IoT in Supply Chain

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By: Julia Nasy
22 Sep. 2023
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Today, global supply chains face unprecedented difficulties. Labour shortages, along with increasing transportation costs, unforeseen demand, and traffic congestion, are both a curse and a blessing for the industry. They challenge and encourage to modernization of old and ineffective systems at the same time. Companies increasingly turn to Industry 4.0 technology to search for solutions, with the Internet of Things (IoT) as the critical component.

A successful implementation of IoT in supply chain management is a valuable investment toward meeting ongoing and future business needs. IoT technology brings optimization, automation, flexibility, visibility, and data collection — from manufacturing to transportation and distribution centers. However, the potential of the Internet of Things in this sector goes far beyond them. This blog post will take you through the key benefits, various use cases, and challenges of IoT in the supply chain. Read on to learn how connected networks can transform your business.

The Benefits of Implementing IoT in Supply Chains

The Internet of Things is playing an increasing role in the logistics industry. Just several years ago, this sector relied on a combination of manual processes, basic technologies, and traditional tracking methods. The logistic apps used then were different from what companies use now. They lacked real-time visibility, connectivity, and data-driven insights. Modern IoT devices help businesses overcome this and other challenges, allowing companies to get an edge over the competition.

Let’s see how the Internet of Things can boost this sector. Here are the key benefits of IoT in supply chain management.

Related reading: How IoT Works

Increased Visibility

Supply chains are becoming increasingly complex due to the growing number of parties involved in various stages. For this reason, end-to-end visibility is crucial for today’s logistic businesses. Companies should be able to analyze real-time data and respond effectively to any disruptions. Deploying IoT devices across different parts of the supply chain is that one solution. They ensure managers access the data in real time and at each stage, from manufacturing to retail.

IoT makes it easy to track the location and status of assets, shipments, and inventory. With it, companies can improve the accuracy of product collection, material handling, inventory control, and customer activity tracking. As a result, they can react quickly to unexpected events such as supply disruption, loss of goods, or a sudden dip in customer demand.

Better Inventory Management

IoT-enabled inventory system is at the heart of smart warehouse. First, it provides instant access to inventory levels and conditions, including physical characteristics, such as leaks and damage. Secondly, the system keeps crucial details about each delivery, such as the contents of the packages and storage instructions. And finally, third, IoT-based warehouse management can reduce errors and keep accurate counts of products. All these options help remotely manage warehouses, make informed decisions, and predict future inventory needs.

Being integrated with inventory management systems, IoT sensors and RFID tags automatically trigger restocking orders when levels drop below a certain threshold. Such inventory visibility allows managers to constantly monitor asset status, prevent the risk of stockouts or overstocking, and maximize supply chain efficiency.

Predictive Maintenance

Traditional maintenance schedules based on fixed intervals are ineffective, as they may miss critical issues between cycles. Such an approach can lead to over-maintenance, replacing parts or performing tasks that are optional at the time. In contrast, predictive maintenance uses IoT sensors that continuously collect data from equipment and vehicles, providing real-time insights into their condition. It helps identify potential failures before they occur, avoid unexpected breakdowns, and minimize unplanned downtime, which can be costly.

Predictive maintenance relies on data analytics, machine learning (ML) algorithms, and AI to predict failures. This data-driven approach helps enterprises identify the factors that can lead to failure, make more informed decisions, and automate service tickets.

Fleet Management

Sensors installed in vehicles, trailers, and trucks provide real-time data on the location, speed, and condition of each asset. Enterprises can track their entire fleet on a digital map, enabling better visibility into operations. IoT-enabled GPS and telematics systems help optimize route planning. Fleet managers can analyze real-time traffic data, road conditions, and weather forecasts to make data-driven decisions and choose the most efficient routes. This reduces fuel consumption, minimizes travel time, and enhances on-time deliveries.

Process Automation

Smart logistics solutions enable businesses to operate seamlessly, adapt to changing conditions faster, and allocate resources more effectively. Automating and optimizing the most time-consuming and complicated tasks reduces human mistakes, supply chain bottlenecks, and disruptions. Among the core use cases of supply chain automation are:

  • order aggregation from different sales channels and confirmation;
  • routes change and planning the best ones according to various factors;
  • order, vehicle, and inventory tracking;
  • customer demand forecasting;
  • documentation tasks;
  • delivery time estimation based on historical data, etc.

Improved Customer Experience

Incorporating IoT into logistics and supply chain operations not only improves the efficiency of these processes but also enhances the overall customer experience. Utilizing the Internet of Things, companies can provide customers with more accurate estimated delivery times and dates. By analyzing real-time data on traffic, weather, and route conditions, logistics managers give clients more reliable information, reducing the frustration of uncertain delivery windows. Real-time tracking solutions also help to identify delivery issues early and take timely measures.

