How procurement teams can maximize the benefits from IoT?
A deep trend in procurement is the move toward automated processes and smart devices.
In this era of digital transformation, it is imperative that procurement teams adopt new technology to increase efficiency, improve customer service and reduce costs.
IoT is generally considered one of the next big things in supply chain management: procurement teams must be able to leverage IoT to improve their operational efficiency and get procurement decision making based on data.
Let's deep dive into IoT benefits for procurement with transport procurement, as an example of IoT application.
IoT provides new data that brings value
IoT technology consists in the use of sensors, actuators, and other technologies connected to the Internet in order to automatically collect data about the processes. This data is used to make decisions, evaluate processes, and improve them.
The connected devices can be put at the core of the processes or the flows of goods. The sensors can measure parameters previously unknown, in real-time. The sensors create physical data : examples of new data with IoT are temperature, humidity, pressure, air quality, and many other environmental parameters. IoT sensors can also track the movement of objects and their position in real-time. Connected objects can detect mishandling and unusual or fraudulent activities, too.
IoT solution is a new source of enriched data closely related to the processes. If relevantly selected, such data can bring high value to the procurement process in terms of piloting, evaluating, and improving the performances of operations.
In addition to that, the collection of data by smart devices is automated. The same goes for the transmission of the data through an appropriate network such as cellular network or LPWA network (e.g. Sigfox or Nb-IoT networks).
This means a more efficient data collection with a lower operational load for the procurement teams in comparison to traditional methods. It means more accurate data gathering which will help in reducing the cost of acquisition. Real-time data unlock faster procurement decision making based on data.
Finally, the data collected with IoT sensors can be automatically combined with other data sources. Then, they are analyzed with machine learning algorithms and artificial intelligence to provide insightful information that can be used to make better decisions and make predictions about future trends.
These procurement analytics can be used to continuously improve procurement processes.
Transport Procurement decision making can be based on data
Continuously collecting data with an IoT device helps to build more robust and more relevant historical data in an automated way. Combining IoT based data with data from other sources and proceeding with data analysis help to get actionable information that can be used in the frame of the shipment tendering processes.
For instance, data collected can help to better define the relevant requirements for better customer service and prescriber satisfaction: the request for proposal can be better specified.
Data can also be used to identify the relevant panel of suppliers based on past monitored performances on multiple levels and according to various criteria.
Moreover, it can be difficult to internally justify the use of new suppliers. In this case also, IoT procurement can be helpful.
The Safecube IoT monitoring services can be rapidly deployed due to its use of the 0G Sigfox network.
So, a monitoring campaign can be launched to use IoT to monitor the performance of the suppliers at the beginning of the cooperation. This will help to determine whether or not a new supplier has successfully delivered his services.
Potential ways of improvement can easily be identified too. In this case, IoT will help to better manage the risks associated with new suppliers.
IoT can be used to monitor the performance of the suppliers and the correct execution of the contracts.
In addition to monitoring the performances of new entrants, IoT monitoring can be used in routine to bring a new visibility over the services as they are executed by the providers.
Any deviation from the contracts can be detected. Objective data directly collected by the IoT monitoring solution rebalance the relationship between the principal and the hauler, in the case of shipping procurement: the discussion with the suppliers can be done on the basis of objective data.
This is an important step in improving the relationship with the suppliers as well as the efficiency and effectiveness of the transport service providers, in this case.
IoT also helps in identifying the issues that need immediate attention and help the procurement team to resolve them.
Another benefit from IoT-based data is the possibility to challenge the extra-costs such as demurrage or detention costs in the case of shipping: by providing objective and independent data for procurement analytics, IoT helps to check the validity of the extra costs that are invoiced by the suppliers and remove the costs that are not justified.
Furthermore, by clearly identifying the source of the justified extra-costs, the procurement teams can implement improvement plans to target these sources of extra costs and reduce them.
Another interesting benefit with the IoT, is the access to conditions data such as temperature, humidity, shocks and intrusions that provides a strong basis to clearly identify and prove non-compliance that may damage the products or lead to quality issues.
Furthermore, IoT based data helps to identify where and when the non-compliance occurred in the supply chain and who is responsible for it. This may facilitate discussion with suppliers as well as improvement of customer service level and customer satisfaction.
It can also have positive effects on insurance by reducing the associated costs thanks to the demonstration of better visibility and control over the transport operations.
Finally, the sharing of the IoT data between the procurement team and the suppliers can be a strong basis for a superior relationship based on transparency and trust which leads to higher performances and better customer service.
IoT data can improve customer service and prescriber satisfaction
We have seen that IoT data is an enabler for better performance of suppliers and optimization of the operations.
A good example is the improvement of shipping and logistics processes which has direct effects on the customer experience and customer service. Shortening delivery time, improving reliability of delivery date, and reducing quality issues thanks to IoT monitoring, better relationship with suppliers, and continuous data-based optimization lead to better customer service.
