Supply chain specialist JDA Software has announced a joint research agreement with the Massachusetts Institute of Technology (MIT) to create innovative new supply chain capabilities.
The multi-year agreement is designed to explore intelligent edge technologies, such as machine learning, AI, the IoT, and advanced analytics, to help organisations predict supply chain demand. The result will be a “unique, prescriptive supply chain”, according to a joint announcement from the companies.
JDA’s product development and Lab teams will work closely with MIT’s Institute for Data, Systems, and Society (IDSS), led by supply chain specialist Dr David Simchi-Levi, MIT professor of engineering systems.
“I’m very pleased JDA has entered in to a multi-year research collaboration with IDSS to develop sophisticated machine learning algorithms that may accelerate research in this area, as well as JDA’s digital solutions,” said Dr Simchi-Levi.
“The collaboration will make use of multiple data sources and emphasise the combination of machine learning, optimisation, and consumer behaviour modelling.”
Under the agreement, new use cases will explore algorithms for both predictive behaviour and “prescriptive cognitive optimisation”. These will go further than current supply chain processes by not only taking into account past behaviours, but also by determining future behaviours based on a variety of demand signals.
“It is more critical than ever to infuse innovation into every aspect of the supply chain, as edge technologies such as the IoT and AI are essential for their digital transformation,” said Desikan Madhavanur, JDA’s executive VP and chief development officer.
“This collaboration allows us to tap into the extraordinary mindshare at MIT to accelerate research into more intelligent and cognitive capabilities moving forward. We are excited to be working on the future of supply chains with MIT, and to double-down on researching enhanced, innovative, and value-driven supply chain solutions.”
No more monoliths
In an interview with Internet of Business, JDA CEO Girish Rishi said: “One monolithic supply chain is not going to work anymore. Monolithic supply chains are dead.
“So you have to adapt to your market, to your customer segmentation. And the monolithic way of approaching it belongs to yesterday. It slows down the velocity of how you can respond.”
Rishi added that JDA has increased its R&D expenditure by 20 percent, and that 40 percent of its research expenditure overall is now targeted at AI, machine learning, and the IoT.
• JDA Software also announced today that it plans to open a new London office within the next two months, and will be employing 100 new data science professionals in the US, and 100 more worldwide.
Internet of Business says
For many organisations, a whole range of business processes have long been a drag on innovation: warehousing, supply chain management, and distribution among them. For too long these have been reactive, monolithic, slow, and static. The promise of the IoT is to make these processes smarter, more agile, more responsive, and – as this agreement suggests – more predictive. That can only be a good thing, both for business efficiency and the environment.
Monolithic supply chains are dead, says JDA CEO Girish Rishi. Companies must now be bold enough to reinvent themselves and focus on redefining customer segmentation. Chris Middleton reports.
Supply chain software giant JDA recently announced record Q4 results on the back of a strategic shift toward AI, machine learning, and a more consultative, services-based approach. Internet of Business caught up with CEO Girish Rishi in London for a one-to-one chat about supply chain strategy, just over a year into his leadership of the Scottsdale, Arizona-based company.
Internet of Business: You’ve shifted JDA’s focus towards AI and machine learning, just as IBM, Microsoft, Google, Oracle, and Salesforce.com have done within their businesses. How are these technologies and the IoT impacting on customers’ supply chains?
Girish Rishi: “I’ll give you some examples. Weather patterns in the world are dramatic – global warming, hurricanes – and you cannot anticipate them. But what you can do is, as weather data happens – or as social networking data happens with teenagers, let’s say in the fashion sector – you can pick that data up and pivot your supply chain. You can direct mobile containers or fleets, or goods or types of goods, to certain locations to adapt to real-time events.
“Returns processing is another area that customers are working with us on. There are customers who tell us that 40-50 percent of what they sell online is returned. And 20 percent of what they sell in the last three months of the year before Christmas is returned.
