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How the Internet of Things (IoT) is Revolutionizing Inventory Management

The greater the speed, scale and accuracy of data collaboratively shared across supply chains, the stronger supplier networks become. The world’s best-performing supply chains, as defined by Gartner earlier this year in their annual Supply Chain 25 List, are all using digital transformation technologies including the Internet of Things (IoT) and predictive analytics in full production environments. IoT is revolutionizing every aspect of these world-class supply chains.

IoT Quick Facts

  • Business-to-business (B2B) applications of the Internet of Things will generate $300B in revenues by 2020, according to a recent Bain Insights Brief.   
  • Manufacturing, Consulting, Business Services and Distribution & Logistics are the top four industries leading IoT adoption today, and will accelerate through 2020, according to a recent study by Dresner Advisory Services.
  • IoT is generating four forms of financial value in manufacturing today, with inventory management & optimization emerging as a leading profit contributor, according to a recent survey of enterprises by Gartner.

How IoT Enables Global Supply Chains To Excel at Inventory Management

What are the lessons learned from these world-class supply chains when it comes to inventory management? First, these high-performance supply chains have a culture that’s rich in analytics, insight, contextual intelligence and accountability for results. They each have built a culture that’s strengthened daily with customer insights gained from IoT data that comes from their distribution networks.

Second, each of these supply chains can quickly aggregate massive amounts of data, finding new insights to grow profitable new businesses and optimize existing supply chains. Third, the level of collaboration these firms attain across their supplier and customer networks is turning data itself into a currency, complete with a monetary value, all based on IoT-based data.

Fourth, IoT data is the foundation for improving track-and-traceability performance and product quality. IoT systems and supporting analytics are the foundations of the supply chain, inventory management, supplier collaboration and supplier quality management and compliance improvements that propel the world-class supply chains in Gartner’s Supply Chain 25 List to global leadership and prominence. The following are examples and leading indicators of how the Internet of Things is revolutionizing Inventory Management:

Business-to-business (B2B) applications of IoT will generate $300B in revenues by 2020, according to a recent Bain Insights Brief. Industrial applications of IoT will be a major catalyst for overall market growth in B2B through 2020. Supply Chain Management (SCM), Inventory Management and Logistics are core areas of Industrial Internet of Things (IIoT) growth. The following graphic compares IoT and analytics revenue growth from 2015 to 2020:

  • Bain IoT ForecastIoT’s potential contributions to Inventory Management, Supply Chain Management and Logistics could reach between $560B to $850B per year by 2025.  The McKinsey Global Institute’s study, The Internet of Things: Mapping The Value Beyond the Hype, provides insights into how IoT technologies and systems will enable greater revenue growth across core enterprise processes and strategy areas by 2020. Automating logistics routing with IoT technologies has the potential to deliver between $253B and $460B alone. The following graphic from The McKinsey Global Institute study provides a detailed breakdown of supply chain, logistics and inventory management-related economic impacts:
  • McKinsey Global Impact SCM Inventory ManagementManufacturing, Consulting, Business Services and Distribution & Logistics are the top four industries leading IoT adoption today, and will accelerate through 2020. A recent study by Dresner Advisory Services found that IoT’s greatest potential value is in simplifying the most complex manufacturing processes, including distribution, logistics and warehouse management. IoT early adopters are most often defining goals with clear revenue and competitive advantages to drive initiatives. Manufacturing, Consulting, Business Services and Distribution/Logistics represent challenging, competitive industries where revenue growth is often tough to achieve. IoT initiatives that deliver revenue and competitive strength are the quickest and most likely to get funding and support. The following graphic from Dresner Advisory Services provides insights into IoT Importance by Industry from their study, 2017 Internet of Things (IoT) Intelligence Market Study, summarized here on Forbes:
  • IoT Importance By FunctionIntegrating IoT platforms with location intelligence, streaming data analysis and cognitive BI deliver the greatest business benefits in a variety of functions, including supply chain and warehouse management, according to a recent Dresner Advisory Services study. Consistent with previous studies, both the broader respondent base and IoT early adopters place a high priority on reporting and dashboards that provide greater supply chain visibility and control. The Dresner study also found that IoT early adopters also see the greater importance of visualization and end-user self-service, especially in supply chain and warehouse management. IoT is revolutionizing this aspect of warehouse management by improving the quality of data-driven decision making. The following graphic provides an overview of IoT early adopters’ preference for IoT and its related technologies:

