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Tackling Complexity with Smarter Supply Chains

Posted by Tom Barbereau on January 2019

The third installment of our Framing the Industries series focuses on growing the efficiency of, and maintaining control over, complex supply chains via the Internet of Things & blockchain technologies as well as machine learning capabilities.

How IoT and smart contracts will morph linear supply chains into intelligent, data-generating networks seeking to maximize efficiency.

To capture the relevance of supply chains, take for example two friends eating dinner, both wondering about the origin of the steaks on their plates. The steak is produced by a brand committed to “farm-to-table” transparency and thus, they will easily find out the name of the cow, its daily routine, including diet and social habits. At some point, the two friends may even consider visiting the Argentinian farm on which the cow grew up on.

Still, assessing the ‘history’ of the steak in real-time before agreeing to eat it is an effort that may seem a bit unusual. However, with the Internet of Things (IoT), we will more easily be able to experience that type of transparency, and so much more. 

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Traditionally, supply chains implied a linear process of procurement, production or manufacturing, and distribution connected via logistics. Though globalization has made these supply chains increasingly complex and distributed, the basic steps remain the same: receive materials and components from upstream, manufacture products or services, and distribute those to customers downstream.

The value of a company is largely driven by how well it manages the connections between partners: the more efficient the supply chain, the better the product, the faster its production, and the lower its marginal cost. Successful companies who manage to keep supply chains efficient, are conglomerates like McDonalds, Heineken or Coca-Cola. 

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Returning to the outcome of the steak dinner example, IoT is set to revolutionize the supply chain with both operational efficiencies and revenue opportunities. McKinsey forecasts IoT’s potential economic impact at $4 -$11 trillion per year by 2025 (for a segmented overview refer to McKinsey) - of which supply chains largely benefits from cost reduction and increased efficiencies.

Operational efficiencies

Amongst others, these are the most impactful, operational efficiencies emerging from digitizing supply chains with IoT, blockchain and smart contract technologies:

  • Asset tracking: The standard method for managing goods throughout the supply chain are tracking numbers and barcodes. With IoT, those methods prove to be outdated, as RFID and GPS sensors connected to the cloud can track products “from floor to store” in real time. These sensors provide live data on variables such as the temperature at which a product is stored, how long it spent in cargo, and its availability in a supermarket. 
    This type of granular data allows companies to gain accurate insights on quality control, delivery times and product forecasting - that in a second stage, is analysed and translated into optimized processes.
  • Vendor relations: With asset tracking, obtained data can also be used to tweak production schedules and identify costly vendor relationships. About 65% of the value of a company’s product or service is derived from its suppliers - this is a huge incentive to increase transparency as to how vendors handle their supplies, and how the product is handled once manufactured. Improving the vendor relationship allows for a higher quality of goods, and better customer retention overall.
  • Forecasting and inventory: IoT sensors are already used to manage inventories at resellers such as Amazon. The possibility of tracking the entire inventory - including in-stock supplies that are available for future manufacturing - at the click of a button. Eventually, the collected data is used to make manufacturing processes and schedules more efficient.
  • Connected fleets: As the supply chain grows in scope and complexity - upward and outward - it becomes even more imperative to connect all carriers, from cargo ships and rail freight transports to inventory bases and delivery vans. As we all know by now, data is the new gold. Similarly to cities that aim to make traffic more efficient by gathering and analysing data, manufacturers and supply chain managers could make use of collected data to increase process efficiency and ultimately deliver products to their customers faster.
  • Scheduled maintenance IoT provides the possibility to use smart sensors and apply them to manufacturing floors to manage planned and predictive maintenance, preventing downtime that can be very costly.

Revenue opportunities

The opportunity of making supply chains ‘smart’ through IoT, blockchain technologies and smart contracts lies in the power of data and in end-to-end performance management. The chance to know more and understand more about customer preferences, their buying habits and the trends associated with transactions is invaluable. It ultimately allows businesses to build a closer connection with their customers, and inevitably market products or services to them more successfully.

Moreover, companies can make use of data to provide customers with an interactive user platform. Think back to the two friends eating steak: in a supply chain made transparent through IoT, they could trace the ‘history’ of their steak back to the birth of the cow in a remote village in Argentina. They can see what countries the steak traversed, what type of trucks transported it and what supermarket fridge kept it cool before it eventually landed on their plates.

aerial-bay-business-1554646The development of previously ‘undiscovered’ data-driven business models prove to offer profitable business opportunities that companies seek to leverage. Beyond using data to improve the customer-to-business relationship, analytics on the performance of the supply chain itself and associated processes allows for more efficient management, and in doing so, cuts costs.

In particular, gaining real-time data insights into the ‘travels’ of goods across the globe is at the core of the problem that for instance, insurances face. Previously, underwriting was done manually, a rather time-consuming and non-precise task due to lack of shipment data and historical records of the shipment. Moreover, insurers do not have the means for loss-prevention in real-time such as in the case of theft, physical damage or a temperature deviation.

The Evertrace Platform as Facilitator

Here at Next Big Thing AG (NBT), we strategically leverage the possibilities afforded by IoT and machine learning technologies. In the context of supply chain management, one of our core ventures, Evertrace, is currently developing a new, end-to-end solution for tracking physical assets across globally distributed supply chains, enabling stakeholders to seamlessly verify the cargo’s trajectory.

Sensors are attached to shipments or placed inside the containers, and are connected to Evertrace’s cloud platform. There, the generated sensor data is ingested and processed by rules engines and machine learning to detect deviations and patterns. Some alerts might then be triggered.

 

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Evertrace's CEO Darina Onoprienko and CTO Gautier Lobry in the NBT offices at Factory Berlin.

From real-time asset tracking to risk prevention modeling, the core product of Evertrace consists of 3 parts: the tracking device, the insurance dashboard and the risk prevention algorithm. For insurance companies and cargo brokers, the benefits of Evertrace’s customizable tracking solution includes more accurate underwriting, savings on claims management, risk accumulation insights, risk prevention modeling, and an ecosystem ‘approach’ whereby the shipper, freight forwarder, and broker are equally important stakeholders.

Rising above the buzz around blockchain applications in supply chain management, Evertrace has developed a tangible and sustainable product allowing stakeholders to gain precise and valuable insights on the shipment.

Through IoT technologies, the Evertrace platform will allow insurance companies and cargo brokers to leverage the operational efficiencies and revenue opportunities described in this article.

Keep Up

Want to learn more about how Evertrace employs IoT’s potential and disrupts supply chain management? Follow them on Twitter or LinkedIn.

Tags: Blog, IoT, Logistics, Blockchain