The recent COVID-19 outbreak has shed a light on a subject that is at the heart of all our organizations: the supply chain.
The supply chain is critical to companies: components of the production are sourced from suppliers, and then manufactured or assembled into finished products, and finally shipped to distributors to be sold to customers. Any rupture or hiatus in the process can significantly impact businesses and have negative impacts in the long term.
The lockdown and the subsequent restrictions put in place after the recent pandemic disrupted the trade of goods around the world. Travel restrictions, shortage of labor and materials, logistical challenges due to border closures and other controls made it complicated, if not impossible for supply chain managers to source materials or sell their products.
Confronted with the necessity to react quickly and adapt their processes, companies that embraced supply chain digitalization before the COVID crisis found themselves in a better place than those who didn’t, and what was a competitive advantage before COVID, has turned to be a mandatory asset for companies to survive the pandemic time.
Indeed, in the face of such a crisis, supply chain managers must be able to get a full picture of their supply chain in order to assess the risks and to prepare scenarios for foreseeable issues, whether human, material, technical or finance related. The Internet of Things, combined with platforms that support applied analytics, artificial intelligence (AI) and machine learning —the Smart Supply Chain— can help in these matters, building transparency all the way from manufacturers to retailers and raising awareness of efficient decision-making by providing detailed visibility of products. This all allows for a greater responsiveness and resilience of the supply network to changing market conditions.
Knowing exactly at any given time where your products are, how they are being stored, how long it takes them to travel from one place to another, which parts your suppliers have, how many products are in stock, or how long it took for it to be sold, is the dream of many a supply chain manager. And one that is not so inaccessible. New RFID and GPS sensors can track products “from floor to store”, giving a company an end-to-end view of what's taking place in its supply chain at the item level. Command centers centralize the information in one location, providing enhanced visibility and helping companies to get a tighter grip on quality control, on-time deliveries, and product forecasting. Some command centers are even equipped with software that make it easy for rapid adjustments to be made on the fly.
In the case of a new pandemic or extreme weather conditions for example, simulation software can model the impact of parts shortages and find alternative sources for replacement parts or even redesign products using available resources. This way, companies can respond swiftly to market events and be able to change their operations at a moment's notice.
The Smart Supply chain takes into account not just every step, and every actor but also any relevant external variables central to the production and distribution process. —Trucks are immobilized? A driver is sick? Impending adverse weather conditions that may impact your distribution? One of your machines is nearing obsoletion and is likely to fail? The system will be able to identify potential issues and bottlenecks in a blink of an eye and inform the managers so they can adapt the production or distribution accordingly. Anticipating and pre-empting this type of event will streamline the system and prevent lack or excess production that could leave your customers unhappy or clog up your factory or shop floor.
Traditionally, forecasts are based on historical sales to predict what to make, and when, for the customers. Purchases are signaled —via an Enterprise resource planning (ERP) software, or sometimes via an Excel spreadsheet manually filled up — and forecasts are adjusted by commercial teams so the manufacturer can pinpoint which quantities are necessary, and plan replenishment. Although ERP software can be powerful, they are often underexploited by companies and in a volatile global economy, this doesn’t allow for much reactivity. IoT sensors can provide far more accurate inventories and contribute to a leaner manufacturing process. RFID tags have a unique identification number (ID) that contains encoded digital data about the product. Upon reading the tag with a barcode reader, the inventory manager can locate the item and display real-time updates about inventory items’ movements. AI and machine learning will then allow the forecasting of the material needed for the upcoming production cycle. Various outputs can also be generated such as alerts if items are lost, if we need to replenish materials, if the distribution circuit is clogged, if deadlines are about to be missed, if there are opportunities to optimize schedules, etc. Smart sensor technology has thus proved to generate savings from inventory theft protection, logistics costs and reduced spoilage.
Nexans have thereby achieved a 20% reduction on their logistics costs thanks to geolocation sensors developed by ffly4u. Collecting empty drums and purchasing new ones to renew the partly lost, stolen or damaged fleet entailed significant costs for Nexans: they estimated that 300 drums were lost per year, an investment of around 500k € devoted to the purchase of new drums. Installed on a fleet of around 40,000 drums dispatched in various workplaces, tiny battery-powered sensors provide real-time information on the drum's location and status, ensuring that cable drums are no longer lost or abandoned.
Communication is key to reactivity. The Smart Supply Chain, by cutting intermediaries, allows a more fluid exchange between the customer and the supplier. It not only creates transparency on all sides of the channel and prevents mistakes and mismanagement of your goods, like incorrect inventory count or missing items, but it also allows both internal and external teams to quickly communicate and share information that will help being more reactive in the face of an unplanned event, helping tweaking production schedules when needed and bringing everyone up to speed with the same level of information. And since stock and product information is centralized, your end consumer can find information about the product’s origin, stock levels and where they can find your product, whether its online or in his closest point of sale, a good way to create a unique omnichannel sales experience, to forge relationships and secure your sales. Further to the sales experience, real-time product usage data from smart sensors can also allow a company to improve its after-sale service offerings by anticipating future problems such as missing parts or damage goods.
Optimize your journeys
Just like Smart waste management uses sensors placed in bins to measure when they are full and notify city collection services when they need to be emptied, helping to optimize the drivers’ routes and schedules, and avoid unnecessary fuel being spent on half empty bins, the Smart supply chain can ensure all your carriers, be that shipping containers, suppliers’ delivery trucks, or something else—are connected.
Monitoring and telemetry solutions like the one developed by Ovinto enable a permanent visualization and control over fleets. Similar solutions have been developed by Traxens for cargo shipments. Sensors are installed on the carriages and capture critical data such as temperature, pressure, shocks etc. as well as their exact location. The data is immediately transferred, via encrypted satellite communication, to a server from where it can be analyzed and relayed to the customer. Autonomous driving enabling sensors can help optimize the route and make it safer through dynamic routing. These solutions significantly contribute to making the supply chain management faster, more accurate, more flexible, secure and efficient.
Optimizing fixed costs is a must in a time of crisis.
The Kanban method, developed in the 50’s by Toyota, have brought huge improvements to manufacturing efficiency by switching the approach to a pull one, a just-in-time manufacturing approach where production is based on demand and products are made to order. These lean manufacturing approaches are the basis of an efficient Smart supply chain. But these methods have their limits.
By scrutinizing every step of the supply chain, IoT can provide a number of opportunities to optimize the production, therefore making savings and increasing the ROI.
In a post Covid world where customers seek more transparency and more security, brands will need to invent new delivery modes, new ways of communicating with their consumers and stakeholders, and new ways of protecting their collaborators.
They will need to be able to undertake rapid restructuring of their supply chains in case of a new crisis.
They will need to have an end-to-end view of what's taking place in its supply chain at any level.
They will need to ask the right questions sooner rather than later.
They will need to organize and optimize, anticipate and practice. In short, they will need to be smart!
Smart sensors, by connecting the physical and digital worlds and transforming data into precious insights, are giving companies the tools they needed to make better-informed decisions, creating new value across the supply chain, making it more protean and capable of rapid adaptation to changing market conditions. In a post epidemic world, the Smart supply chain will prove to be a real competitive advantage, one that can ensure the survival of a company.
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