The Internet of Things and Its Impact on the Supply Chain

Predicting the weather with 100% accuracy for all regions has always been a challenge, so imagine confirming weather forecasts using real-time activity logs sent by windshield wiper sensors of all cars in a particular region. This is already a reality in the USA, on the Weather Channel.

This an example of the many possibilities of IoT (Internet of Things). According to Gartner consulting, “IoT is the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment.”

The term IoT is not new. Created in 1999 by Ashton Kevin, a pioneer in working with Radio-Frequency Identification (RFID) networks and co-founder of the Auto-ID Centre at MIT, it was presented to the Supply Chain team of P&G (Procter & Gamble), describing possibilities of using RFID combined with the newly created technology — the “Internet”.

It took time to create the right conditions to allow IoT to advance, such as overcoming some of the technical barriers, such as hardware, software and the necessary communication infrastructure.

But the future has arrived and opportunities exist in every conceivable area: IoT’s potential is immense and further enhanced by the recent advances in Artificial Intelligence (AI) and Big Data analytics.

How Big Is the Market?

According to Gartner, the number of “things” connected should be 25 billion by 2020 and IDC estimates the global market for IoT at U.S. $ 1.7 trillion by that year. For the consulting firm Accenture, by 2030, productivity gains resulting from the investment in IoT will add $ 6.1 trillion to US GDP and contribute to an increase of U.S. $ 14.2 trillion to the global GDP. They also estimate that we will have 50 billion devices and 200 billion sensors connected to the Internet by 2020, sharing data with systems, applications, people, companies and their business partners. McKinsey also estimates that there will be 30 billion connected devices by that year and the impact on the global GDP will be U.S. $ 6.2 trillion by 2025.

All the above estimates are impressive: the question is how to effectively can we all capitalise on the market opportunity of this trend, given the huge diversity of applications for IoT?

Opportunities and Challenges

With a great opportunity at hand, a number of companies have already implemented IoT initiatives with different goals. In the context of the “connected car”, there is, for example, the Apple CarPlay, Google Android Auto, MirrorLink, Ford Sync / OpenXC, GM OnStar, among others. For the “connected home”, there is the Apple HomeKit, Google Nest, etc. For generic manufacturing platforms we can list Cisco IOx, GE Predix, Intel IoT, PTC ThingWorx, etc.

However, IoT requires standards that enable communication, operation and programming across different platforms, regardless of brand, model, manufacturer or industry. Connectivity between people, processes and “things” must be possible regardless of the type of screen, browser, operating system or hardware used in the project. Furthermore, the need for security and privacy features is essential when delivered at large scale.

IoT’s Impact on the Supply Chain

Supply chain management processes have the common goal to deliver the right products at the right time, place, quantity and cost. Considering this, there could be space for many uses of IoT.

The use of RFID tags is one of the key factors to enable efficiency in various supply chain processes at manufacturers, warehouses, logistics operators and stores alike, in order to count and track SKU’s in real time, check orders and define the location for the smartest movement of products.

Another example is Wearable Devices in warehouses and distributions centres, where the picking of products is being optimised through the use of smart glasses that integrate with the traditional bar code identification. The concept is called “Pick-by-Vision” or “Vision Picking” and can be viewed in the video from DHL. Other examples of smart glasses’ manufacturers for industrial use are Google Glass, Epson and Brother.

In a store, consumers can be guided to the exact location of an item that he/she is looking for, as well as automate and facilitate the checkout and payment processes. The presence of more than 10 companies presenting RFID solutions at NRF 2015 is a positive indicator of progress in the adoption of this technology.

Among some business cases is the U.S. retailer Target, announcing recently that they will deploy RFID in all of its stores worldwide by 2016. Zara has also implemented its RFID project in more than 700 stores and plans a rollout to all stores by the end of 2016.

For marketing and in-store relationships with consumers, companies have adopted “beacons”, sensors with low-power wireless Bluetooth Low Energy (BLE) technology, which enable to transmit messages or prompts directly to a smartphone or tablet when people are within the right range of a products. It is a kind of indoor GPS that accurately locate the customer’s position within the store and sends customised offers and content, based on their profile, interests and brand history. Apple and Tesco are examples of retailers who have adopted solutions based on the iBeacon protocol of Apple, which is one of the key players of this technology.

Back to Basics

For your company to make the most of the IoT “(r)evolution” in the Supply Chain, it is imperative to ensure that the structural projects have been implemented and that the basic supply chain management systems and processes are being executed with extreme efficiency: “Back to Basics”.

By: Ricardo Prochnow, NeoGrid Market Intelligence Coordinator.

We are experts in synchronising your business to actual demand - by always making your product available to the consumer, at the right place, time and quantity. We are Neogrid - a company providing automated supply chain management.