How is IoT
transforming the Supply Chain?
The recent digital transformation in the business
world adds new dimensions in competition; Firms are facing tremendous
challenges to outperform their competitors as their operational excellence and
strategic positioning are no longer protected. As a result, firms are
struggling to find new competitive advantages and make them sustainable. As we
know, managing Supply Chain effectively can maximize the total value generated
(What customer pays – Total effort expended to fulfill). Thus, the efforts
expanded to fulfill customer order in an efficient way, reduce waste & emission,
and increase efficiency can be a great source of competitive advantage, but a
typical Supply Chain often faces obstacles to implement these.
IoT or Internet of Things can be a
strategy to implement these and transform the Supply Chain. But how can IoT help
to implement these? Or how is IoT transforming the Supply Chain?
IoT has a particular impact on Supply
Chain. Its five key capabilities including connecting, collecting, monitoring,
monetizing and optimizing facilitate the three key flows of Supply Chain-
information, physical and financial- by ensuring Supply Chain visibility,
increasing confidence with the amount of information the firm received from
Supply Chain, and making the Supply Chain resilient. More particularly, IoT is
expediting and transforming the Supply Chain by following ways:
1. Connecting: IoT is enhancing communication
by connecting all elements and parties in a supply chain. It integrates the
entire network by connecting them by IoT Cloud Platforms, Software Products,
Blockchain etc. Besides, the launch of smartphones or 4G created high growth
opportunities for communication among the parties ranging from the different
tier suppliers to the ultimate customers, and the upcoming development of 5G
technology will add a new dimension in communication. IoT connected Supply
Chain increases firm’s confidence with the information received. As a result,
it helps to reduce the bullwhip effects.
2. Collecting: In order to tackle visibility
problems and collect data from the Supply Chain, companies are using sensors
and analytics tools that are placed inside trade containers to track
conditions, including temperature, humidity, pressure and movement. Sensors are
a core component of IoT technology. It even detects whether doors have been
opened during a journey. This raw data collecting through IoT technologies is
helpful to users, including shipping lines, cargo owners, freight forwarders
and ports.
3. Monitoring: IoT is acting as an aggregator
that gathers related information from the end to end Supply Chain and
consolidates it for viewing. It facilitates the ability to engage in remote
monitoring, providing a rich, detailed picture of the entire Supply Chain.
Thus, the existing efforts of fulfilling customers' orders and monitoring the
processes of delivering value to customers and assets deployed in the Supply
Chain can be responsive and managed more efficiently through the applications
of IoT.
Monetizing: IoT is allowing companies to make their Supply Chain data-driven.
By applying IoT in end to end Supply Chain, the Supply Chain is becoming
data-rich both in terms of collecting and analysing data, making a company more
informed than ever before. This data-rich Supply Chain enables a company to
estimate required raw materials rightly, forecast customer demand accurately,
match between demand and supply, reduce Supply Chain complexities, and deliver
the right value to the right customer at the right place at cost. Therefore,
IoT uses data-rich Supply Chain as a market research product and capitalizes it
into a mechanism for maximizing Supply Chain surplus.
Optimizing: IoT is optimizing the Supply Chain by reducing emissions,
monitoring assets in transit to reduce product spoilage, and enabling the
rollout of fully autonomous vehicles to improve road safety. The latest
innovations in this area includes artificial intelligence and machine learning
systems that can flag supply chain problems based on variance between current
asset movements and planned expectations and alert participants.
IoT is set to have a major impact on
the global and local Supply Chain. Some of this transformative potential is
already being seen. It keeps the Supply Chain awake all the time. Therefore,
businesses that adopt IoT in their Supply Chain Management will become more
competitive, and this digital strategy will help firms achieve a sustainable
competitive advantage.
Reference:
●
The Internet of Things:
Applications for Business. (Exploring the transformative potential of IoT) by
The Economist Intelligence Unit Limited 2020.
● Digital Transformation by BCG (A Coursera course). Business Strategy from Wharton: Competitive Advantage ( An edX course)
Abul Hasnat Pabel
Session:
2012-2013
Department
of Management
