Wireless M2M in the Supply Chain Achieving High Performance through Dynamic, Real-Time Insight. by Praveen Shankar

Transcription

1 Wireless M2M in the Supply Chain Achieving High Performance through Dynamic, Real-Time Insight by Praveen Shankar

2 Supply Chain Challenges Companies today do not have the luxury of relying on the tightly-integrated but often rigid supply chains built in simpler and more stable times. We live in a world of rapid and relentless change, or permanent volatility, and supply chain management is among the business functions most affected. 1

3 The volatility facing supply chain managers in today s business environment manifests itself in the following key challenges. Demanding Customers Paradoxically, new technology and improved supply chain processes that have enabled companies to serve customers better have led to ever-higher customer expectations that can be challenging to fulfil. For example, customers used to speedy online order fulfilment now demand reduced lead times even as globalized supply chains sometimes tend to lengthen them. Cost Pressures Competitive pressure to keep costs in line requires a careful balancing of cost-to-serve and customer service, as well as reduction of inventory and obsolescence and efficient management of rising freight, energy, labor, IT, and raw materials prices. Need for Greater Visibility Demanding customers, cost pressures, and the need to deal with rapid change and unexpected events require managers to establish a high degree of visibility in their supply chains. This requires access to relevant, end-to-end supply chain information in real-time, enabling decisions to be made with confidence based upon analysis of the most current data. New Sources of Risk Increasingly complex operating models and the interdependence on a number of variables and with a number of partners now characterizing supply chain networks necessitate new risk management priorities. A number of natural as well as man-made disruptions in recent years have heightened concerns about risk-preparedness, resilience, and agility in supply chain networks. Public concern about environmental issues and sustainability also poses new risks for companies in the management of their supply chains. Globalization Today s globalized supply chains require companies to track and manage products manufactured in offshore locations, distributed through warehouses in several countries, and shipped to millions of customers throughout the world. More generally, permanent volatility means that supply chains must be redesigned for what Accenture calls Dynamic Operations, as suites of ultra-flexible, hyper-responsive capabilities. A key enabler of tomorrow s dynamic, real-time, smart supply chains will be wireless machine-tomachine (M2M) networks utilized in ways that unlock significant value in supply chains through real-time monitoring and coordination of activities. 2

4 The coming revolution in wireless M2M M2M technology allows the automated exchange of information between different pieces of equipment or with a control center, without human intervention. It helps to monitor, maintain, and control assets remotely and offers users enhanced performance and reduced cost through utilization of real-time information. Machines capable of communicating with one another are not new, of course. M2M technology has long been used in factory control systems and vehicle telematics. What has changed today, first of all, is that wireless network coverage is expanding worldwide, while emerging 4G mobile networks will provide the necessary bandwidth for everything to be connected creating a critical mass for mainstream use. Indeed, various studies have predicted that, by 2015, more than 300 million devices will be connected using mobile networks, and wireless connectivity for M2M will grow at a CAGR of 25 to 30 percent. A second factor is the emergence of increasingly powerful capabilities through technology innovation and new applications that harness M2M communications. Finally, low-cost communication services and falling hardware costs are making wireless M2M technology increasingly affordable. Machine/User with M2M Device Communication Network Information Location Driver Behavior Condition - Temp, Humidity, Pressure, etc. Stock Level Maintenance Status Energy Consumption Applications Telematics Reporting User's Information Technology Remote Management Planning/Scheduling 3

5 Building a dynamic, real-time supply chain with wireless M2M Wireless M2M allows companies to improve existing supply chain processes by enabling remote monitoring and sensing and real-time updates that can be aggregated, enriched, and communicated to provide meaningful information. These capabilities present companies with several potential opportunities for using M2M to meet today s supply chain challenges and unlock significant value in the process. Inventory-condition monitoring Tracking the condition of inventory e.g., humidity, temperature, pressure, light ensures the effectiveness of medicines, shelf life of products, and/or safety of items intended for human consumption. Inventory-level monitoring Monitoring of inventory levels enables automated replenishment by sharing inventory information with suppliers, reducing stockouts. Tagging of high-value assets and inventory Tracking and tagging of valuable assets and inventory such as computers, data storage devices, consumer electronics, and ATMs increases security and reduces theft. Fleet tracking Monitoring of fleet location arrivals or departures and flagging of exceptions facilitates end-to-end logistics visibility, enabling improved planning. Event-based monitoring of driver behavior Monitoring of speed, idle time, and hard braking of delivery vehicles reduces fuel and insurance costs and increases driver safety. Field force management Coordinating the field force through real-time monitoring of status and availability in a central field force dispatch center optimizes real-time routing based on traffic information, increasing field force efficiency. Preventive maintenance Proactive remote monitoring of equipment to detect problems before they result in failures and schedule preventive maintenance is an alternative to manual inspection that reduces equipment failures and costs for manual inspection. Smart warehouses/supply chain facilities Optimizing energy use in warehouses, production facilities, and other physical locations through remote metering and control capabilities reduces energy costs. The capabilities offered by wireless M2M technology, taken together, help address the whole range of major supply chain challenges that companies face. The challenges of cost pressure, the need for greater visibility, and new sources of risk are particularly amenable to solutions built around M2M. 4

