How the Internet of Things Can Improve the Supply Chain
Smart, connected technology presents unprecedented opportunities to turn your supply chain into a competitive advantage.
Many global supply chains are not equipped to cope with the connected world we live and operate in today. Traditional supply chains were created to manage stable, high-volume production of products and equipment with lifecycles easily exceeding a decade. But the rapid growth of connected technology has companies facing an entirely new set of challenges that have made the manufacturing process more complex than ever before:
- Evolving market and user needs have created the need to rapidly expand product lines
- New users require custom products and services
- Competition has increased and the pressure to reduces costs has never been greater
- Economic uncertainty means companies need to be respond to changing market conditions
In short, companies need to do things better and faster along the entire supply chain – delivering efficiency, shortening lifecycle times and providing transparency to build stronger customer relationships. The industry’s current supply chain model will not be able to meet these challenges, and requires organizations to develop new digital capabilities to meet new demands. According to Emily Rakowski of the Procurement Leaders, research shows that companies who have embraced digital (supply chain) strategies are seeing real value, boosting revenue more than nine percent, market valuation more than 12%, and profitability by over 26%.
How are they doing it? Here are 4 key challenges that the connected supply chain will help solve to deliver value and insight to all areas of the organization:
- Controlling Costs
According to a Morgan Stanley study, the average age of automation infrastructure in the U.S. is the highest it’s been since 1938. Nearly 75% of U.S. manufacturing plants are more than 20 years old. These aging assets cost approximately $20 billion in unplanned downtime. Smart, connected technology is helping OEMs achieve higher performance in complex areas. Just consider the benefit of increasing supply chain transparency and predictability. For example, we worked with a large industrial client to facilitate connectivity across their supply chain. The networked supply chain allowed for greater visibility on status and timing of parts delivery. This simple information leads to instant production changes to meet better demand and eliminate unnecessary manufacturing delays.By taking advantage of real-time data about inventory and other factors, organizations are able to develop strategies to deal with supply chain disruptions and improve delivery and service speed, effectively eliminating unnecessary costs.
- Increased InsightAccording to a recent study, ‘The Current and Future State of Digital Supply Chain Transformation’ conducted by Capgemini Consulting and GT Nexus, today only 23% of supply chain managers say that the majority of data from the extended supply chain is analyzed and used for decision making. In five years, that number jumps to 68%. This is because the traditional supply chain operates in terms of weeks, months and years. Additional data and analytics from the connected supply chain is going to allow organizations to operate in minutes or even seconds.But, most companies aren’t ready just yet. The data is getting there, but data alignment needed to provide real value is not in most cases. This additional insight is also going be a big culture change for a lot of organizations who will not only need to analyze this new information, but be able to quickly act and take advantage of increased supply chain visibility.
- User-Driven VariabilityOEMs today are most comfortable developing one product with a long lifecycle. But pushing products onto the market and waiting for users to buy them is no longer enough. The IDC predicts that by 2018, 33% of all industry leaders will be disrupted by digitally-enabled competitors. Why is that? Digital competitors are going to be able to better meet the varying needs of their users. The one-size-fits-all supply chain is gone.Digital organizations that align their supply chains with product design, manufacturing and service are going to be able to achieve the customer-centricity required to compete in today’s market. Leading OEMs are intelligently segmenting their supply chains according by volume, demand, user and product requirements. This type of segmentation along with complete organizational alignment will allow companies to optimize planning and production and also improve overall service levels to support a larger array of user needs.
- Better Partner RelationshipsFor years, supply chain partners have talked about creating more collaborative and transparent relationships with each other, but few have actually done it. The inability to coordinate end-to-end processes within an organization as well as across an extended supplier and partner network is detrimental to the health of the supply chain.Smart, connected technologies can facilitate collaboration among partners and suppliers to help OEMs achieve optimal supply chain performance to meet shorter lead times to new user demands. To do this, OEMs need to provide true visibility between suppliers including risk, inventory, supply chain changes and insight into improved operational processes.
The Internet of Things is offering unprecedented opportunities for the supply chain from controlling costs, increasing insight, facilitating user focused products to better partner relationships. But, even more than that, OEMs are able to better provide products to meet the needs of today’s users and gain the competitive advantage they need to excel in today’s rapidly changing digital world.