The First Step to Leveraging the Internet of Things in Your Supply Chain

Meagan Douglas
Mon, Feb 2, 2015

Over half of thought leaders in the logistics world report having issues with their external suppliers. The problem, according to the study by BaseKit reported by Digital Supply Chain, is having multiple companies that supply products to a business at the same time can be overwhelming. A close look at the report suggests that visibility may be an issue as over one-third of those surveyed reported they simply do not know how many suppliers are in their supply chain.

An additional Digital Supply Chain article reported that many companies don't know where to begin when it comes to managing their logistics conundrums. Stuck using clipboards and paper, they find themselves unable to take advantage of the latest technology. By waiting to improve their supply chain, they end up behind the technology curve. The tools that a company needs to automate data are not as expensive as many businesses might think. Ultimately the solution might lie in beginning right now to consider making technological updates that will enhance the way a company functions by giving it a sharper lens as to who its suppliers are and how its warehouses are storing products. This is part of an overall trend toward what Forbes calls the Internet of Things, in which machines talk to each other, communicating information about supplies in one factory to a warehouse somewhere else. As a result, inventory management software can make many of the decisions about warehouses that would be too complex to make otherwise.

The ultimate underpinning of such technology is likely using data capture tools to collect information about how a supply chain is currently running and which company is shipping to which factory.

Implementing the Changes Right Now
Companies that wait until some undefined point before they begin automating their data collection processes will ultimately fall behind as other companies advance sooner and cut costs faster, reducing the overall price of the goods they sell while maintaining the same margins. By handling supply chains effectively, companies can actually regain much of the money they might lose in an initial investment by saving cash through creating more efficiency. Digital Supply Chain explained this by saying that supply chain operations have the greatest impact on a company's revenue because it handles all of the raw materials and finished goods. By sending things to the right warehouse in the appropriate city, a company can cut costs on shipping. By using third-party suppliers that offer great deals and hiring the right logistics company for the right factory based on location, businesses can reduce the price of their raw materials.

In order to do that, supply chain managers must be willing to invest in some kind of tool for making these sorts of calculations

The Internet of Things
Much of the software available that can calculate the best deals for a company's supply chain operate under a principal called the Internet of Things, which essentially means that machines directly communicate to software in a factory and order products automatically, making calculations and predictions that are cumbersome using manual processes.

In order to have a system that can do this, a company must first invest in data collection software. This adds the necessary layer of visibility to the factory floor and the supply chain in order to make the cost-saving calculations that computers can now execute. By simply designing a system based around barcode software and linking raw materials to finished goods, and then scanning the products as they leave on trucks to go to retail stores, companies can draw a map that can be used to calculate savings.

The supply chain landscape is changing. It has already become a very different field because of the recession and its aftermath. The companies that recognize the importance of computers and warehouse management software will know that they first need to build a foundation of visibility before they can add the roof of big data and the Internet of Things.

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