Will IoT reinvent the supply chain?
While IoT is promising to reinvent the in-store experience with smart shelves, robots and other connected devices, the big early payoff appears to be back in the supply chain.
According to PWC’s “2019 Internet of Things Survey,” supply chain and asset management are retailers’ top priorities for active IoT projects. Almost half (49 percent) of retail respondents indicated they are already benefiting from using IoT solutions to improve their supply chain. Thirty-eight percent expect to see value within two years.
PWC writes, “IoT solutions can monitor and report the exact location, environment, and handling of shipments from a factory or fulfillment center to a retail store or customer destination. This capability offers retailers real-time insights into the handling of an order while it’s en route, while also spotlighting any delays.”
Microsoft’s “IoT Signals” report that arrived in late July likewise identified supply chain optimization as the top IoT use case at retail, cited by 64 percent of retailer respondents. That was followed by the closely-related inventory optimization, 59 percent; surveillance and security, 48 percent; loss prevention, 44 percent; and energy optimization, 40 percent.
“IoT is a huge benefit in supply chain,” a developer in the manufacturing sector stated in the report. “You can automate, get more efficient, use more data, and get faster.”
IDC’s just-released “Worldwide Supply Chain 2020 Predictions” report explored how a wide range of digital technologies and platforms are expected to drive efficiencies. In an interview with Modern Materials Handling, Simon Ellis, program VP, global supply chain strategies at IDC and the report’s author, cited the potential benefits of faster supply chain decision making from AI, access to different streams of data through IoT and more reliable data through blockchain.
Mr. Ellis said, “Supply chains that do a better job of leveraging the data available to them, I believe, will outperform the ones that do not.”
Discussion Questions
DISCUSSION QUESTIONS: Does it make sense that IoT is driving quick dividends for retailers in the supply chain? Where do you see the obvious and less obvious supply chain benefits in the near and long term?
Poll
BrainTrust
Michael Terpkosh
President, City Square Partners LLC
Oliver Guy
Global Industry Architect, Microsoft Retail
Obviously the supply chain is greatly impacted by IoT. However, I would caution not to ignore the benefits to the supply chain of an IoT-enabled store. Without a doubt, a competitive advantage will come to those who first leverage IoT to integrate their stores deep into their supply chains.
IoT is mostly relevant in the replenishment of shelves. Drones in stores can quickly spot inventories on hard-to-reach top shelves. It will also reduce the time needed for inventory counts in the distribution centers quite dramatically.
IoT can drive quick, cost effective wins in supply chains. The cost of the technology is relatively cheap, versus huge capital intensive warehouse/distribution projects. This can allow any supply chain to implement IoT projects and start to see benefits and payback in the short-term (same year vs. a multi-year capital intensive project). Many of the same technologies being implemented in retail stores can work equally well in the supply chain environment. Retail smart shelves equate to smart warehouse slots. Connecting devices across the store via wireless networks have similar efficiencies for warehouses, transportation networks and retail notification. Then, as mentioned in Tom Ryan’s article, there are huge data insight opportunities in the supply chain using AI to fine-tune the whole supply chain. As retailers try to find the right combination of IoT in store that customers will appreciate, there are huge opportunities in their supply chain network for early and fast adoption of IoT.
IoT has huge potential in retail and supply chain is a key area where it can add value quickly. The ability to directly link real-time consumption of product to orders (unattended retail for example) is a potentially quick win to drive up availability and reduce lost sales without increasing inventory. Beyond that the ability to track product and shipments through the supply chain in order to have the insight to make more appropriate decisions around redeployment has huge potential to reduce the impact of delays, reduce fuel costs and increase sales.
The difficulty is around connecting so many different types of device and indeed connecting different initiatives/projects together to benefit from the “network effect” of overall insight – something that could well feed into a supply chain control tower of real-time perspective. There is also a huge challenge in terms of linking the devices and insight to the rest of the infrastructure (connecting Information Technology to this operational technology) – hence the reason analysts are predicting that the big cost (around 50 percent) in IoT projects for the next few years will be integration.
I have seen so many IoT projects run by retailers over the past few years – but the projects never go anywhere because the business case was not big enough. My perspective is that linking these things together and benefiting from the “network effect” is where things start to get interesting, offering massive insight and potential for new innovations.
The industry writers and journalists must be careful to insure that, when we talk about IoT, we are all talking about the same thing and that is Internet Protocol (IP) addressable devices (the “Things” in IoT) that can “speak” to the other devices via the Internet (the “Internet” in IoT). With a standard definition as a given, we can say that the biggest winner from the use of IoT is inventory accuracy. This is especially true in physical stores. That in turn can impact upstream supply chain activities to make those activities more efficient as a result.
