The Internet of Things (loT) is becoming more than a buzzword. IoT is rapidly being implemented in every part of our lives, and the growth of connected devices is increasing exponentially. Billions of new devices will be connected by the end of the decade and IoT spending will almost double to $1.3 trillion, according to IDC.
Every industry stands to benefit from the IoT. Changes will be substantial, particularly in B2B industries such as logistics, where the IoT promises to revolutionize the way organizations do business.
INTRODUCING THE PROBLEM
The difference will be night and day. So what better way to demonstrate how IoT will change the supply chain than by using a before and after scenario.
A Wholefoods retailer purchases fruits and vegetables from around the world. In particular, they source bananas from India. They purchase the produce from local farms and rely on a third-party logistics company to transport the product from India to their headquarters in the U.S.
To preserve the freshness of the product and ensure that the bananas ripen in time for American consumers, the temperature of the produce must be strictly controlled throughout the supply chain. But what happens when, halfway through the chain, a large shipment of the bananas is stored in a warehouse where the cooling system malfunctions and the produce exceeds the temperature limit?
BEFORE: WHAT HAPPENS WITH A TRADITIONAL SUPPLY CHAIN
In a traditional supply chain, the bananas will ripen too early unless someone catches the malfunction quickly. If they don’t, the entire shipment will spoil and the retailer won’t be able to sell the produce in the U.S. Not only has the retailer lost the money it originally paid for the produce in India, as well as the cost of shipment, it will also suffer reputational damage in the US. Because all of their bananas have spoiled, the retailer’s stores won’t be able to sell bananas in some of their stores for several weeks. This will annoy customers and damage the company’s reputation. Of course, this means a loss of revenue when shoppers choose to buy their fresh produce from other stores that do have the supply of fruit and vegetables that they want.
AFTER: WHAT HAPPENS IN A CONNECTED SUPPLY CHAIN
This could all have been avoided if the retailer worked with a third party logistics provider which used a connected supply chain. When the warehouse cooling system malfunctioned, sensors within the warehouse would have alerted quality controllers in both companies to the issue. This would have allowed them to contact warehouse staff, notify them of the problem and have their shipment moved to a functioning storage facility. The produce would have been preserved, stores would have their supply of bananas, and customers would have remained satisfied. For the investment in a connected supply chain, both the retailer and the third-party logistics provider didn’t just save business costs in terms of the purchase price of the bananas and the cost of transport; they also saved themselves from reputational damage that could have significantly impacted their bottom line going forward.