  • Tech Importance Graphic74% of IoT early adopters say location intelligence is critical or very important. Conversely, only 26% of the overall sample from the Dresner Advisory Services report ranks location intelligence at the same level of importance. One of the most promising use cases for IoT-based location intelligence is its potential to streamline traceability and inventory management compliance workflows in highly regulated manufacturing industries. In 2018, expect to see ERP and Inventory Management software vendors launch new applications that capitalize on IoT location intelligence to streamline traceability and supply chain compliance on a global scale.
  • IoT Importance of Location IntelligenceManufacturing and Supply Chain Management, including Inventory Management and Business Intelligence Competency Centers (BICC) are among the most powerful catalysts of IoT adoption in the enterprise. The greater the level of activity across the 12 functional drivers of BI adoption defined in the graphic below, the greater the potential for IoT to deliver differentiated value based on unique needs by area. Supply Chain Management, including Inventory Management, is among the most active early adopter segments of IoT adoption, followed by Marketing, Sales and Strategic Planning. In the context of strategic planning, these twelve areas of adoption are synchronized to common data capture, aggregation, reporting and performance improvement goals. Supply chains are the lifeblood of any business, and serve to unify each of the twelve areas into a single, cohesive strategy.
  • IoT Drives 12 Functional AreasSmart inventory management using IoT systems is the catalyst driving real-time visibility across inventory, warehouse, production and distribution centers, reducing inventory costs and improving predictive maintenance. Strengthening legacy inventory management systems with the quality and depth of data that IoT sensors and systems can provide contributes to lower inventory carrying costs and reduced inventory management errors. IoT data integrated into the ERP system contributes to the overall system of record for any company, ensuring that the best possible data is available for decisions daily. The following graphic illustrates how IoT sensors and systems can improve inventory management at the shop floor level:

DHL Workflow

Source: DHL, The Internet of Things In Logistics

  • IoT is generating four forms of financial value in manufacturing today, with inventory management & optimization emerging as a leading profit contributor. Additional sources of financial value generated by IoT in manufacturing include greater operating efficiencies, Supply Chain Management (SCM) and predictive maintenance. Of the early IoT adopters, 88% see a competitive advantage from using sensors to capture additional data they hadn’t had access to before for streamlining supply chain and inventory management. CIOs and the enterprise IT staffs they lead are most often relying on reduced operating and support costs as the business case to finance IoT pilots aimed at improving inventory management. 37% say having additional IoT data on inventory management performance is the primary factor driving their business cases to finance pilots and full-scale production-level adoption. These findings are taken from Gartner’s Survey Analysis: Top Digital SCM Take-Aways From Gartner’s 10th Annual SCM Technology User Wants and Needs Study.


There are latent opportunities across the value chains of all companies, especially manufacturers, to improve their overall operations using IoT real-time data as a catalyst for improvement. Of the many areas where IoT can contribute and is beginning to be integrated into daily production, the most valuable is Inventory Management and Supply Chain Management. Inventory Managers’ greatest challenges occur when there isn’t enough data available to make an informed decision. There are also the continual challenges of tracking assets that haven’t been entered into tracking systems correctly and are often lost, then written off. IoT systems’ strengths include bringing greater tracking, traceability, quality management, compliance and real-time data on inventory positions. All of these factors contribute to a roadmap of value that every company can chart their course with by using IoT systems and technologies.

Louis ColumbusHow the Internet of Things (IoT) is Revolutionizing Inventory Management

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