Now is the time to explore the IoT supply chain

The Internet of Things will create profound and irrevocable changes to traditional supply chain management. Here's advice on how you can capitalize on the potential instead of being left behind to react.

The Internet of Things may not be technology's final frontier, but it's certainly offering new areas of exploration....

Some of you might want to think about that in terms of expanding your business itself, but all of you will want to think about how the explosive growth of smart products will change your supply chain. That's why business leaders at all levels need to start creating an IoT supply chain strategy now. Here are a few issues you'll need to know.

Whether talking about enabling an IoT supply chain or creating products that meet IoT needs, creative thinking and top-level ownership is needed. The CEO's team needs to take an entrepreneurial approach to the business model and the products and services the company sells. Questions to confront include:

  • How will we transform our products to smart products?
  • What platforms are needed to harness data generated from smart products?
  • Will this be an internal-only initiative?
  • Are we building a new business unit or spinning out a new enterprise?
  • How will our support structures -- plants, logistics and service chain -- change?
  • What investments will be needed to adapt to this new world?
  • Do we need to forge partnerships to enable these changes?
  • Once you place smart products in the market, an always-on organization will possess a new level of awareness and must respond. How will internal processes and the supply chain then need to change to become more agile and responsive?

Let's imagine a new digital product with sensors and other devices will be launched into the market. The first key consideration is getting trading partners and customers involved. Often manufacturers are removed from markets and have poor insights into the world of their customers. Distributors and logistics providers also fail to leverage their proximity and lack an understanding of customers beyond those at their back door.

Connectivity and streaming data creates a sense of urgency to respond, but that response must be accurate to make IoT profitable.

IoT will promote new partnerships collected around new kinds of devices and software, third-party platforms, integration technology and channels of distribution. All of this, along with broadened product offerings, will increase supply chain complexity and necessitate a reimagining of processes. An IoT-enabled supply chain encompasses a total lifecycle view of the product. Here are the key areas that should be addressed in the plan.

Total lifecycle management. Smarter products enable information across the lifetime value, helping product developers, sales, and supply chain and service management to innovate and improve products and quality, and to develop new sources of revenue.

Responsive fulfillment. IoT's impact is dramatic in this category. In a world where embedded products call out in real time for refills, replacements and same-day delivery, distribution networks will have to be ever ready with the right inventory strategies.

Predictive service and maintenance. How can sensor and other data be analyzed to reduce failures, avoid downtime, and increase product performance and value in the eyes of the customer? Smart products will increasingly enable companies to address these issues, though that capability comes with the expectation of much-higher service levels.

Flexible manufacturing. IoT will drive richer product choices and customization with shorter lead time. The digital manufacturer will need to take a more responsive approach.

Smarter demand management. How do we develop richer data sources and learn to use these to understand customers and consumption patterns -- at an item level -- by location? IoT will require we answer that question.

New needs in an IoT world

Regardless of whether your organization moves into the business of producing IoT products, such products will force addressing IoT supply chain issues. For example, disparate systems will need to talk with one another, and the need to mine the rich and vast sources of data IoT generates will be pressing. That connectivity and streaming data also creates a sense of urgency to respond, but that response must be accurate to make IoT profitable. That means not only incorporating the data and capabilities above, but also more frequent, precise and responsive planning cycles. Supply chain managers have been clamoring for visibility, but their dated systems are not able to achieve this due to old data models and systems.

In other words, traditional systems will need to modernize to provide new views. You should prepare for radical changes in two major ways: integration and responsiveness.

When addressing integration, make sure you deal with these integral areas.

Sensor networks. These provide source data about "things," including carriers, their equipment, and other inventory and products; trucks and containers; machines, work-in-progress materials and other physical objects related to factories; and people. Sensor data is a new data type, which many traditional software products don't have. Thus sensor middleware or sensor networks will need to become part of the IT platform. 

Big data engines and complex event processors. Complex event processors continually monitor the vast amounts of data generated by and related to IoT to discover patterns and create insights that reduce risk and boost performance.

Unified integration. Often overlooked, but critically important is integration that unifies business-to-business and application-to-application scenarios. Data needs to be shared and incorporated into applications in real time across the supply chain.  

Application program interface (API) libraries. Standard products and processes will be needed to connect organizations to things.

Business process extensions. The click-and-connect world of applets for sharing data and processes are like APIs, but expressed in the language of the business that allows workflows into millions of endpoints.

IoT supply chain requirements

An IoT supply chain requires the following:

  • Demand management targeted to how events affect demand -- forecasting should be at an item level by location.
  • Inventory planning to capitalize on IoT data, which can provide better insights on current inventory conditions and status, and, in turn, more efficient inventory policies.
  • Manufacturing scheduling at a finite level to support new product launches and customization with more agility.
  • Logistics that provide visibility throughout the transportation process.
  • Service logistics that use devices to call for service before people are aware of failure -- smart processes will equip one service call with all the right skills and parts with the goal to make downtime obsolete.

Although IoT logically centers on "things," employees -- that is, people -- will still be important. Be sure to encourage exploration and fresh ways of tackling old challenges via new technology and processes. These will be keys to arriving early in this new world of IoT and cultivating all it has to offer.

Next Steps

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This was last published in February 2016

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