Supply Chain Automation and IoT

When it comes to supply chain solutions, “automation” continues to be the buzzword—specifically, smart automation through the Internet of Things. IoT, as the term is acronymized, makes use of sensors and beacons that, via the internet, connect to various monitoring devices. This technology, as we know it today, really gained traction around 2008 when the first IoT conference was held in Switzerland. Since then, IoT has spread across industries, including the supply chain.

From the back office to the warehouse, from transportation to delivery, fewer and fewer human hands are involved. But while some operations are large enough to benefit from full-on smart supply chain automation, smaller operations wouldn’t see a large enough ROI to justify a complete overhaul. For the majority of businesses, in fact, a hybrid model—in which some elements are automated and some are not—makes the most sense. 

“It may not always make sense to automate the entire supply chain,” says Bob Anderson, Business Development Executive for PRIDE Industries, “To get the most from automation, the end-to-end process needs to be evaluated for the best opportunities for cost savings and velocity.” 

According to Anderson, three areas benefit the most from automation: the warehouse, transportation logistics, and the back office. 

“Microsoft's 2019 Manufacturing Report showed the average cost of an IoT sensor fell from around $1.30 in 2004 to a projeced cost of $0.38 in 2020.”

Supply Chain Automation in the Warehouse

Visibility into all links of the supply chain is critical. Starting with inventory management, an organization needs to know how much product is in stock, where it is, and in what condition. This is an area where IoT can make a significant contribution. In the warehouse, not only does this technology provide real-time data on a product’s shelf location, but it can also monitor temperature, humidity, levels of powder and liquid, and changes in the product’s general condition. These capabilities save time and labor that employees would otherwise spend in manual inspection and location. What’s more, extracted IoT data allows warehouse operations managers to discern trends and forecast future customer needs. 

But the reach of supply chain automation doesn’t just apply to products. It can also monitor equipment and machines. Used this way, the technology’s algorithmic predictions can greatly enhance preventative maintenance—whether in a robotic pick-and-place device or an ordinary forklift. Safety data can be easily harvested as well, allowing warehouse managers to discern what activities generate the most risk—as well as where, when, and how. By placing sensors on dangerous machinery, in problematic areas of a warehouse, and even on employee uniforms, facilities managers can monitor risky situations, thus improving safety in the facility.

The decreasing cost of sensors makes IoT more attractive to companies of all sizes. Citing data from Goldman Sachs, Microsoft’s 2019 Manufacturing Report showed the average cost of an IoT sensor fell from around $1.30 in 2004 to a projected cost of $0.38 in 2020. Of course, sensors alone are useless without an IoT infrastructure—devices, applications, data storage, support, and connectivity. And that’s where things can get pricey, which is why—for a smaller organization—simple RF scanners and bar codes may be enough.

Here, evaluation is key. Which specific aspects of your warehouse operation would most benefit from automation? It could be as simple as knowing the evaporation rate of a stored liquid or the condition of your most relied-upon machine. Or, maybe, all you need to know is how many widgets you shipped last month.

“By the end of the year, [Walmart] projects that this delivery mode could deliver over 1 million packages to 4 million U.S. households across six states.”

Shipping and Transportation Automation

Supply chain visibility also means that a supplier knows when its shipments are sent, when and where they are in transit, when the customer receives them, and in what condition. And here’s where a relatively new IoT technology, known as Multi-Dimensional Monitoring (MDM), can bring real benefits. MDM is capable of real-time tracking that generates notifications for all stakeholders along the supply chain. Plus, as an IoT platform, it can extract and interpret large volumes of predictive data. As with other IoT applications, this information depends on the type and location of sensors, as well as a company’s associated software and device choices.

According to an article featured on Flexis’s blog, Multi-Dimensional Monitoring allows suppliers to “get as granular as you need” when it comes to data.

You can be informed of any temperature and humidity fluctuations, alerting you if temperature surpasses a pre-defined threshold to ensure the quality of your cargo stays intact. Additional services include door opening and light intrusion notifications and shock detection, once again making you aware of any possible risks to the quality and condition of your products.

And shipping and transportation automation doesn’t stop there. Some companies have already begun using drones and autonomous vehicles. In fact, this May, Walmart announced that it will be expanding its DroneUp delivery network. By the end of the year, the big-box giant projects that this delivery mode could deliver over 1 million packages to 4 million U.S. households across six states.

Again, some organizations may need less specific transportation information than others. Delivery of toilet paper, for example, doesn’t require real-time temperature and humidity measurements. However, when store shelves are emptied of it, and customers are waiting, an IoT device that allows for tracking will certainly be beneficial.

Back Office Automation

Often the last in line when it comes to supply chain automation, the back office can nevertheless benefit greatly from IoT technology. That’s because, as stated in Supply Chain Brain’s blog, Supply-Chain Innovation: In the Front Office or Back? “ . . . the back office can have an outsized impact on the supply chain.”

Andy Stinnes, writing in Supply Chain Brain, notes that a company’s back office is where a “huge swath” of white collar employees can be found, “none of them touching, making, or moving any goods, yet engaged in a myriad of administrative support functions without which no supply chain could ever function.” Stinnes further notes:

They’re network planners, inventory managers, sourcing and procurement professionals, transportation analysts, trade compliance experts, and packaging designers—the list goes on. By some estimates, 15% to 20% of all employees in the supply chain are in the back office. Adjusting for generally higher salaries, that’s likely 25% or more . . . and that’s just labor cost.

Without the benefit of automation-generated data, everything from the design and placement of warehouses to the best transportation routes is subject to miscalculation, as are projected demands for goods, packaging requirements, and labor. Meanwhile, repetitive documentation, paperwork, and data entry tasks suck time, money, and labor away from higher-priority tasks.

New technologies, designed for the back office, allow for the streamlining and synthesis of time-consuming manual processes. Optical Character Recognition (OCR) programs, for instance, extract data from scanned documents, camera images, and PDF imagery, converting these data into words—eliminating the need for manual data entry. Data extraction and transformation also allow  for the automated generation of documents such as invoices, order forms, and contracts. Workload Automation Tools (WATs) and Robotic Process Automation (RPA) can automate workflows and carry out an array of repetitive computer tasks—from scheduling to order processing.

Within smaller organizations, back-office automation could be as simple as a robust CRM system, social media automation, a metric-providing email platform, and even a customer-interfacing chatbot—which can be implemented for as low as $15,000.

Supply Chain Automation is Here to Stay

Increasingly, even mom-and-pop businesses are seeing a need for some degree of supply chain automation. The good news is that IoT components can be pieced and woven together with elements that are not automated. While a large operation may go all out—upgrading its warehouse, shipping operations, and back office—a smaller company may find that only one key automation makes sense. So, for now, “it depends” may be the best answer to the question, “How do we get the most bang for our automation buck?”

One thing is certain. Automation is here to stay, and the ways to integrate it into the supply chain will only expand.

“As the importance of visibility and velocity within our supply chains continues to be tested,” says PRIDE Industries’ Bob Anderson, “automation will continue to be a real requirement at every stage in the process.”

“ . . . 15% to 20% of all employees in the supply chain are in the back office. Adjusting for generally higher salaries, that’s likely 25% or more . . . and that’s just labor cost.”

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