“But how can you anticipate what will be returned? And when things get returned, what do you do with them? Currently, they just lie in the back room; it’s lost money and inventory. But now there is tangible and proactive planning that you can achieve with AI and machine learning. These are some of the new use cases that we’re working on with customers.”
A story we’ve covered a lot on Internet of Business is organisations that are using sensors to track the movement of goods all the way from production to retail. How far away are we from widespread adoption of this type of technology, of being able to track everything in the inventory and the supply chain? And what are the obstacles to making that happen?
“I believe those will become mainstream in the next 24 months. I come from some of those technologies – RFID, IoT – and there’s been an abundance of deployments. But the challenge is, it’s isolated in local sites and the decision systems about what you can do with that data have yet to created.
“There’s an announcement we put out with a customer, Academy Sports – and we’re deploying now in about 20 stores with them – where perpetual inventory data is driving sales in the store. Let’s say I’m looking for trousers size 34/30 and I can’t find any. I can go to the store clerk and he can look up real-time inventory and say, ‘It’s not where it’s supposed to be, but we have it in stock’.
“So the opportunity is how can you, in real time through RFID, IoT, and data on pallets, serve your customer’s interests? And if you don’t have that in an online marketplace or a physical store, how can you fulfil that need?”
We’ve been writing about how anumber of retailers – Mango and Nieman Marcus among them – have been using digital fitting rooms to upsell products, while linking in with inventory and supply chain management. Customers enjoy these innovations, but if you’re a more traditional or conservative business, or not as advanced as those companies, what advice would you give to strategists? How can companies like JDA help organisations to think about the future?
“You have to go out and understand who your customer really is, with much greater deliberation. And if the answer is broad, mass-based, and not specific, then you need to work on defining your customer segmentation more clearly. Also, what format is your master data in, and how actionable is it? We run into a lot of customers whose datasets are not actionable.
“You have to look at what are the most impactful use cases. I gave you the example of returns, but there may also be seasonality. How do you make sure that the seasonal trending that you’re seeing is incorporated into your designs and into your inventory? These are areas where we can work with customers. How is your planning and your fulfilment aligned?
“But in most companies, planning is one function, and warehouse and transportation management are another. The promise of JDA is we offer intelligent fulfilment, where we take your forecasting data and we thread it into your fulfilment so it’s aligned. It’s a very consultative model.”
Transformation expert Sean Culey believes that the monolithic manufacturing and distribution process is breaking down. Why manufacture a million trainers in China and spend weeks shipping them worldwide when you can make one pair to order locally and deliver them the next day? To what extent do you think that future will happen on a wider scale, beyond the niche examples of Adidas’ Speedfactories? How can companies be bold enough to reinvent their businesses, refocusing on customer need rather than on lowest labour cost?
“I agree with Sean. One monolithic supply chain is not going to work anymore. Monolithic supply chains are dead.
“We have real world examples of this. Take Michelin. For years, they had one supply chain that fed into all their customer sectors. But now they have four different supply chains for four different types of customers. They realised that they were treating their high-value, high-margin customers the same as they were treating everyone else. So now they have a supply chain that treats high-value customers differently – and their winter customers, for example.
“I’ll give you another example, Bridgestone, another tyre company. They have 300 fulfilment spots in Japan, but just two in Germany. So what’s the reason for that? The answer is that real estate in Japan, in Tokyo, is very different. It’s very small. They have small warehouses and small service centres. And the Japanese user doesn’t schedule tyre changes, they just drive in. So they need rapid-response type fulfilment centres, unlike Germany, or the US, or the UK.
“So you have to adapt to your market, to your customer segmentation. And the monolithic way of approaching it belongs to yesterday. It slows down the velocity of how you can respond.”
So will other countries move closer to the Japanese model of local fulfilment and rapid response?
“No, because they have totally different profile in terms of how customers buy tyres. One monolithic approach across the world doesn’t work. In Germany, they have two stock centres because there is a lot of warehouse space and they can afford to carry more inventory, but you can’t do that in Japan.
