The benefits of internet of things for supply chain (and 5 use cases)

08 April 2022 7 min. read

A growing number of supply chain leaders are turning to internet of things (IoT) as a means to drive efficiency, transparency, and sustainability. Siyi Xu, a Consultant at Procura, outlines five use cases how internet of things can be applied within the supply chain function, and the benefits that come with the rapidly emerging technology.

According to research from Gartner, the global market for internet of things solutions is expected to grow to around €1.5 trillion by 2025.

The growth is driven by the wealth of benefits that the technology can bring to sectors, ecosystems and functions with organisations – McKinsey & Company for instance believes that IoT use cases could have an economic impact of up to €10 trillion by 2025.

The benefits of internet of things for supply chain

IoT is defined as “a network of physical devices embedded with electronics, software, sensors, actuators, and connectivity that enables the devices to connect and exchange data using cloud computing.” The technology creates opportunities for more direct integration of the physical world into computer-based systems.

Five use cases how IoT can advance supply chain

Inventory forecasting

The collection of data intelligence, with pattern analysis over time, enables accurate forecasting and intervention, should faulty operations occur. This equips inventory planners, production and procurement managers with better information and forecasting accuracy when making executive decisions on buying, manufacturing, and selling products.

For instance, ACE Hardware, a hardware retailer uses IoT solutions to track product orders and shipping status. “IoT sensors enable real-time point of sale analysis which enables ACE to replenish inventory systems more quickly and reduce inventory holding costs.”

Shipment and asset tracking
IoT systems such as RFID (Radio Frequency Identification) and global SIMs provide timely access to supply chain managers to locate the shipment or asset, enabling them to use real-time data to identify, locate and determine the status of an order or existing asset. Instead of logging the data manually or using traditional inventory devices, managers can now use software for automated data gathering and get a real-time update of the status of all assets.

For instance, for shipments, FedEx “uses cloud platforms that are fed data from the fleet, along with traffic models, weather reports, and other sources, to plot the most efficient routes for items being distributed through their network.” This cloud application improves the accuracy of decision-making, the precision of delivery forecasts and the speed of risk mitigation.

An example for asset tracking is Deutsche Post DHL Group, a leading logistics company, and Sigfox, a leading IoT service provider, partnered for an IoT process optimisation project for the supply chain of DHL’s German parcel network. The IoT trackers enabled digitalised administration and location of the roll cages used to transport parcels.

This has not only increased the transparency of DHL’s supply chain but also contributed to improved customer service quality and operational cost saving.

Maintenance & repair
IoT-driven solutions can collect data such as temperature, humidity, and machine malfunctions. This can be used by cloud computing applications to monitor real-time operations and visibility. Photographic instruments can scan machine components, such as blades, to send alerts for predictive maintenance. Production facilities that integrate sensor networks into machinery can therefore increase up-times, reduce operational costs, and improve the overall quality of service.

For instance, GE Digital collaborates with FogHorn, a leading developer of edge computing AI software for IoT who developed a solution using its complex event processor to transform raw, streaming machine data combined with RFID into actionable parts and process quality characteristics.

By analysing the large amount of RIFD sensor data produced during the production cycle, GE detects early defects and can develop smart, not scheduled maintenance. This helped GE to significantly improve yield in manufacturing operations.

Quality control
Additionally, IoT-driven solutions can also help product managers to monitor and control the quality of raw materials and productions. IoT scanners can scan raw materials for traits such as paint colour or fabric composition, to confirm quality and accuracy before they are used for a finished product.

For instance, Daihen Corporation, an industrial electronics and power company automates the quality control of its industrial transformers by using outsourced IoT solutions to ingest and aggregate multi-protocol streaming data collected from diverse assets and use the real-time analytics based on the cleansed data to determine inspection pass/fail and to meet the high industrial quality standard for electric transformers. This effectively reduced production time and labour costs in maintaining product quality.

Storage/condition monitoring
Environmental sensors allow supply chain managers to track shipping conditions and proactively respond to accommodate changes. IoT solutions can gather data on the temperature inside vehicles, pressure, humidity, and other factors that could compromise the product’s integrity and trigger automatic condition adjustment.

For instance, software development vendors such as ScienceSoft uses Amazon’s AWS Cloud as a server. Data gathered from sensors are then transmitted to the cloud via GRPS. This IoT solution enables cargo temperature and humidity monitoring, which are then brought into customers’ existing vehicle management systems.

The benefits of implementing internet of things

Improved transparency 

Incorporating IoT solutions into supply chain management is a good way for retailers to learn more about their products, customers, and demand and build relevant strategies. Data collected throughout the product cycle can help them to better understand the market and segment products with the target audience in mind.

Improved efficiency
Smart route-planning tools and IoT tracking technologies increase the overall supply chain speed exponentially ix by shortening the feedback circle, reducing decision-making time, and proactively mitigating delay risks.

Companies with a cloud-based IoT system in place can address issues faster by giving access to and sharing the relevant data to all parties involved in the supply chain lifecycle. This data helps different stakeholders at different stages of the supply chain to shape strategies and scenarios according to their own roles and needs. This effectively minimises the impact of human error in data collection and improves the overall accuracy over time.

Risk mitigation
IoT solutions can leverage the impact of technology and machine intelligence to go beyond the constraint of human capacity and to identify unforeseen problems or saving points in the supply chain, such as resource leaks, inefficiencies, and machine failure. These connected systems then provide accurate and real-time tracking information and alert notification to different stages of the supply chain.

This not only enables IoT as a steppingstone for full-on warehouse automation with little to no human supervision ix but increases business agility and adaptability to the uncertain global market.

Cost reduction
By improving businesses’ ability to mitigate risks, IoT solutions can reduce the cost of unplanned downtime and save production time from scheduled maintenance by monitoring a variety of data and sending instant alerts with notifications if something goes wrong. Moreover, the historical data collected from IoT sensors can be used by analytic tools to predict future behaviour, leading to less unplanned disruption, increased production efficiency and capacity.

Improved sustainability 
In a smart supply chain, IoT sensors can enhance corporate sustainability by updating managers with relevant information on how energy and resources are used within their supply chain and product cycle. By providing better information and raising awareness, IoT solutions enable executives to implement green strategies at various stages and integrate initiatives at scale, such as actively choosing renewables, electric vehicles, and energy-efficient spaces.