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The Effect of the Internet of Things on Supply Chain Management

Supply Chain with Internet of Things and Cargo Shipping Containers

Posted on 05-23-2017 by Lucia Garza

Reading Time: 3 minutes

In supply chain management and otherwise, the Internet of Things (IoT) is a hot topic these days. Gartner defines IoT as “[a] network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment.” The Internet of Things is comprised of millions (and soon to be billions) of Internet-connected sensors, beacons, and data collectors inside a staggering array of consumer and business devices.

What does IoT mean for global supply chain management?

IoT and the Supply Chain

The global supply chain is already taking advantage of the IoT upsurge. Business Insider identifies four key technological building blocks for supply chain management:

  • RFID Tags: Radio frequency identification tags are typically embedded in individual inventory items, pallets, containers, vehicles, and other physical supply chain assets. They most often provide location and identification data.
  • Bluetooth: Bluetooth beacons help track inventory and customers in confined settings like retail stores and stockrooms.
  • Near-Field Communication (NFC) Tags: NFC tags help workers (and, increasingly, automated systems) track and manage inventory – for instance, scanning items out for local delivery.
  • Wide Area Networks (WANs): WANs and satellite tracking systems keep track of shipments over long distances, across multiple modes, even in remote land or ocean areas.

What to Expect from an IoT-Driven Supply Chain

It’s a foregone conclusion that IoT will heavily influence supply chain management in the coming years; the only questions are by how much, and in what ways. Gartner identified five potential outcomes, and many other observers throughout the industry have voiced their opinions as well. Here’s a quick overview of what could happen next:

  • Managing Fleets More Efficiently: Business Insider estimates that 90% of the United States’ commercial vehicles will have embedded IoT sensors by 2020, opening up vast opportunities to optimize routes and improve driver behavior. In particular, IoT will likely speed the ongoing reduction in deadhead, low-load, and no-load mileage for trucks and container ships.
  • Gaining Real-Time Clarity: Legacy technologies, such as barcode scanners, are effective; however, since they require human input, they’re inherently flawed. Long-lasting, low-power RFID tags and Bluetooth beacons will remove the human element, providing real-time clarity that doesn’t depend on attentive (or inattentive) employees.
  • Optimizing Warehouse Space: IoT-equipped inventory produces tremendous amounts of data. When properly synthesized, this trove of information can improve inventory flow within warehouses – and, over time, will likely lead to new, innovative layouts and modes of organization.
  • Gathering End-User Data: The supply chain doesn’t necessarily end with the end-user. Cheap IoT sensors can help OEMs monitor end-user behavior, leveraging the resultant data to understand use patterns and drive iterative product improvement.

Are you excited or nervous for the supply chain’s IoT-driven future? Your answer could tell you a lot about the state of your business.