“So it all comes down to your understanding of your customer and the culture that you operate in. What’s the most adaptive supply chain that you can construct? And you have to be nimble about it. You need to redesign your factories and warehouses and your supply chains in order to adapt.”
We’ve been hearing a lot about the impact of robotics in manufacturing. To what extent has their impact been overstated? And how does this technology map into the supply chain?
“It’s different answers for different industries. In high tech and semiconductors, you are seeing ‘lights out’ factories with no human beings. But with robotics in the warehouse, we’re very early in the cycle. There’s a lot of experimentation with robots and drones in the warehouse, but it’s early. But over the next two years, we’ll see gradual adoption.
“Also in many markets, labour is cheaper than technology, than robots, so there are other dynamics that play into it. So I think once again you’ll see countries and industries respond very differently. There is very high-skilled, expensive labour, and on the other hand – with repeatable processes like in semiconductor manufacture – you will see great automation and robotics. And beyond robotics, there are other technologies – IoT technologies, sensors, pallet tracking, mobility.”
You say that in some countries, labour is cheaper than robotics. But China is automating faster than any other nation in the world in order to keep its own costs down as its cities and middle classes expand. Meanwhile South Korea is the most automated nation on Earth, in terms of its robot density [the number of robots per 10,000 human employees]. Is the West losing the battle with Asia in terms of making our industries smarter, faster, and more efficient? Are we falling behind countries that are already cheaper in labour terms?
“Where China is investing is an important development for other countries to watch and learn from and invest in. Retraining workers: it will clearly have a social and political impact. We should not be fooled by that; it will have that impact. I think what you will see is labour doing different types of jobs, labour being more flexible.
“We are working with one of the major outlets worldwide where we are putting their workforce on automated tools so that they can be deployed in different locations, and they’re doing different types of work. So you will see an evolution of what a worker does. It’s a complex question, as it goes beyond technology.”
A lot of the press coverage about robotics has been negative and sensationalist, talking about job losses, rather than job creation. How unhelpful is this constant narrative?
“People should be aware that the type of job will change. The last 20 years of history in technology have automated lots of processes – tickets, boarding passes on your cellphone, and so on – and yet GDP is muchgreater and unemployment rates are lower. So what we have to be conscious about is that societies aren’t static, and they’re dynamic in terms of skill sets and learning and envisioning what these new jobs will be.
“So anytime you’re not dynamic and you’re static about the type of jobs, you’re going to be in trouble. I’m very optimistic that over the next 20 years that with AI, machine learning, and the IoT, the compensation of the workforce, and jobs, are going to grow, but the type of jobs will change.”
Internet of Business says
JDA has set up a Labs division to work with customers on co-innovation projects. This points to a future of companies not only learning from vendors at the cutting edge, but also of tech companies learning from their customers about how to run their industry verticals. These types of partnerships are the way ahead as we move into the connected age.
But as Rishi says, the old, ‘one size fits all’, monolithic approach to business is starting to lose ground. The future is smaller, smarter, more local, and more autonomous. In this fast-emerging world, the companies that are the first to break apart their monolithic processes – an artefact of a focus on cheap labour, rather than on smart labour – will win.
Make way for the onshore revolution. Transformation expert Sean Culey joins our writing team and explains how the rise of the Personal, Automated, and Local (PAL) value chain uses AI, the IoT, and robotics to shift manufacturing and supply chains to where the customer is, rather than where labour is cheapest.
Ever since the financial crash a decade ago, investment has increasingly moved from speculation in financial products to supporting technologies that transform the way we capture and supply against demand.
Until this shift took place, progress in these areas was linear and deceptive; now, as the money flows in, it is poised to become exponentially disruptive.
On the upswing
This upswing of the ‘S’ curve of digital disruption is happening because of a clustering together of a number of different technologies that will transform the supply chain; new approaches that improve efficiency, eliminate intermediaries, and reduce waste.
