How to make the Internet of Things work in the supply chain

The Internet of Things is probably one of the hottest buzzwords in the industry today. You can’t pick up an industry trade publication or read a blog post that doesn’t mention the Internet of Things in some way. It’s a challenge when you have something like this, that generates so much hype, and lots of companies read about it without knowing quite how to get started or what steps to take to take advantage of these technologies.

But what exactly is the Internet of Things and why is there so much buzz and hype around it, particularly around supply chain management?

The Internet of Things, as a term, has been around since the late nineties, so it’s not a new one. It referred simply to the interconnectedness of devices, objects, and things being able to talk to each other and communicate through the internet; it’s a pretty simple concept. And the reason why it’s become so popular in recent years is because it now has a much lower cost of entry and a much smaller size of the microprocessors required to allow these objects and things to connect and communicate.

When you think about that, just as the Internet itself changed the world when it became mainstream, the Internet of Things has the same opportunity in the coming years to change the way we think about life, how to be more productive, more efficient and to get more into a world of complex thinking vs routine tasks. So when you apply that to the supply chain, what you think about is the Holy Grail of logistics and supply chain, which is having true end-to-end abilities and transparency throughout the entire process. The Internet of Things may bring this reality to us in the coming years.

One of the things that executives say consistently is that there’s a need to make smarter decisions faster, and part of the objective is having a more real-time pulse on what’s happening across the supply chain. When you look at some of the traditional ways of communicating information, data and so on, which inherently has some latency built in, part of the promise is already there, but having this more real-time communication in place is going to enable executives to make smarter decisions faster, and obviously be able even to move on to higher forms of analytics and even move towards predictive analytics.

How to make the Internet of Things work in the supply chain
Courtesy of WeMake Milano at flickr.com

When we talk about the Internet of Things and its real value, we look at the fact that it delivers actionable data. So it’s not just information for information’s sake, but it allows us to make quicker, smarter decisions within the supply chain. This will enable concepts such as “just in time” in the supply chain, so we’ll be much quicker in moving and responding. Companies choose to outsource because they look for flexibility. The Internet of Things is something that will allow us to be agiler and more flexible in the future.

How to get started

The hardest part for a lot of companies is trying to figure out where and how to get started when it comes to the Internet of Things. What should the first step be for companies? What’s the biggest mistake a company could make as they’re starting to become engaged in Internet of Things initiatives?

The first thing is to start by defining your problem. Realizing what is it that you’re trying to overcome, what challenges are you trying to overcome. What’s that thing that the Internet of Things will potentially help you solve? You should identify the gaps in your process today and start working at that point to say “here’s where I need to grow”. Then, take a look at the situation and ask yourself if that is really the right solution. Internet of Things is all about the data, and you need to analyze it at the right time to do something about it. So you must make sure your problem is something that the Internet of Things will help you solve as you look at it. But, like any other project, you should start with the problem.

When you look at the biggest mistakes that companies have made, you see people looking at new technology like this one and seeing that the flashy factors, the cool factors are presented to their leaders; and they present dashboards and information at your fingertips, which may seem impressive at first, but when they deliver the product, the information or the data that’s being released is not really valuable to bring true cost savings to the production line.

You have to try to understand where are the opportunities, where are the challenges, what’s the problem that you’re trying to solve. It might be that you have some black holes in your supply chain, or that you have too much inventory and you’re looking for ways to reduce it. Whatever the supply chain problem is, it’s necessary to define it before seeing if the Internet of Things approach would be the right path.

When it comes to quantifying the return on investment of this technology, we must consider the fact that it has an ability to have actionable data in real-time in a manner that allows us to be agile and flexible.

Related content: Read David Kiger’s “Supply Chain Management and Retail.”

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