In addition, sharing information based on IoT data with the customer (e.g updated date of arrival) can also improve relationships with customers leading to the improvement of customer services. This is a good way to create customer loyalty and retention through enhanced customer experience and customer service.
Procurement teams can also leverage IoT data to help the prescribers to better define their need. IoT will help the procurement teams to satisfy prescribers needs, to better communicate with them, and to improve their relationship. IoT-based procurement analytics also save time and reduce the costs associated with answering to the prescriber's requests.
IoT data also increase the efficiency of exception management and incident management. Real-time IoT monitoring provides alerts as soon as incidents occur.
This can sometimes helps for identifying potential issues even before they occur and IoT based procurement analytics can be used to identify possible solutions in the fastest way.
Then IoT can be used to rapidly implement the solution and continuously monitor how the situation evolves while informing the various stakeholders with the proper level of information.
Definitely a must-do in terms of customer service and customer experience.
In such a case, IoT saves time and money in collecting and sharing information to improve customer service. IoT-based data help for the management of the communication with the stakeholders, for the decision-making process and for the implementation of the most relevant response.
IoT allows for more efficient and cost-effective risk management and customer service.
Sustainability is a growing stake for procurement teams: IoT can help.
With the environmental impact of operations becoming a major concern, procurement teams are increasingly looking at ways to reduce their carbon footprint.
Since one can optimize only what one can measure, IoT data can bring the necessary visibility over such processes as shipping.
Then, it becomes possible to track and measure the CO2 emissions related to products that are being shipped in a more reliable way. IoT also provides the data that can be used to justify CO2 emission evaluation and calculate the real impacts of emissions reduction initiative.
This helps to identify the best solutions for reducing emission levels and mitigating impacts on the environment.
Furthermore, IoT data and data analytics enable process optimization that can lead to huge emission reduction, most often without any additional cost.
For instance, optimizing the shipping solutions to avoid useless detours and stops has proven to reduce both emission and costs (either associated with transport mode or with in-transit inventory).
One last very interesting opportunity of emission reduction for shippers lies in the shift of transport modes.
Shifting from air freight to sea freight creates a huge reduction of both CO2 emission and shipping costs.
Lead times are a bit longer with sea freight compared to air freight and sea freight is generally considered less reliable than air freight.
However, we have already explained here, how IoT monitoring of sea freight can increase its reliability a lot as well as reduce sea freight lead times and eliminate most of the associated risks.
It is all the more the case when the use of IoT monitoring is combined with smart transport purchasing and negotiation of the relevant contractual clauses to prioritize critical shipments.
How to get IoT deployment that maximizes benefits for procurement teams?
We have seen many ways procurement teams can benefits from IoT in their daily missions. To get the maximum value from IoT, it is critical to get effective ioT deployments.
Most often the complexity of IoT deployments, the heterogeneity of available technologies and the associated costs with a lack of clear understanding of ROI are the main inhibitors of IoT adoption.
Of course, it is important to first identify the critical parts of your processes for which better visibility and real-time data would be a game-changer.
Focusing on the shipping part of operations as an example, it would consist in identifying the critical flows of goods that need to be closely monitored.
Then second key success factor is to work with a partner who is an expert in IoT solutions, IoT deployments, and supply chain activities: such partner will help to identify where IoT monitoring will have the maximum and the fastest ROI as well as how to run an effective IoT deployment plan with the type of IoT monitoring service relevant to best fulfill the specific needs of the use case.
A third key success factor is to be agile and fast in IoT deployment. An IoT monitoring solution can be selected or customized quickly by an expert partner who will launch it on a first selected perimeter, quickly assess the feedback and make the necessary adjustment to secure fast ROI and then quickly scale up the implementation where and when relevant.
To do this, the expertise of the partner in both IoT and supply chain is key indeed; but using the proper IoT technologies is also a critical point.
New IoT technology such as Sigfox-based solutions offers the perfect secure a successful IoT deployment.
As an example, the IoT solutions offered by Safecube are based on the Sigfox network: these solutions are frugal by design and centered on creating value for the supply chain.
Low power consumption of the IoT devices and the global Sigfox network open a wide range of applications that can be quickly covered with a light operational load.
Furthermore, the characteristics of this technology make interesting pay-per-use business models possible.
Finally, the frugal design of the IoT service offers a very competitive price which increases the speed of ROIs.
Both the pay-per-use business model with no initial investment and the very light implementation of such frugal IoT solutions allows to quickly deploy the IoT monitoring service using the Global Sigfox 0G network, quickly evaluate ROIs, iterate and scale up the solution in the blink of an eye.
In these conditions, an IoT monitoring service can be operated for spot processes monitoring during a limited period of time or it can be used in the routine.
The IoT data can be visualized on ready-to-use cloud-based platforms which provide real-time analysis of the performance and efficiency.
All levels of integration with existing data management systems used by procurement teams can also easily be done to provide seamless and automated procurement processes to get maximum value for the team, save time and costs in their daily tasks, improve their relationship with suppliers, prescribers, and customers while getting more efficient operational performances.