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RFID, Sensor Technologies Can Build Smarter Supply Chains, IBM Says

A new study of 400 supply chain executives around the world indicates supply chain visibility is still cloudy, but IBM believes RFID, sensors, GPS and other real-time technologies can help companies to manage risks, improve customer relations and contain costs.
By Beth Bacheldor
Mar 04, 2009Supply chain leaders at companies around the world share similar challenges: They want to improve supply chain visibility, manage risks, know and serve customers better, contain costs and succeed at globalization, according to a new IBM study involving nearly 400 executives. But the report also reveals that few companies have adopted solutions that can provide them with a complete and real-time view of their supply chain operations—a finding that surprised the IBM executives who worked on it.

"The fact that, over and over again, we heard about the lack of visibility [was surprising], because a lot of people say, 'Oh my gosh, that issue is 150 years old,'" says Karen Butner, global lead of the IBM Institute for Business Value, who worked on IBM's inaugural chief supply chain officer study, entitled "The Smarter Supply Chain of the Future." The 72-page report offers a glimpse into the minds and agendas of 393 supply chain executives at companies located in 25 countries and serving 29 separate industries, including retail, industrial products, food and beverage, pharmaceuticals, telecommunications, electronics and government. The results, Butner says, are based on in-depth interviews conducted with these executives that typically lasted 90 minutes.

Karen Butner
When asked whether their companies have real-time visibility of their supply chains—both within their own operations and beyond, to include partners' operations—only 15 percent of the executives surveyed answered in the affirmative. Seventy-five percent said their firms have "somewhat" real-time visibility, Butner says, while the remaining 10 percent indicated having none whatsoever. What's more, 70 percent of those questioned reported that the real-time visibility challenge impacts their supply chains to a significant or very significant extent.

According to IBM, the technologies best poised to improve supply chain visibility are RFID, sensors and GPS that can collect and deliver real-time data regarding every facet of an interconnected supply chain, with analytics, business intelligence and modeling layered on top to turn that information into intelligence that can be acted on instantly and decisively—and, in some cases, automatically.

"The baseline for smarter supply chains really is about RFID, sensors and actuators," Butner states. Companies not only require the real-time gathering of information that RFID and sensors can provide, they also need that data collection to span the supply chain, she says—from the moment raw materials leave a supplier to the instant a finished good is sold in a retail store, and beyond. That requires communication and collaboration within and across businesses, as well as the integration of systems within and across companies so those systems can share the collected data.

"Of course, we need to take it up another step," Butner says. "The last thing everyone needs is more information that no one can make sense of." The data not only needs to be fed into transactional ERP systems, she notes, but it also must be analyzed and modeled, so companies can proactively react to—and predict—events.

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