Impact of IoT on your S&OP process

Internet of Things was poised to become a pervasive technology but hasn’t lived up to its expectations yet. Beyond its highly popular use cases of smart homes, intelligent transportation, and smart cities, there has not been the kind of acceptance in the Enterprise IoT space as was predicted a few years ago. While in 2015, Business Insider predicted 9.1 billion devices in use by 2019, Gartner’s estimate last year seem more conservative at  7.5 billion devices by end of 2020. Does this mean that the IoT juggernaut has slowed down? In my opinion, IoT is going to enter the “Trough of Disillusionment” phase of the Gartner Hype Cycle. A quick reference to the Google trends chart on the keyword "Internet of Things" show us that the interest in IoT is stabilizing and it is beginning to enter that phase.

We can brace ourselves for some rough road ahead, but IoT will keep chugging along and even if it sees some failures, it will fail forward. Use cases will keep finding us and we will continue to see the proliferation of IoT in every aspect of business in the near future.

What I want to explore today is how the advent of IoT is going to impact our monthly S&OP processes. Even companies with rudimentary S&OP processes will now need to sit up and take notice of the IoT initiatives that their companies plan to undertake. Let us take a quick look at some of the ways that this might happen.

• If you are a manufacturer, engaging with an IoT partner in the retail space will help improve your market share. Transactions made through IoT devices dramatically reduces friction in the buying process of the customer. Amazon Dash button comes to mind here.
• Logistics will be one of the major areas where IoT can make significant inroads. It will help in optimizing the fleet in terms of fuel, vehicle downtime, labor etc. You can immediately visualize connected trucks providing higher visibility to your Yard logistics thereby increasing efficiency and reducing waste
• Collect data for Preventive maintenance – this involves proven technology and multiple business cases with positive RoI. My colleagues Matthias Hollanders and Vlad Shapiro have written an excellent whitepaper which I would encourage you to read. You can find the link here.
• Access to real-time information can help suppliers track inventory and ensure fulfillment. It can also help provide increased spend visibility in real time and take trust and transparency with suppliers to a higher level.

One thing that we see as a common feature of all these scenarios is that they all improve cross-functionality, an important goal of S&OP. The increased visibility that you gain from IoT devices in your supply network enables you to truly orchestrate your supply chain. Entering a product into a button program requires you to prepare for direct and indirect demand drivers across multiple channels. Gartner Analyst Andrew Downward puts it more eloquently here, “Supply chain leaders need to be aware of what promotional activity is planned in connection with IoT button launches and account for it in demand and supply plans. This can be handled within standard S&OP discussions — the same as with the launch of products into any new channel — and used to inform planning and inventory management decisions.”

IoT investments in the logistics side of the business will provide enhanced visibility into your transportation. This will lead to lower variability in transportation lead time. These insights can encourage discussions about inventory drivers in S&OP meetings and take decisions on lower buffer stock levels that arise out reduced lead time variability. IoT investments in Predictive maintenance will give rise to early warning systems regarding planned downtime. S&OP managers can get these alerts and immediately re-plan demand in the short term, thus making their supply chains agile.

In the whitepaper that I referred to earlier, there are two aspects to IoT technology:

Source: https://westernacher-consulting.com/white-paper-industrial-internet-things/

Integrating the “Analyze & Act” into your S&OP process early on will help streamline the two process flows as their end goals intersect. It will be beneficial if the S&OP manager is considered a stakeholder in your IoT initiatives is classified under “Informed” category of your IoT project’s RACI matrix. The devices/sensors that you use in IoT are dumb devices. Connectivity isn’t going to make it smart either. It is the people who make it smart. And when those people have the ability and mandate to affect change across your supply chain over a long period of time, like the ones doing S&OP, then you will have truly moved to a different level in making your supply chain a competitive advantage.