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Creating Intelligent Supply Chains

Feb. 27, 2015
The Internet of Things has the potential to become one of the most disruptive technologies to impact future supply chains.

Today’s supply chains are in a state of transformation. The emergence of the connected or digital consumer is leading companies to place increased pressure on suppliers by demanding greater customization of products, swift delivery of goods and an experience that is smooth and seamless. As a result, supply chain operations are being placed at the heart of delivering a superior customer experience.

To successfully facilitate changing consumer demand, it is becoming increasingly important to have end-to-end visibility of shipments across a supply chain. Businesses need to be able to collect information about the physical location of shipments from the point of manufacture, across the distribution network and on to the point of delivery, so that they can quickly fulfil orders with greater accuracy and efficiency.

In the past, it was important for organizations to understand the physical flow of goods based on information that had been manually entered into IT systems. However, this had the potential to be inaccurate or out of date. Today, the introduction of Internet of Things-based technologies has the potential to transform end to end visibility across global supply chains. Billions of connected devices associated with global supply chains will transform the amount of information that can track shipments in real time. Digital information coming from these connected devices will drive increased levels of pervasive shipment visibility and this in turn will allow organizations to move towards more intelligent value chains.

Exponential Growth in Connected Devices

The exponential growth of connected devices holds the potential to revolutionize the exchange of digital information across the supply chain. Analyst firm IDC estimates there will be 200 billion connected devices by 2020, and Cisco estimates the market size at $14.4 trillion.

The Internet of Things (IoT) has many applications in the supply chain—for example, warehouse stock levels can be continually monitored so that stocks can be replenished whenever sensors detect a near-out-of-stock situation. Alternatively tagged goods in a warehouse can help to guide pickers to their exact location using augmented reality technologies such as wearable devices. For example, one German-based automotive supplier has created a virtual supply chain based on IoT technologies which is used to replicate the physical movement of goods from one of their plants. Each shipment has an RFID tag attached to it and these tags can be read not just in the factory but while travelling across third-party logistics networks to an end destination in real time.

SAP has built a supply chain demonstrator based on a connected vending machine, using their technology to monitor consumer buying trends. Not only can the vending machine recognize each consumer, but based on previous purchasing history it can make real time suggestions for next purchases or offer tailored promotions. The vending machine also monitors its stock levels and can automatically place orders for new stock to be delivered to the vending machine as required. With a global network of connected vending machines, confectionery manufacturers for example can analyze consumer buying patterns, or trends across different regions around the world and then optimize product mix for each machine based on hyper-local preferences.

In fact, Big Data analytics is widely regarded as a key component of IoT-based technologies as every company will need to find a way of analyzing information coming from sensors attached to connected devices. At the ARC Advisory Forum in Orlando in February 2015, the different applications of Big Data analytics in IoT was one of the key themes of the event. From an aftermarket supply chain point of view, many of the sessions presented at the ARC forum had a heavy focus on how IoT can help companies implement predictive analytics to help monitor the performance of remote equipment such as wind turbines or power generation equipment.

Emergence of a Digital Nervous System

The key challenge moving forward is how companies capture and analyze a whole host of critical information from a variety of products, appliances and equipment and then communicate status updates and information as we approach the next phase in the evolution of the Internet.

In this next phase of development, wireless and machine-to-machine technologies will help to connect globally dispersed machines and form the digital nervous system of the new world. To be prepared, manufacturers need to create business networks that support disruptive technologies by synchronizing the flow of data and transactions from different types of sensors attached to logistics drones, 3-D printers and even wearable technologies. Once a remote device captures information, it will need to be transferred to other business systems such as cloud-based B2B integration platforms or ERP environments. This automated flow of information into back end enterprise systems will significantly improve the efficiency of tomorrow’s supply chains.

In a global economy, the key challenges faced by organizations of all sizes are working seamlessly with trading partners located anywhere in the world and responding quickly to any form of supply chain disruption. Moving forward, the IoT will help to establish intelligent supply chains that potentially minimize disruptions to ordered goods, mitigate instances of downtime and allow companies to scale their supply chains according to economic conditions or consumer demand.

Mark Morley is industry marketing director for manufacturing at OpenText, a provider of enterprise information management solutions.

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