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IoT and the supply chain: Dealing with disruption

The world of logistics and supply chain is on a precipice of massive change with few daring to take the leap of faith required to bring their organisation into the 21st century. Disruption due to external factors is at an all-time high, says Lee Stacey, product evangelist at Thingstream, and every part of the supply chain needs to change. Fast. But how?

The disruptors

External factors are set to plague the supply chain over the next few years. These include: political tussling, like that between the US and China regarding trade deals; unrest in the middle east, not least the targeting of goods carrying ships; and of course, Brexit. All of these have an immediate effect on the shipping of goods around the globe and, of course, the cost of doing so.

Environmental concerns are an increasing problem for the supply chain. For shipping companies, the next few years will entail rising fuel costs in the short term, while the conversion to low-sulphur fuel takes place and in the long term with the conversion to electric propulsion. Not only this but an increase in “freak” weather is having a massive effect with entire shipments being lost to the sea.

It’s also important to note that today’s consumer is very different to that of just a few years ago. Modern consumers demand more choice in getting goods to them where, when and how they want them. 24 hour delivery windows simply can’t cut it anymore. This behavioural paradigm is a result of disruptive companies like Amazon moving into the retail and distribution business and simply doing things differently – most importantly with a customer focus, rather than just simply thinking about getting a product from point A to point B in the quickest time or cheapest way possible.

Dealing with disruption through digital transformation

In the simplest terms, the supply chain needs to improve at every level. Due to rapid change and an unpredictable marketplace, there is also a need to be able to react quickly. Easy to say but not so easy to achieve.

While no two supply chains are exactly the same (and likewise for the links within them), there is one thing every part of the supply chain has in common with every other: the reliance on, and the production of, data. It’s the exploitation of this data that can fuel the change needed to keep up with and even beat disruption.

This is where the term “digital transformation” becomes more than a marketing buzzword. There is now an abundance of sensors that can retrieve data from parts of the business and the supply chain at large that were previously unavailable. Couple this with the glut of analytics software available today and any business can have the power to find and weed out inefficiencies they didn’t even know they had.

IoT – the backbone of digital transformation

The concept of getting data from point A to point B is simple enough on paper but in the real world, point A and point B could be in the same warehouse or on different continents. This is where the Internet of Things (IoT) comes into play. IoT is essentially everything that sits between the sensor and the destination for its data. Likewise for sending information or instructions in the opposite direction.

The true power of IoT extends beyond simply tidying your own yard. Data and even assets, each of which having a digital footprint, can also be shared in real time between the different links in the supply chain, enabling further improvement of the end-to-end process.

Another benefit IoT can bring is the creation of new revenue and business opportunities. This could be through partnership with other organisations or changing to an x-as-a-service business model.

Joined-up thinking with no silos

While it’s no bad thing implementing your own local IoT solution, more benefit can be achieved by all nodes in the chain working together. To date, many systems such as navigation, warehousing and condition monitoring operate in silos and as such, the scope of the benefits that can be achieved is limited for this reason. Sharing data and insights throughout the chain in real time can enable an adaptive supply chain. This will in turn bring value to the end customer and enable the supply chain to react quickly to disruption.

The three stages of IoT in supply chain

An IoT strategy shouldn’t be thought of as something that is decided at the beginning of the project, rolled out, then left to run. Due to the very nature of IoT, you find out more about your organisation as you go along and for this reason, a step-change approach will allow you to adjust your focus as you proceed.

Stage 1: Discover

The first stage of IoT adoption is one of discovery. This is where you begin to capture data from across the supply chain to find out where the inefficiencies are. The low-hanging-fruit here is the data collected from relatively simple IoT devices designed to capture information about the condition and location of goods and/or assets.

Stage 2: Adapt

Once data has been acquired, it then needs to be interpreted and changed into action. In this stage, the supply chain begins to make decisions and affect change based on analysis of the collected data. Initially, this will be a manual exercise but once enough data has been analysed it should be possible to locate tasks and processes that can be automated and triggered by IoT data in real time.

Stage 3: Innovate

The innovation stage moves away from fixing problems altogether and fully into the realms of value creation. Data being collected throughout the chain is now analysed and fed back to enable continuous improvement of the processes and the network. Further analysis of the data at this stage can also highlight potential new business models, revenue streams and products.

By forming data-led ecosystem partnerships, the potential for new business opportunities increases further but lowers the cost at each node in the supply chain.

Despite an almost overwhelming amount of external disruption, it’s not all bad news for the supply chain. Digital transformation and IoT bring a vast wealth of power and understanding to the supply chain. Beyond that, the uptake of these technologies can also help to discover entirely new ways of doing business. It’s an exciting time for the supply chain and it needn’t be that scary.

The author is Lee Stacey, product evangelist at Thingstream

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