Markus SontheimerMember of the Board of ManagementSchenker AG CIO/CDO

IoT tracking and processing options have multiplied over the years and have already reached billions of connected devices. Let’s look at the impact of IoT in logistics with its tracking options, challenges, requirements, business models and opportunities for improving end-to-end-visibility.

The internet of things has taken the markets by storm. Figures show that there will be up to 50 billion connected devices in 2020On top of that spending on digital transformation is expected to reach $1.18 trillion in 2019. Even though the investments are huge, they say nothing about the success of IoT bringing end2end-visibility. Furthermore, the successful implementation of IoT depends on many more factors. Among them are the right solutions for hardware, software, specialized customer services, staff, company collaborations and support for government and business models. The following article gives a glimpse on what IoT has done so far, what IoT is capable of, how it can be applied businesswise and what challenges lie ahead on the way to the great goal: end-to-end visibility along the supply chain.

IoT Technology and its impact on Supply Chain visibility

In the past, the visibility of logistics processes relied on vertical checkpoints between major steps within the supply chain managed by different parties (terminals, importers, exporters). The milestone approach has resulted in many in-transit processes existing within the major steps that were simply off the record. IoT carries the potential of an interactive network between people, data and processes that provides more complete visibility throughout the entire supply chain. IoT accomplishes this through its intelligent devices and sensors that collect data and deliver them to the information architecture of an organization. As more containers, trucks and cargo become equipped with IoT sensors and devices an uninterrupted location-based tracking becomes possible and real time visibility from shipper to the recipient can be monitored end-to-end and eliminate many blind spots.

With the services that are developed at DB Schenker we intend to leave an IoT footprint that is covering the measurement and detection of several data points while in transit:

  • Online location monitoring
  • Online-monitoring of temperature, humidity, acceleration forces, door alerts, movements in the interior, light, vibrations and detection of unauthorized access
  • Geofence maintenance
  • Proactive alerting system based on aforementioned parameters

This enables our customers to conduct in depth operational analysis and create individual reports and statistics that will help them to make more data-based decisions and more efficiently managed the movement of their cargo.

The data collection, exchange and use are complex processes with many players along the way from the transportation and enterprise side. In the end it is very important that we turn the complexity into a customer management application with an excellent customer experience. (Dieter Sellner, Program Manager, Global Digital Solutions, DB Schenker)

After we have reduced complexity and provided actionable information through an excellent customer experience, we will be able to gain a broad acceptance and a high usage rate of IoT solutions. 

Source: Improving Logistics & TransportationPerformance with Big Data, Oracle, 2015

How IoT influences organizations and their strategy

If you are also convinced about IoT and you want to work with it in your company one thing is for sure: the whole organization will experience changes. In fact, your company´s strategy must revolve around IoT sooner or later on all levels. Daniel Elizalde, lecturer at Stanford University, emphasizes that the product managers of IoT devices play a key role in the process of IoT implementation. It is because IoT devices require a whole new set of skills, in depth technical understanding and processual adaptions. It is important to know that you do not need new staff in the field of engineers, but your current and future product managers need to know IoT, its processes and devices on all levels.

IoT requires new and unknown ways to combine technologies, collect data and leverage them. Besides new combination and application patterns a special technology stack of IoT devices must be implemented in the organization. (Christian Bockelt, SVP Global Digital Solutions DB Schenker) 

From my perspective there is no way around a framework that serves to explain to the complete team, be it C-level, leadership or project teams, what needs to be known about the complexity of an IoT product and at which level the company is operating at currently. 

A practical webinar regarding the technology stack of IoT is available here.

A selection of Business Models with IoT focus

When looking at all these massive IoT spending numbers one thing needs to be spoken about honestly: ROI. Companies are busy building IoT solutions and sometimes forget that a business plan should exist ahead of any developments, to make the whole concept and design profitable and sustainable. Among others there are a couple of business models that help to create, capture and deliver value with IoT very swiftly:

1) A Data Monetizing Model / offering a service

2.5 quintillion bytes of data are generated around the world on a single day . This number is hard to grasp by the human mind, but as logistics has become a “24/7/365 business” with an increasing number of data touchpoints it is clearly imaginable that data generated by our sector will dramatically grow and become more valuable. Data is the most important asset created during the IoT processes and it represents a significant opportunity for a data driven business model.