IoT can provide very good data along the supply chain to help suppliers and retailers know much better the actual location and inventory of items headed to stores. However, the most important data point is the demand and inventory on shelves in each store. The POS system inaccuracies do not provide accurate inventory data as has been well documented. Sensing on-shelf inventories automatically using IoT is technically very difficult so technologists have focused on tracking items in the supply chain. The Holy Grail for supply chain improvements using IoT technology will occur when on-shelf inventory can be collected automatically and efficiently.
Supply chains thrive on information. With fresher and more accurate information, supply chain practitioners will make better decisions and realize higher efficiencies of the workforce. When that information is shared across the organization, such as sales and merchandising, we see better informed business decisions that optimize across the company and not just a specific function.
Take that further to other partners in the extended supply chain and you are able to create shorter, smarter, more intelligent supply chains that better serve the consumer. It’s all about real-time, accurate, and actionable data that transforms existing processes and creates new ones in multi-echelon networks.
While some of the more notable business use cases for IoT in the extended retail supply chain are around omnichannel fulfillment, traceability and asset management, there is a clear opportunity for it to help with basic blocking and tackling issues like out-of-stocks and overstocks. By addressing these core inventory challenges and getting early and significant wins for all trading partners, retailers and suppliers can more easily and effectively gain more resources for advanced IoT applications.
The capability to manage supply chain/logistics/inventory is better than ever. Technologies (like IoT) are allowing for more efficiency. This will cut costs by helping to reduce excess inventory, better distribution and more.
I believe IoT holds universal promise in retail. The supply chain benefit is obvious, but the store is where the big ROI is. The challenge for both the supply chain and the store is getting to a real time platform that reacts in a sense and respond mode similar to a biological model. Understanding inventory/sales/customer data via IoT tomorrow for what happened today is simply unacceptable, but almost all retailers function in this manner with a decentralized point of sale that is a day late and a dollar short.
Until we change the supporting islands of automation into a real-time unified commerce platform we will not reap the benefits of this game changing technology.
IoT in the supply chain is a natural — supply chain is all about optimization and IoT throws off lots of new data to be able to do that with. That’s already established to a large degree. The larger opportunities come with integrating IoT into the store as that hasn’t been done (at scale) effectively yet.
There are several uses of IoT in production right now, beyond physical asset management. One company is leveraging IoT in the helmets of workers to monitor health and safety, and to notify the worker and management if the worker is under too heavy a strain while they’re on the job. The possibilities of IoT is endless.
The supply chain thrives on all forms of data and the more you have (and use) the more pliable it becomes. The nature of the supply chain, whether deterministic or probabilistic, is optimization and based on data.
IoT can impact fast routing, establishing appropriate safety stock, avoiding stock outs or improve in-store counting productivity. However, IoT is just a tool — a bunch of sensors to bring in added data — it can tell you where products are, what pallets contain, when things arrive, and whether containers are filled. With the right platforms and data science they can increase efficiency, but (right now) by themselves they only automate current ways of measure and share the data to centralized points.
Retailers who can harness the collection of data (via IoT) and simplify the data to combine with optimization algorithms to use the data will be the winners.
I am fully supportive of the advanced technology that IoT will bring that will enhance existing supply chain dynamics. I am optimistic about its ability to seamlessly connect each store to the entire supply chain with real-time data that can increase visibility and transparency and, ultimately, can maximize the consumer’s experience. Conversely, with the ubiquity of data breaches, I would like to see more “robust security measures” implemented to ensure consumer data is protected.
I think the supply chain is benefitting (and will continue to) massively from technology including IoT. The logistics industry in retail alone is huge, and ecommerce uptake keeps impacting this further. The ability to better track and monitor shipments, and know their history, is a no brainer when it comes to transforming the way the industry works. I think connecting this with stores in smarter ways will also bring new improvements — whether it’s robots reporting out-of-stocks and ordering supplies to IoT enabled shelving identifying when they need restocking (as an example) — and help bring the frictionless concept to the backend of retail too.
The obvious benefit of IoT in the supply chain is that it will help automate many things. IoT alone, however, won’t be beneficial as IoT needs AI to act as an intelligent machine – one that can learn from the data it collects, make interpretations, and decide the next course of action, just like humans do. AI needs the ability of a machine or software to perform a pre-programmed task repetitively, but with efficiencies many times higher than a human i.e. RPA.
The combination of these three factors is set to power the digital enterprises of the future.