Logistics management and inventory tracking have always been vital parts of a successful business. Yet historically, these methods were functional, rather than efficient. Over the years, we’ve shifted from counting how many units remain at the end of each day in order to determine how many were sold and forecast future demand, to using punch cards to keep track of inventory, aligning the number of punches with available product. In the 1950’s, Mattel co-founder Ruth Handler famously sent an army of employees to retail stores to count toys and bring back data on the sales of their products. More recently, supply chains adopted bar codes, which are useful, but provide limited information, as they can only contain about 20 characters of data.
As technology evolved, tracking resources from points A to B to C became easier. In the early 21st century, radio frequency identification (RFID) microchips tracked shipment location and monitored temperature, humidity and other real-time conditions. Then came the internet of things (IOT), one of ASCM’s Top 10 Supply Chain Trends in 2023. As our report explains, the IOT provides near-real-time transparency and information about product location, speed of movement, estimated arrival and local atmospheric conditions. Data about each of these steps in the supply chain process is stored in the cloud and available to anyone with connected access, whether it’s the producer, the warehouse manager or the end consumer.
A McKinsey research report predicts that the IOT market could be worth up to $12.6 trillion in value globally by 2030 — and the benefits will be concentrated in supply chain. The researchers determined that the “factory setting (which includes standardized production environments in manufacturing, hospitals, and other areas) will account for the largest amount of potential economic value from the IoT, around 26 percent.”
Making sense of the data
Today, IoT “devices are getting smaller, less expensive, more functional, and easier to deploy,” explains Tancred Taylor, a senior analyst at ABI Research. “IoT devices offer greater functionality than what previous solutions could offer: being able to locate an expensive asset anywhere or receiving data throughout a product’s journey in the supply chain creates a lot of new value that was impossible with point-to-point or more manual systems. In short, there is more data, and it is more easily available in real-time or near-real-time.”
One major benefit of internet-connected devices is the amount of data they produce. DHL declares that the amount of data collected from IoT devices is “mind-boggling. In 2020, it reached 44 zettabytes (44 trillion gigabytes) – and it’s doubling every two years.”
To interpret this data, Taylor refers to little “v” and big “V” visibility. “Little ‘v’ visibility means you have got data coming from the physical supply chain: blue dots on the map, data on the condition of your products,” Taylor explains. But the quantities of data, and the complicated structure of the supply chain, means this type of visibility is not enough to successfully interpret the IoT-based data. Big “V” visibility requires software to make sense of that data, “feeding pre-built dashboards, giving insight into pre-determined KPIs, running analytics programs to determine root causes, or feeding data to multiple departments within the supply chain who might each have different uses for it.”
This is how the data is used and is the foundation of smart logistics, which illuminates delays, disruptions and potential quality degradation, the ASCM report says.
Choosing the right device for the right product
The options for internet-connected devices are plentiful, but choosing the right device for the right “thing” depends on the use case, Taylor explains. RFID or Bluetooth may work well to “track inventory in and out of facilities in a closed-loop supply chain,” whereas a device with wide-area network connectivity and additional sensors is better for understanding “where in a multi-leg journey supply chain goods get damaged or held up.” Smart packaging is ideal when the supply chain manager or consumer needs to be sure a product is authentic, and smart labels specifically are becoming much more widespread: ABI Research estimates that 581 million smart labels will be shipped in 2028.
QR codes gained popularity with consumers during the pandemic due to their simple format and integration with smartphones. And unlike bar codes, the information stored in a QR code is extensive: up to 7,000 characters, making them useful for supply chain managers seeking product data as well as customers interested in understanding more about their purchase’s authenticity.
To combat fraud in the rarefied food supply chain in Italy, producers of the raw ham, Prosciutto di San Daniele are using QR codes as their “digital tracing system” of choice. Each pack is printed with the code that consumers can use their smartphones to check for origin, slicing date, curing location, and other important details, and producers can leverage to confirm authenticity. “This technological innovation ensures the transparency of the prosciutto di San Daniele PDO production chain,” the company’s website explains, and will “guarantee the origin of the raw materials at every processing stage.”
QR codes work well on plastic packaging and on products with a shorter shelf life, but some food products, like Parmigiano-Reggiano cheese, require extensive ageing — at least one, and sometimes more, than three years. QR codes degrade fairly quickly, and they are easily copied, reports Eric Sylvers for The Wall Street Journal. Enter edible microchips: Produced by Chicago-based company p-Chip, the chips use authenticate data as far back as the milk producer; they’re food safe; and, importantly, the microchips can also withstand extreme temperatures and the ageing process needed to give Parmigiano-Reggiano its authentic flavor.
The edible smart labels are the size of a grain of salt and are embedded in the 90-pound cheese wheel. During storage or shipment, the microchip can be read by a laser device to authenticate the product and maintain its coveted EU designation of origin, guaranteeing that the cheese “is made in a specific region while using strictly defined raw materials and traditional methods,” Sylvers explains.
The unique technology is backed by blockchain and “associates a unique, unchangeable identifier with a physical object, thereby creating a digital twin. With a uniquely traceable, light-activated microtransponder (a silicon microchip), ultra-secure p-Chip tracking chips trace, connect, and authenticate goods across the supply chain,” p-Chip’s website explains. They’re also “virtually impossible to duplicate or counterfeit.” Which is good news to the producers of Parmigiano-Reggiano, which experiences $2 billion in counterfeit sales per year — almost as much as sales of the authentic cheese. On the other hand, according to p-Chip, these trackers are a “mere penny per chip.”
Cybersecurity challenges
Meanwhile, ABI Research reports that “total active IoT device shipments for the supply chain will increase to $613.5 million in 2027. Nowhere has IoT attracted as much attention in the past 3 years as in the supply chain,” researchers note. That massive innovation is something to celebrate for leaders in supply chain, but they should also be aware of the risks.
As consulting firm KPMG points out in its report on trends “shaking up” supply chain this year, the ubiquity of IoT means that the points of entry into the security system are growing exponentially — and hacking techniques are evolving along with the number of connected devices. “In 2023, cyber criminals will likely be even more sophisticated when it comes to infiltrating supply chains to damage or steal from businesses” by breaking into warehouse equipment “via Internet of Things (IoT) devices applied within your manufacturing and other operational sites.”
Their advice? “Conduct a cyber assessment for all of the functions/activities within the supply chain using IoT devices (storing data, managing inventory, tracking goods), especially those with direct access to sensitive information and/or provide a gateway to wider system access.”
The Microsoft Threat Intelligence team agrees. In a blog post from late last year, they explained that vulnerable IoT devices have become a target for cybersecurity attacks like the ones that affected SolarWinds and Log4J. “A report published by Recorded Future in April 2022 detailed suspected electrical grid intrusion activity and implicated common IoT devices as the vector used to gain a foothold into operational technology networks and deploy malicious payloads.” The Microsoft team implores users of IoT devices to enable vulnerability assessment to determine when a device or platform has been comprised.
Allied Market Research predicts that the supply chain security market will reach $6.3 Billion by 2031, driven partly by the “growing number of IoT devices in the supply chain.” And though many of these security protections will need to be implemented by a dedicated technology team, as I wrote a few months ago, cybersafety is everyone’s job. Addressing cybersecurity risk requires significant investment and buy-in from stakeholders and executives, and has supply chain managers, it’s imperative that both the benefits and risks of smart logistics are made clear to a business’s leaders.