The multiple touchpoints and data routes enable network and synergy effects. However, the value of data will remain the key factor determining relevance for potential clients.(Florian Kemmerling, Head of IoT, DB Schenker) 

The principle of truly listening to what your customers have to say and what they demand will help you to select what data to aggregate and leverage to produce valuable and actionable information. Some examples of insightful information that can be derived from IoT data includes…

  • IoT devices can be attached to containers, trucks, cars, trains and cargo of all sorts to produce data that can be used to optimize and define the best, fastest, and safest transport routes.
  • Alerts can be generated when break downs or corrosion occurs and provide the opportunity for immediate resolution of the problem.
  • Data collected from the IoT devices can be used to track usage and establish preventative maintenance options for the devices to reduce replacement costs.
  • Insuring parties can be continually informed about the condition of cargo they have insured.

2)     Asset Sharing options and individual rates

IoT promises big benefits, but also comes with high investments – mainly because of the underlying costs of the platforms and data infrastructure required to have a large reach and impact. Also, the ebb and flow of product demand and the challenge of reverse logistics for the IoT devices can make it difficult ensure your IoT investment is running at full capacity always. This presents an opportunity for an IoT business model that monetizes excess IoT device capacity or more ambitiously a model that monetizes excess IoT device and excess container and truck capacity. This could be an asset-based model where capacity is leased to companies that need an IoT capability or it could be a platform model that enables sharing of IoT devices, containers and trucks between interested parties.

Additionally, there could be an opportunity to provide an IoT offering with varying levels of capability based on the needs of the customer.  In this model, customers could customize the IoT capabilities according to the requirements of the cargo. This might be based on a several influences including the cost of the devices, carriers, insurance and other services required for the transport. This model underlines the importance of customer centricity and meeting the demands of customers through flexibility and convenience.

In light of these examples, it became obvious that sometimes there are no tailor-made solutions available for customers or the investing companies.

What are the potential IoT advantages and challenges for the future?

As far as IoT has pushed the development in the logistics industry, enhancing supply chain visibility, there remains advantages and challenges. To sum it all up, here is a list of the main IoT advantages followed by the challenges for the logistics sector.

IoT Advantages:

  • With IoT data your business can act proactively, respond faster and more precisely according to the information and insights gained from the whole supply chain.
  • It can identify where danger zones exist, inefficiencies occur and at which part of the supply chain benchmarks are not met against the expected level of performance.
  • IoT data exchange networks can eliminate the half-life period of data – increasing the value and its usability, preventing that data is eroded.
  • An IoT infrastructure can be perfectly paired with Blockchain technology to safeguard contractual and legal needs by providing tamper proof data.
  • Through the extensive coverage IoT helps to move away from centralized and isolated data silos and main bottlenecks, preventing monopolies and supporting data neutrality.
  • A smart IoT infrastructure helps to give a legal foundation for disputes between the contractors and companies.

IoT Challenges:

  • IoT should be completely interconnected with Blockchain technology to ensure security of the data – this is not the case now.
  • Only open, standardized and safe IT- systems can prevent IoT silos (“shadow IoT” – data that is not interchangeable, accessible and not as scalable as it could be)
  • IoT investments could run dry if use cases are not more publicly promoted.
  • Seamless connectivity remains an issue. When collecting data there must be as few wireless downtimes as possible. Therefore, the wireless infrastructure (including the mobile network) must be carefully selected and monitored.

Having listed the advantages and challenges above there is left to say that of course the readiness in companies for IoT is not yet at 100 percent. But as unpredictable as the future development of IoT and its possible impact on the companies (skill gap) might be – I am convinced that these risks are outweighed by the many advantages and new business models. A completely transparent supply chain, happy customers and greater efficiency are the best tradeoff for these insecurities.