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Big Ideas

IoT and the Modern Value Chain

By implementing modern best practices and architecting a digital, IoT-driven supply chain, organizations will be able to realize a number of benefits.

by Gaurav Palta and John Murphy

August 2014

 

Today’s modern consumers expect faster and more flexible fulfillment options that provide full visibility into product information, availability, and lead times. With billions of networked devices—from cell phones and laptops to equipment sensors and wearable technology—the opportunities for significant innovation are vast. But so are the possibilities for exposure to risk and inefficiencies. The business battleground is moving, and the value chain is at the forefront of success or failure.

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Now, fast forward to 2020, there are 25-plus billion Internet of Things (IoT) devices and a “networked” economy approaching US$2 trillion. According to Bryan Tantzen, senior director of IoT at Cisco, “We have now crossed the chasm and people are waking up to the value at stake. Supply chain managers in particular are leveraging IoT to create a real-time supply chain where line operators take digital orders and integrate them immediately into production runs.”

To take advantage of the increasing deluge of data, commonly referred to as big data, businesses are replacing traditional methods with modern best practices. These practices are more focused on customers, enable faster and more responsive supply networks, inspire more profitable product innovation, and facilitate a more collaborative environment of empowered supply chain professionals.

By implementing modern best practices and architecting a digital, IoT-driven supply chain, organizations will be able to realize a number of benefits:

The business battleground is moving, and the value chain is at the forefront of success or
failure.”
Increase focus on customers

As consumer-level information is captured by machine-to-machine communications, businesses can immediately analyze the data in multiple ways to create faster, more reliable, and more accurate forecasts so inventory and production levels are optimized. For example, in the not-so-distant future, sensors will be added to consumable items such as a gallon of milk. Milk producers will go beyond the shelves at retail outlets and into the homes of consumers to determine, in the short term, levels of consumption and, in the long term, patterns of consumption for individuals so they can better manage their supply chains and predict future demand and supply their retailers more efficiently. This level of detail was never before available.

“There's a massive amount of data that is going to feed back into optimizing IoT value chain—and all of that data will come back into driving demand and supply signals across the value chain,” says Tantzen.

Accelerate responsive networks

As IoT makes its way into commercial over-the-road assets, these assets will have information about road conditions, weather conditions, traffic congestion, and pick-up and delivery availability that will allow for more dynamic route, driver, and tractor management.

“In terms of the Internet Of Things's impact on transportation, there are multiple use cases—everything from having sensors that are checking tire pressure on trucks to cold chain sensors that track a product from when it's initially produced through transport to the end retailer and purchase by the end customer,” says Tantzen.

Inspire profitable innovation and new product introduction

As more data is captured, businesses who deliver real customer value through creatively connected products will succeed over those who follow the hype. The challenge will involve sorting through ideas, selecting those with the highest value potential, and then translating them into profitable product offerings.

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Gaurav Palta heads hi-tech consulting at Infosys and is the founding partner of its IOT practice. John Murphy is senior director of Supply Chain and Product Lifecycle Management Applications at Oracle.

Gaurav Palta heads hi-tech consulting at Infosys and is the founding partner of its IOT practice. John Murphy is senior director of Supply Chain and Product Lifecycle Management Applications at Oracle.

Car companies have been among the first industries to embrace this concept and are using it to connect vehicle data for remote monitoring, diagnostics, and service alerts. A luxury sports car manufacturer was recently getting reports of damage caused by one of its model’s low-to-the ground underbody. Immediately, the company delivered an over-the-air software update to increase the default ground clearance of the vehicle. Not only did this IoT solution reduce the propensity for underbody impact, but also the original equipment manufacturer was able to resolve the issue without the costly alternative of bringing vehicles into service centers.

Empower supply chain professionals

To eradicate rural poverty, nearly 2,000 farmers in India have embraced an IoT supply chain platform to conduct up-to-the minute searches for agricultural data and images, region-specific weather updates, sales volumes, and average prices. This IoT supply chain platform gives these farmers real-time person-to-person access to agricultural experts who provide immediate insight into next-generation farming technology, resulting in better crop yields, faster deliveries, and increased profits.

According to Joseph Bradley, general manager of the Internet of Everything Practice at Cisco, “The most important component of IoT is the impact of people to people. How do I improve decision-making? In reality, big data is really worth zero without big judgment. We have to help the individuals throughout the supply chain actually improve their decision-making and shorten their time to insight.”

Photography by Shutterstock