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IoT – The Next Frontier for Supply Chain Innovation May 27, 2015

The ‘Internet of Things’ or IoT is one of the few phrases that elicit visions of grandeur and immediately captures the imagination of the masses based upon its wide open potential.

The possibilities of IoT in the business world are exciting and real. Ubiquitous connectivity, affordable and accurate sensors, technologies to digest massive volumes of data and secure information keep reducing the barriers of adoption. Supply chain operations and the techniques utilized to manage them will be heavily impacted by IoT.

Over the last 30 years, the value chains have been getting more and more fragmented, driven by economic factors that reward specialization. Outsourced manufacturing and third party logistics are a direct consequence of this trend. Business operating models such as Collaborative Planning Forecasting & Replenishment (CPFR) and Vendor Managed Inventory (VMI) have attempted to offset some of these challenges, but still have significant gaps.

A fundamental requirement to efficiently manage a supply chain is ‘visibility’- of raw materials, work in progress, goods in transit, finished goods inventory, machine availability and more. Deficiency in any of these aspects leads to overcompensation, resulting in a bull whip that translates into excess inventory, delays, increased costs and working capital.

IoT offers improved visibility of all inventories, the status of the machines and their ability to make certain products, delays in truck movements, prevailing environmental conditions, etc. The ecosystem will evolve and mature over a period of time, but enterprises need to start planning and preparing for tapping into IoT.

The following foundational considerations are essential for companies to focus upon to set the stage:

Robust infrastructure and comprehensive systems for planning and execution

IoT provides access to new data sets; the immediate value is being able to utilize this set of data to create signals to predict an imminent need for a part, a delay in the receipt date of a product, etc. and determine course corrections and tweaks to plans. To truly leverage IoT, companies need to ensure that robust applications exist to support the planning and execution functions. These applications need to be comprehensive and flexible as non-enterprise grade applications will not provide the scalability and support.

Data management, analytics and algorithms

With IoT, large data volumes will be introduced into the enterprise. Skills and infrastructure to manage this stream should be developed and put in place so it does not overwhelm the company. Companies will have to move away from time tested ‘batch processing’ models to real-time streaming data management with brokers along the way. Developing algorithmic models and applications to distill significant events and discerning signals will be key to realizing the opportunities.

IoT is becoming the prevalent mechanism to capture and analyze data for critical decision support, with many of the use cases resonating for those in manufacturing. Today’s supply chain visibility is fragmented across device-centric, non-device centric, and movement of goods along supply chain threads.

The Intrigo team thinks IoT provides a compelling scenario for supply chain visibility. Companies desiring to take advantage of the IoT revolution should consider the first use case to increase the visibility of their inbound logistics, trans-shipment or outbound logistics. Current technology provides the ability to move the data into a central repository in the cloud to track, trace and execute supply chain threads using both structured and streaming data from internet enabled devices (RFID).

The Intrigo guidance is to jump in cautiously to understand what you want from IoT. Intrigo feels that supply chain related activities in transportation, track and trace and visibility management are sound candidates for businesses to evaluate IoT.

Intrigo provides advisory services on marrying IoT and big data for supply chain planning, execution and analytics and is happy to work with you on your current projects.

–Kanth Krishnan, VP of Supply Chain Management Solutions, Intrigo Systems