IoT: The Connective Tissue of a Cognitive Supply Chain

Article by Bettina Warburg

Supply chains are dependent on efficient, effective, and timely communication between their participants and components to function correctly. This communication is, among other factors, one of the most significant inadequacies of traditional supply chains, where disconnected network segments create information gaps that prevent markets from finding their natural equilibrium points.

Cognitive supply chains, however, do not suffer from such inadequacies due to interlocking technologies like blockchain, artificial intelligence, and additive manufacturing that are all either directly or indirectly informed by the functional nervous system of the framework: the Internet of Things (IoT). IoT leverages the forward-looking insights and continually-flowing data from connected machinery and equipment across all stages of a supply chain, effectively making the IoT-equipped components nerve endings within the network.

Such connectivity allows other parts of the system to monitor supply chain health and make adjustments as needed to prevent bottlenecks in the flow of information and goods.

Disrupting Traditional Supply Chain Vulnerabilities

Supply chains are incredibly susceptible to failures in machinery and equipment. In a traditional model, a single machine on a production line can break down and disrupt the entire network, blocking inventory and creating shortages that create cascading repercussions for all parties involved.

Production grinds to a halt as line managers fix the machine, distributors cope with idle capital assets like delivery trucks that otherwise would have been used to deliver the produced goods, vendors miss scheduled deliveries, and consumers face product shortages and even higher prices if the issues persist. The deadweight loss created by these inefficiencies trap or eliminate value across the breadth of the supply chain.

Companies and industries are already making a concerted effort to connect machinery across their supply chains to avoid such disruptions, integrating IoT sensors to enable real-time access to vital information. In the same example, IoT sensors could have anticipated the mechanical issues in the production line before they disrupted the entire network. Such foresightedness is so promising that, according to a recent survey, 62% of plant managers and executives plan on integrating IoT connectivity into their production equipment by 2020.

IoT isn’t relegated to production, however, but lends its transformative powers to nearly every stage of the supply chain, from inventory and warehousing to logistics and transportation. As consumer demand continues to grow in scope and expectations, manufacturers will need a logistics model that is continually functioning and updating itself. This evolving model is perpetually dependent on different equipment and machinery. IoT is the technology that will allow around-the-clock fulfillment to occur as it monitors the relative health of that equipment and machinery to anticipate future production capacities, maintenance needs, and general supply chain data that, collectively, all feed directly into an enterprise resource planning (ERP) platform. The ERP system collects, analyzes, and distributes the data provided by the IoT sensors to inform the other components of the supply chain.

Such connectivity is nothing short of revelatory for modern logistics, adding an estimated $8 trillion in value to global economies in the next decade. IoT adoption will continue to rise in coming years as organizations and industries begin to understand the tremendous utility afforded to all stages of the supply chain. In the distribution stage of logistics alone, an estimated 90% of the North American market – roughly 180 million commercial vehicles – will ultimately use IoT connected fleet management within their delivery systems.

The Future of IoT

IoT technology will continue to evolve with the marketplace. We envision a framework that streamlines supply chains by removing all unnecessary intermediaries to maximize efficiencies. Amazon, for example, is developing a patent-pending framework that combines 3-D printing and IoT-equipped machinery and delivery trucks to enable customer orders to be manufactured on the delivery trucks themselves on their way to the consumer’s doorstep.

Likewise, as the sensors, microchips, and nanotechnology that comprise IoT continue to grow in precision, reliability, and usefulness, the applications will rapidly expand as well. Newer, smaller generations of IoT tags, for instance, will be embedded in everything from jewelry to paper and plastic, blending the trackable provenance of each item into the item itself. Future innovations in nanotechnology will only further shrink sensors and tags, utilizing what has already been dubbed “radio dust” to imprint data on virtually anything.

IoT is the connective tissue that allows the disparate parts of supply chains to work in complete coordination with one another, eliminating information gaps that create the costly latencies in traditional supply chains. When combined with the other critical components of asset chains and the cognitive supply chains they enable – including blockchain, AI, and additive manufacturing – IoT provides logistics networks the prescient insights needed to match demand in a dynamic, ever-evolving marketplace. To learn even more, check out our white paper.