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The Internet of Things and the Supply Chain

April 28, 2014


“One day,” Steve Rosenbush writes, “sensors will be embedded in all sorts of objects and machines, collecting data and communicating across what is known, aspirationally, as the Internet of Things.” [“The Internet of Things Is Coming, But We Don’t Know When,” Wall Street Journal, 27 March 2014] I’m a bit surprised that Rosenbush asserts that the Internet of Things (IoT) is just an aspiration. We all know that sensors are already embedded in all sorts of things and that many of those sensors are communicating with other machines over the Internet. To that extent, the IoT is a reality not an aspiration. Rosenbush could be referring to estimates of how large the IoT could become over the next decade. Those estimates range from a modest 100 million things connected to the Internet up to a trillion things. One of the things that will determine how large the IoT becomes will be the standards that are adopted for connecting to it. Rosenbush notes that an industrial consortium has been established for that purpose. The initial members of that consortium are: General Electric Co., International Business Machines Corp., AT&T Inc., and Intel Corp. “The group, which has an open membership,” Rosenbush reports, “is working to establish common technology standards and architectures to the still-emerging Internet of Things.” He continues:

“Common standards have been key to the widespread adoption of technologies, from PCs to Wi-Fi. That’s because common standards facilitate communication, making technology more useful. They also create the largest potential market for developers, boosting their economic incentive to contribute to an ecosystem.”

Although General Electric prefers the term “Industrial Internet” to the more familiar “Internet of Things,” the latter is a better term because the IoT will have an effect on more than just industrial activities. Personal wearable devices will be connected to the IoT as well as many household items from HVAC systems to appliances. That’s why Cisco prefers the term “Internet of Everything” — although that term is probably too hyperbolic. Bernice Hurst notes that the IoT’s effects will be ubiquitous and, therefore, will present opportunities for retailers. “Smart cities full of smart appliances, dubbed the Internet of Things (IoT), could offer retailers unlimited opportunities to sell new appliances,” she writes. “Everything from heating to lighting and appliances will one day be connected to the internet in the name of efficiency and it will all be managed by remote control.” [“Will the internet of things mean big things for retail?RetailWire, 26 March 2014] The potential size of the “connected home” market is enormous. Hurst notes that currently only “one or two percent of people have connected devices to control lighting, climate, energy, appliances and home monitoring.”


Devices connected to the IoT will be monitored, analyzed, and acted upon for a myriad of reasons. Home devices can provide safety. Connected cars can avoid accidents. Monitored equipment can reveal when parts need to be replaced. A Gartner report concludes, “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.” [“Gartner predicts Internet of Things will spark supply chain reaction,” by Stu Robarts, TechRadar, 24 March 2014] “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.”


In a statement accompanying the release of the report, Gartner managing vice president, Michael Burkett, said, “It’s important to put IoT maturity into perspective, because of the fast pace at which it is emerging, so supply chain strategists need to be looking at its potential now. Some IoT devices are more mature, such as commercial telematics now used in trucking fleets to improve logistics efficiency. Some, such as smart fabrics that use sensors within clothing and industrial fabrics to monitor human health or manufacturing processes, are just emerging.” [“Internet of Things, 3D Printing to Shape Supply Chains,” by Nathan Eddy, eWeek, 26 March 2014] Eddy continues:

“Digital businesses are also expected to disrupt the design and manufacturing of products during the next five years. First will be the use of digital product models for use in 3D printing and for simulating hybrid digital-physical software-embedded products. However, the report noted that supply chain strategists should recognize that 3D printing is still in its very early stages and is currently applicable to only select materials and manufacturing process technologies. ‘As the number of software-embedded digital-physical products grows, the methods of product development and life cycle management across the supply chain will change,’ Burkett said. ‘Supply chain teams will have to take ownership for coordinating the delivery of quality-perfect orders of these digital-physical products. This extends beyond developing and ensuring quality of a single device to managing the larger complexity of these connected systems.’ Using digital channels for product launches, seasonal promotions and other initiatives, marketers are conducting campaigns and communications across multiple channels, and adjusting promotions depending on results. ‘Supply chain leaders must design their processes to operate in this digital business world,’ Burkett continued. ‘This includes fulfilling the new expectations of customers and the volatile demands that digital marketing will create. A future supply chain will meet those expectations by converging people, business and things in a digital value network, and incorporating fast-emerging capabilities such as IoT and smart machines into this design strategy.'”

Most analysts seem to agree with Mike Wheatley’s assertion: “We’re seeing a new wave of innovation that’s transforming all kinds of machines – not just computers – into ‘intelligent’ devices that will revolutionize our biggest industries. The Industrial Internet will be the most important development since the Industrial Revolution, giving the world a platform to exchange untold amounts of Big Data – and that will lead to massive advantages that experts have only just begun to quantify.” [“How People Will Drive the Industrial Internet Revolution,” Silicon Angle, 28 June 2013] Wheatley continues:

“There are three crucial ‘enablers’ driving the advance of the Industrial Internet. Firstly the essential hardware, including digital communications devices and the advanced sensors machines need to communicate, has become much more affordable. Second is the exponential growth of computing power, particularly the development of smaller and more powerful microprocessors that allow us to talk with and manipulate any machine. Third, and arguably the most important, is Big Data software which gives us the ability to crunch the massive amounts of data these machines generate and understand what they’re saying.”

All of those pieces are in place. Although new technologies will continue to be developed, they won’t be necessary to make the Internet of Things a growing reality. Wheatley notes that cognitive computing systems (i.e., systems that use artificial intelligence to learn more about the world around them) are going to be an integral part of the IoT. So will a lot of smart people. Wheatley explains:

“No doubt, the Industrial Internet will create many more roles that we haven’t even conceived. As our industries are rapidly transformed, companies will be forced to trust their most dynamic and versatile employees to fill these new positions, and those that take the initiative first will almost certainly see the biggest rewards. The Industrial Internet might be built on artificial intelligence, but it’s the human intelligence that makes everything falls into place.”

For supply chain professionals, the Internet of Things will be a mixed blessing. With millions (or billions) of sensors reporting on the status of machines or the location of products, the supply chain is going to get much more complex. On the bright side, supply chain professionals will be assisted by cognitive computing systems that will deal with the complexity and provide executives with the information they need, when they need it, in the form that best suits their purposes. Most of the communication that takes place within the Internet of Things will be behind the scenes as far as humans are concerned. Machines will be busy chatting away, doing analysis, and making routine decisions so that humans are freed to concentrate on more important matters. At least, as Rosenbush notes, that’s the aspiration.

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