Customers can access real-time tracking and visibility into the location and status of shipments via web portals or mobile apps. This allows them to know exactly where their goods are and when they will arrive. Such transparency builds trust and increases service satisfaction.

Applications of IoT in Supply Chain Management

After looking into the key benefits of IoT adoption, let us now take a look at some practical examples across logistics industry leaders.

Amazon

This international e-commerce giant ships approximately 1.6 million packages daily, processing about 20 orders per second. Just a few years ago, Amazon employees had to manually pick, pack, and label each order. Today, the company has more than 200,000 IoT robots working inside its global warehouse network, helping perform tasks that require speed and lifting heavy loads. Fully autonomous mobile robots move shelves of products to pickers and then transport finished orders to packing stations. Embedded IoT sensors help them navigate through the warehouse, avoid obstacles, and operate safely alongside people.

In 2017, Amazon released Relay, a mobile app for drivers. This trucking application is designed for independent owner-operators, small fleets, and carriers to improve the efficiency of transportation operations, delivering products to Amazon warehouses faster, hurdle-free, and transparent.

Volvo

Volvo Group, which includes companies like Volvo Trucks, Volvo Penta, and Volvo Logistics, actively uses IoT technology in its logistics operations and supply chains to enhance efficiency and reduce costs. For instance, IoT-based telematics systems linked to the “Volvo Connect” platform collect real-time data such as trucks’ performance, including engine diagnostics, fuel consumption, driver behaviour, and location. Collected data helps in optimizing route planning, scheduling maintenance, and improving fuel efficiency.

Volvo Penta has developed an IoT application to monitor the performance of marine engines and other ship systems in real time. Sensors collect data on engine health, fuel consumption, emissions, and other vital parameters. Then, sensor data is transmitted to shore or satellite-based systems, allowing for remote diagnostics. Another IoT solution from Volvo fully automates the transport of shipping containers between ports with minimal human involvement. All processes are monitored through control centres, allowing ships to dock themselves automatically and then the loader to unload the container onto another vehicle.

Maersk

Danish shipping and logistics company actively utilizes IoT systems in asset tracking, cargo monitoring, warehouse automation, route optimization, and security. Being responsible for 18% of container trade in the world, it invested heavily in IoT and blockchain technology. Its Remote Container Management (RCM) allowed managers to achieve unrivalled transparency in shipping perishable cargo. A constant stream of IoT data enables monitoring of the current location of containers, temperature, humidity, and O2/CO2 levels inside them. In case of deviation from the norm, the system lets managers know and helps to make better decisions to reduce or prevent spoilage of perishable cargo.

Related reading: Top IoT Use Cases Across Industries

Challenges of IoT in Supply Chain and Logistics

While the Internet of Things offers numerous advantages, transforming supply chain management and logistics operations, it also comes with several challenges that transportation companies need to address. Here are the key issues of IoT adoption in supply chains.

Data Security

Interconnected physical devices generate vast amounts of data, which security is paramount. That’s why supply chain managers must create a secure architecture before switching processes to connected IoT platforms. Data breaches, hacking, and the potential exposure of sensitive information can damage a company’s reputation. With ML and cryptographic hardware monitoring, organizations can minimize security concerns and still have secure access to stored data.

Cost

Even though IoT reduces supply chain costs, the implementation of IoT solutions with all necessary equipment requires a significant investment. Organizations must budget for these expenses and carefully evaluate the return on investment to justify the initial one. Training employees, maintenance and support, data storage, scalability – all this also requires large expenditures.

Data Storage

After effective IoT implementation, the amount of data collected will increase in a geometric progression. Companies require sufficient server capacities to maintain the process smoothly. They must also define data retention policies to determine how long it should be stored. However, ensuring timely access to IoT-generated data, whether for decision-making, analytics, or compliance, can be challenging. This problem is particularly relevant to geographically dispersed supply chains. To address this challenge, organizations leverage cloud-based storage solutions, edge computing, and data management platforms that can efficiently handle IoT-generated data.

The Future of IoT in Supply Chain Management

The Internet of Things is a new wave in the industrial revolution that will transform complex supply chains worldwide. Among key aspects and trends that stand for the future of logistics IoT are predictive analytics, ML, blockchain integration, AI, edge computing, 5G connectivity, and other technologies. It is equally important how, step by step, companies prepare their supply chains for a sustainable future through environmental protection, responsible sourcing of raw materials, and provision of fair wages.

Unfortunately, the future IoT supply chain will have to face new types of security threats that will emerge, potentially resulting in data breaches, system disruptions, and intellectual property theft. That’s why companies and supply chain partners need to constantly invest in robust cybersecurity measures to protect IoT infrastructure in the future.

IoT is not just a technology but a game-changer for the industry. And investing in IoT applications is no longer digital transformation only. Today, this is one of the key options for small and large companies to stay competitive and meet the evolving demands of the sector.

By: Julia Nasy
22 Sep. 2023
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