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How the ‘Internet of Things’ will Impact B2B and Global Supply Chains

Over the past few months CIOs and executives around the world have been trying to embrace a new set of IT related buzzwords, namely The Internet of Things (IoT), The Internet of Everything and the Industrial Internet. All three terms are essentially used to describe machine to machine (M2M) connectivity across the internet. The IoT relies on any machine or device being connected, via fixed wire or wireless communications links to the internet and then being able to transmit information in one form or another. There are countless research articles that have been published on the internet describing these three terms and I do not want to spend too much time discussing these in detail, instead I will discuss how they relate to B2B and the Supply Chain and how they are going to change the way in which companies work with each other in the future.

The IoT has provided a much needed boost to the high tech and manufacturing sectors, but the technology being deployed is usable across virtually any industry sector and there lies the business opportunity. The most widely published figure estimating the market size for IoT was produced by Cisco who believes the market will be worth $14.4 trillion by 2020. Cisco has taken the lead in terms of developing thought leadership in this area, their recent Internet of Everything study provided some interested insights including the benefits chart shown below.

IDC estimates an IoT market size of $9 trillion by 2020. Either of these estimates are very big numbers which is why IBM, GE, Infineon, Qualcomm and many other companies are investing significant amounts of money on IoT based technologies and services. IDC suggests there are three enablers driving the IoT, namely:

  • On-going development of smart cities, cars and houses
  • Enhanced connectivity infrastructure
  • An increasingly connected culture where everyone wants to be connected to the internet at home, at work or in the car

IDC goes on to predict that there will 212 billion ‘things’ connected to the internet by 2020. It is important to stress that the IoT is in its infancy but wired connected devices have been in use for many years. The idea of the IoT initially became popular through the Auto-ID Center, a non-profit collaboration of private companies and academic institutions that pioneered the development of a web-like infrastructure for tracking shipments around the world through the use of RFID tags carrying electronic product codes. The IoT relies on web-enabling virtually any type of product or piece of equipment so that data about the object can be captured and communicated. Once captured, the information would be transferred from the remote device and then processed via some form of middleware to an integration platform. Ideally from a business point of view, all connected devices would be connected to the same integration platform to allow them to work seamlessly with back office business environments such as supply chain management and ERP platforms.

McKinsey & Company recently said in a report that the manufacturing sector is likely to see the most benefits from the IoT and they went on to predict that we are about to enter the fourth industrial revolution, or Industry 4.0. The industrial internet will see the world of manufacturing become more and more networked until everything is interlinked with everything else. GE sees so much potential in the industrial internet that they have setup a software division, called GE Software, based in California to look at how they can exploit this across the various products and services that they offer. McKinsey also believes that the IoT will lead to an exponential growth in data flowing across the extended enterprise and companies will have to acquire personnel with the necessary data analysis experience to be able to process this information. These people will have to design robust algorithms for processing IoT related information and then translate what happens in the physical world into a format that can be handled in the digital world. This requires mathematical, domain, market and context know-how. In the connected world, the physical world should be integrated with business processes, including delivering data, sending events and processing rules. The area of Big Data may just be starting to gain acceptance across different industry sectors, but the IoT will see interest in Big Data Analytics grow exponentially over the coming years.

With a piece of integration software or middleware acting as the interface between the physical and digital supply chains, how can companies leverage this connection and more importantly how could it help to streamline supply chain processes across the extended enterprise? There are a number of ways in which the IoT could add value to supply chain strategies, not just in manufacturing, but in other sectors such as retail as well. We are at the very early stages of understanding how the IoT will impact the enterprise, but from a supply chain management point of view here are three initial areas where the IoT could impact global supply chains:

  • Pervasive Visibility – relates to the way in which shipments are tracked at every stage of their journey from their point of manufacture to their point of delivery. The IoT not only provides ‘information everywhere’ but will offer ‘visibility everywhere’ as well. RFID is one such technology that was introduced to provide improved visibility of shipments, but has sometimes struggled to offer full end to end visibility across a supply chain due to the fact that the infrastructure to track RFID tags has not existed on a truly widespread, end to end basis. As more pieces of equipment, infrastructure and vehicles are connected to the internet, it means that traditional ‘black spots’ or visibility gaps across a supply chain where shipment visibility is limited will begin to disappear. Connected devices or infrastructure will help to plug these visibility gaps and allow shipments to be tracked end to end across a supply chain. The IoT will also allow companies to have two way communications with their shipments at each stage of its journey across the supply chain. For example a piece of equipment could be remotely contacted and instructed to go into an ‘installation mode’ before it arrives at the site where it will be delivered.
  • Proactive Replenishment – efficient inventory management has always been a challenge across the retail industry, especially when one considers the various channels that consumers can purchase goods today. Whether buying online, or through traditional brick and mortar stores, managing inventory levels and being able to replenish stocks efficiently is a constant challenge. It is not just the retail outlets, keeping vending machines stocked up is another area that could be considerably improved. Many vending machines are typically in remote locations and the only way a company gets to monitor stock levels is to physically visit the vending machine and replenish the stock as required. What if the vending machine could be connected to the IoT and when the vending machine detects low stock for a particular item it is able to automatically place an order for new stock which can then be delivered before it runs out. What if this was expanded to normal retail outlets and low stock signals from a sensor fitted to shelving in the stores triggers the ordering of new stock. In France many supermarkets have RFID based price tags to allow pricing information to be updated centrally, extending this capability to check for stock levels will change the way in which retail outlets manage their inventory levels.
  • Predictive Maintenance – In an earlier blog I highlighted a case for how the IoT could support the replacement of parts in serviceable products such as industrial equipment and office equipment for example. If a piece of equipment is able to self-diagnose a potential problem and then place an order for a replacement part, then it can be fitted before the part fails. I used an example of a car engine detecting reduced flow rates across a water pump. A seal on the water pump could be leaking, causing inefficient operation of the cooling system. Before the water pump completely fails, the car’s ECU sends information via the internet to a local service centre about a potential problem and at the same time places an order for a new seal to be delivered directly to the car owner’s normal location where they get their vehicle serviced. The service centre then automatically checks the service schedule and emails the owner of the car to notify them of an impending issue with their car. This scenario could be applied to an aircraft, a piece of construction equipment or even a fax machine in an office, any serviceable equipment will be connected to the IoT to help detect potential problems and get them resolved ASAP. Direct integration with a B2B platform allows all ordering and shipment related documents to be created and tracked automatically so that service centres know exactly when the replacement parts will be delivered.

Key to all three of these areas is the ability to integrate the physical and digital supply chains. Companies will need access to a cloud based integration platform that can integrate to a wide variety of connected devices, equipment and services. An M2M API or middleware that sits between the piece of equipment and the supply chain management environment will be key to providing the link between physical and digital supply chains. Therefore common standards will have to be developed to achieve this seamlessly and IBM has started the ball rolling by proposing their MQTT standard as the basis of how machines will communicate with each other across the internet. But this is only one part of the equation, as document/file standards and ways to process the information being transmitted between these devices must also be developed. The key challenge to widespread adoption of the IoT relates to achieving seamless interoperability and common standards that need to be developed to allow machines to be able to communicate at a technical level and across different borders and cultures as well. In North America an alliance of ten companies including Cisco and GE are working to lobby the US government on the importance of developing open standards that will encourage broad adoption of the IoT. The alliance is aiming to address the following IoT related issues:

  • Co-engineering cyber and physical systems
  • Identifying cyber-security issues and solutions
  • Addressing concerns about interoperability
  • Identifying ways to maintain robust wireless connections
  • Setting standards for real-time data collection and analytics
It is not just in North America where IoT related standards are being discussed. The European Research Cluster on the Internet of Things has undertaken some interesting research over the past couple of years, one of the more interesting reports tried to define all the areas that had to be addressed to develop an IoT related platform. In China the government sees the IoT as being able to offer a key competitive advantage in the global economy. So as not to miss out on the next big internet revolution they have instructed numerous government departments to come up with policies for how the IoT can be deployed across China.

Pervasive, Proactive and Preventative, three words that begin to define the benefits of the IoT, especially from a supply chain perspective. The IoT will allow the seamless exchange of information in real time between a shipment, its surroundings and a common, cloud based, integration platform that is used to connect all trading partners across the extended enterprise.

Mark Morley

As Senior Director, Product Marketing for Business Network, Mark leads the product marketing efforts for a suite of cloud integration, IoT and IAM solutions that help companies establish an end to end digital ecosystem to connect people, systems and things. Mark also has an interest in how disruptive technologies will impact future business environments. Mark has nearly 30 years industry experience across the discrete manufacturing sector.

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