6 Unlocking shareholder value with M2M In considering these potential opportunities for using M2M technology to respond to major supply chain challenges, it is also important to consider the ways in which dynamic, real-time supply chains can unlock shareholder value. Uncertainty and volatility in the business environment mean, among other things, that companies must protect their supply chains against downside risk and be able to move with speed and agility to take advantage of the upside of being ultra-flexible and hyper-responsive. While supply chain decision-making often focuses most intently on taking costs and risk out of the business, today s companies can also make the supply chain a revenue and profit enhancer by leveraging M2M. M2M technology can be a vital link between the supply chain and shareholder value, both enhancing net income and increasing the value of assets. As noted above, fleet tracking, event-based monitoring, field force management, inventory-condition monitoring, asset tagging, preventive maintenance, and smart warehouses/supply chain facilities can all help reduce operations costs, while inventory-level monitoring can also lead to higher sales revenues. Inventory-level monitoring and asset tagging can be used to increase working capital, while preventive maintenance and smart warehouses/supply chain facilities can help get more productivity out of physical capital. Enhanced Shareholder Value M2M-Enabled Supply Chain Key Supply Chain Challenges Net Income Sales Revenue Cost Fleet Tracking Event-Based Monitoring Field Force Management Demanding Customers Meeting ever-higher customer expectations fueled by new technology and past improvements in supply chain processes Cost Pressures Balancing cost-to-serve and customer service; reducing inventory and obsolescence; efficient management of rising freight, energy, labor, IT, raw materials prices Shareholder Value Assets Working Capital Inventory-Level Monitoring Tagging of High-Value Assets & Inventory Inventory-Condition Monitoring Need for Greater Visibility Access to real-time, relevant information about end-to-end supply chain, enabling decisions to be made with confidence based upon analysis of most current data New Sources of Risk Monitoring and managing disruptions in complex, interdependent supply chain networks; meeting public concerns about environmental issues and sustainability Physical Capital Preventive Maintenance Smart Warehouses/Supply Chain Facilities Globalization Tracking and managing products manufactured in offshore locations, distributed through warehouses in several countries, and shipped to millions of customers throughout the world 5

7 The steps to strategic differentiation The links between M2M supply chain technology and shareholder value show that, with intelligent implementation, M2M can be used to turn the supply chain into a source of strategic differentiation. To position their companies to take advantage of this opportunity, supply chain managers should take the following steps. Understand the unique challenges and business requirements for your supply chain. Because M2M supply chain technology provides a variety of applications rather than a single, prefabricated solution, it is imperative to begin with an understanding of your relevant business needs so that you can design a solution that fits these needs. Develop an M2M strategy. The goal here is to devise a strategy whereby the increased visibility, real-time data, and analytics made possible by M2M technology can be used to move from insight to action. A global roadmap and detailed business case should be developed to plot how the enhanced data and analytics from M2M can be optimized to support flexible innovation, reduced costs, and improved service to customers. Refine the supply chain design to help businesses achieve the capabilities, flexibility, and speed to deliver an M2M solution. This requires attention to every element of the supply chain design, including supply chain networks and asset configuration, organizational structure, business processes, IT architecture, performance management, collaboration and sharing of data with partners, and risk management. Select the right M2M solution and partners. A comprehensive M2M-enabled solution requires not only the choice of the right applications but also partnerships across all the elements of the M2M value chain device, network, and application to enable an end-to-end service delivery. Develop a detailed implementation plan. Such a plan must support integration with current supply chain systems and business processes. It should also implement the solution in a phased approach, starting with a pilot to demonstrate quick wins and gain valuable experience before committing to a full-fledged rollout. The key to achieving benefits from M2M is not only getting the real-time data from a device but getting the intelligence out of the data and using it to improve the supply chain performance. Supply chain managers have come to a crossroads with the coming revolution in M2M. The technology and applications on the immediate horizon will create opportunities for real breakthroughs in making supply chains more dynamic and flexible. The time to seize these opportunities is now. 6

8 About the Author Praveen Shankar is a Senior Manager in Accenture s Operations Management Consulting practice. He has 12 years supply chain experience in global supply chain transformation, strategy and planning. He has worked across the Communications, High Tech, Life Sciences and Manufacturing Industries. More recently Praveen has led a multi-year supply chain transformation program for a large telecom operator with operating companies across the globe. Based in London, he can be reached at [email protected]. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, Its home page is Copyright 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture /