The Internet of Things (IoT) – Welcome the Digital Supply Chain!

IoT

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Over the last 5 years there has been an explosion of smart and connected devices. Gartner is predicting that by 2020 there will be 37 Billion connected devices and more than 4.3 Zetabytes of data generated by these devices.  The Internet of Things (IoT) is well upon us!

Quick adoption of health devices like Fitbit and smart thermostats such as Nest are bringing more and more connections and opportunities into the consumer world. As such many home appliance and consumer goods companies are looking at how they can take advantage of this trend and transform their interaction with their consumers and customers.

In order to understand how this is starting to evolve and how it will impact and change the supply chain, let us consider 4 user cases that are emerging with early adopters in this space.

Registration and warranty management

The base requirement for managing smart devices is registration of that device and identification of it as a valid and unique item. Historically in the consumer space, that was a process tied to warranty management. This task was enabled with warranty registration cards which were bundled with the instructions for home appliances.

This gave manufacturers some limited insights into their consumers and provided consumers with some peace of mind in case of an issue with the appliance. According to Warranty Weekly Magazine, best in class participation in this paper based process was 2%. Meaning that 98% of consumers were largely unknown to a company and in case of a failure, these consumers would often be searching for receipts and proof of purchase to demonstrate warranty entitlements.

In the age IoT, smart devices can self-register and integrate to ecommerce information to link individual devices to consumers. In order to support this investments are often needed in warehousing and order management capabilities to support item level serialization and integrate this information into a highly scalable IoT services and entitlement management system.

Consequently when the device is received and connected for the first time (via wifi or Bluetooth) it is able to “call home”. This will declare itself active and register for the warranty entitlement by matching to the e-commerce information (name, address, email etc.). This not only delivers peace of mind for the consumer that their device is registered and the warranty will be in place should it be required, but it has major benefits for the manufacturer.

Registration levels should approach 100%, enabling an enhanced marketing database and consumer insights. The expensive infrastructure of mail processing and data entry (including the unavoidable keying errors) is no longer needed, and the foundation is established for other higher value IoT driven processes.

 

Smart Replenishment

For smart devices which require consumables, one area of significant interest is enabling consumption based replenishment. Through tracking consumption events on the appliance, and tracking or modelling the inventory a consumer has, automatic replenishment can be triggered to ensure the user never runs out. Unlike, time based subscription services, this will adjust replenishment based on actual usage and usage rates. This avoids shortages if the rate of consumption increases, or excessive inventory if it slows.

By offering this direct service, the manufacturer not only “locks in” the consumer to their brand(s), they also have the opportunity to own the replenishment process and retain the margins that normally would be passed on to a retailer or distributor. The consumer has a hands free replenishment process and can be confident that they will not run out or have to cancel scheduled shipments.

In addition to these benefits, with the correct IoT infrastructure, a manufacturer is able to generate real-time data at the individual device level, as well as building granular insights at a consumer by consumer level of usage behavior, including stock levels and how this can be influenced.  The proliferation of data showing consumption demographics by geography will be a Marketing Department’s dream.

From a marketing and new product development perspective, the data and potential insights are hugely valuable. However there are also significant supply chain benefits available from this. If you compare how the drive for Point of Sale and retail inventory data 10 years ago was hugely beneficial  in enhancing forecasting and deployment decisions, IoT presents the opportunity to have true end to end visibility into inventory and usage from production to consumption.

 

Proactive service

In both the B2B and B2C space, IoT offers the possibility of service enhancements and a level of proactivity that can be a significant differentiator with your customers. With sensors built in to the devices, IoT can gather this telemetry and key events on a device and allow the tracking and analysis of this to drive service activities. Feeding this data into machine learning and predictive analytics engines, can lead to proactively scheduling a service call or triggering a user intervention prior to a major failure or quality problem. In addition by tracking appliances in the field regional differences and the impact on the device can be observed and fed into product design or user education. For example how does a device such as a coffee machine behave in a hard water area versus soft water zone?

Predicting failure and triggering user intervention such as a simple maintenance task or cleaning a device can make significant reductions in returns and in the field failures. This not only avoids the large cost of reverse logistics and warranty costs, but also avoids the damage to your brand from a failure with a customer.

 

Everything as a service

As manufacturers build out their IoT platforms and develop increased insight and access to the usage, performance and activity of a device, new business opportunities become available. A company can track usage, replenish, maintain the equipment and provide more guaranteed availability for an end user.

One important opportunity is captured in the phrase “everything as a service”. Rather then selling devices or equipment, often for large capital outlays, manufacturers can offer discreet, outcome based services. A simple example could be “laundry as a service”. Rather than charge a consumer hundreds of dollars for a state of the art laundry machine, provide the machine for free, but only charge a nominal fee for each use. After a certain period or number of cycles a “free” upgrade could be offered. A similar model exists with cell phones and telecommunication providers today. Appliance manufacturers could also partner with detergent brands to build in smart replenishment and also include this in the service fee.

For some time now large earth moving equipment manufacturers are leasing equipment based on time.  With IoT this can be varied based on actual usage to allow differentiated offerings and tailored packages based on the nature of a customer’s needs. “Holes in the ground as a service”!

Conclusion

IoT and smart devices are appearing in many new categories and areas where previously no technology was present. These use cases are specific examples in both B2B and B2C channels. They build on each other and increase the visibility, services and business opportunities.

You need to understand how IoT can change your business and your category and move quickly to gain an advantage with this. You can be very sure that your competition is.

 

A special thanks to Neil Hampshire for his contributions.

 

Check out   IoT and Manufacturing (Infographic)

#IoT #Innovation #SupplyChain

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