IoT can Help Manufacturers Create the Supply Chain of the Future

The Internet of Things is already offering the potential to recast entire supply chains in the manufacturing industry. IoT strategies not only can help companies cut costs and improve efficiencies, but also can help them transform supply chains to offer manufacturers greater product differentiation and innovation.

Joe Mariani, research manager at the Deloitte Center for Integrated Research, said companies are now using IoT technologies such as sensors, communication devices, servers, analytics engines and decision-making aids, to link the digital and physical worlds more closely than ever before. Mariani said the increasing ability to collect data from real-world objects is enabling a new level of supply chain management. “More information is valuable to supply chain managers because it allows them to know about more specific objects and make more informed decisions. Knowing more about objects involved in a process and refreshing that information more often also increases value,” said Mariani.

Vendors like Samsung, AT&T, Bosch, GE and Cisco are offering more enterprise-level IoT devices and solutions. Mariani points out that Whirlpool is using IoT not only in routine work, but in locating misplaced inventory. Until 2012, the company used manual processes and paper tags to manage inventory. The company now uses RFID tags and network readers across the plant to give operators real-time access to information on the flow of materials. “The result is that inventory is down, quality is up, and Whirlpool is now using RFID to schedule inbound logistics to the paint line and produce a true “pull” system,” said Mariani.

The ability to use more detailed asset tracking will give companies an entirely new way to overhaul their supply chain and logistics operations. This could help manufacturers save considerable costs on raw materials and on moving their own products to distribution. Cisco and DHL estimated in 2015 that IoT technologies could have a nearly $2 billion impact in the logistics sector. GT Nexus and Capgemini also found that 70% of retail and manufacturing companies have started digital transformation projects in their supply chains.

Maha Muzumdar, vice president at Oracle, added that IoT will allow manufacturers to reach outside their own organizations to build better supply chains. By receiving and sending information with business partners, all parties will be able to respond to changes more quickly. That will help create smarter supply chains with better predictability of demand and inventory visibility, Muzumdar said. IoT also will enable better tracking and efficiency with more advanced insight into the effectiveness of equipment and other operating assets. RFID tags, which provide data on items to which they are attached, also will allow manufacturers to track items throughout their entire journeys, anywhere in the world, even in areas that do not have cell phone coverage.

IoT also can help accelerate innovation and product support by sending real time customer feedback to the manufacturers on the usage, success and failure of a product. This will help them make better design decisions earlier in the lifecycle and optimize for supply and manufacturability. “In addition, this information can be shared with key suppliers during product innovation and development processes to further improve product capabilities,” said Muzumdar.

He added that while the demands on supply chain managers to rapidly respond to change and boost profitability are “greater than ever,” IoT can offer significant opportunities to deliver value and increase performance. Companies he said, must quickly “come up to speed on IoT” by understanding its value, analyzing gaps and supply chain use cases, and deploying specific IoT-enabled solutions to ensure success. “There is a clear call to action for supply chain professionals to explore, understand and exploit IoT for enhanced supply chain performance,” said Muzumdar.