These include autonomous vehicles, collaborative robots (cobots), 3D printing, blockchain, artificial intelligence, chatbots, and smart home hubs.
But that’s just the familiar hype. While media chatter about these technologies has been growing louder, fully operational versions have already entered the workplace.
The smart machine
The key is not to look at these technologies as individual innovations, but to instead step back and view them as interconnected components of a smart machine.
Seen from this perspective, it becomes apparent that this combination of technologies enables the automation of an entire end-to-end supply chain.
This combination of intelligent machines, software, sensors, and AI, creates what I call the ‘PAL’ value chain: one that is Personalised, Automated, and Local to the end-consumer.
PAL is the next evolution of the way we market, produce, and deliver goods; leaving the industrial age of mass production/marketing of commodity products behind, and moving to a chain of value-added services.
Let’s look at each link in this chain and examine the implications.
Goods are becoming increasingly customised to the needs of individual consumers, or to consumer niches. Three technology groups enable this personalisation:-
Artificial intelligence and the introduction of sensors throughout the supply chain
This is allowing companies to monitor systems and understand data at a granular level, resulting in the ability to manufacture products based on demand signals, rather than long-term forecasts.
This increase in our ‘sense and respond’ capability means that rather than produce large quantities of product in advance and push it to market en masse (a wasteful, slow, and monolithic approach), final production can be delayed until actual sales demand is received. This creates a more sensitive, pull-based model.
The shift from physical to digital products and sales platforms
Digital products have the benefit of having a marginal cost of almost zero, incurring virtually no production, storage, and distribution overheads – and no waste. This creates a seismic shift of power from the producer to the consumer.
The creation of electronic marketplaces has also enabled vendors to deploy machine learning algorithms that track and monitor viewing and buying habits, so that rather than creating a single shop for everyone, they can effectively create a personalised shopping experience for each customer.
New manufacturing techniques, such as 3D printing
These enable companies to produce new types of products, rethink the production process, avoid the pitfalls and expense of subtractive manufacturing, and make things on demand to unique specifications.
For example, footwear companies such as Adidas (see video below) and Nike are already able to make a single pair of trainers to a customer’s required colour and style, rather than mass-manufacture the shoes and ship them to retailers in their millions.
Adidas’ automated, cobot-staffed Speedfactories are opening throughout the world, moving production closer to local customers. (See below for more on localised services.)
The company is even planning to offer personalised orthotics that are 3D printed, based on digital photographs of customers’ feet.
Autonomous vehicles and smart robotics will increasingly replace the need for manual labour to carry out repetitive tasks, such as production, picking, packing, and shipping.
Meanwhile, blockchain, Robotic Process Automation (RPA), and chatbots can carry out and track repetitive information-processing tasks, such as the recording and administration of all physical and financial transactions, and resolving customer queries.
In the long run, each of these machines and algorithms will be managed not by human hands and brains, but by AI systems, using predictive and prescriptive analytics to determine demand and reschedule supply automatically.
All of this automation will enable manufacturers to produce goods where the consumers are, rather than where the cheap labour is.
Many manufacturers have long misunderstood the total cost of offshoring their production, focusing only on the unit cost of labour, without realising the additional transportation costs, lead times, storage requirements, and quality issues that arise – not to mention the environmental impact of slow, monolithic production.
The cost advantages of using robots to make products on demand, and in smaller quantities, is becoming more and more pervasive, and stands to create an ‘onshoring’ revolution. Manufacturing is coming home, but not in the guise of old-style factories.
To support localised production facilities, a micro-logistics network, using warehouse robotics and autonomous delivery methods (drones and delivery robots) is also being developed to satisfy consumer demand for same and next-day delivery.
Meet your new PAL
To witness the PAL value chain in action, one only needs to look to e-commerce behemoths such as Amazon and Ocado. But it’s important to look behind the headlines and see what’s really happening there.
