When you hear about the potential impact that digitization technologies can have on the supply chain — in terms of how they could be leveraged to re-imagine or redefine business practices — it’s hard not to be optimistic about the future. Last week we shared highlights of a recent research study conducted by SCDigest. Of the 203 organizations surveyed, 66 percent of respondents believe that digitization technologies will provide their organizations with significant competitive advantage over the next five years, and 64 percent anticipate investments in supply chain digitization technologies and capabilities to increase over the next three years.
You can learn more about the survey results in “The Future Is Now: Harnessing the Power of Digitization to Drive Greater Supply Chain Performance” white paper and infographic.
Yet deploying digitization technologies can be more challenging than it seems. Many companies are still burdened by legacy systems that are often expensive to maintain, not to mention update or replace. Large companies, in particular, have accumulated such complex IT footprints (multiple instances of enterprise resource systems, plus many other systems with unique architectures and data models) that it is a challenge to combine and extract relevant data across all of those disparate systems in a timely manner.
These constraints often make it difficult for companies to respond to change with agility. The SCDigest survey respondents reported that when unplanned events occur (such as a natural disaster or a competitor dropping its price), their ability to respond quickly varies dramatically:
- 46 percent of respondents do not have a systematic way to respond, or make ad-hoc or manual changes to their plans, and 13 percent are not sure about their company’s response capabilities.
- For 18 percent of respondents, it takes approximately one week to respond to unplanned events due to planning cycles.
- Only 23 percent have planning and execution systems that are connected in real time, enabling them to respond almost instantly to unplanned events.
It is the companies that have planning and execution systems that are connected in real time that are best positioned to take advantage of the real-time insights that the Internet of Things (IoT) — one of the digitization technologies that has received a lot of hype in the past couple of years — can provide.
Examining the IoT Opportunity
IoT, which refers to the network of physical objects connected through the Internet, as well as the intelligent communication that occurs between them, has been getting a lot of media focus lately. While there are many and far-reaching opportunities, at JDA we see the benefits of IoT in the following two areas:
- Enhanced product development: IoT can provide companies with insight into factors such as consumer preferences and product usage, which can then be used to develop new products or enhance existing product designs. Embedded sensors on industrial equipment, for instance, would enable a company to have access to the machine’s key performance parameters such as temperature, pressure and ambient condition. With this information, the company has the ability to calculate the remaining life of critical parts and plan timely replenishments, avoiding expensive shutdowns.
- Improved supply chain performance: IoT can drive performance improvements across the entire supply chain through automation and dramatically enhance end-to-end visibility. Using a combination of sensors (radio frequency identification, or RFID), connected devices and communication channels (3G/4G, GPS, Bluetooth, Internet, etc.), companies will have the ability to monitor transit status, including factors such as location, temperature and diagnostics, in real time. Some companies, for example, are already using this technology to track real-time transit information, as well as model ideal routes to optimize the freshness of perishable cargo.
When considering the application and benefits of IoT, survey respondents anticipate the greatest value to be gained from increasing supply chain performance/reducing costs, compared to developing product offerings with new capabilities and/or services. In fact, 70 percent view IoT as an opportunity to drive product innovation, with 35 percent seeing it as a major opportunity. Eighty-five percent view IoT as an opportunity to drive improved supply chain performance/reduced costs, and of those, 44 percent view it as a major opportunity.
Respondents view IoT as a major opportunity to improve supply chain performance in the following areas of the supply chain:
- Real-time inventory visibility (55 percent)
- Understanding product flows/dwell times (45 percent)
- Machine/production monitoring (40 percent)
- Field service (37 percent)
- Truck/driver performance (36 percent)
- Quality/safety monitoring (35 percent)
The possible implications for IoT, specifically in the supply chain, are vast. Where are you looking to incorporate it into your operations?
- Download the “The Future Is Now: Harnessing the Power of Digitization to Drive Greater Supply Chain Performance” white paper
- Access “The Future Is Now: The Power of Supply Chain Digitization” infographic
- Watch a conversation about the power of digitization between SCDigest’s Dan Gilmore and JDA’s Doug Kimball
- Access the 2016 SCDigest Supply Chain Digitization Benchmark Survey data