The Connected Supply Chain: Get Positioned Now to Play

Game changing.

That’s the impact the Internet of Things (IoT) technology may have on Supply Chain Management generally, and inventory management and demand forecasting specifically. And it’s happening now.

Through 2025, according to projections by DHL and Cisco Consulting Services, the IoT can be expected to generate some $1.9 trillion in value driven by supply chain and logistics applications. By 2020, the firms also estimate that the number of devices connected to the Internet will explode to 50 billion from 2015’s 15 billion.

Supply Chain Management at its simplest involves managing the flow of goods and services from the point of origin to the point of consumption and all the stops in between. A supply chain that’s “connected” stands to yield any number of operational efficiencies. But, at the same time, there will be challenges – not the least of which is bringing businesses current with IoT technology, given the number of outdated legacy systems being used alongside new technologies and assets that are both connected and unconnected.

Among the efficiencies a connected supply chain can create:

· Far better tracking of assets and at incredibly granular levels. The IoT poses substantive advantages by expanding the existing application of RFID and GPS sensors that will track products from floor to store or more. In addition, deeper data dives will be possible on things like storage temperature or length of time on retailers’ shelves. All of this improved data will combine to improve quality control, delivery performance and forecasting.

· Having better data on assets can lead to improved production schedules and also give companies a better perspective on vendor performance. That’s important when up to 65 percent of the value of an organization’s products or services stems from its suppliers. Having a better understanding of how they’re handling supplies and product is a bonus.

· IoT monitoring programs for forecasting and inventory planning purposes are a lot more accurate than what humans can do. Still, data collection can be haphazard, not necessarily providing a good baseline for analyzing product performance and predicting failures. MIT’s Center for Transportation and Logistics, though, has developed an algorithm that builds IoT failure data directly into the equation. It not only helps predict future inventory needs, but has been shown to help reduce stock by 6 percent to 10, a considerable bottom-line impact

The drive to create a connected supply chain is not going to be easy, however. And it’s not just the question of investing in the technology and in the skills that people will need to develop to make it work.

The IoT-connected supply chain is going to result in exponentially larger amounts of data. Simply collecting it won’t be enough. It’s knowing what to do with all the disparate data that will be produced, when much of it will be incomplete, insufficient and inaccurate. This data will need to be accounted for and properly managed in order to lead to the sophisticated analytics that provide insights for smarter decisions. Sound analytics processes, along with the right people and technology need to be put in place.

Without question the IoT is changing the supply chain game. But as this game is a work in progress, your best bet is to start positioning yourself now to be a player.