The Amazon shopping experience is increasingly personalised to each customer’s needs, with artificial intelligence systems making a series of recommendations based on previous purchases – and those of other customers with similar buying patterns.
Amazon is also increasingly extending the number of ways it can engage with customers. Perhaps the most innovative of these is its Alexa-based Echo and Dot range.
While masquerading as a smart speaker, these products link Amazon’s retail, fulfilment, and Web services operations via a new domestic platform that enables customers to order anything from tiramisu and toilet paper to taxis and takeaways, simply by speaking.
Behind this platform and Amazon’s ecommerce site sits an increasingly automated end-to-end supply chain. The management of this supply chain, including the purchasing, placement, and picking of products, is increasingly carried out by machine-learning-based planning and scheduling systems.
Finally, in order to meet its Prime Now one-hour delivery promises, Amazon is developing a series of localised, micro-logistics hubs in urban areas, with Uber-style on-demand delivery drivers. But this is merely an interim solution until Amazon rolls out its new autonomous, electric delivery robots to compliment the orange Kiva bots and other systems that already operate in its fulfilment centres.
Amazon’s plans in this area include flying delivery drones, as well as ‘mothership’ concepts – autonomous vans loaded with smaller delivery robots that make the last-stage deliveries. There are even patents for airship fulfilment centres that hover over urban areas and despatch drones to customers’ houses.
However ambitious (and legislatively complex) some of these proposals may be, the underlying principle is simple. The PAL model represents a totally connected supply chain, with demand and supply signals passed automatically up and down the chain, with multiple points of value generation for consumers and corporations alike.
This is fantastic news from a sustainability perspective, especially as goods are increasingly made on demand, reducing excess production, transportation, storage, and waste.
However, it will also see a supply chain increasingly devoid of human labour; managing the fallout from this will be one of the major challenges of the next decade.
Internet of Business says
Seeing manufacturing and supply chains logistics as a single machine-like system, as Culey does, might seem like a futuristic concept, but many companies are already taking over entire markets using this strategy. The key is to be imaginative and bold: have the courage to consider dismantling a monolithic system and replacing it with something smarter, localised, and more efficient in each territory – a global grid of granular services, and one that your customers may prefer. Which brings us to the human element. Amazon is automating faster than any other company, and yet it has created 100,000 new human jobs in recent years, while the US automotive sector is reported to have created 230,000 new jobs in 2016, the same year it purchased 60,000 robots. So it is not as simple as ‘one robot in, 15 people out’. The future is about niche expertise and transferrable skills – and about entirely new types of business that will create new human jobs. Creating valuable work for humans: that’s the real challenge.
German software company SAP is betting on blockchain’s distributed immutable ledger technology as a key enabler for disseminating information around digitally tracked business networks and supply chains.
SAP has used its TechEd Europe 2017 conference and exhibition held in Barcelona this week to explain its approach to blockchain and how it will push forward key use cases into the IoT.
As a technology, blockchain is best described as a system of creating a distributed immutable ledger of data (that can be a record of any data type) that spans multiple computers and so has extremely high levels of robustness by virtue of the fact that it is resistant to modification.
In terms of news, SAP has detailed new work that sees 27 customers and partners now join SAP’s blockchain co-innovation initiative. The initiative seeks to integrate the blockchain digital ledger system into IoT within manufacturing and digital supply chain software deployments using the SAP Cloud Platform Blockchain service.
SAP is upbeat about the breadth of adoption currently being seen with blockchain. Executives at the company say that customers participating in its co-innovation initiative come from verticals including consumer products development, telecoms, retail, logistics, agriculture, aerospace and defense, industrial machinery, energy and utilities.
“At Deutsche Telekom, we see a big potential for blockchain technology in the telecommunication business” said Hartmut Mueller, senior vice president of business solutions at Deutsche Telekom IT. “Our cooperation with SAP will speed up digitization to the benefit of our customers.”
