Reinventing the Supply Chain with the Internet of Things
What do oil pipelines, factory floors, automated warehouses, shipping containers and food distribution centers have in common? They’re all critical components in supply chains – and they’re all facing a fundamental transformation thanks to the Internet of Things.
The Internet of Things, or IoT, has become a hot topic across the business world, in part because of the sheer number of “things” being connected over the Internet. These devices, be they cars, industrial robots, washing machines, elevators or home thermostats, are being outfitted with sensors and connectivity that enable them to generate high volumes of data and transmit it over the Internet. On the receiving end, organizations are collecting and analyzing that data to inform a variety of business decisions and operations.
Market researchers predict that billions of new devices will be connected over the Internet by the end of this decade. Worldwide IoT spending will grow from $698.6 billion in 2015 to $1.3 trillion in 2019, according to IDC.
Gartner estimates that more than half of new business processes and systems will incorporate some element of IoT by 2020. By 2025, the IoT will have a total potential economic impact of anywhere from $3.9 trillion to $11.1 trillion a year, predicts McKinsey & Co. Of this total, business-to-business (B2B) applications will likely capture nearly 70% of the value, McKinsey says.
Supply chain ecosystems, and the processes that span them, will be among the biggest beneficiaries of cloud-powered IoT solutions. Sensors, controllers and other IoT-connected devices will reside on everything from individual products to crates and shipping containers. They will be embedded throughout factories and warehouses and will help track fleets of ships, trucks and other vehicles.
All told, these diverse and interconnected entities will give corporate managers real-time, end-to-end visibility and control across their supply chains. Layer on data-driven automation, big data analytics, anywhere/anytime cloud-based services and other complementary technologies, and supply chain processes are set to become much more effective, predictable and cost-efficient.
Of course, capitalizing on the potential of the IoT requires careful planning and involves tackling a variety of challenges. But many companies in a range of industry sectors are already reaping benefits from IoT-enabled supply chains. Given the current pace of technological change, and the impetus to use digital technologies to transform established business models and operations, companies need to move now to start modernizing their supply chains with IoT-driven solutions.
Diverse Supply Chains, Common IoT Benefits
Supply chains in different industry sectors vary widely in their profiles and processes.
Vegetables, fruits, grains, meats, dairy and other agricultural products are especially susceptible to delays, temperature variations and other environmental factors as they travel from farms through processing and distribution centers to supermarkets, restaurants and other destinations.
Encompassing some of the most complex partner ecosystems, these chains stretch from the mining of raw materials that travel to component manufacturers, whose products then move to system assembly sites, with finished systems then sent to wholesale or retail outlets, and finally into the hands of the ultimate purchasers.
Oil & Gas
Once these natural resources are drilled and extracted – often from remote and dangerous environments – they may travel by pipeline, ship, train or truck to a series of destinations including refineries, distribution centers and local gas stations.
Given the diversity inherent in these and other supply chains, the impact of IoT on their operations inevitably will vary. In one example, IDC predicts that by the end of 2018, digitally connected processes will drive 15% productivity improvements for manufacturing supply chains.
Other types of supply chains may see greater or lesser productivity gains, but IoT-enabled solutions should propel significant improvements in productivity, efficiency and other key performance indicators regardless of the supply chain category.
For example, utilizing sensors to create digital endpoints across each
supply chain element can produce data about product inventories,
shipment locations, ambient temperatures, retail purchase rates and dozens of other variables. By analyzing that data, organizations can automatically restock inventories, predict product arrival times and potential delays, warn about spoilage or other quality control issues, and react instantly to changes in demand.
IoT-enabled solutions are already aiding a “farm-to-fork” supply chain in the United Kingdom. At the front of the chain, Agrii, a provider of agronomy services and technology solutions, collects data from more than 200
weather stations throughout the U.K. The company also uses scanners to analyze soil after harvests to help farmers map their fields and plant crops in locations that maximize their yield.
In addition, Agrii captures product forecasts from all of its growers. “We put [the forecasts] into [Microsoft Dynamics] AX and model out our season so we hold the right products in the right places for our customers’ projected demand,” explains Derek Wilson, information officer at Origin Enterprises PLC, Agrii’s parent company. The forecasting models help Agrii meet its commitment to deliver 97% of its product in full and on time to customers.
IoT and Cloud: A Natural Pairing
Rockwell Automation, a leading provider of machine controllers and sensors, is using IoT to transform its processes for moving oil and other hydrocarbons from remote extraction sites through refineries and ultimately to gas station pumps.
Rockwell is feeding data from devices across the supply chain into Microsoft’s cloud-based Azure IoT Services to achieve a variety of benefits. Among them:
- Hilcorp Energy Co. operates drilling platforms in the coastal waters off Alaska’s Kenai Peninsula, where a single pump failure on an offshore rig can cost the company up to $300,000 a day in lost production. Rockwell Automation has connected the pump’s electrical variable speed drives to the cloud, so pressure, temperature, flow rates and other indicators of the equipment’s performance and heath can be continuously monitored, and problems can either be prevented or rapidly identified and fixed.
- At multiple locations across the supply chain, the “skids” that measure the amount of product transferred from one container to another have been modernized by Trigg Technologies, using technology from Rockwell Automation and Microsoft. Detailed data about skid transfers and maintenance, formerly paper based, is now digitized and automatically used to create electronic records as well as to improve skid diagnostics and maintenance.
- At gas stations adding liquid natural gas pumps to their operations for the first time, Rockwell Automation is connecting and cloud-enabling the new pumps, permitting the collection of data about everything from pump operations to liquid natural gas sales rates and tank levels.
Rockwell’s pairing of IoT devices with cloud services represents a natural marriage of technologies that will become increasingly common across all types of supply chains. Given the geographic scope of supply chains, the number and variety of IoT devices, and the need to collect and analyze huge volumes of data – often in real time – cloud-based services are a perfect complement to today’s emerging IoT-driven supply chains.
“Our solutions enable unprecedented efficiency by bringing the data generated by even the most remote assets into cloud, driving business insights and evolving an entire industry,” says Gary Pearsons, VP and GM of Rockwell’s Services Business.
Rockwell’s successful deployment of cloud-based IoT solutions could help others make a business case for moving supply-chain management applications to the cloud. IDG’s annual Cloud Computing Study finds that just 14% of organizations have migrated supply-chain management applications to the cloud, with only another 11% planning to do so over the next 12 months.
Our solutions enable unprecedented efficiency by bringing the data generated by even the most remote assets into cloud, driving business insights and evolving an entire industry
Enabling Supply Chain Links with the IoT
IoT solutions for supply chains can be challenging, given the inherent complexity of a supply chain that consists of multiple companies and IT systems. These companies produce, process and move a wide variety of assets, and the chains may span huge geographic distances and cross multiple borders. Every stage of the supply chain introduces potential security vulnerabilities, integration issues and other hurdles, which means that each company-to-company pairing throughout the chain must be well thought out and managed.
As with the supply chains themselves, IoT-based solutions often involve many players. They may include device and sensor suppliers, network operators, cloud services providers, application vendors, systems integrators and others. Blending the multifaceted ecosystems of supply chains with the ecosystems of IoT solution providers requires that companies conduct comprehensive evaluations and due diligence as they seek to leverage IoT across their operations.
Identifying partners that combine proven IoT technology proficiency with expertise in supply chain operations and processes should be the first step on the IoT journey. Working with these partners, companies can then determine the many ways in which IoT devices and data can lubricate their supply chains, boosting efficiencies, visibility, reliability and control across each stage of the source-to-market flow.