Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
Nov, 3, 2016

Iot and the Visible Supply Chain

IoT is Overhyped Right Now, but It will Ultimately Deliver what RFID Alone Could Not

RFID alone didn't do it. So is the Internet of Things (IoT) going to deliver a whole new world of detailed, real-time visibility in a way that will transform how we manage our supply chains?

In September of 2003, in the second issue ever of Supply Chain Digest, I reported (rather briefly) on the first ever Electronic Product Code (EPC) RFID conference in Chicago. It was a momentous gathering, actually, at the forefront of the "great RFID hope" period that later fizzled, with the announcement then that the MIT Auto ID Center - which invented the EPC version of RFID - was transferring operation of the center to a new organization under GS1 called epcGlobal.

In that original column (which you can find here), I wrote the following: "It did hit me at the show that we seemed to have crossed a major threshold. Many of the world's largest companies have now at least mentally committed to the concept that they will be able to track every product, everywhere, proactively, in real-time. This is not something I think we really were contemplating even a short while ago, and it has significant supply chain (and other) implications."

Gilmore Says....

I believe it was McKinsey that awhile back said most companies will be astounded when they learn how customers actually use their products.

What do you say?

Click here to send us your comments
 

This view was of course largely coming out of the consumer products sector, led by such companies as Procter & Gamble, Kimberly-Clark, Unilever and others. And I still believe that at the time it was momentous: even with bar codes, it was simply not possible for companies to see all their assets and inventory across the supply chain, in real-time. It was not something companies could even envision before then.

HP was one of the original eight consumer goods companies that famously first began shipping RFID-tagged cases to a few Walmart DCs in Texas in 2004. It soon starting talking about the logistics insights RFID was bringing in early pilots, such as identifying long "dwell times" of pallets of goods in a DC that should be moving quickly but were not.

Heady stuff - only in the end it largely went nowhere. I could write many words on this, but I will summarize the factors for this collapse of RFID in supply chain as these:

• Everyone else in retail decided to wait for Walmart to do the dirty work in terms of vendor compliance and driving down tag/readers costs.
Walmart screwed its own program up royally, from generally poor project management to taking a one size fits all approach to vendors and product tagging to failing to listen to companies like P&G that had done tons of analysis and knew in what areas RFID could be deployed to add the most value.
There really was not much value, just cost, for most consumer goods companies in the Walmart program, so they delayed, refused, pushed back, etc.

By early 2009, it was all over, as P&G rather amazingly issued a press release that basically said its pilot with Walmart on tagging promotional displays in-store was proven a success, but it was cancelling the program because Walmart wouldn't do anything with the data. Take that Bentonville.

So here we are almost eight years later. There are now many mainstream and successful use cases for RFID outside the supply chain (ticketing, toll booths, tracking healthcare equipment and assets, etc.), and some inside the supply chain, notably work-in-process tracking in manufacturing, which is now commonplace. But in my view it is hardly taking off in supply chain - though that may be changing.

And now we have the "Internet of Things," which, however you define it, is clearly above the strong hype level of where RFID was back in the early 2000s.

So, let's start with this: RFID is a subset of IoT. RFID was primarily about identification - this product is here. But IoT is about more, identification connected to other information, commonly from sensors that can measure temperatures, movement, and additional useful data.

So we have, for example, Caterpillar with thousands of pieces of equipment out in the field now IoT-enabled, sending data back to Cat that not only can be used to know when maintenance is needed, but also how customers are actually using the product. It can tell, for example, when a given operator is not using an excavator as efficiently as possible. What it does with this information will undoubtedly evolve (sell the insights to its customers?), but this is the level of near-real time visibility Caterpillar and others have achieved. In fact, nearly every maker of big equipment of any kind (e.g., Schneider Electric) is on a similar IoT path.

That's all well and good, but can IoT really transcend beyond those types of businesses? Is it the concept that can deliver what RFID alone could not, which is pervasive supply chain visibility?

I have been as usual skeptical of the thick IoT hype, but I am beginning to come around to an answer of Yes.

Let's look at a few recent developments:

Major Technology Companies are Making Huge Investments: At the recent CSCMP annual conference, GE's chief digital officer for its transportation unit said the company's goal was to be a top 10 software provider globally by 2020. That's right - GE. Much of that software will be IoT related, such as its new "Predix" solution, an operating platform that as best I can gather allows tools for connecting digital data streams, such as from IoT devices and sensors.

SAP is making huge investments, saying it will spend some $2.25 billion on IoT related software over the next few years. That's a really big number even for SAP. In 2016, it has made several IoT related acquisitions, some for fairly big bucks, and released several applications, such as SAP Connected Goods, a Cloud-based solution designed to generate actionable insights from IoT data from mass-market "things," everything from coolers to vending machines to power tools, using remote monitoring, management and (where appropriate) central control.

