Impact of IoT on Supply Chain Management
Technological advancement especially the emerging technology is significantly playing a vital role in various fields such as insurance, security, accounts, finance and organizational economic sectors (Marrone and Hazelton, 2019). Some of these emerging technologies include Internet of Things-IoT, Blockchain, Artificial Intelligence, Robotics, Drones, Big Data, Word Cloud (Adner and Levinthal, 2002, pp. 50-66). This paper will focus on discussing how implementation of IoT has affected supply chain management of Ericsson Maritime ICT Cloud company project.
The invention of IoT was in 1999 in Auto-ID center MIT-Massachusetts Institute of Technology by Kevin Ashton (Greengard, 2015). The idea of Kevin Ashton was that one can track various products and goods using Radio-Frequency Identification (RFID) tags. European nations have greatly adopted this technology in their industrial processes especially Germany.
IoT is a network platform that makes it possible for objects to connect anytime and anywhere through network or simple put Machine-2-Machine communication (Atzori et al., 2010, pp. 2787-2805). It is an emerging technology that facilitates global supply of goods and services via networks (Liu and Sun, 2011, pp. 1374-1380). For firms to remain afloat and a command in their respective market shares then the supply chain and retail department has to be effective in the way it delivers its services and this can be enabled by Supply Chain Integration Process. Supply Chain Integration is an external and internal business management strategy with objective of executing sufficient services and products to the customers and this in return improves productivity, consumer happiness and satisfaction of the company.
As known, necessity is the mother of invention. In the same light, inefficiency in traditional technology in storing data, reducing and processing fraud lead to the inventions of the emerging technologies such as the IoT that has now led to efficient service delivery (Constantinides et al., 2017). The technology has enabled fraud reduction hence leading to safe delivery of information and services in supply chain departments (Mishra et al, 2016, pp. 1331-1355). Being a new technology, the application of IoT is in early stages and hence it is not fully implemented by all retailers and supply chain departments. Therefore, there is a call for empirical evidence of IoT effect on supply chain and thanks to de Vass et al. (2018) study that proved that IoT have a positive effect on supply chain and consequently the performance of a company.
Given significant challenges experienced in retail and supply chain sectors of various firms and industries, the idea of IoT was greatly welcomed and was viewed was viewed as a great game changer in the supply chain management by improving supply chain operations (Balaji and Roy, 2017, pp. 7-31). The supply chain departments use IoT in data collection on the rate of demand of customers and analyzes the data in order to have accurate demand results which leads to increased profitability of various firms (Constantinides et al., 2017).
This topic of study is greatly significant especially in the modern-day business environment where competition is very high. According to Lambert and Cooper (2000, pp.65-83), to achieve productivity and sustainability in the management of modern-day businesses, companies need to embrace and have a sufficient supply chain management strategies and execution. Success of a business is associated with a good supply chain, however, due to dynamic business environment, challenges posed can lead to failure of the supply chain strategies as well the business itself. This is due to high rate of volatility in the demand of the customers in the quality of services and products as well as prices of the products or services (Christopher, 2016, pp. 63-82). Furthermore, with the high and increasing rate of technological advancement, products have become more complex increasing the challenges faced (Simchi-Levi et al., 2003). In addition, another factor that need to be considered is the external environment of the company which is highly volatile due to changes in factors such as prices, interest rates. These events are highly volatile making it difficult for companies, supply chain management departments make decisions for instance, investment decisions or make it difficult to predict customer demand. Due to this complex environment, firms need to be flexible and resilience and adopt better strategies of dealing with the situation by for instance, adopting the new emerging technologies. Given great advantages brought by advanced technology, this paper is aimed at investigating the economic effect of implementation of IoT by the retail supply chain on the business.
Supply Chain Integration Process
Understanding supply chain process is vital particularly in the centric view process and the model of Supply Chain Operations Reference (SCOR) is of great help in enhancing the understanding. As per the model, the supply chain process is structured into Plan, Source, Make, Deliver, Return and Enable divisions (APIC, 2015). As a result, the model of SCOR is greatly used in providing and understanding of centric view process of the supply chain management. Using IoT technology in retail supply chain processes is of great important as it helps in reducing costs, provision of efficient communication and fraud prevention. The extent to which IoT has affected supply chain process remains unknown and this gap will be solved by use of various literature analysis and case studies. Let discuss the SCOR model process as follows.
