By Christine Parizo
Some of the biggest challenges in international supply chain management involve customer demands for faster response times and lower costs. According to industry association MHI’s 2016 report1, 57 percent of respondents are struggling with response times, while 56 percent said that total costs to manufacture and deliver a product (known as “delivered costs”) are a concern.
IoT can provide competitive advantages by addressing these and other challenges in international supply chain management. According to the Gartner market research company, new IoT applications involve more than just passive sensors. Once embedded in equipment, IoT capabilities can change settings and reconfigure workflow to optimize performance.2 They can also make international supply chain management less of a linear process and more of a loop that brings in data post-delivery.
These capabilities are driving IoT adoption. In its research covering supply chains and other enterprise applications, Gartner estimates that businesses worldwide will have installed almost 2.4 billion IoT devices by the end of 2016, up 26 percent over last year, and will reach almost 7.3 billion installed IoT devices in 2020.3 In the key supply chain area of fleet management, the BI Intelligence research service estimates IoT solutions will be installed in 180 million commercial vehicles in North America, or 90 percent of the addressable market, by 2020.4
IoT helps optimize multiple aspects of international supply chain management.
For example, being able to fulfill orders faster can positively impact the bottom line. Consider current IoT usage in vending machines, which enables inventory monitoring, reordering fast-selling products, recognizing when products are delivered and paying suppliers automatically.
IoT can also help tackle the common challenge of unforeseen delays in the supply chain. Weather conditions or man-made disturbances can disrupt shipments. Using IoT applications, international supply chain managers can reroute trucks, for instance, and make changes to automated delivery systems.
On the factory floor, IoT can be used for applications such as locating lost inventory. One home appliance manufacturer deployed radio-frequency identification (RFID) sensors across its factory to keep track of inventory. These sensors have freed up employees from having to scan each piece multiple times, and it also lets them know immediately whether they have loaded all the necessary parts on the assembly line.5 If this type of use is taken to the next level, embedding RFID chips in pallets and using global positioning system (GPS) identification and data analytics that aggregate weather, traffic, and driver data, it’s possible to optimize pallet delivery and create other efficiencies in the supply chain.6
IoT can also assist with protecting inventory as it is manufactured, including monitoring temperature stability. A U.S. automobile manufacturer tracks the humidity levels in its plants and moves painting operations to another section of the building when humidity is too high, to reduce the likelihood that the vehicles will need repainting due to poor conditions.7
The power of international supply chain management doesn’t have to end at delivery. Data collected from IoT sensors can be used to determine how products are selling on the shelves – for example, different varieties of toothpaste – based on real-time data from the sensors. It can help companies segment their customers better, allowing for more targeted marketing in certain areas.8
In the popular mind, IoT may seem to be all about wristbands, wearables and connected cars, but it’s also about warehouses, factories and supply chains around the world. In international supply chain management, companies increasingly use data collected via IoT sensors not only to optimize their supply chains, but to learn more about consumer behavior and become more responsive.
1. "The 2016 MHI Annual Industry Report – Accelerating Change: How innovation is driving digital, always-on supply chains", Deloitte/MHI; https://www.mhi.org/publications/report
2. "Five Ways the Internet of Things Will Benefit the Supply Chain", Gartner; http://www.gartner.com/smarterwithgartner/five-ways-the-internet-of-things-will-benefit-the-supply-chain-2/
3. "Gartner Says 6.4 Billion Connected ‘Things’ Will Be in Use in 2016, Up 30 Percent from 2015", Gartner; http://www.gartner.com/newsroom/id/3165317
4. "How IoT Logistics Will Revolutionize Supply Chain Management", Business Insider; http://www.businessinsider.com/internet-of-things-logistics-supply-chain-management-2016-10
5. "Forging links into loops: The Internet of Things’ potential to recast supply chain management", Deloitte University Press; https://dupress.deloitte.com/dup-us-en/deloitte-review/issue-17/internet-of-things-supply-chain-management.html