IoT in the Supply Chain Boosts Operations

Hidden in the gaps between raw materials, manufacturing, and end markets for manufactured goods lies the supply chain, a constantly moving flow between farms and mines, factories, warehouses, distribution centers, and retail outlets.

To give you an idea of the size of this part of the economy, in the U.S., spending on logistics and transportation was $1.33 trillion in 2012, 8.5 percent of GDP. Supply chain costs are roughly 20 percent of the final cost of any finished good.

Efforts to improve supply chain operations are largely invisible to most of us, but have significant effects on our daily lives. As with any industry where visibility, tracking, and integration of information is essential, the Internet of Things is increasingly part of these efforts.


Warehousing has never been a sexy business, but it is a huge one.  According to the 2012 U.S. Statistical Abstract, there are 597,000 warehouses of all sizes in the U.S., totaling over 10 billion square feet of floor space. And growth in the warehouse market is strong. According to the James Lang Lasalle Winter/Spring 2014/2015 Big Box Outlook, which tracks this market, “half of the nation’s 142.5 million square feet of construction activity is from big-box facilities, 500,000 square feet or greater”. As required distribution speeds increase and industrial processes become increasingly agile and responsive to demand, the need for warehouse volume will continue to grow.

Warehouses are not static storage areas, but incredibly busy facilities that need to keep track of thousands of types of goods. Every bit of a warehouse has to be managed so that goods are stored, retrieved, processed and delivered as speedily and efficiently as possible. Robustness and technical sophistication are at a premium, and the environment is ideal for seeing improvements from IoT implementation.

How to monitor, measure, and manage warehouse inventories is a more difficult challenge than it might seem at first. To understand why, let’s take a quick look at the history of the RFID chip.

The past and future promise of RFID

In 2003, Walmart implemented the use of radio frequency identification devices in its supply chain. More controversially, Walmart mandated that within 18 months its top 100 suppliers also have to use RFID for their cases and pallets, with other suppliers following by 2006. The goal was a truly smart supply chain. RFID allows for individual items, cases, or pallets to be identified and tracked wirelessly, providing for richer data than barcodes, and not requiring line of sight.

Walmart abandoned this project by 2009. Initial implementations were too expensive, both for the chips and for the readers, and metals and liquids both block RFID signals. Most warehouses have a lot of both.

Now that RFID prices have plummeted, they are finding their best use on an item level in the chaotic retail environment, and in immediate back-room storage areas. Retailers will increasingly find affordable coverage of their inventories invaluable.

Current warehouse intelligence

It would be a mistake to think that somehow warehouses have not been tracking things effectively. Most warehouses use Warehouse Management Systems (WMS) based on barcodes. Larger, more sophisticated warehouses with a lot of equipment use Warehouse Control Systems that use equipment sensors to provide diagnostics. And high-end warehouses use Building Automation Systems (BAS) to manage lighting, HVAC, and facility access. There are many vendors for these various systems, and a variety of dashboards.

Where IoT shows true promise is in uniting these various disparate tracking systems, and establishing a single point of truth for each and every item in the warehouse.

In addition to tracking items, by allowing for the monitoring of all warehouse assets, IoT supports optimal asset utilization, for everything from conveyor belts to forklifts.

The example of Bobcat

The 800,000-square-foot manufacturing campus of Bobcat, a construction equipment manufacturer, has three different warehouses that together handle 40 inbound truckloads totaling 1,000 pallets daily. They wanted to improve inventory accuracy. RFID was not possible, because of the aforementioned metal problem, particularly severe in a construction equipment warehouse.

Instead, receiving, putaway, and ferrying lift trucks were equipped with roof-mounted infrared sensors that scanned location bar codes on the warehouse roof. A label reader on each truck also scanned pallet labels, enabling real-time location tracking.

The SmartLIFT software from Swisslog that controlled the system integrated WMS data with sensor data from the trucks. According to Bobcat, the result was a 30 percent increase in pallets handled per hour. It is a good example of incremental improvements from new sensor data, better integration with existing data, and more-sophisticated data analysis and prediction, and shows that sometimes seemingly low-tech data, such as that from bar codes stuck on the ceiling, can be the right solution.

Less-visible benefits

The Bobcat example has other implications. Safety in a busy and complex warehouse is always a concern. The Industrial Truck Association and OSHA estimate that around 850,000 forklifts are in operation in the U.S. These are involved in 100,000 accidents a year, which cause almost that many injuries, 80 percent of them involving a pedestrian. Vehicle and worker positioning and tracking, with suitable procedures for overriding vehicle attempts to occupy a space where a person already is, have the promise of significantly decreasing these numbers.

Transportation and logistics companies recently listed what they saw as key issues that their IoT implementations would address. In a recent Forester survey, 90 percent of transportation and logistics companies indicated that they would be implementing IoT solutions within a year. Their top concern? Regulatory compliance. This is surprising only if you don’t manage a wide range of goods, both domestic and imported. Import duties and tariffs, safety regulations, hazardous materials designations, and inventory audit requirements all impose significant overhead on warehouses and other steps in the supply chain. Clear visibility of each item throughout its entire path makes it vastly easier to ensure compliance and satisfy regulators and auditors.

A big fact of modern life is that many of the things that you may think are boring and prosaic are changing dramatically somewhere beyond your awareness. The warehouse portion of the supply chain is one of them.