SAP also said that it will join Spain’s Alastria consortium and the blockchain-in-trucking alliance BiTA to expand the adoption of blockchain to customers in a range of industries and geographies.
Alastria brings together banks, telecom providers, energy companies, universities, smart-city organizations and developers. As a member of the Blockchain in Trucking Alliance, an organization promoting the development of blockchain standards and education, SAP will also expand its reach in freight and transportation management.
SAP is co-innovating with customers and partners to establish use cases for blockchain that can be standardized to enable wide adoption in digital supply chain and SAP Leonardo IoT installations including:
SAP Asset Intelligence Network – A cloud-based business network and global registry of equipment providing a digitization platform for original equipment manufacturers (OEMs) used to share asset information with operators and service providers to improve service targets and increase asset uptime.
SAP Distributed Manufacturing – A network-based application providing a private platform for customized manufacturing and collaborative manufacturing with suppliers (for example, 3D printing service suppliers, material providers, OEMs and technical certification companies).
SAP Transportation Management – A blockchain case for international trade. Sellers, buyers, banks and authorities would be able to share, review and sign documents electronically, tracking process statuses and hand over ownership of the e-Bill of lading. A secure container release process is intended to reduce frauds and stolen freight.
“Our customers and partners are eager to join SAP in embracing blockchain as a distributed ledger that can increase transparency and collaboration,” said Tanja Rueckert, SAP’s president of IoT & digital supply chain. “We are equally eager to co-innovate with the world’s leading companies to reimagine a future where blockchain is woven into the fabric of the digital value chain.”
Rueckert spoke in breakout sessions after the SAP TechEd event keynote to suggest that the future of IT with specific regard to the IoT might be a space where competitors start to work together in far closer collaborative relationships. When might this be? Any number of technologies could service to bring us all closer together, but blockchain could be a key facilitator. With the United Arab Emirates having already announced its intentions to be a blockchain-based government by 2020, this is a technology set to rise.
Technology company IBM is leading a consortium to explore how blockchain can benefit the global food supply chain.
IBM will be joined by food companies Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company, Nestlé, Tyson Foods, Unilever and Walmart, all of whom are looking to improve the safety of food via blockchain.
Tackling food safety at source
According to the World Health Organization (WHO), one in 10 people fall ill and 400,000 people die every year from eating contaminated food. This is, in part, due to difficulties in tracing the exact point in the supply chain at which a food became contaminated.
For example, in May of this year it took the Center for Disease Control and Prevention more than two months to identify the farm source of contamination in a recent incident of salmonella in several brands of papayas. As many as 173 people were found with symptoms across 21 states in America, and one person died.
The consortium believes that blockchain is well-suited to address these problems with traceability because it would establish a trusted environment for all transactions, whereby each participant in the global food supply chain could view the origin and state of food ingredients. Thus, contaminated foods can be spotted and prevented from traveling further, much more quickly than at present.
Using IBM’s own blockchain platform during trials in China and the US, IBM and retailer Walmart claim to have proved that blockchain can be used to track a product from the farm through every stage of the supply chain, right to the retail shelf, in seconds, instead of days or weeks.
“Blockchain technology enables a new era of end-to-end transparency in the global food system – equivalent to shining a light on food ecosystem participants that will further promote responsible actions and behaviors,” said Frank Yiannas, vice president of food safety at Walmart.
“It also allows all participants to share information rapidly and with confidence across a strong trusted network. This is critical to ensuring that the global food system remains safe for all.”
Full details of IBM’s partnership will Walmart can be viewed here:
Now, the consortium hopes to find new areas where blockchain can benefit the food supply chain, all of which will feed into new technology developments at IBM.
Movie studios looking to set up early-access rentals with companies like Apple and Comcast may reportedly push ahead with those negotiations and skip revenue sharing with theater chains, if the latter don’t reduce their demands. AppleInsider – Frontpage News
Traditional logistics and freighter supply chain operations are set to be disrupted by the advent of smart trucks, such as those designed by Uber, a recent report from analyst house Frost and Sullivan suggests.
