The Internet of Things (IoT) will transform your supply chain from a necessary evil into a critical strategic advantage by a combination of new technologies and new ways of thinking about them.
In a previous blog, I pointed out that it has been impossible in the past to get and share real-time data about things and their current status, forcing us to rely on a range of make-shift measures. Nowhere was that as much of a problem as in the supply chain. Where was that critical parts shipment? Most likely stuck in traffic, or slowed at sea by a tsunami or someone responsible for processing an order who was overburdened, but who knew? Sure, we’d talk about “just-in-time” resupply, but it was, at best, “sort-of-in-time.”
With the IoT, everyone who needs real-time data about individual components and the supply chain as a whole can share that data instantly. Add blockchain technology to integrate and protect the system, plus new production methods such as 3D printing and nanotechnology, and the result will be unprecedented precision and integration, not to mention surprising new revenue sources.
The change begins with precise labeling of all materials. The IoT got its name from an MIT project that began in 1999 revolving around the introduction of RFID tags, which are still very much part of the IoT today. Now, sensors on the items are increasingly common, and have not only led to the ability for shipper and customer to know not just where the item is, but also its status: has it been exposed to light? Has it gotten too hot or too cold (about a third of all food is wasted because it overheated in shipping)? Has the container been tampered with? FedEx has even created new revenue streams with this technology, charging a premium for its Sensaware tags that track and report such variables. Maersk, the Danish shipping firm, tracks how cool 300,000 “reefers” on the oceans are using the IoT and eventually hopes to use the system for predictive maintenance of the containers.
A key to the IoT’s supply chain benefits is that it’s on a M2M basis, automating procurement. “Traditionally, the supply chain was driven based on the ERP system -- a best guess at consumption and production,” according to Kepware’s John Harrington. “But you don't want to look at what is planned on being built and consumed; you want to look at what is actually being built and consumed.’’
Again, precision replaces guesswork.
Fully capitalizing on this new ability to precisely locate something requires a new attitude that can be difficult for those used to a culture in which hoarded data gave a strategic advantage. Instead, with the IoT, advantage also comes from sharing data.
For example, knowing the precise location of a shipment also allows for creative new solutions where mashing up the location data with weather and traffic data allows the shipping department to do predictive routing to avoid traffic.
The most precise supply chains combine IoT and blockchain, which is yet another example of the intersection between data and sharing. Blockchain is the technology underlying the bitcoin alternative currency, and suddenly is also proving critical in fields from finance to healthcare because it is beautifully matched to the needs of an increasingly security-conscious and inter-connected economy. Blockchain is a great paradox: it is secure precisely because it is shared. No one controls it. In the past, a ledger for complex transactions or sequence of events was secure because one person or trusted intermediary, such as a bank, had sole control. Now, long data sequences are broken into parts — or blocks — encrypted with a 32-digit “hash” and stored on different computers. All the components of this sequence become blocks, combined into the block chain. Once data is entered, it can only be altered by agreement of all block holders, a foolproof protection against tampering or data theft.
Combined with the IoT, blockchain not only assures knowledge of what’s where when, but also can create new revenue sources. A friend in the grocery business told me labels for some organic foods now include the name of the exact farm where it was grown. John West boosted sales by £17m when it put codes on its tuna cans so customers could trace the tuna to the individual fisherman. The new IoT supply chain enables “predictive maintenance,” the concept of harvesting vast amounts of data about products’ real-time status, using that data to identify possible operating problems before they become acute, then replacing the parts the next time the equipment is idle. If replacement parts aren’t immediately available, the predictive maintenance opportunity is lost.
The change to an IoT-based supply chain will accelerate with integration of new product design and production technologies such as nanotech (see recent blog series) and 3D printing. Again, both lead to precision: building projects atom-by-atom or in an additive fashion, rather than the crude, expensive and time-consuming subtractive methods of the past.
Car manufacturers must stockpile parts for a given model for ten years after it ceases production. What if sensors detect a potential problem while the car is still driving, the digital blueprint for the necessary part is downloaded to a 3D printer at a UPS distribution hub minutes from the end user and delivered within an hour to the repair shop? The customer would get the part sooner (and, as an added bonus, the part might have been refined and upgraded from the original design based on IoT data on how the part is actually used!), and the manufacturer wouldn’t have to maintain huge warehouses of parts that might never be used.
There’s even a potential environmental benefit from this switch to an integrated IoT-based supply chain. Because of concern about resource depletion and waste disposal there’s a new push for “circular supply chains,” where products would either be designed to be continually renewed and upgraded or, at the end of their lives, the parts would be recovered to be melted down and used to form new parts.
Unprecedented IoT-based supply chain precision will be a win-win: cheaper, quicker, and higher quality.