The world around us doesn’t stay still, and supply chain management being one of its spheres is very susceptible to innovation. Whatever the trend in technology: 3D-printers, drones, artificial intelligence, augmented reality, data analytics – professionals are immediately looking for its use in procurement, transportation, inventory management. All these technologies help to make the supply chain more effective, the product closer to the customer and therefore increase its value.

Previously, most of them were observed in “Technologies in Supply Chain Management: Trends, Costs, and Predictions” article. Today let’s dive into one of them, the Internet of Things (IoT), and find out how it can improve the supply chain and learn about:

  • the first steps
  • benefits of the Internet of Things in supply chain management
  • challenges of the Internet of Things in the supply chain
  • IoT supply chain solutions variety.

The First Steps

The emergence of the IoT in the supply chain can be considered the forthcoming of such technology like RFID (Radio Frequency IDentification), developed and spread in the 1980s possibility to automatically identify the labeled products in which data stored in RFID tags written and read by means of radio signals. The second main element of the system is the reader. The reader sends a message to the chip, which receives it with an antenna and sends a response signal. The device receives and processes it, displaying data on a screen. Such marks allowed to track the movement of goods, check stock balances, quickly carry out the reception and shipment of products, which has found application in logistics.

Initially, the IoT was understood as a network of objects (things) having devices and technologies for communication and interaction with each other. After 2003, interest in IoT transferred to a qualitatively new level, thanks to the manifestation of the IPv6 protocol. Other factors contributing to the rapid development of the Internet of Things have been the spread of cloud computing and wireless networks.

Today objects can communicate with each other via wi-fi, Bluetooth, LPWAN, BLE, Ethernet, RFID, ZigBee, and other types of wireless communications. It’s not a surprise to meet the technology on every layer of the supply chain – starting from manufacturing, ending with retailers, and e-commerce.

Benefits of Internet of Things in Supply Chain Management

Interest in the IoT is based on its ability to gather reliable data that are stored, processed, analyzed, and managed. On these data, after analysis and statistical procedures, essential business decisions on various processes automation are made. IoT is also able to give reverse commands for controlling devices, manage processes in automatic mode, establish communication between devices that can be a part of an enormously significant and complex system, like manufacturing. It may be executed in production on plants and factories, as well as in transportation and distribution (warehouses, logistic centers, retailers).

With the spread of cloud services, smartphones, and PCs, the control and optimization of a supply chain touch more and more of its sectors.

The most significant benefits are:

Detailed accuracy. IoT provides managers with detailed stats insights on the goods turnover, with the help of barcodes/QR codes scanning for collection, packaging, and stacking operations at a warehouse or distribution center. The Internet of Things reduces the impact of human error, help identify packages, and navigate drivers on the road.

Time savings. Route optimization tools and the Internet of things give a synergy effect while reducing delivery time. It is very important for the last mile and just-in-time delivery for production needs. It makes easier the supply and demand planning as parties know when they can expect to receive and process goods and raw materials.

New possibilities. IoT devices, as well as smartphones, give a wide range of new possibilities towards employees. Surveyors can use smartphones or tablets to record discrepancies in the amount of cargo and the quality of transport, and notify all relevant parties about this in real-time. There are sorting station management applications that allow distribution centers to provide ongoing feedback and directions to truck drivers on where and when to put their cars under loading. Tools like smart glasses help warehouse staff seamlessly to ensure they spend less time completing a task.

Reduce the risk of downtime and breakdowns. IoT is actual for 3PL and transport companies. They can monitor information from sensors on the vehicles, and manage fleet – fulfill diagnostics, predict wear-out, plan repairs, react on deviation from estimated time on the route.

Better quality. Quality management is paid a lot of attention to the supply chain. IoT is an effective tool for better quality management thanks to keeping raw materials and goods in the required conditions.

Challenges of the Internet of Things in Supply Chain

Technologies life-cycle is becoming shorter
Сonstant pressure in the market is unlikely to change in the sphere of the supply chain. So, competition pushes companies towards new technologies in their attempts to win a bigger share of the market. Nevertheless, as the history of recent technological developments shows, innovations that were predicted to become a world leader can become obsolete in a moment. Investments the companies are making now may not pay off because of the pace of technologies outdating.

The process of standardization is incomplete
The IoT evolution’s crucial element is standardization. Without global standards, the complexity of devices that need to connect and communicate with each other will increase exponentially. The complexity, success of integration, and the system final cost straightly depend on standards, their comprehensiveness, and completeness.

Issues with security
Constantly communicating devices may become a serious security gap for the main companies’ systems. There is a serious risk of losing confidential and commercial information. Through a connection to a smart IoT device, hackers can find a vulnerability and crash the whole system, make a collapse, and cause significant harm, as well as reputation and monetary losses.

IoT Supply Chain Solutions Variety

With the technical evolution of devices and the spreading of mobile internet, companies want to develop custom supply chain solutions, mobile applications of their numerous enterprise systems, additional modules, and web apps integrate them into the already working ones and operate in all of them seamlessly.

Here are eminent effects of the IoT on the supply chain:

  • Transportation forecast and planning. Due to real-time tracking, the supply chain managers get more accurate information to make forecasts on the time and date of delivery to further planning, especially in multimodal transportations. It is very important in cases of urgent supplies with the fixed time of the final delivery date.
  • Location-tracking in real-time. Supply chain managers observe real-time data regarding the product location and transportation process. In case of the wrong product movement, as well as schedule deviation, the interests will be alerted to take urgent measures against thefts or accidents.
  • Transportation monitoring. IoT is used in transportations of goods that are sensitive to temperature, humidity, shaking, and other external influences. They control the contents of containers and refrigerators during transportation and give the confirmation to interested parties that all conditions were kept.
  • Storage monitoring. Goods like pharmaceuticals, food, chemicals, and many others must be stored in prescribed conditions. IoT devices monitor such conditions as temperature, humidity, light, and other environmental factors. If conditions change the devices send an alarm for the warehouse and distribution center staff. Prevents goods and materials from spoiling and ensures their quality.
  • Manipulations in the warehouse and distribution center. IoT is one of the vivid warehouse technology trends with proved efficiency for warehouse staff. It reduces the time spent on locating a delivery. Thanks to real-time location trackers, the workers will know the exact aisle for a specific parcel.
  • Goods administration upon arrival. Thanks to goods verification and state tracking through IoT devices, a supply chain manager can validate exactly when goods arrive at the destination. One can initiate other administrative tasks like supplier payments or onward shipping requests.


Many supply chain participants initiate the Internet of Things projects and succeed in reaching their business objectives. The technology becomes more and more intensively used in different areas of the supply chain, such as manufacturing, transportation, and distribution providing positive impacts on processes automation, time savings, and costs reduction, ensuring quality and much more. XB Software has significant experience in developing custom software for logistics and supply chain spheres as well as IoT technology.
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