The Internet of Things and how it will influence modern Supply Chain ?

The Internet of Things is a term you’ve likely heard quite a bit in the past year or so. It’s frequently mentioned in the same breath as supply chain, with the common observation that it will significantly impact supply chain operations.

Internet of Things: What is it?

The term was coined in 2009 by Kevin Ashton, RFID pioneer (radio frequency identification) and co founder of the Auto-ID Center at the Massachusetts Institute of Technology (MIT), which created a global standard system for RFID. The simplest definition is the Internet of Things (IoT) is the network of physical objects embedded with electronics, software, sensors, and network connectivity, which enables these objects to collect and exchange data, often using the Internet.

The McKinsey Global Institute defines IoT devices as those that “can monitor their environment, report their status, receive instructions, and even take action based on the information they receive.

Frost & Sullivan’s estimate that connected objects will total more than 50 billion by 2020. The IoT is enabled by the widespread availability of broadband Internet, WiFi and Bluetooth connectivity. It’s also made possible by the increasing miniaturisation and growing functionality of the sensors and transmitters needed to enable this communication.

What IoT means for supply chain operations?

What this means is a massive amount of data, coupled with new communications options, is becoming available. And, because it’s new, many of the possibilities for exploiting the data probably haven’t even been dreamed up yet.

The IoT allows for virtually endless opportunities and connections to take place, many of which we can’t even think of or fully understand the impact of today.

Already we have GPS that allows for real-time tracking of cars, trucks, stuff—and people—through our mobile phones. Sensors on sensitive infrastructure items like bridges report structural information. Vision systems can identify sub-standard products in manufacturing environments so they can be removed from the line. Tags embedded in products or shipping containers can record and report data about the condition of the cargo and events such as temperature fluctuations or excessive G-forces throughout the supply chain.

One area that will play a prominent role in the future supply chain, as it’s impacted by IoT, is in-transit visibility. Analyst firm Berg Insight anticipates there will be a strong focus on cargo transport security and increased supply chain visibility in the coming years. Tracking of trailers and intermodal containers is increasingly common and technology advancements allow for even smaller logistics units such as individual pallets or cargo boxes to be tracked at reasonable costs.

The number of active tracking devices deployed in cargo loading units including trailers, intermodal containers, air cargo containers, cargo boxes and pallets reached 1.8 million worldwide in 2014. This number is expected to reach 5.8 million by 2019.

The maritime shipping industry has started to embrace realtime container tracking on a large scale. “The foremost example to date is Maersk Line that recently announced a major implementation,” After several years of pilot projects, 290,000 of Maersk Line’s refrigerated intermodal containers are now connected. 

Logistics and transportation companies are now accelerating their IoT efforts to improve productivity and customer service levels by taking advantage of the increasing amount of data generated by cargo tracking solutions.

As well, effective cargo tracking will aid companies in ensuring compliance with the increasing chain of custody regulations being implemented worldwide. Especially for sensitive cargo like livestock or perishables, being able to collect and use data about conditions during transit will pay dividends when reports are required for regulatory bodies.

Supply chain applications 

• The potential for IoT supply chain applications is huge. Objects that can communicate immediately open the possibility of knowing where they are at all times.
• The IoT will also contribute to better control over mobile assets, like forklifts or yard trucks, by having the ability to know where they are, but also to know how they are being used.
• In the big picture, all these smaller benefits can be brought together to create process efficiency through the sophistication that “smarter, highly integrated networks” can drive.

Pitfalls

• Since the Internet of Things is still in its infancy, there are a lot of questions that will need to be answered when you’re making a pitch to senior management to explain why your company will benefit from the outlay on new technology.
• Security will continue to be a big concern. With IoT “growing at a dangerously fast pace,” security needs to keep ahead of the technology.

Two areas stand out in this realm.

First, with so many items talking to each other all the time, there is massive potential for loss of privacy.

Secondly, with so many potential portals into the networks that are relied on for corporate data management, there is the chance that someone hacking your smart toaster, for example, might be able to get from there into your main operating systems.

• The second concern, as with any new technology is the risk that it will ultimately fail, or be rapidly superseded by the next great idea.
• For companies in the supply chain sector, the constant pressure to control costs and streamline operations is unlikely to abate. Current trends towards even stronger demand for e-commerce and the accompanying need for faster, more accurate business-to-business and business to consumer deliveries will no doubt encourage innovative, early adopter-type firms to take the plunge with new technology.

How to ensure you benefit from IoT ?

• What is certain is that the IoT will “create a torrent of raw data that must be converted into useful information.      
• Chances are the next tech boom will be companies trying to cash in on the IoT by developing apps in a variety of areas to enable the tracking, storage, analysis and application of the available information. The trick will be to figure out what works, what’s useful and what you actually need to drive efficiency into your supply chain.
• Another way to benefit as much as possible is to ensure you can leverage the technology assets you already have. Right now that means assessing what tech you have that’s ready for the IoT onslaught.
• One place to start is with the increasingly powerful and ubiquitous smartphone. This ‘gadget’ is changing the playing field for supply chain management. The combination of so much computing power in the palm of your hand, plus the data available through the IoT will revolutionise how we operate.

Mobile Devices in the IoT supply chain and what kinds of apps have been found to work?

• Phones can scan bar codes, which is useful for picking, packing and put away operations in the warehouse or DC.
• Dockworkers can use the camera in smartphones or tablets to capture load discrepancies and communicate this to all relevant parties in real time.
• 3rd party truck drivers arriving at distribution centre yards can use the same type of applications that are commonly used by airlines to expedite passenger check-in.
• Yard Management Apps exist that allow distribution centres that “live-unload” trailers to provide constant feedback and directions to truck drivers on where and when to bring their trailers to the warehouse.
• Apps are also available for shippers to hire carriers, set pick-up appointments and update shipment status.
• Asset management is another area where the phone can function as a tracking device, monitoring signals from objects nearby or far away.

How to ensure a successful IoT implementation with minimum Costs ?

Also crucial to ensuring a successful IoT application adoption is knowing what you should spend. Because it’s all so new, there are few benchmarks available, and projects are still very much in one-off territory.

Practically, this means budgeting one of these projects is a moving target and  breaking  it down into a number of cost categories that will need to be accounted for:

• Endpoints. IoT endpoints are a combination of things (real-world objects) and some form of hardware and/or software that detects or causes a change in the states of those things.” Depending on the implantation there can be a few or millions of endpoints required, and they vary hugely in complexity and life cycle. Industrial and enterprise endpoints are often custom-built and therefore carry a higher cost.
• Supporting Infrastructure. This includes back-end systems, hosting platforms servers, storage, database management and backups.
• Software. Standard packaged software and custom applications.
• Security. As noted above this is a complex area, and requires careful attention.
• Design
• Implementation. Endpoint deployment and installation can involve intensive logistics efforts and consequently high costs.
• Operating expenditures, including day-today management, hardware and software services, administration.
• Communications services
• Downtime

Summary

• It’s clear there’s a lot of work involved before you can reap the benefits of an IoT project. But it’s clear that the potential for supply chain efficiency is enormous.
• 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.
• Given the great unknown that the IoT presents, supply chain managers need to keep a close eye on what will no doubt be the emergence of many new technologies that will leverage the data that’s becoming available.
• Know the dangers but keep the potential benefits in mind as you watch this tech story unfold.