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HOW THE INTERNET OF THINGS IMPACTS SUPPLY CHAIN
HOW THE INTERNET OF THINGS IMPACTS SUPPLY CHAIN
Traditionally, companies have relied on third-party logistics contractors to ensure that goods get from one place to another. This was a reasonable solution, but certainly open to human error, considering that all shipping, tracking, receipt, etc. have been accomplished manually.
Today, however, we have “smart” technology with the capacity to perform complex tasks at a higher speed and with higher precision. The combination of cloud computing, analytics and hardware advancements have created a new avenue for conducting delivery and fulfillment operations, powered by the Internet of Things (IoT).
Just what is IoT?
The Internet of Things is a new technology paradigm that allows objects to “talk” with other objects and with humans, through embedded electronic nodes that are programmed for specific functions. It makes these things “smart.” Thus, a “smart” thermostat can communicate with its owner and other “smart” devices in the house and vice versa. A “smart” car can alert its owner to traffic issues on the way to work.
So, how does this new technology relate to supply chain management? In many ways. And in so doing, it can eliminate the third-party logistics contractor and speak directly to a supplier, shipper or receiver, according to Sean Liu, CEO of Versara Trade, a trade finance platform built on blockchain to facilitate crypto credit enhancement on trade finance transactions and improve on traditional factoring and asset-based lending (ABL) by using cryptocurrency as extra collateral.
There are different aspects of tracking the locations of raw materials, inventory, and finished products.
1. Tracking transit and delivery from a raw materials supplier to a manufacturing facility. Many manufacturers rely on a number of suppliers to deliver ordered materials on time. When these suppliers can use RFID (radio frequency identification) tags on materials, everyone knows the route, the times, and the actual delivery to the manufacturer. This provides full transparency at both ends of the chain.
2. Tracking the locations of materials once delivered. Again, if the manufacturing facility is large and shipments are arriving all of the time, it can be a nightmare when a specific shipment is somehow “lost” in the yard. Those embedded RFID tags solve this issue.
3. Tracking materials and products within a facility. Materials do get misplaced. This can result in production problems, delays and unhappy customers. With RFID tags, nothing is misplaced.
Many products are perishable and/or environmentally sensitive. Certain temperatures, humidity, and other conditions must be maintained for risk control. IoT applications for these circumstances are ideal, because, just like a smart refrigerator in a home, there will be alerts when conditions go awry.
“IoT allows for monitoring conditions during shipment – not just temperatures and humidity, but vibrations and shocks,” said Liu. “Thus, both transporters and receivers of goods can be notified in advance of delivery, and a replacement shipment can be dispatched in short order. When blockchain is added to the mix, it increases transparency, security and confidence.”
CB radios and then cell phones have been the traditional means of communicating with transport vehicles, as goods are moved from one point to another. And there are all of those pesky regulations regarding driver operations and rest, not to mention weight compliance issues.
“With IoT and blockchain, which facilitates the recording of every transaction across multiple copies of the distributed ledger, a manufacturer or contracted transporter knows where each of his vehicles is at any given point during the transit process, can monitor that it is on schedule, and can be immediately alerted if there is a breakdown or some other issues,” Liu explained.
Cisco recently teamed up with the California Shock Trauma Air Rescue service – an air ambulance operation – in the use of IoT for its dispatching functions. The biggest benefit is that when a call comes in, the location is “geo-matched” to the closest crew and that crew is automatically dispatched to the scene. And the entire operation is monitored throughout the process.
Transporting perishable goods
IBM is utilizing its artificial intelligence platform, Watson, to not only provide efficiency in their supply chains but also to provide predictive analytics – data that will help to minimize disruptions and risks in the flow of good from one point to another. In a reported case study with a plant supplier, the use of Watson allowed the supplier real-time visibility to know where and when to ship plants as they were needed.
Important considerations for adoption
As companies look to IoT applications for their logistics solutions, Liu said they should ask vendors some critical questions, including the following:
- What level of location accuracy is available? As the system is implemented, there may be need for expansion of reference points.
- What are the installation infrastructure requirements? A new facility/enterprise can plan for IoT infrastructure as it is built. An existing enterprise will need retrofitting.
- What are the costs involved? It’s not just the tag costs involved. There are costs related to battery life and power consumption, as well as the employee training requirements.
- What are the prices variances among passive RFID, Bluetooth, and WiFi tags? Budgets will dictate which will be the most suitable.
- How secure is the system? Any time data is put “out there,” there is risk involved, so there should be multiple layers of security and encryption. Sony was hacked. Xbox was hacked. Several U.S. power grids were recently hacked. Even smart cars are at risk of being hacked. This underlines how important cyber security is.
IoT is obviously the future of logistics and supply chain management. It is “smart,” efficient, and, when coupled with blockchain and predictive analysis, can provide suppliers, manufacturers, and transporters with the real-time information they need to keep a competitive edge.