RFID objects and enablers are the two main IT enablers. For IoT enabling technology there are four layers: We first have data collection layer that make use of Radio Frequency Identification (RFID) sensors, we then have transmission layer and a good example is the mobile phone network, we then have service layer and lastly interface layer (Lou et al., 2011). There is possibility of the last two layers to be combined together and work as a one-unit layer. For example, Tao et al. (2014, pp. 1547-1157) applied IoT technology in the process of cloud manufacturing and in addition, Gnimpieba et al. (2015, pp. 550-557) implemented IT enablers in the platform of cloud in the process of supply chain for data analysis and other real time events. IoT enablers are faced with some challenges and some of them are: scalability of the internet, the issue of identifying and addressing many tasks, heterogeneity problem and then the issue of service paradigms (Haller, Karnouskos & Schroth, 2009, pp.14-28). As per Bi et al., (2014, pp. 1537-1546), the challenges faced by IT enablers can be associated to privacy and security issues. On the other hand, as per El Khodr et al. (2013, pp. 218-222), the challenges faced by IT enablers are associated with governance and trust. Additionally, the challenges faced by IT enablers can be related to computation and problems of classical scalability (Atzori, Iera & Morabito, 2010, pp. 2787-2805). To summarize, the central enablers of IoT are RFID and many researches have been conducted to determine its application in supply chain department.
Sourcing is the way in which a company acquires raw materials, services and other inputs for production. This is a vital stage in supply chain management and for a successful business, the supply chain department need to be extra strategic on sourcing. Some of the strategic decisions are out-sourcing, in-house sourcing and supplier selection. IoT proves to be of great help in sourcing because it facilitates the supply chain department to plan, monitor, control products quality as they pass through supply chain. IoT technology provides supplier with advanced real-time visualization in the supply chain management processes (Lou et al., 2011).
Many nations are prosperous due to product manufacturing. The evolution of manufacturing can be divided into industry 1.0, industry 2.0, industry 3.0 and industry 4.0. Each of the industry stage is associated with as a change in the processes of manufacturing. For example, industry 1.0 used steam power and water in manufacturing, industry 2.0 used electricity for production hence characterized by huge productions, industry 3.0 and 4.0 are characterized by information technology and electronics leading mass production that is advanced. In order to improve production, Industry 4.0 is in the process of implementing the emerging IoT technology. Technologies such as Big Data Analytics, Cloud computing have facilitated improved mining of data and storage and thus providing a good environment for smart manufacturing. IoT enables smart manufacturing whereby it leverages both wired and wireless connectivity enabling the flow of data and providing the ability to monitor and manage processes remotely and the change the plans of production quickly, in real-time when needed.
SCOR Model and its Application
Every organization has a logistic department and one of its duty is delivery function. There is a great connection between supply chain and delivery because in supply chain, key concern of delivery is ordering, warehousing and inventory management as well as transport sector. The problems of diverse sensing and measurement standards are significantly affecting the supply chain management of various companies. Absence of compatibility between partners in supply chain and IoT have consequences of resulting in preventing predictive modelling and consequently loss of sound decision making. According to Verdouw et al., (2013, pp. 160-175), there is need to apply IoT technology in supply chain because the technology brings about virtualization in supply chain. For example, Tadejko (2015, pp. 261-273) studied and determined applications of IoT that has capability of reducing delays, capability of making decisions on time and capability of effective processes monitoring. Additionally, through IoT technology, there is efficient and effective flow of information by connecting production and transport processes Qiu et al., 2015, pp. 4-15). Majority of studies have exhausted inventory, management and production process
Idea of making products and then inserting sensors in the products with the primary goal of monitoring the products was initiated by Thierry et al. (1995, pp.114-136). Due to the lack of required technology, the idea was not implemented. When there was evolution in technology that led to RFID in supply chain, the idea of Thierry was implemented. Zhiduan (2005) invented the information sharing idea that had a platform of enabling waste electrical recovery in supply chain. Paksov (2016, pp.1-20) invented a supply chain idea on providing the demanded sales a collection center for manufactured and new products.
In industry 4.0, IoT as an emerging technology is expected to be of significant value because of the digitization of logistics by IoTs in industry 4.0 (Hofmann and Rusch, 2017, pp. 23-34). Therefore, there is great expectation that IoT will drive a technological change in supply chain department (Ben-Daya et al., 2017, pp. 1-24). According to Haddud et al. (2017, pp. 1055-1085), implementation of IoTs in supply chain management will result in improved coordination of external and internal of businesses driving improved performance. Implementation of IoT in supply chain management has resulted in interconnection of digital world and the physical bodies consequently facilitating information flow (Ping et al. 2011). There is a significant evidence provided by de Vass et al (2018) show casing IoT ability of having a significant effect on customer, supplier as well as activities of internal integration which consequently affect firm sustainability and performance of supply chain.
