The internet of things promises to have a profound impact on logistics and the supply chain. Chris McClincy, senior vice president and chief information officer of Expeditors International, explains.
SCB: How should the supply chain and logistics be dealing with the internet of things?
McClincy: With a healthy dose of curiosity, hopefully some enthusiasm, and then real engagement. The IoT movement is progressing pretty quickly. Some analysts are predicting that in 2019 we’re looking to spend about $745 billion on IoT globally. That’s across all verticals. Breaking that down, you see manufacturing at right around $200 billion, and transportation and logistics at $71 billion. Clearly there’s a lot being invested in IoT.
SCM: What form is that investment taking?
McClincy: There are two forms of engagement that we’re currently seeing. The first is on an indirect level, with sensors being distributed across the supply chain and logistics processes. Most organizations benefit indirectly through the technology that service providers are using. There’s also a more direct level of engagement, for organizations to evaluate what IoT can do for them — to take that leap and start looking for the new markets and solutions that IoT can provide for you. You need to start working both within your own organization and with strategic service providers.
SCB: Executives these days are demanding a quick return on investment in systems. What’s the short-term value proposition for engagement in IoT today?
McClincy: In order to justify whether or not organizations should be engaged in IoT, we recommend they do a readiness assessment of their culture and where they are in their supply chain, transportation and logistics. You need to look at things like product sensitivity before you get to the ROI or cost-justification phase.
SCB: So you’re not saying that everyone needs to be jumping into IoT to the same degree?
McClincy: Not at all. One of the areas that we recommend be part of a readiness framework is looking at the jobs to be done in the organization. You need to identify some very specific jobs that IoT can solve for. Then you take that next step and start looking at making the business case for moving further along.
SCB: What are some best practices for implementing IoT in the supply chain and logistics?
McClincy: You want to focus on small incremental wins. Of course it depends on where you’re at in terms of your adoption of IoT. Some companies haven’t even started yet. Others are moving along very progressively. For those that are just beginning, it’s about identifying good strategic service providers, so you can be very targeted in your IoT work. And if you’re far along, then it’s about taking advantage of some of the more advanced aspects of IoT. At a very simple level, it solves very specific jobs that need to be done. Beyond that, it provides advantages in terms of enabling visibility, and the digital footprint it can create for organizations. If you can harvest data and apply data science, it unlocks a lot of potential.
SCB: In the world of supply chain and logistics, what types of devices are being drawn into the world of IoT, and for what purposes, as opposed to applications in the consumer sector?
McClincy: The underlying technology is very similar. It’s about sensors, which are getting smarter, smaller, cheaper and more sophisticated. We’re seeing them being applied in warehouses and transportation assets. It’s providing a great degree of visibility and transparency.
SCB: Is adoption of IoT a competitive advantage today, or is it the ticket for admission to the business?
McClincy: Indirect engagement will continue to rise, and that’s going to benefit all organizations. There’s a window where there’s great competitive advantage to be found, but across all technologies that window closes over time. Those that want to be early adopters, and be more progressive in terms of how they’re pursuing IoT for their businesses, will potentially reap the benefits of that.
SCB: When you’re talking about IoT, a big issue is security. How do we handle that, especially in the area of supply chain and logistics, where security is so important?
McClincy: For the suppliers that we’re working with, the amount of information involved, and the way that distribution is deployed across the supply chain, lend themselves to increased scrutiny, and leave us open to attacks. We’re working with suppliers of technology and service providers who have security at the forefront of their conversations, and can demonstrate how they’re applying it to their solutions. The technology will help to ensure that we’ve got the integrity we need in our organizations as we’re applying those IoT capabilities.
SCB: The world of IoT requires sophisticated analytics. Where are we today in our ability to make sense of this massive amount of data?
McClincy: We hear about machine learning and artificial intelligence everywhere, but there’s the practical question of what do I do with this data, and how do I solve business problems? It depends on what your company’s capabilities are, and your ability to attract talent. For that reason, the ability of the top technology firms to apply data science is going to be different than perhaps other organizations.