Connectivity is a big deal for data and systems today. The more devices can talk to each other, the more information they can share. The faster and easier it is to get stuff done. Internet plays a key role in connecting native digital items like PCs, IT servers, smartphones, and software applications.
Supply chains have much to gain from connectivity too. However, the things to hook up now include physical assets from an analogue world. Machinery, vehicles, mechanical devices, actuators, gauges, sensors, and other things are non-digital. They cannot connect directly to the all-digital Internet. Instead, they need connectivity adapted to their needs. That’s where the Internet of Things or IoT comes in.
The IoT is already making a name for itself in the consumer world. Smart fridges and fitness bands are some simple examples. On the other hand, supply chains can be much more complex and demanding. Assembly lines must work without fail to make products. Perishables like food and pharmaceuticals must be kept from spoiling, both in storage and in transit. Forklifts and trucks must move the right goods in or to and from warehouses at the right times. The IoT specifically for connectivity in these industrial contexts is also called the IIoT or the Industrial Internet of Things.
The number of non-digital things being connected will likely soon outstrip the number of native digital devices. Forecasts vary, but average estimates for 2020 might be 24 billion IoT devices compared with 10 billion native digital devices. IT vendor Intel suggests that by 2025, about 40% of IoT devices will be in the business and manufacturing sector. More than 8% will also be used in the retail sector.
What Can Connecting Things in a Supply Chain Do for You?
In the first instance, IoT connectivity brings you data. Data can be turned into information. Good information can make any supply chain run better. Within a single supply chain process, it can improve efficiency. End-to-end information across processes can take optimisation to a new level altogether. Gathering the data digitally lets you get more of it, faster. Processing it digitally speeds up the transformation of data into information and insights. It shortens decision times. It increases flexibility. It helps you prepare better for the future. You no longer need to work around the inefficiencies and delays of manual checking, phone calls, faxes, or emails. Instead, you get real-time status and trend information directly from the supply chain.
This digital chain of data collection and processing can help in several ways.
- In many cases, if it can speak to you via the IoT, you can control it. Plant machinery can be automatically started, stopped or adjusted to match changes in demand. Truck fleet activity can be optimised to reduce the miles travelled without carrying useful loads (deadhead miles).
- Status and trend data from critical machinery can be continuously monitored. Problems or outages can be detected as they happen. Immediate repair then ensures minimal downtime.
- Data can be analysed for signs of impending problems or failure. Preventive maintenance can then be done at the earliest time with the lowest impact to production or logistics (perhaps at night or over a weekend).
- Raw materials and finished goods can speak too. Via the IoT, they can be connected to let you know how much you have of each article. They can also tell you the location of the stock – in a retail outlet, in a warehouse, even on a truck. The bullwhip effect of excessive safety stocks can become a thing of the past.
- Accounting becomes more efficient when your supply chain automatically informs you about assets and inventory. Machine status information gathered automatically reduces the need for manual intervention, helping to improve safety at work.
- IoT can connect points of purchase and customer sites. It can help record sales of products in real time. It can monitor usage patterns of products supplied to business end-users. Demand and sales forecasts can be refined. Marketing tactics can be improved. Even product design can be optimised.
- Historically, managing variation was labour-intensive and time-consuming. Supply chains were often built to avoid variation. Increased information and control via the Internet of Things changes this. Variation becomes easier and cheaper to manage. Instead of a liability, it can be turned into a competitive advantage. Supply chains can innovate to meet different customer demands better, faster, and at lower cost. They can open doors to new markets.
How Do You Connect Things to the Internet of Things?
Anything in a supply chain can be adapted to supply digital data to digital systems. At the very least, a product or a pallet can be given a radio frequency identification (RFID) tag. The tag holds data about the item, such as its description, part number, batch number, and so on. It can be read by a scanner that sends the tag information in digital format to a computer system for processing.
Machines and assembly lines can be equipped with sensors and counters with interfaces that convert from analogue on the machine side to digital on the network side. For control as well as monitoring, machines are increasingly equipped with microchips that receive instructions over the IoT for activating different machine functions.
Supply chain visibility in transport can be through GPS, RFID and in-vehicle monitoring technologies. Shipping can be planned, and delivery predicted. Product quality, for example for temperature-dependent products, can be monitored right up to the end-delivery point.
The data flowing to or from each thing in the supply chain may travel via different routes. Industrial networks inside factories, the Internet, and mobile radio networks are all possible. Together, they make up the Internet of Things. The central data-gathering and control systems can be located on the premises of the enterprise running the supply chain. They can also be provided as cloud computing services. The cloud is then the centralising entity, also offering flexibility and scalability.
