The role of the Internet of Things in managing supply chain risk

By Evan Puzey, Chief Marketing Officer, Kewill.

This article is brought to you by Retail Technology Review: The role of the Internet of Things in managing supply chain risk.

While at a recent Gartner conference in London I noticed that the Internet of Things (IOT) is now being referred to as the Internet of Everything. I don't know if this has a TLA (Three Letter Acronym) yet, will guess at IoE, but I decided to go back and look a t some of their recent research on the uptake of the IoT.

According to Gartner, The Internet of Things (IoT) is moving firmly from hype to reality, forecast to reach 26 billion installed units by 2020, and will "impact the information available to supply chain leaders and how the supply chain operates, depending on industry." Of course IoT is already in widespread use within the supply chain, for example through the use of telematics in road forwarding to drive efficiency in route management and vehicle handling.

But current uses of IoT are fairly limited and have only scratched the surface of what could be achieved. IoT has a multitude of potential uses that will benefit the supply chain, but arguably the greatest benefits are around managing supply chain risk.

Perhaps the most obvious potential benefit of IoT, and more importantly going forward the IoE, is supply chain security, which could be much better managed through the use of tracked and monitored containers or packing cases, right down to individual packaging level, which alert security or the authorities if removed from where they should be. FreightWatch recorded 946 cargo theft incidents across the U.S. in 2012 and 689 in Europe, a 24% increase on 2011, with organised criminals known to be targeting ports and rest areas, so this is a major issue for the global supply chain. Theft costs shippers and LSPs billions of dollars each year when the impact of inventory delays, as well as the cost of the stolen goods, is taken into account.

Another major potential benefit of IoT is tracking exactly what happens to good under transportation or storage. Shippers could much more easily verify that goods have been maintained at the correct temperature, and have been handled properly (e.g. not dropped or shaken) which has the potential to save billions of dollars in damaged goods and also provides LSPs with the means to prove they have complied with their customers' operating procedures, particularly important where a number of third-party contractors are involved.

Even before goods leave the production line, IoT offers possibilities to ensure quality remains consistent in off-shore production by verifying the components are genuine and not substituted with cheaper alternatives and that the correct production procedures have been followed. This is especially useful where production locations move frequently to achieve the lowest cost.

Combining most of these elements, scares such as the widespread discovery of horsemeat in the human food chain in 2013 could potentially become almost unheard of, with IoT providing a virtually infallible means of demonstrating provenance from field to fork.

The possibilities are almost endless – supply chain businesses will increasingly have the opportunity to track and interact with goods down to a per item level if required, assuming the costs stack up. But it's not just about the cost. It's already possible to achieve many of the potential IoT benefits outlined above through RFID, albeit in a much more limited and disjointed way that relies on specific (and often expensive) technology and hardware being in place at critical physical locations, such as the entrance to docks and loading bays in warehouses. The reason RFID isn't more routinely used is only partly down to the cost – it's the huge task of collecting, analysing and making use of the huge volumes of 'big data' generated that's off-putting.

It's all very well knowing where goods are in the supply chain (supply chain execution software, such as TMS/WMS/freight forwarding and visibility solutions such as those provided by Kewill) already offer this capability, but factoring in knowing what's happening to them creates a whole new level of complexity and even bigger data to manage. The challenge will be making sense of that 'bigger data' and extracting what's useful and channelling it appropriately, to impact positively on supply chain outcomes.