Supply chains around the globe are tremendously challenged by volatile demand patterns, cutthroat competition and increasing consumer expectations for fast delivery speeds. While businesses and industries have steadily developed various levers to improve the performance of supply chains, those levers are not effective enough to meet customer demand, particularly in the digital age.
However, with the advent of the “Internet of Things” (IoT) there is tremendous potential to change the very structure of the supply chain, from a linear, step-by-step process, into a seamless, data insight-driven stream.
In part one of this series, I’ll discuss the conventional levers that have been implemented to improve supply chains in recent years, and the gaps these levers still cannot fill. I will explain, too, how IoT can create more cohesion.
In part two, I’ll explore the IoTization of conventional levers and how it can enrich the customer experience of employees, customers and other stakeholders in the supply chain.
Traditional Levers: Grinding Ahead
In recent years, companies have explored a gamut of levers in their quest to optimize supply chains. Most of these levers are structured around one of three categories:
1) People and process: These levers improve efficiency by process engineering, policy change and organization redesign. Simplification and all-inclusiveness of customers are at the crux of these initiatives and actions.
2) IT enablement: These levers improve supply chains by facilitating communication between various stakeholders and entities in the supply chain. Many of these levers work at a process transaction level and have evolved over a period of time from EDI to advanced ERP systems and supporting applications. They give customers access to tremendous amounts of information anywhere and anytime.
3) Industrial automation: These levers automate supply chain elements such as warehouses, shop floors and logistics. Automation, as we’ve known since the industrial revolution, greatly reduces manual efforts and human errors.
But Where’s the Wow?
Pull all three levers and there’s no doubt that the customer experience has been improved. But while traditional levers tend to make a supply chain gain some speed and efficiency, there are still significant gaps, and few opportunities to innovate. In short, there’s still no “wow!” experience.
Let’s explore why:
Lack of flexibility: Most conventional levers are investment-intensive and therefore, costly and difficult to modify. Traditional user interfaces, for example, are often designed in ways that stress process over customers. While there might be some degree of simplification, users typically adjust to an interface’s characteristics rather than the other way around. Some supply chain stakeholders find themselves stuck with an IT systems’ non-intuitive screens and there’s no way to change the situation.
Transactional level only: Generally, the supporting IT systems of traditional levers operate at a process transaction level. An analysis can provide a holistic view but completely miss a root cause of inefficiency at the sub-transactional level. For example, if a shipment is late, a manager might be able to find out by how much, but not be able to drill down to determine where on the route the shipment got stuck.
Investment intensive: Most conventional levers are investment intensive, requiring a long period of time to reach a break-even point. Since they often consume a huge part of a budget, they leave little scope for supply chain managers to engage other initiatives.
IoT: Filling the Gaps, Creating a Stream
Given accelerating pressures, further investment into traditional levers is risky. There’s an obvious need for a lever that requires incremental investment, is flexible for deployment and modification, operates at a sub-transactional, granular level and prioritizes the customer rather than the process.
IoT-enabled levers can do exactly that. IoT would not eliminate conventional levers but fill in the gaps, creating a more seamless, supply chain – even a supply stream. IoT enables more innovation, communication and an enormously improved customer experience:
More customer touch points: With IoT, a higher number of touch points are monitored. This produces loads of information on data points that affect customers directly or indirectly. One can observe processes and the customer at a detailed level, previously not possible.
Clearer insight to customer behavior: Analysis at a sub-transaction level enables granular insights. This also paves the way for steadily improving detailed analysis as data becomes available. Now customers can determine exactly where their shipment got stuck.
Preventative capabilities: The alerts triggered from IoT based applications can generate recommendatory alerts and precautionary measures. Moreover by developing business logic, triggers can be generated to facilitate quick curative actions. For example, a trigger might alert a supply chain stakeholder of a loss or stoppage in real time, providing the opportunity to remedy quickly and prevent further losses.
In the next blog I’ll explore the IoT levers that bridge the gaps left by conventional levers, and the precise role IoT plays in creating a supply stream.