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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.
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.
The volatility facing supply chain managers in today’s business environment manifests itself in the following key challenges.
Demanding CustomersParadoxically, 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 fulfill.
Cost PressuresCompetitive 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 VisibilityDemanding 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 RiskIncreasingly 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.
GlobalizationToday’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.
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.
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. Supply chain managers should take the following steps:
Understand the unique challenges and business requirements for your supply chain—begin with an understanding of your relevant business needs so that you can design a solution that fits these needs.
Develop an M2M strategy—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.
Refine the supply chain design to help businesses achieve the capabilities, flexibility, and speed to deliver an M2M solution—attention to every element of the supply chain design.
Select the right M2M solution and partners—the correct choice of applications and 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—must support integration with current supply chain systems and business processes. It should also implement the solution in a phased approach.
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.
Praveen Shankar is a Senior Manager in Accenture’s Operations Management Consulting practice. Mr. Shankar has 12 years supply chain experience in global supply chain transformation, strategy and planning.
May 16, 2013
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