The market is therefore projected to grow at a compound annual growth rate (CAGR) of 40.9 percent, garnering $ 20.5 billion in the process, as the trucking industry becomes smarter, more efficient and, consequently, more productive.
However, this transformation from analogue to digital also poses problems for some in the industry.
Smart trucks bring opportunity and loss
“The logistics industry is expanding to include unconventional players, resulting in innovative and unique value-added services,” said Frost & Sullivan Mobility senior analyst, Krishna Chaithanya Bathala.
“As logistics service providers (LSPs) shift from mere outsourced logistics to more non-asset-based and end-to-end, integrated, demand-driven logistics, with an extensive e-business focus on all logistics operations, technologies such as real-time data, sensorization and intelligent autonomous machines, will accelerate the transformation of the logistics and supply chain industry.”
That sounds very positive; however, Bathala also claims that “by 2020, IoT use cases characterized by advanced machine-to-machine capabilities and sensor fusion will make the traditional supply chain models redundant.”
“The shift away from vehicle-centric platforms to IoT-based platforms that connect vehicles, warehouses, and infrastructure, is expanding opportunities for key ecosystem participants,” Bathala says, but that leaves traditional players trying to catch up to the technologists with the capability to support smart trucks.
Frost and Sullivan is indicating that strategic partnerships between OEMs and LSPs are now critical to remain competitive and garner growth opportunities in this evolving market.
The firm states that telematics, which includes real-time traffic, tolling, routing and scheduling, parking, freight aggregation, as well as weigh station bypass, will become the key revenue driver for logistics companies looking to get value from their supply chains.
To extract this value, Frost and Sullivan believes LSPs and OEMs must:
Develop a brand-agnostic open platform: A single holistic platform with core fleet management solutions (FMS), value-added services, and back-office management software, such as transport management systems (TMS) and enterprise resource planning (ERP), will enhance operational efficiencies;
Quickly identify and implement new services through collaborations with start-ups;
Develop a cloud-based logistics control tower: A central hub through which the entire ecosystem can capture data across various stages of the supply chain and offer stakeholder-specific dashboards for custom viewership;
Ensure data security by partnering with network and data security vendors.
Investment in smart IoT devices is set to rise among food and grocery companies, causing significant change in global supply chains, according to research from research organization IGD.
The company’s Supply Chain Analysis questioned 84 food and grocery businesses and service providers worldwide about the potential opportunity for food and grocery companies to transform their supply chains using IoT.
Two findings, in particular, stand out. First, IGD claims that 37 percent of companies in this sector are already trialing or have successfully deployed IoT products or services, such as smart fridges and smart heating systems. Second, its researchers say that a further 58 percent of food and grocery companies are planning to increase their investments by working more closely with technology providers to help them maximize IoT opportunities.
The reasons behind this investment in IoT are numerous, with 61 percent of respondents highlighting “improved understanding of customers” in their top three expected business benefits from IoT; 53 percent of companies citing “reduced costs and increased efficiencies”; and 51 percent suggesting that the “development of new business models” are the main potential benefits.
Chris Irish, supply chain insight manager at IGD states that the “pace of change and breadth of impact for technology is such that demand is growing for food and grocery supply chains to deliver innovations that offer speed, transparency, connectivity and convenience.
“The Internet of Things allows each unique product to be tracked and monitored, opening up the possibility for highly personalized and responsive solutions for consumers while introducing a new level of real time data-sharing for businesses.”
As well as the opportunity to deliver personalized offerings to consumers and open up new business models, Irish makes further predictions about how supply chains will evolve as IoT proliferates.
In a company statement, Irish suggests that IoT will change the traditional business approach to forecasting by providing more accurate data from live consumer feedback using product sensors. But, he cautions, consumers won’t be prepared to pay more for existing products to become IoT-ready, so the onus will be on retailers to create value, by offering additional services around their products and by using the data products generate more efficiently.
