain operations. As I have noted in previous posts, the “revolution” has been slowed by security and standardization issues. Steven Manifold, Chief Marketing Officer at Ubisense, believes the revolution has also been slowed by a lack of understanding on the part of supply chain professionals. He observes, “The good news is that, given our research suggests a lack of understanding rather than a complete lack of interest, the industry redoubling its efforts to educate and inform manufacturers should be able to turn this situation around. It’s now up to IoT providers to ensure that manufacturers don’t get left behind.”[1] Because IoT solutions affect every stage of supply chain operations, all supply chain professionals need to be better informed, not just manufacturing professionals. Robert Schmid (@roberteschmid), chief futurist for Deloitte, observes, “Whenever I think of IoT, it’s about bringing the physical into the digital world. From digital twins to connected sensors and even QR codes, it’s about getting that physical aspect into the digital world.”[2] Experts have identified a number of potential benefits supply chain organizations can hope to achieve by implementing IoT solutions. Some of those benefits are discussed below.

 

Potential Supply Chain Benefits of IoT Solutions

 

Demand Sensing. Most supply chain experts insist supply chains must be demand driven. Schmid believes the IoT can help transform a “supply chain to [a] demand chain by tracking demand with product-based sensors that help detect not just how the product is used but also environmental demand.”

 

Inventory Management. Inventory embedded with the proper sensors can be tracked in real-time via the IoT. Supply chain journalist Catherine Metcalf explains, “Businesses can now place IoT sensors with a variety of components to help manage inventory more efficiently. With an IoT inventory system, the supply levels of several critical elements can be monitored in real time to help inform business decisions and prevent shortages. The data from these systems can even be analyzed to predict the future inventory needs of the business.”[3] Not only does this allow enterprises to maintain more control over their inventory, the sensors can be used by other stakeholders as well, such as, collaborative robots — or cobots — now being used in many warehouses. Schmid explains, “Workers no longer have to locate and pull products. Now, the cobot brings everything to the picker.” Tech writer Doug Bonderud (@DougBonderud) adds, “For inventory management, this means reduced risk of injury for human staff, increased accuracy for goods being picked and — thanks to advancements in artificial intelligence and machine learning — the ability of cobots to ‘learn’ alongside their human counterparts to improve overall efficiency.”[4]

 

Customization and Personalization. Two oft-cited trends affecting manufacturing and other supply chain operations are personalization and customization. The IoT can help manufacturers adapt to this new reality. The staff at Thomas explains, “IoT solutions will enable manufacturers to design products specifically tailored to consumer demands. The changing manufacturing processes that accommodate this mass customization will result in a huge increase in SKUs, ultimately making inventory management more complex. IoT solutions address this complexity by connecting once-isolated parts of the production process so that production can be easily scaled up or down, resulting in happier customers and less waste. These solutions can also be used to monitor changes in demand to further customize products and forecast production. Over 76% of early adopters claim IoT solutions are increasing insight into customer preferences.”[5]

 

Discrete Manufacturing. Customization is having a significant impact on discrete manufacturing. The Thomas staff reports, discrete manufacturing accounts for the largest proportion of IIoT spending. They add, “The adoption of IoT solutions will provide discrete manufacturers with the data needed to drive innovation and better manage complex production cycles, leading to improved operations and profitability. Reduced production cycles will also enable discrete manufacturers to offer short-notice production runs.”

 

Visibility and Traceability. One continuing challenge for most supply chains is gaining better visibility. Traceability (sometimes referred to as supply chain transparency) is also becoming an important capability. Web developer Michael Dehoyos explains, “Customers are more and more interested in choosing products that are made sustainably as well as ethically in every part of the production chain. Because of that, transparency at all stages of the supply chain is essential.”[6] He adds, “The more visibility people have in the supply chain, including businesses, the better chance it stands to function well.” IoT sensors can help improve track and trace capabilities.

 

Asset Management. Dehoyos writes, “Devices that are part of the IoT help manufacturers track all their necessary parts globally, in real time. By using Radio Frequency Identification (RFID) tags on their parts, manufacturers will be alerted about their components’ arrival dates. This helps them better manage product levels in their inventory and optimize it for better efficiency in all their locations. They can also share with their customers up-to-date shipping times and delays. They can also trace goods that are finished so they can track any product recalls.” Once products are shipped, the IoT can also help manage those assets. Metcalf explains, “IoT sensors can also be placed with products, so helping businesses to track the location and condition of items as they are in transit. This information can provide companies with a more accurate estimate of when shipments will get delivered, and also help to prevent issues associated with shipments arriving containing damaged items.” Today’s customers expect to know when their purchased products will be delivered. Dehoyos explains the IoT can also help there. He writes, “The last mile is the key step in the supply chain for a product because it has the biggest impact on customers and getting repeat orders. IoT devices can give information so companies can optimize their last-mile delivery.”

 

Process Optimization. The Thomas staff reports, “According to IoT Analytics’ IIoT Platforms For Manufacturing 2019 – 2024, there are three areas where manufacturers rely most on IIoT platforms to transform the industry: 1) General process optimization: 43.1%; 2) General dashboards & visualization: 41.1%; and 3) Condition monitoring: 32.7%. IBM reported that adopting IIoT insights for process optimization will increase product count by up to 20%.”

 

Equipment Maintenance. Metcalf writes, “Modern supply chains rely on the health of many elements, including that of machines. When one of these machines breaks down, it can slow the supply chain down, or even bring it to a complete halt. For the businesses that are relying on this supply chain, an event like this can be extremely costly. By placing IoT sensors in critical equipment and machinery, a variety of performance metrics can be monitored, enabling the prediction of breakdowns and any other possible maintenance issues.”

 

Reduced Manufacturing Costs. When all of the benefits noted above are aggregated, the results can be impressive. The staff at Thomas writes, “The combination of minimized machine downtime, optimized asset and inventory management, efficient energy usage, agile operations, and supply chain management will significantly reduce operational manufacturing costs and reduce product cycle time. The use of IoT devices in the manufacturing industry will result in an additional economic value of between $1.2 and $3.7 trillion before 2025, McKinsey predicts.”

 

Concluding Thoughts

 

Dehoyos concludes, “The impact of IoT on supply chain is just starting, and the next few years will see the benefits grow in leaps and bounds.” As I noted at the beginning of this article, there are challenges that still need to be addressed. I have confidence solutions will be forthcoming. That’s why Metcalf insists, “The Internet of Things might be a relatively new technology, but businesses need to start embracing it now. By adopting these technologies early, a company can gain a significant edge over the competition.”

 

Footnotes
[1] Staff, “Manufacturers’ feel they are being left behind in the IoT race,” Top Business Tech, 10 July 2021.
[2] Doug Bonderud, “The Evolving Role of IoT in Supply Chain and Logistics,” BizTech, 21 May 2021.
[3] Catherine Metcalf, “How IoT Tech is Improving the Modern Supply Chain,” Gravity Supply Chain Solutions Blog, 17 January 2019.
[4] Bonderud, op. cit.
[5] Staff, “7 Things You Should Know About IoT in Manufacturing,” Thomas, 3 January 2020.
[6] Michael Dehoyos, “Benefits of IoT in Supply Chain!” Supply Chain Game Changer, 19 June 2021.