How the Internet of Things will transform your Supply Chain

By Jorge Ruiz on September 2, 2015

The term “Internet of Things” or IoT was coined by British entrepreneur Kevin Ashton, Co-Founder of the Auto-ID Center at MIT, during a presentation linking the idea of Radio Frequency Identification (RFID) in supply chain to the Internet world. “If we had computers that knew everything there was to know about things—using data they gathered without any help from us—we would be able to track and count everything, and greatly reduce waste, loss and cost.” Internet of things computer and smart watch remote control flat icons composition poster abstract isolated vector illustration

The IoT has become a powerful force for business transformation, and its disruptive impact will be felt across all industries and all areas of society. There are huge networks of dedicated physical objects (things) that contain embedded technology to sense or interact with their internal state or external environment. According to Gartner, there were 3.7 billion connected “things” in use in 2014 and that number will rise to 4.9 billion in 2015. Consumer applications will drive the number of connected things (almost 3 billion connected things in 2015), while enterprise will account for most of the revenue.

Many analysts speculate that the number of connected devices could be more than 50 billion by 2020, forever changing the way everyone conducts business. The Internet of Things could potentially reach trillions of dollars in financial impact, affecting 50% of the world’s industries.

Challenges for ERP systems

One of the main challenges with IoT for ERPs is that it will drastically increase the amount of data in the system; however, raw data is useless when it cannot be analyzed. The IoT has a strong data collection aspect (and only data collection thus far), so process optimization will be more critical than ever to assimilate and convert all this data into added value.

Once data integration is established, data management is the next priority. The IoT infrastructure must not only have massive storage capabilities, but also compute and processing mechanisms that can scale as data volumes increase, in order to integrate device data with business processes and workflows.

All of this data across different connected devices and systems in organizations must be protected. Security in data centers, networks and software has to be considered a core design requirement in order to protect data, while ensuring it is instantly available to users.

Business value

With the right infrastructure for data integration and IoT-relevant data management capabilities, companies will be able to unlock the value of device data and use it to drive innovation.

Transparency and Visibility: All device data can offer unprecedented insight into all operations and processes across an enterprise.

Workflow: IoT can help companies achieve new operational efficiencies by bringing sensor data into their core business processes and enabling bidirectional communication, so that actions triggered by business processes can be propagated back to the edge.

Analytics: Static reports are no longer interesting. Consumers of mass amounts of data want flexible reports to explore that data. High performance during this exploration will be vital for an engaging user experience.

Impact on Supply Chain Management

In order to profit from the IoT revolution, organizations need to leverage analytics and define new processes along the entire supply chain, with the ultimate goal of fulfilling customer demand for products and services. Companies are already using the IoT in areas such as proactive replenishment, predictive maintenance, and risk management or reduction in asset loss.

According to Gartner’s Vice-President of Supply Chain Research Noha Tohamy, Chief Supply Chain Officers (CSCOs) should focus on at least these 3 aspects:

1. Leverage the IoT to improve or fully redesign existing supply chain processes

As well as being a driver for business and supply chain transformation, the IoT can also drive benefits to existing supply chain processes spanning asset utilization, warehouse space optimization or production planning.

2. Offer IoT-enabled Information to internal and external clients

With the IoT, the supply chain will have unprecedented access to valuable data for internal and external stakeholders. This presents an opportunity for supply chain organizations to develop new information-based solutions for customers or markets.

For example, an agricultural equipment manufacturer can capture data from sensors on agricultural equipment to understand how farmers are using different product features. This information can be shared with the R&D groups to develop products that best meet customers’ needs.

3. Build strong supply chain technology leadership to support the convergence of the digital and physical supply chains

The IoT will create new challenges and requirements for supply chain organizations, who will likely be tasked with delivering and maintaining technology-enabled products and solutions. This presents a great opportunity for supply chain organizations to play a critical role in defining the overall digital business strategy.

To learn how the IoT and many other technologies have shaped the data management world, check out our interactive Big Data Timeline.

Big data timeline


Come and meet the Winshuttle team at the Supply Chain & Logistics event at Silverstone, UK in September to learn more about optimizing supply chain processes.

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