The industrial IoT will play an important part in the evolution of supply chains from linear “point to point” models to network or circular models. Business efficiency, sustainability and regulatory pressures are causing many companies to investigate these new approaches, but IoT and blockchain actually make it feasible to adopt the new business models. 

There is nothing new about IoT; companies have been using sensors to obtain and act on information from product and devices for years. What’s changing is that it’s becoming possible to deploy IoT technology cost-effectively and to integrate it with existing systems and processes. 

To optimize component selection, designers can — using IoT sensors and cloud analytics — obtain information about reliability and performance in the field so that the most suitable part (and its supplier) can be selected. For example, TSM realized that the plastics industry didn’t have good visibility of their material usage and that providing this to their customers in a useable format enabled them to streamline their processes and become leaner. TSM uses PTC’s ThingWorx and Kepware software to connect their devices and provide information to the customers. Howden, a major supplier to the mining industry, is increasing its market share by providing sophisticated simulation tools — to allow its ventilation systems to be designed-in to the mines, and control tools — to allow them to be monitored and controlled after installation. Howden works with OSIsoft, Microsoft and PTC to deliver its solutions.

Designing products to include IoT technology can support circular supply chains. Products can be tracked through their lifecycle — including through the supply chain — and re-used (or recycled) at the end of the loop. IoT technology will also support regulatory compliance, where it is necessary to know the source of all components, who has handled them and the conditions they have been held in. 

Blockchain technology will increasingly be used to ensure the supply chains are secure and that products are produced, transported and stored in proper conditions. For example, Viant has a collaboration with GlaxoSmithKline, Microsoft and others to develop blockchain-based supply chain tracking solutions using Viant’s Ethereum-based blockchain supply chain platform with distributed ledger technology to track intellectual property licenses. This will ensure that products are produced, transported, and stored in proper conditions, prevent mislabeling and help combat counterfeit medications.

Complex, expensive products demand just-in-time delivery from suppliers. Sensors on products can provide visibility of the exact location and information about a part as it moves through the supply chain so that it can be made more efficient and mistakes can be avoided. For example, Caterpillar is using its “Live Factory” initiative to optimize its material flow and supplier network.

“Servitization” will also have an impact as the supplier doesn’t sell the product, but provides it as a service. Sensors and advanced analytics bring down the cost of service, which makes this business model viable. This approach has been used for many years by aero engine manufacturers, and — as the technology becomes more affordable — is being taken by many other suppliers from bicycle makers to air compressors. 

The Outlook

Suppliers will improve their success if their products are designed with IoT capability to comply with advanced supply chains’ procurement and transportation models. This facilitates working with OEM design teams as well as procurement and service management. Blockchain technology will increasingly be used to ensure that supply chains are secure and fully traceable to show where products are produced, where they are transported, and how they are stored at all stages. 

Alan Griffiths is a principal industry analyst of industrial IoT and digital transformation at Cambashi.