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5 Ways the Internet of Things Will Benefit the Supply Chain

April 09, 2015

Contributor: Christy Pettey

The IoT presents unprecedented opportunities to digitally enable the supply chain, and to create solutions that combine digital and physical products and services.

How many times have you been late for a meeting only to find that the elevator is ”out of service” meaning you had to take the stairs? The good news is that companies can leverage the Internet of Things (IoT) to make this a thing of the past.

Embedded sensor technologies can be used to allow for bidirectional, remote communication with over one million elevators worldwide. Based on captured data, technicians can run diagnostics and remotely initiate repair options or guide on-site technicians to make the appropriate decisions, resulting in increased machine uptime and improved customer service.

Unlike previous generations of passive sensors, the IoT will allow a supply chain to control the external environment and execute decisions. With the IoT, sensor-embedded factory equipment not only can communicate data about parameters such as the temperature and utilization of the machine, but also can change equipment settings and process workflow to optimize performance.

As Noha Tohamy, research vice-president at Gartner, will discuss at the upcoming Gartner Supply Chain Executive Conference, in order to profit from the IoT, chief supply chain officers (CSCOs) need to leverage analytics and define new processes along the entire supply chain, with the ultimate goal of fulfilling customer demand for digital and information products and services.

Ms. Tohamy outlined five rules CSCOs must follow for success:

Pursue the IoT at any Demand-Driven Value Network (DDVN) Maturity Level

The ability of an organization to benefit from the IoT is not predicated on higher maturity levels. However, the magnitude of those benefits will be impacted by those levels.

Take, for example, a consumer products manufacturer who plans to implement telematics to allow the organization to capture information on the location and conditions of its transportation equipment. “While a functionally siloed company (Stage 2) would be able to apply the IoT use case to capture efficiency and cost reduction improvement; a company with an integrated supply chain (Stage 3) would  benefit from the same technology to further improve overall supply chain performance, and to become demand-driven,” Ms. Tohamy said.

Leverage the IoT to Improve Existing Supply Chain Processes

As well as being a driver for business and supply chain transformation, IoT can also drive incremental benefits to existing supply chain processes spanning asset utilization, warehouse space optimization or production planning.

Consider the Potential for IoT to Fully Redesign Existing Supply Chain Process

The proliferation of the adoption of IoT will drive the need for the redesign of many existing supply chain processes.

For example, an industrial equipment manufacturer that has redefined its customers' value proposition from selling pure physical products to offering a complete solution that spans physical products, embedded software and combined services. In this business model, a supply chain process like sales and operations planning must now account for the customers' demand for the complete solution.

Assess the Potential for Offering IoT-Enabled Information Products to Internal and External Clients

“With the IoT, the supply chain will have unprecedented access to data valued by internal and external stakeholders,” Ms. Tohamy said. “This presents an opportunity for supply chain groups to co-develop new information-based solutions for individual customers or markets.”

For example, an agricultural equipment manufacturer can capture data from sensors on agricultural equipment to understand how farmers are using different product features. This information can be shared with the R&D groups to develop products that best meet customers' needs.

Build Strong Supply Chain Technology Leadership to Support the Convergence of the Digital and Physical Supply Chains

Infusion of IoT in the supply chain will create new challenges and demands on the supply chain organization who will likely be tasked with delivering, sourcing and maintaining technology-enabled products and solutions.

“This presents a great opportunity for the supply chain to play a critical leadership role in defining the overall digital business strategy,” Ms. Tohamy said. “To do that, the supply chain organization must acquire senior technology skill sets and leadership with the companywide credibility to define strategic technology direction. These skill sets must go far beyond those with the traditional focus on providing tactical support to supply chain functions.”  

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