A Supply Chain Matters Guest Contribution

by Rich Sherman

Supply Chain Management is at the beginning of a fundamental transformation from linear, sequential thinking and communication to a demand/supply network, systems thinking, and dynamic communication. The transformation is being driven by the new wave of technological change, “The Connected Age.” Since the commercialization of the Internet and development of the Web in the mid-90’s, we have become “wired.” The impact of the Internet, however, may have been understated. As we have become wired, the “Internet of People (IoP)” has become ubiquitous to us and increasingly mobile. There are 6.8 billion people in the world and more than 4 billion have a mobile phone. That’s 500 million more than own a toothbrush!

Mobility has untethered us from fixed locations. Wireless technology and access are becoming as ubiquitous as the Internet. Quite simply, it has enabled people to be always connected and always on nearly everywhere. According to research provided by “path to purchase” data provider Retailigence, 91% of adults have their mobile phone within arm’s reach 24/7. And, the number of mobile phones that are “smart” is increasing. According to eMarketer, in 2014 there will be 1.75 billion smartphone users worldwide and will be growing to nearly half of all mobile phone users by 2017.

And, the number of mobile phone and smartphone users that use their mobile device to connect to the Internet is growing as well. In 2014 (according to eMarketer), 2.23 billion people will be using their mobile device to access the Internet. With built in intelligence, Internet access, Global Positioning Systems (GPS), and the increase of Location Based Services (LBS), the amount of available consumer market information is, well, Big Data.

You don’t have to imagine it, it is happening as we speak. 81% of smart phone users have used their smart phone to conduct an on line product search with 50% of them making a purchase with one. Retailigence, for example, enables retailers to upload their active store location inventory and pricing data to the Retailigence data base. Mobile App developers can access the data base for on line search to off line purchase applications. As the “connected consumer” searches for a product, their location information is visible to the app which displays not only on line products, but products and prices that are in a store located within a geographic radius of the connected consumer. They can order on line or more probably stop by the store and pick up the product at their convenience, no drones necessary.

The retailers and brand manufacturers can see who and where their products are being considered, automatically collecting “point of demand (POD)” data. Using POD data, retailers and manufacturers can push coupons or other incentives to the connected consumer to encourage them to buy their brand or shop at their location. We would call that “demand visibility” to drive delivery speed and accuracy, and supply chain planning and replenishment.

With 74% of smartphone users using their device while shopping in the store, many retailers are developing and deploying apps to allow the connected consumer to scan their products into their shopping carts and when ready, they simply “check out” providing payment information and departing the store, no checkout counter, no lines, just a satisfied customer. For those customers without a smartphone, wireless scanners are provided by the retailer. Real time “point of sale (POS)” data, store inventory update data, consumer market basket data, location data, demographic data and payment received data to name a few of the outputs. We just need a checkout ringtone; because, that should be music to the retailer’s ears.

Why is this important to Supply Chain?

Traditionally, information on the Internet has been dependent upon people entering the data; hence, the reference to the Internet of People earlier. But, with advances in wireless connectivity and automatic data collection technologies, such as Bluetooth, RFID, sensors, monitors, readers, etc., we have been seeing the evolution of the “Internet of Things (IoT)” as suggested by Kevin Ashton in 1999.

Have you see the new “smart house” technologies that are emerging? No more wires. Using Bluetooth technology video devices, speakers, home theater systems, thermostats, appliances, anything in the household is connected to the home server/wireless hub for access by apps. The resident simply accesses the appropriate app from their smartphone or tablet to receive monitored information about what’s happening in the house and can issue commands to lock doors, initiate video surveillance, speak with other residents or delivery personnel, start the coffee or microwave, turn on or off lights or entertainment, and the list and possibilities are growing. All of these “things” are now connected to the Internet, automatically collecting data about the environment, health, and functions they are operating in.

While these are consumer applications that everyone can understand, the growing convergence of the Internet of People with the Internet of Things is resulting in an “Internet of Everything (IoE)” that is not only transforming the consumer world; but, it is resulting in a fundamental transformation of the commercial work and the supply chain in particular. More and more asset management systems connect the assets to the Internet for collection and communication of location, health, and performance data. Commercial (and passenger) vehicles are outfitted with in cab computers and telematics for monitoring and communicating location and performance data. Estimates on the number of devices already connected top 10 billion and are increasing to more than 50 billion in five years or less. Quite simply, there is a limit to the growth of the IoP; but, growth in the IoT is unbounded.

The IoE holds the promise of transforming the linear supply chain of the past to a transparent supply network system of channel participants driven by real time automatic data collection providing real time visibility and analytics to the information they need to adjust the flow of goods to respond to changes in the point of demand variation that is also being collected automatically in real time.

The Web was initially limited to the display of static pages. Web 2.0 provided dynamic, interactive, and collaborative capabilities for the IoP. We believe that the emergence of the IoE signals the transformation to Web 3.0. There is considerable debate about Web 3.0 within the technical community; however, simply put, Web 3.0 extends 2.0’s capabilities and is ubiquitous, data driven, analytic (predictive and prescriptive), and actionable. Web 3.0 enables advances beyond traditional supply chain management by collecting real time data and providing predictive analytics to recommend prescriptive actions to manage increased complexity and change for competitive advantage. In my book, I refer to a Smart Supply Network; but, with the IoE, we may be seeing the emergence of a Smart Supply Network 3.0. But, that’s the subject of another blog. Stay tuned.

 

About the Author: Rich Sherman is an internationally recognized researcher and author on trends and issues across supply chain management. He currently serves as a Principal Essentialist at Trissential LLC in their supply chain consulting practice. His book Supply Chain Transformation: Practical Roadmap for Best Practice Results (Wiley, 2012) has received praise by practitioners, academics, and non-supply chain executives as a great read on business transformation.