There has been a lot written about the Internet of Things (IoT) and how it will disrupt business paradigms across a broad spectrum of industries. The most exciting areas of impact is also one of the most important business areas in any industrial facility, the supply chain.
Warehousing is one sector where the Industrial Internet of Things (IIoT) can make tremendous gains for companies. As warehouses are becoming increasingly automated, they are improving productivity, efficiency and safety. In the future almost everything in your warehouse will be connected to the Internet of Things. A network that will be connecting and exchanging data between devices, vehicles, inventory and even buildings.
IDC predicts that we will be spending $1.3 trillion in 2019 worldwide for the IoT.
According to Gartner by 2020 more than half of the major new business processes will incorporate elements of IoT. Up to 26 billion internet-connected ‘smart’ devices will be installed, generating some $300 billion by the end of the decade.
Early adopters of IoT technologies will be better able to drive their business forward and gain a competitive edge from this technology.
This transformation is already underway. According to a recent survey by GT Nexus and Capgemini 70% of retail and manufacturing companies have already started a digital transformation project in their supply chain and logistics departments.
When it comes to operational efficiency, the IoT offers many advantages such as:
Freight and shipping companies have used barcode scanners to track and manage their inventory throughout the supply chain for a long time. But with the IoT, those methods are no longer the most advantageous. New RFID and GPS sensors can be installed on your assets, so you can easily monitor the location of the equipment. You can use these sensors to gain granular data such as the temperature at which an item was stored, how long it was kept in cargo, or how long it took to fly off the shelf. Businesses can obtain a tighter grip on quality control, delivery times, and product forecasting.
The data obtained through asset tracking will not only allow businesses to operate efficiently but also to spot inefficient sub-par vendor relationships. According to IBM, products or services deriving from a company’s suppliers can account for up to 65 percent of that company’s value. Therefor it is important to keep an eye on how your vendors are handling the supplies they’re sending you, and how they’re handling your product once it’s made.
Forecasting and Inventory
The collection of data along with pattern analysis over time enables far more accurate forecasting than humans can manage alone. This way your inventory will no longer explode with overstock at the wrong time nor you will find out that your shelves are empty one month later. One relevant example would be Costa Express. After its success in 2011 with a couple of hundred self-manned coffee bars, Costa Express decided to grow in less than five years to 3000 locations. In order to sustain the growing demand, Costa needed visibility and control over its supply chain and accurate stock replenishment. Its unmanned coffee stations use integrated telemetry to transmit data every 15 minutes to help forecast demand, optimize inventory, and generate replenishment proposals for distribution and procurement. To keep up with the expansion and remain profitable, Costa launched a major supply chain transformation; it has implemented a planning software that uses the data to calculate on a nightly basis the refill order requirements.
Six months after going live, Costa Express had managed to:
- reduce the field stock at its partner sites by 20%.
- lower delivery refusals by those partners by 50%
- reduce its annual logistics operating costs by 30%,
- increase its Net Promoter Score by 10%.
While IoT can improve the management of fixed assets like manufacturing equipment, it can also optimize the management of assets that are in motion, from trucks to forklifts to shipping containers, suppliers’ delivery trucks or autonomous vehicles. Manufacturers can use connected fleets to gain increased visibility into their supply chains, lowering transportation costs and increasing fleet efficiency.
BI Intelligence has estimated in a recent report that by 2021 there will be 380 million connected cars on the road. Currently, GM alone, already boasts a fleet of 12 million IoT-enabled cars.
The IoT allows manufacturers to analyse historical and real-time sensor data in order to predict equipment failure so they can repair or replace equipment before it fails and prevent down-time that can cost so much.
A new McKinsey Global Institute report, The Internet of Things: Mapping the value beyond the hype estimates that the Industrial IoT market is worth $11 trillion and that predictive maintenance can help companies save $630 billion over the next 15 years.
Smart warehousing solutions
Leveraging the latest supply chain technology and the Internet of Things, a “smart warehouse” will allow your company to be more efficient. You can utilize sensors to create digital endpoints across each supply chain element this will allow you have a complete set of data about product inventories, shipment locations, ambient temperatures, retail purchase rates and various other variables. By analysing that data, companies can automate their replenishment process, predict product arrival times and potential delays, warn about spoilage or other quality control issues, and react instantly to changes in demand.
An accurate analysis of this data will give the opportunity to improve the supply chain, company goals and objectives, new product development, and customer service.
Warehousing is one sector where IoT can make important gains for companies. For example a fully-automated, connected warehouse, would allow your company to fully eliminate dead space. By implementing a vertical stacking system that is operated by robots, you can completely eliminate the space needed by people to walk around in order to pick or load items into place. Companies like Lufthansa and Puma are already looking into implementing such a solution and they estimate that the warehouse space will be reduced by up to 75%.
Some of these organizations use connected technology in tandem with cloud-based analytics to drive efficiencies and launch new business models. According to Gartner “By 2021, one in 10 warehouse workers in established economies will be replaced by autonomous mobile robots”
Amazon: Reinventing warehousing
The online retail giant, Amazon, has already started the industrial transformation. As MIT Technology Review has put it:
Amazon is “testing the limits of automation and human-machine collaboration.” Amazon’s fulfilment center, is using armies of Wi-Fi-connected robots that locate shelves of products and bring them to workers rather than have employees go to the shelves in search for products. This addition of robots allowed Amazon to store 50% more inventory, according to the company, while they helped the company cut its operating costs by 20%, according to Dave Clark, a senior vice president at Amazon.
By taking advantage of the available digital transformations, companies can greatly improve operational and systems efficiency. The IoT has a ripple effect throughout the entire supply chain industry by reducing costs and speeding up the movement of goods from warehouses to stores and finally to the consumers.