Roman Davydov
Ecommerce Technology Observer
What is a smart supply chain?
A smart supply chain involves the use of many emerging technologies including big data, IoT, blockchain, and RPA to streamline operations. These technologies allow supply chain companies to cut costs, shorten delivery times, reduce negative environmental impact, and achieve unprecedented levels of automation.
Importantly, a truly ‘smart’ supply chain is a self-improving and resilient system that can operate in an unpredictable environment. A smart supply chain also involves seamless sharing of information, partial reliance on automation, and continuous optimization of workflows based on real-time data. To better understand what a smart supply chain is, let’s see how one operates in real life.
In March 2021, the Suez Canal, one of the most important shipping routes in the world, was blocked by the largest cargo vessel in the world, preventing hundreds of ships from reaching their destinations. Just within six days of blockage, approximately $40 billion was cumulatively lost in trade disruption.
Blue Yonder is an AI-driven logistics platform which helps businesses to monitor their supply chains and constantly optimize operations. The embedded AI system takes into account a company’s past sales history, global weather conditions, local socio-economic situation, and a myriad of other factors that can impact the supply chain.
By analyzing data from local media, weather conditions, and IoT sensors installed across shipment containers, Blue Yonder has managed to predict how exactly the delay caused by the Suez Canal blockage will impact the production, sales, and operations of the company’s customers. By accurately predicting when the shipments will arrive at their intended destinations, customers could estimate the impact of potential disruptions and take actions to mitigate it. In September 2021, Panasonic Corporation bought Blue Yonder for an astonishing $8.5 billion.
Conventional vs smart supply chains
A conventional supply chain involves a limited number of different parties that proactively communicate with each other and exchange assets. But since these supply chains took shape way before the internet and digital technologies, they are inherently static and linear.
Let’s look into the example of a simplified version of the bicycle supply chain. Raw materials are first supplied to original equipment manufacturers (OEMs), where they are turned into bicycle parts. Then these parts are shipped to bicycle manufacturing facilities, where they are assembled into bicycles. Afterward, bicycles are distributed to retailers and finally sold to consumers. Nowadays, this level of supply chain simplicity can be found only across small-scale, local businesses.
The majority of modern supply chain ecosystems involve a hundred times more participants. Large-scale supply chain networks have to deal with hundreds of OEMs and operate across different regulatory requirements, causing the number of network participants to grow exponentially and significantly complicating operational workflows. This is why the modern supply chain requires a different approach to communication and collaboration between all parties involved.
In a nutshell, conventional supply chain practices prove adequate for small businesses operating in a highly predictable environment. In our increasingly unstable times when customer demands are constantly evolving, the traditional approach to supply chain management has simply grown inadequate and therefore obsolete.
IoT
In the supply chain context, IoT facilitates remote identification of equipment failures and provides decision-makers with granular data on devices’ state and their surrounding environment. For example, by installing IoT sensors on a freight vehicle, a company can assess if it needs immediate maintenance. On top of that, the same sensors can provide information about vehicle location, which is useful for determining alternative routes.
Similarly, IoT sensors set up across a cargo with environment-sensitive goods like drugs or food can notify managers when the temperature, humidity, or light intensity exceeds allowed thresholds. This way, companies can reduce waste and ensure product quality.
Maersk, a Danish industrial container transportation provider, had to monitor the condition of more than 300,000 refrigerated containers. With the help of IoT sensors and Microsoft Azure cloud computing, Maersk can adjust certain parameters on the fly to ensure that products are delivered to customers in perfect condition. For example, when it comes to fruit and vegetables, employees can adjust oxygen and dioxide levels in the containers to accelerate or decelerate fruits’ ripening.