Ericsson Inc. is a global company that provides telecommunication equipment and services related to it (Bloomberg, 2022). The firm provides its products as well as services to network operators-both fixed and mobile in addition to providing communications networks, telecom services and solutions in multimedia (Bloomberg, 2022). Therefore, the company falls in technology sector and in the industry of tech hardware and semiconductors (Bloomberg, 2022). The company is headquartered in Stockholm, Sweden and it started in 1876. It is a public listed company. Therefore, as it can be seen Ericsson Maritime ICT Cloud platform is an extension of Ericsson Inc. to provide supply chain management solutions in the shipping industry by improving communication, delivery of products, customer satisfaction as well as ensuring the well-being of the crew.
Challenges and Opportunities Faced by IoT Enablers
The case company that will be considered is Ericsson Maritime ICT which has transformed the shipping industry with IoT technologies. Ericsson Maritime ICT is a digitized shipping company that (Schimek, 2020);
- Enables optimization of voyage, monitoring of cargo and monitoring welfare of crew.
Even though ships carry approximately a cargo of 9.6 billion tons in 2013, industry of maritime is still behind communication and flow of information compared to other transport industries (Schimek, 2020). The Ericsson company is determined to change that and improve flow of information and operations with its project of Maritime ICT Cloud which is determined to improve connectivity, effective services and the general improvement in services integration at the ports or in the shipping industry (Schimek, 2020).
Currently operations at the port are manually executed from one point to another instead of making it available to all parties simultaneously through network (Schimek, 2020). Hence, this leads to great time wastage and no real-time data accessibility increasing the error in the sea or ship operations. With Ericsson Inc. project, ships at the sea are easily connected with the sea operations, operations at the shore such as providers of maintenance services, customer support operations, connection with fleet partners, connection with port authorities and operations (Schimek, 2020). The services also manage fleets, monitor consumption of fuel and engine, oversee routes and navigation as well as ensuring well-being of the crew (Schimek, 2020).
Though shipping for many years has led to connection of industries, places and people, there is still a challenge in the logistics and connections due to the isolated nature of ships at the sea. This affects delivery of cargoes and products on time, in good conditions as well as the crew wellness (Schimek, 2020). With the birth of satellite communications and IoT technologies, it inspired Ericsson Inc., which is Swedish company to handle the problems of supply chain fragmentation as well as maritime-vessel isolation with only one remedy namely the Ericsson Maritime ICT Cloud platform (Schimek, 2020).
Implications to the theory
From the related work theory, there is less work on the IoT implementation in the retail supply chain. Most literature reviews have focused on the IoT implementation but not in the retail supply chain management and this is due that fact that IoT is still a new technology and as such, many industries have not yet implemented it in their respective operations. The literature reviews and other theories suggest a significant application and contribution of IoTs in the supply chain management of various industries and companies. The theory states that if IoT technology is successfully implemented in supply chain department of an organization, then it will result in efficient execution of inventories, on time delivery of products or cargoes, consistent flow of information, reduction in operational costs, a balanced demand and supply which consequently will lead to a satisfied and happy customer increasing productivity of the company. Simply put, the theory implies that implementation of IoT in retail supply chain management have positive economic impact on the respective companies.
Another implication is that even though IoT in supply chain management has overwhelming advantages, the technology has its own challenges especially given the fact that it is a new technology. Applying IoTs in supply chain management is not a smooth process because the process is faced with significant obstacles that needs resilience and persistence for a company to be successful. For instance, there is obstacle of lack of expertize because it is a new technology, regulatory laws, internal misunderstanding between operational team and management team. Therefore, a company seeking to implement IoT technology in its supply chain department must be aware of the challenges faced and have to be prepared.
Stating in theory can be easy, but the real deal come when it is time to put IoT technology in practice. Practically, it has to be known that IoT implementation in supply chain management has both positive sides and challenges and all of the sides must be embraced. The good thing is that the obstacles can be handled and they are not difficult to deal with it. Therefore, in order to handle the obstacles then the company must be ready to invest a good fortune because failure to this might make the obstacles overwhelm the merits of IoT in supply chain leading to the failing of the project.
Conclusion
The emerging technologies such as Blockchain, IoT, IA, Big Data has significantly been helpful in this modern-day business environment that is highly competitive hence helping businesses to remain afloat. Particularly, the technology has helped in enabling mass production in industry 3.0 and 4.0. One such specific technology is the IoT that has played a significant role in the supply chain management of various companies. One such company that has successfully implemented IoT is the Ericsson Maritime ICT Cloud that has successfully implemented IoT in shipping industry to boost the supply chain management of the shipping industry. IoT application in retail supply chain management has some advantages such as sufficient flow of information, balanced demand and supply, timely delivery of goods and services, well management of inventory, improved customer integration, reduced production and operational costs leading to satisfied customers and improved production. The implementation of IoT is also faced with challenges such as lack of expertise because it is a new technology, strict regulatory laws, internal wrangles between operational and management department teams. Despite the obstacles, application of IoT in retail supply chain has far more merits and greatly benefits the firm.
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