Using The Internet Of Things To Extend Beyond Factory Walls

Tanja Rueckert

Part 5 of the “Manufacturing Value from IoT” series

In my last blog, I talked about how a strong collaboration between information technology (IT) and operations technology (OT) departments increases IoT-enabled profitability and productivity. Here, I will talk about how the Internet of Things can help manufacturers engage with their supply bases to prevent wasted productions and late deliveries.

Any manufacturer seeking to improve performance must engage its supply base or risk:

  • Production of goods with flawed components, parts, and materials, leading to customer rejections
  • One-piece flow processes stalled by delayed supplier shipments, resulting in late deliveries to customers
  • Development of inefficient, overpriced products that drive customer defections

The good news is that IoT initiatives can and should extend beyond factory walls to suppliers – with the potential for dramatic boosts in productivity across the entire supply chain.

The bad news is that most suppliers still don’t have access to their customers’ IoT-enabled data. For example, only 13% of manufacturers report that all suppliers who need IoT-enabled data have it. What’s more, 10% report that no suppliers have access to this information, and another 22% have no IoT data for their suppliers to access.

This IoT-supplier disconnect limits manufacturers’ abilities to alert suppliers to demand changes, leading to wasted production and shipments. In fact, many companies can’t connect their own IoT information to their own supply-chain management (SCM) systems, making supplier guidance impossible or, at best, out of date.

Yet sharing IoT-enabled data with suppliers can improve both company and supplier performances via:

  • Better sequencing of supplier deliveries to plant schedules
  • Rapid responses to inventory changes
  • Real-time awareness of production problems with supplier goods
  • Intelligence that drives value-added supplier services

At the same time, failure to connect supply chains to IoT-enabled data is more than just a performance issue. Regulators and customers increasingly demand that manufacturers be accountable for supplier actions. The IoT can minimize these risks by:

  • Monitoring in real time supplier component and material specifications vs. requirements
  • Ensuring quality of supplier goods during development, and enabling track-and-trace functionality in the event of product contamination or recalls
  • Documenting supplier operating environments (e.g., environment, workplace safety) that can harm corporate reputations and brands
  • Tracking inbound goods to ensure safe passage and documenting that sensitive materials and components haven’t been tampered with or adulterated

It’s imperative that manufacturers establish practices and solutions that deliver IoT benefits across the supply chain. How?

  • First, embed devices within your operations to capture data, and then share that intelligence throughout your supply chain.
  • Next, begin a supply-chain rollout by sharing information that benefits vendors, even those unwilling to participate in IoT efforts. For example, provision of real-time inventory levels and forecast changes can help suppliers synchronize deliveries to your production schedule while allowing them to optimize their own inventories.
  • As suppliers learn to leverage your IoT information, share product-quality data, such as scrap and rework tallies, to help suppliers improve the quality of their goods.
  • Finally, allow suppliers to monitor and react to all of your real-time data to improve performances and add value to processes. Ask, too, for access to their real-time data for insights into their operations.

The IoT can rapidly help your supply chain improve, delighting customers, increasing sales, and growing margins. What are you waiting for?

Stay tuned for more on how your company can increase productivity and profitability with IoT, analytics, machine learning, and artificial intelligence. In the meantime, download the report “The IoT is Delivering the Future – Now” to learn more about the complexity of an IoT transformation.


Tanja Rueckert

About Tanja Rueckert

Tanja Rueckert is President of the Internet of Things and Digital Supply Chain Business Unit at SAP. This year she was voted by IoT Breakthrough as IoT CEO of the Year.