Supply Chains Need to Be Ready for the Internet of Things

Dec. 1, 2014
We'll soon be living in a world of smart, interconnected devices that will quickly change the nature of supply chains.

If you've been a bit confused lately about what exactly the Internet of Things refers to and why you should care about it, take solace in knowing that you're hardly alone. In fact, nearly half (43%) of the manufacturing executives polled recently by LNS Research said they either don't understand or don't know anything about the IoT. What's more, only 10% say they've started to invest in IoT technologies (6% say they see value to their operations, and 4% say their investments are being prompted by customer demand).

The Internet of Things, basically, is a catch-all buzzword that refers to a network of connected, intelligent devices and sensors that "talk" to each other. One of the chief selling points of the IoT is that it enables real-time performance monitoring, which is of particular value in maintenance and asset-management applications when machinery can self-optimize, self-configure and self-diagnose themselves. However, start-up costs can be considerable, and to date most ROI projections are strictly anecdotal.

According to Mike Roberts, an analyst with LNS Research, "Given the IoT's relative nascency -- not to mention the manufacturing sector's traditionally slow-to-deploy mentality -- these 'don't understand' numbers are not all that shocking." He believes the emergence of industry groups such as the Industrial Internet Consortium (which includes Cisco, General Electric, IBM, Intel and Toyota) will help promote best practices and a better understanding of the technology.

At any rate, the IoT is expected to grow at an enormous rate throughout the decade, with analyst firm Gartner predicting as many as 25 billion Internet-connected intelligent devices by 2020, a big jump from the roughly 3.8 billion believed to be in use now. Manufacturing, utilities and transportation are currently the top three industries using IoT devices, and by next year more than 700 million connected things will be in use.

"It's important to put IoT maturity into perspective because of the fast pace at which it is emerging, so supply chain strategists need to be looking at its potential now," says Michael Burkett, managing vice president at Gartner. "Some IoT devices are more mature, such as commercial telematics used in trucking fleets to improve logistics efficiency. Some, such as smart fabrics that use sensors within clothing and industrial fabrics to monitor human health or manufacturing processes, are just emerging."

As Burkett sees it, the IoT will help manufacturing supply chains deliver more targeted and efficient service to their customers, thanks to the ability of physical assets "to communicate their state to a networked ecosystem, that then formulates an intelligent response." This will also put pressure on product developers to react more quickly to the demands of a customer base that will come to expect smarter products that can, in effect, improve their performance.

About the Author

Dave Blanchard | Senior Director of Content

Focus: Supply Chain

Call: (941) 208-4370

Follow on Twitter @SupplyChainDave

During his career Dave Blanchard has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. He also serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), which has been translated into several languages and is currently in its second edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

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