Internet-of-Things (IoT) and Operations/Supply Chain Management: Past, Present and the Future

The term Internet-of-Things (IoT), coined by Kevin Ashton in 1999, highlighted the linkage between RFID tags and a central information repository using the internet. The key idea was that using such machine-to-machine connectivity (M2M), locational data access would optimize supply chain operations. Although the evolution of IoT is rooted in M2M connectivity (i.e., connecting a device/sensor to the cloud, managing it and collecting data),[1] today it refers to a network of sensors (smart devices) connecting disparate systems targeted towards collecting and sharing data to make better business decisions.

The future growth potential in IoT technology is substantive. By 2020, internet-connected things will outnumber humans 4-to-1, creating new dynamics for marketing, sales and customer service.[2] Further, the number of active IoT devices will grow to 10 billion by 2020 and 22 billion by 2025,[3] and global manufacturers are predicted to invest $70 billion in IoT solutions in 2020, up from $ 29 billion from 2015.[4]

Operational benefits of IoT include the ability to remotely control operations, conserve energy by ensuring that processes are continuously operating within prescribed parameters, increase process availability by dynamically monitoring equipment usage, reduce waste and in-process inventories using real-time process optimization, and ensure better quality adherence to standards by monitoring both process inputs and finished product outputs. Supply chain benefits of IoT stem from inventory cost reductions through continuous tracking and monitoring of raw materials and finished products, quicker responses to disruptions to minimize losses in customer demand, better balancing of investments by real-time asset tracking, enhanced transaction accuracy by streamlining and coordinating distribution (warehouse) operations, and greater better compliance with environmental and safety regulations.

Looking ahead, there are several aspects of concern vis-à-vis the IoT landscape. First, although technology advances have resolved sensor connectivity issues, security is still a major concern. For example, IoT botnets based on out-of-date sensors were responsible for taking several websites and services offline in 2016 and a Chinese firm later recalled 4.3 million unsecured connected cameras.[5] Second, privacy concerns stemming from potential hacking of information is another unresolved issue. Insecure IoT systems led to toy manufacturer VTech losing videos and pictures of children using its connected devices.[6] Privacy advocates are concerned about “Big Brother is Watching” ramifications stemming from the comments of Jim Clapper (Director of the NSC) in 2016 that “…. intelligence services might use the [internet of things] for identification, surveillance, monitoring, location tracking, and targeting for recruitment, or to gain access to networks or user credentials..”[7] Finally, given the relative infancy of IoT technology, there is a dearth of common communication standards. Although there are efforts underway to establish such standards (e.g., Microsoft’s IoT Central, and the Hypercat[8] standard), there is the need for more wide-spread industry standard which will facilitate the communication between different sensors.

Regardless of these challenges, IoT technology offers significant promise for addressing critical aspects in operations and supply chain management. It also has the potential of enabling us to resolve simpler daily issues such as monitoring essentials in our home refrigerators, facilitating parallel parking, and maybe even develop a better golf swing! On a community level, it has significant potential for enabling the development of smart cities and of course, on a global level, help us respond quicker to natural disasters!

[1] There is some confusion/disagreement about whether M2M and IoT are different/similar. The reader is referred to What are the Differences Between M2M and the IoT? (accessed September 23 2019) where a succinct table highlighting differences/similarities is available.

[2] See Leading the IoT: Gartner Insights on How to Lead in a Connected World, accessed September 23 2019.

[3] See State of the IoT 2018: Number of IoT devices now at 7B – Market accelerating, accessed September 23 2019.

[4] See Stats That Show The Massive Opportunities In The Internet of Things, accessed September 23 2019.

[5] See Chinese IoT firm recalls 4.3 million connected cameras after giant botnet attack, accessed September 23 2019.

[6] See Parents urged to boycott VTech toys after hack, accessed September 23 2019.

[7] See US intelligence chief: we might use the internet of things to spy on you, accessed September 23 2019.

[8] See Internet of Things: Creating best practice, sharing new opportunities and tackling global IoT challenges, accessed September 23 2019.