Impact of the Internet of things (IOT) on the supply chain

Impact of the Internet of things (IOT) on the supply chain

Supply chain and IoT go hand in hand

Few networks are more complex than today’s global supply chain. Products often travel thousands of miles. From when they begin as raw materials to when they arrive at a customer’s doorstep as a finished product. Along the path a product takes, numerous handoffs occur between manufacturers. This process has been further complicated through the adoption of just-in-time inventory systems. These are designed to keep only what is needed in stock at any time.

The adoption of Internet of things can dramatically improve this process. IoT can continuously track and monitor every product in the supply chain in real-time as it moves through the global supply chain network. Below are some of the possible use cases:

Inventory tracking and information

Many Businesses have adopted just-in-time inventory control methods as a strategy to control costs and eliminate waste. This process can be improved if real-time information about the items is available at all times.

For example, tracked items or packages in transit allow for notification of the manufacturing if a delay is predicted in shipping time. Inventory losses become avoidable when the precise location of every package and container is known at all times.

Consumption of inventory can trigger alerts that new materials need to be purchased and as the algorithms become more advanced, this material replenishment could happen in a completely automated fashion, eliminating the need for human intervention. Why is eliminating human intervention a good thing? It is commonly accepted that any human intervention opens up a greater chance of errors, which are time-consuming and costly for a business.

Case study: Inventory tracking and control

A leading retail chain uses radio frequency identification (RFID) sensors in its packaging. This enables the inventory levels to be tracked in real time from store shelves, through its distribution centers, and at the point of manufacture from its suppliers. By continually improving and investing in this technology, the retail chain is the undisputed leader in the retail industry in sales per square foot and inventory turnover among discount retailers. Its adoption of RFID technology, as well as underlying systems that enable accurate forecasting of inventory levels and sharing of this information with its suppliers, has led to a considerable reduction in stockouts. Recent studies demonstrate that RFID-embedded packages are replenished three times faster than packages with physical bar codes only.

Another more advanced and innovative example can be seen in the below video. Waltonchain, a Chinese startup is looking to revolutionise the fashion industry through IoT and RFID sensors. The video shows how they can be used both to aid the shop with its supply chain and the shoppers experience.

How IoT can aid waste elimination for perishable inventory

In the United States, the US Food and Drug Administration have adopted the Food Safety Modernization Act. This requires companies to store and maintain packages that contain perishable items at temperatures no more than two degrees above the acceptable temperature. It also requires that they adopt loading procedures that prevent cross contamination.

IoT sensors are ideal for fulfilling these regulations, as they will be able to continuously monitor, record, and notify the carrier if the temperature of the items is at risk of violating the rule. In addition, global positioning system (GPS) sensors attached to the containers ensure they are properly loaded and avoid risk of cross-contamination in the supply chain.

IBM and Walmart along with a plethora of other startups have been exploring the use of Blockchain combined with IoT sensors to aid food supply chains. The video below is an overview on the system that IBM have been building.

Challenges facing the Supply Chain

The largest challenge facing the supply chain industry for adoption of IoT is interoperability and common standards for data exchange. Due to the countless parties involved and the highly matrixed environment, it is difficult for IoT to achieve its potential without addressing these two elements.

Interoperability in IoT refers to the ability to exchange data seamlessly between systems. For this to occur, common standards must be developed related to the data structures, formats, and protocols used to transmit the data. Currently, these standards do not exist. Many systems use proprietary formats that will be difficult to integrate later.

Governments and industry associations can play a large role in developing these standards and helping companies adopt them. The supply chain is most vulnerable to these two elements due to its process. Goods must be created and travel from one party or company to another, and both parties need real-time information regarding the status of the goods being exchanged. If both parties cannot agree to a common standard of data exchange, the IoT system will slow down.

To summarise

The global supply chain represents a unique and compelling example of how adopting IoT can yield significant process improvements. By creating an interconnected network of real-time information, companies can create goods and transport them smoothly around the globe.

By constantly monitoring the status of goods in transit, companies can eliminate substantial waste by preventing the spoiling of perishable items. The data collected can be analysed to identify and eliminate bottlenecks and to create further improvements in the flow of goods and transit processes. It is often said that data is the new oil. IoT provides a gateway to generate a lot more data about existing supply chains which will prove to be invaluable to businesses as they look to further increase revenues and expansion.

If you are interested in reading further on how Blockchain can be combined with IoT please check out my post on Walton Chain.

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