And while having this data places a burden of responsibility on businesses, Irish predicts that privacy concerns with sharing personal data will not be a major barrier to IoT adoption, since many people have already become accustomed to sharing this information as long as they see the benefits. If companies can convince consumers that they are trustworthy with the security of their data and their intentions with how they will use it, Irish says, consumers will be prepared to share.
Nevertheless, this won’t happen on its own. Irish suggests that there won’t be a “game-changing” IoT innovation, but an accumulation of applications will steadily increase take-up until its ubiquity results in transformational change. Therefore, as the number of IoT devices grows, the more powerful IoT will become.
The digital transformation of consumer goods supply chains is being held back by legacy infrastructure, according to a recent survey from IoT start-up, Evrythng.
In a poll conducted at the Internet of Supply Chain conference held in Amsterdam in May of this year, more than half (56 percent) of the consumer product manufacturers that Evrythng spoke to identified the challenge of integrating complex legacy systems across their supply chain network as “highly significant”, the company claims.
The net result of this difficulty is that businesses increasingly struggle to bring together data from across their fragmented supply networks, meaning opportunities are missed to optimize supply chain efficiency.
Lack of maturity means lack of visibility
Of those who responded, 44 percent said that legacy infrastructure made it difficult to get timely access to data, and 39 percent suggested it led to poor visibility throughout the product’s lifecycle.
It is increased or real-time visibility that represents the most important opportunity for consumer goods companies, according to Evrythng.
Writing in a company blog post, Evrythng CEO Niall Murphy suggests that “real-time visibility is most useful for gaining valuable consumer insights,” which is backed up by respondents, who indicated that “the most important benefit of a digital supply chain is the ability to get closer connections with their customers, ranking this higher than enabling new business models, driving new revenue and cost savings, which are often enabled once a business has established closer connections with its customers.”
Yet, despite its potential, the survey revealed that “real-time visibility from the factory to the consumer” is the poorest rated of all current supply chain capabilities among consumer goods companies, scoring just 2 out of 5 on Evrythng’s scale, followed closely by “item-level provenance for everything you manufacture”, which scored just under 3 out of 5.
At present, the problem comes down to maturity. Just 6 percent of consumer goods companies describe their digital supply chain efforts as “ecosystem-connected”, while a significantly higher 39 percent say that they are at the lowest stage of maturity, with most (if any) of their digital transformation efforts taking place no higher up than the departmental level.
For Murphy, however, there is cause to be optimistic. He believes consumer goods companies can see the value in their digital transformation efforts. That important, he says, because “product manufacturers and brands are now competing on a global basis with digitally-native, insights-led businesses such as Amazon and Apple. Real-time data is everything, with full instrumentation of the supply chain end to end. Achieving this capability is a survival issue.”
“Siloed legacy systems are a barrier to achieving the kind of end-to-end visibility that enables companies to understand their supply chain and product lifecycles inside-out and compete at the top table.”
“Smart products and smart packaging with data management in the cloud is the game-changer,” Murphy suggests. “From shoes to jackets, champagne bottles to shaving foam canisters, physical products can now be part of interconnected ecosystems enabled by the web through active digital identities in the cloud.
It’s these “digital product identities”, which, when combined with “open standards and the ubiquity of smartphones,” will “make vital data available at all times, outside of IT systems and enterprise walls,” he concludes.
Internet of Supply Chain is the only event bringing together Supply Chain executives representing the retailers, manufacturers and logistics operators to share best practices and inspire new revenue opportunities.
The two-day forum will offer as yet unheard case studies on how the total lifecycle of a product can be monitored in real-time and be delivered on time without any compromise in quality.
Key themes will include using IoT to improve end-to-end visibility, modernizing a legacy supply chain process and marrying manufacturing and supply chain.