These are just a couple of examples. These companies and others could turn out to be wrong, but there are a lot of smart people investing huge dollars - far beyond the money behind RFID - in a bet that the IoT market will be massive. While part of this is responding to perceived demand, the reality often is that tech vendors actually create the demand.

Macy's Goes All-In in RFID: Painfully slowly, there has been some traction in so-called item-level RFID tagging in retail. The promise: highly accurate in-store inventories, notoriously inaccurate at most retailers.

But what is now really spurring the interest is the trend towards using stores as order fulfillment points, either as part of an "order on-line, pick up in store," scenario, or as the source for shipping products to on-line customers.

In either case, the need for highly accurate in-store inventories should be clear. It seems only RFID can achieve that today. Macy's recently announced it was to soon require vendor tagging of 100% of its SKUs. Other retailers at last are sure to follow suit - especially of course if Macy's strategy pays off. Such tagging will move back up the supply chain.

Recognition that Understanding How Customers Use Products is Key: It's fairly obvious that IoT can provide deep insights into how companies use big machinery - but does it go further than that?

I believe it was McKinsey that awhile back said most companies will be astounded when they learn how customers actually use their products. Just a few weeks ago, a young UK genius named Josh Valman, all of 22 years old but already consulting with many of the world's largest companies on product development, recently said he was very bullish on IoT for this very reason.


"A lot of the things we make have sensors in them. Even if they're dumb products, we put sensors in, because understanding how people actually use products is so valuable. That data is how you get into niche markets," Valman said.

He added: "Take a mop, for example. If you can see that in Singapore people use a mop in this way [makes forward sweeping motion], but in Thailand they use it like this [sweeps from side to side], that totally changes how you make the thing, how you design it, and how the grips work."

So I am out of space - there will be a part two. The bottom line, though, is this: IoT is heavily hyped for sure, often by those with agendas. That said, its ability to make the "invisible visable" will greatly impact many areas of business, including of course supply chains. Critically, over time, high value-added applications will trickle down into more prosaic ones - like where the inventory is.

And then nearly the entire supply chain will be visible. What we do with that in part remains to be seen.

What are your thoughts on workforce, technology, consumer or infrastructure issues? Let us know your thoughts at the Feedback section below.


Your Comments/Feedback

Mike Albert

Director Business Development, Geodis
Posted on: Nov, 04 2016

Great column!  You opened my eyes about IoT and the potential applications.  

I wonder, though, how consumers will react when they realize that the products they use will be broadcasting information about how their homes work, when tasks are done, periods of no activity, etc.  Privacy "invasion" may be a big hurdle.

Thanks for the insights.

David MacLeod

Lean Logistics Limited, Principal
Posted on: Nov, 04 2016

I have a background not just in supply chain management, both operations and planning, but also in industrial engineering. This has trained me to gather all the facts I can about any given situation. The beauty and curse of IT systems is that they can now provide you with an almost infinite quantity of facts. It can rapidly become a situation of not being able to see the wood for the trees. This can in turn encourage senior managers to demand the “Silver Bullet”, as they tend to become discouraged by too much detail.

Supply chain management is about flow and ensuring that the restrictions/constraints are minimised. This can be difficult enough without the added dimension that any action in one part of the network can have an effect on another part not necessarily directly connected with it. I’m probably still not explaining my concerns with too much data, but perhaps some clarity may come about by updating my father’s first law of engineering which stated: “You need to know what to hit, what to hit it with and how hard to hit it”, with my own first law of Information Gathering and Handling: “You need to know what questions to ask, how to get the answers to only the questions asked, and how to check that the answers are correct”.

Getting back to IoT I remain to be convinced that it will make that much difference. Whilst in theory it should provide a better quality of data, and it can be greatly more focused, what is the likelihood of the prime question being the right one that reflects the root cause of the problem?

Steve Murray

Lead Auditor and Senior Research Associate, Warehousing Education and Research Council
Posted on: Nov, 08 2016
Thanks for another great article!

Your post below contains some great insight on the future impact of the “Internet of Things” (IoT) on supply chain generally and indirectly on my favorite area - warehousing.

You and I have had many discussions about warehouse processes and automation over the years, and of course you are dead on in your analysis of the history of RFID in the supply chain.

As you suggest, IoT may be a bit different. Sure, RFID is a component of IoT, but with the expanded scope offered by IoT, and when you combine it with "Big Data" to get "Cradle to Grave" data for analysis of product flow and usage the sky is the limit.

As I always say - our ability to analyze and perform educated opinions regarding past and future directions is only limited by our access to data.

Thanks again for simply being there are telling it like it is (or will be).
 
 
 
 
 

Features

Resources

Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator

Newsletter

Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
submit
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
 
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2013 - All rights reserved
.