Cloud solutions are especially relevant when supply chains extend beyond just one enterprise. Upstream, there may be independent suppliers of raw materials. Downstream, distribution including shipping and intermediate storage may be handled by a third-party logistics (3PL) provider. Separate retail partners may take and manage stock, as well as generating product returns. Even a manufacturing stage may involve the several different companies, all working in sequence as part of the same overall supply chain. A secure cloud system can then offer a neutral, easily accessible IoT platform for all partners to use together.
Specialised software solutions are now available for processing IoT and IIoT data. They provide software building blocks and tools to make solutions tailored to a given supply chain. Features can include data analytics to get actionable insights from supply chain “things”, cyber and IT security to prevent data breaches, and compliance checking to ensure data protection regulations are being met.
What Can You Do with IoT Data?
Supply chain data is only useful if it is actionable. Actions can be taken by a software application that monitors the input from different things, then reacts to it accordingly. For instance, systems can be programmed to order new supplies of raw materials if scans of RFID tags in a warehouse show that stocks are running low. Input from transport fleets can show estimated times of arrival. Customers can then receive automatic updates and confirmations of delivery times.
As a more specific example, an automotive manufacturer can use the IoT in its plants to optimise vehicle body painting. Through a network of sensors, a system can measure humidity, an important factor in the quality of the painting process. If humidity rises above an acceptable limit, systems automatically divert vehicle bodies to other parts of the production process. Painting is done afterwards when humidity levels have come down again. Rework (repainting) and idle time are minimised.
Data can also be made actionable by analysing it to detect patterns and trends. It may be possible to spot a failure likely to occur soon on production line equipment. The effects of seasonality, weather or other macro factors can be seen on transport fleet costs or on the maintenance requirements for equipment running on customer sites. The production line can then be repaired or upgraded before it breaks. Transport and maintenance planning can factor in predictable price and resource variations, and so on.
It is also possible to have too much of a good thing. Collecting data without any actionable goals in mind can be futile. Supply chain business requirements must always be the starting point, driving any choice of technology. Likewise, beware of confusing efficient data collection with improved process quality. If a process is misaligned from the start or loses more money than it makes, digital data and the IoT may only help make the problem happen faster and at greater scale.
Data security and cyber security may be tougher to deal with in the Internet of Things. In the purely digital world of business IT servers, PCs and mobile computing devices, cyber security may not be perfect. Nonetheless, it is often better than the IoT. There are historical reasons for this. Industrial networks in enterprises have traditionally operated in isolation from any other network. Reliability has been the top priority. Security has tended to be a secondary consideration, because the need was lower.
However, once an industrial network is connected to the IoT, this situation changes radically. Now, anyone can try to gain access. IoT product vendors have not always improved protection accordingly. Fixed passwords that are easy to hack are still a problem. Industrial network protocols devoid of any security, and a lack of firewalls are further issues. Security risks include data breaches, sabotage, and hijacking of networks and devices by hackers for attacking other networks. Proper security is as important for the IoT as for the Internet. It needs to be planned and implemented by cyber security experts.
What Supply Chain Paradigms Does the IoT Enable?
The IoT empowers supply chains to do better things as well as doing things better. End-to-end visibility helps supply chains move from push to pull operations. In a push model, enterprises try to guess the right quantity of products and services to stockpile ahead of time to match the market’s appetite. In a pull model, the IoT feeds data about demand into the supply chain for real time adjustments in production and distribution, offering higher efficiency and lower costs.
The pull model starts from the point of purchase and works backwards. For example, department stores can use IoT beaconing devices placed in their sales areas. The beacons present deals to customers via their smartphones. At the same time, they capture interest and demand. This data can be fed back to department store inventory management and procurement systems. From there, it can also give department store suppliers extra visibility for their own operations.
In other contexts, machines connected to the IoT can provide data on hours and intensity of usage. Within a supply chain, this helps optimise performance and uptime. Externally, on a customer site, this data can open doors to new supply models based on services, rather than products. Pay-per-use becomes possible, instead of pay-for-ownership. Customers get a better deal by only spending on what they need. Suppliers uncover new markets to supply with a service or rental based model.
Some industrial equipment manufacturers have gone further. They now offer customers outcome-based services. IoT sensors record machine performance, collecting data to measure and prove gains for customers. The companies offering the services still make their turbines, locomotives, farm machinery and so on. These physical products continue to be the basis of their business. However, their supply chains are now changing to offer customers results instead of just equipment.
Internet of Things technologies let supply chains better manage their operations from production through to delivery. Connected machines, vehicles, and inventory provide data in real time. Digital automation then uses the data to optimise the supply chain. Data analytics help spot trends and opportunities. If there are problems, the enterprise can see them and resolve them before they have an impact on partners or customers. Cloud solutions help members of extended supply chains and ecosystems to benefit from the IoT together.
Business goals must always take priority when deciding which IoT technologies to use. Security and compliance are also critical issues. If these aspects are properly managed, supply chains can benefit from the Internet of Things for increased flexibility, faster reaction times to market changes, and new, more competitive supply chain models.