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85 Using smart sensors to drive supply chain innovation A series exploring Industry 4.0 technologies and their potential impact for enabling digital supply networks in manufacturing
Using smart sensors to drive supply chain innovation Contents What are smart sensors? 04 Benefits of smart sensors in the supply chain 06 Criteria for evaluation and adoption 08 Key levers for smart sensors in your supply chain 10 Key Deloitte contacts for smart sensors and supply chain management 11 02
Using smart sensors to drive supply chain innovation
Do you need smart sensors in your supply chain?
Smart sensors transform the physical world into digital insights that are used to create new value
across the supply chain. By arming managers with real-time information about their inventory,
machinery, and purchased materials, smart sensors create visibility across the supply chain and fuel
analytics that can be used to understand and anticipate demand, optimize sourcing, and drive high-
value manufacturing decisions.
Of interest because: The ability to provide relevant, timely data regarding both products
and conditions can be used to generate a more holistic, accurate perception of the operating
environment. Smart sensors create the “digital last mile” of a fully connected, always-on supply
chain—a digital supply network—that brings the company end-to-end visibility into its suppliers,
distributors, and customers.
Could improve your supply chain by: increasing operational efficiency, lowering production
costs, and providing critical insights into customer behavior. Smart sensors introduce automated
monitoring processes, such as inventory counts or predictive maintenance, improving both labor
productivity and performance accuracy. By embedding smart sensors into products, companies
generate awareness of usage trends that can be used to inform future product development and
improve after-sale service offerings.
Why not? Investment in supporting technology, limited internal functional expertise, or an
unwillingness to redesign processes may deter some companies from adopting smart sensors
in their supply chain. A number of enabling technologies—in-house data aggregation platforms,
plant bandwidth, data encryption, and several others—are required to create value through a
smart sensor strategy. Having the technical skill sets for interoperability is also a prerequisite to
smart sensor integration. Moreover, companies need to possess the willingness and flexibility to
implement or replace processes in their supply network to unlock the benefits of smart sensors.
Deloitte recommends: With the introduction of reliable IoT platforms and advancements in
technologies that have both accelerated performance and reduced costs, traditional barriers
to smart sensor adoption are eroding. Companies should consider investing in smart sensors
to increase value capture through their supply chains after carefully prioritizing their business
objectives and defining their use cases.
03Using smart sensors to drive supply chain innovation
What are smart sensors?
Overview Ecosystem Recent developments and outlook
A sensor is a device that provides feedback A differentiator of the smart sensor is The global smart sensor market is
on a physical process or substance in a its role in the broader information and growing at a 19 percent annual rate and
predictable, consistent, and measurable analytics ecosystem. The accelerated is expected to reach $60B by 2022.4
way. Smart sensors are different from exchange of physical-turned-digital Technological advances have miniaturized
sensors in that smart sensors are information can exponentially increase the devices, improved performance
advanced platforms with onboard the range of opportunities for increased and energy efficiency, and reduced
technologies such as microprocessors, performance, higher capacity, greater production costs.
storage, diagnostics, and connectivity reliability, and advanced innovation. Five
tools that transform traditional feedback primary interface methods—digital, logic, Smart sensor computing capabilities
signals into true digital insights.1 These voltage, current, frequency, and phase— have strengthened substantially, thereby
smart sensors can provide the timely and convert observed inputs into digital form. enabling data processing and analysis at
valuable data underpinnings to power Transmission standards such as Wi-Fi, or near the source (“edge computing”)
analytical insights that can in turn drive Bluetooth, NFC, RFID, and others are then and reducing the amount of data that
improvements in cost, performance, or used to communicate this data to other moves between the device and platform.
customer experience. sensors, controller devices, centralized Additionally, the introduction of micro-
management platforms, or distributed electro-mechanical systems (MEMS)
computing platforms for data aggregation technology has allowed for more compact,
and analysis (see figure 1). 2,3 higher functioning smart sensors by
effectively incorporating microelectronic
functions in minimal space.5
Figure 1: The smart sensor ecosystem8
Wi-Fi
Local area
network (LAN)
Bluetooth
Near field
communication
(NFC) External/central
database
Radio frequency
identification
(RFID)
Zigbee
Cloud
Physical Smart Transmission Secure gateway/ Centralized
environment sensors standards controller device platforms
04Using smart sensors to drive supply chain innovation
Other innovations—such as micro-sensor Extracting insights from sensor-created Smart sensors in the supply chain
implants and biodegradable sensors— data is getting easier as analytics tools Integrating smart sensors throughout the
have made smart sensors more dynamic continue to improve. Handling and storing supply chain can decrease operating costs,
and improved their business cases.6 large, complex data sets is becoming more increase asset efficiency, improve demand
New wireless technologies are offering manageable through platforms such as planning, and provide critical insight
connectivity solutions that are more Apache Hadoop. Tools such as complex into customer behavior. As centralized
scalable and tailored than traditional event processing (CEP) enable processing platforms and communication networks
wireless networks, which are designed and analysis of data on a real-time or continue to evolve for the purposes of IoT
for higher bandwidth, larger volume data a near-real-time basis, driving timely devices, companies should consider the
devices. Low-power wide area networks decision making and action. Algorithms variety of smart sensors available (see
(LPWAN), for example, have reduced cost, continue to advance, expanding the figure 2) and determine how to better
power consumption, and range issues for capability to predict and prescribe courses sensor-enable their supply chains from
smart sensor usage.7 of action. end to end.
Figure 2: Types of smart sensors2,3
Type Definition Example
Acoustic Recognize audio vibration or frequency to Piezo microphones, electret microphones, condenser
determine activity, location, intensity microphones
Chemical Measure fluid composition and concentration of MEMS technology, fuel cell
biological/chemical compounds
Electrical Identify and examine changes or disruptions Voltage, current, power
in electrical or magnetic signals based upon
environmental inputs or conditions
Environmental Monitor and assess deviations in physical state, Temperature, humidity, color, moisture, light, pressure,
conditions, or surroundings liquid flow, air flow, heat, surface temperature
Image Convert light waves into electrical signals to Infrared, ultraviolet (UV), visible spectrum camera
constitute a digital, optical form for visible
condition monitoring
Motion and force Measure static and dynamic objects to determine Proximity (ultrasonic/acoustic, infrared), strain/weight,
the amount, type, and rate of change to physical vibration, accelerometers, shock accelerometers,
properties gyroscopic, position, motion, magnetic field, rotational
Touch Detect body capacitance during physical contact Capacitive touch, resistive touch
between objects
05Using smart sensors to drive supply chain innovation
Benefits of smart sensors
in the supply chain
Value drivers for smart sensors Operational efficiencies Secondary potential benefits
Smart sensors increase the level of Smart sensors introduce operational
•• New revenue channels through data
automated collection and processing of data efficiencies that can help reduce labor,
brokering of connected products
and broaden management visibility across logistics, and quality control costs.
the supply chain to help companies reduce Processes like inventory counting and •• Better measure of the true cost of
operating costs, improve asset efficiency, materials sorting have become more operations as indirect costs become
and generate incremental revenue. automated with the assistance of smart more quantifiable
sensors, thus helping to improve the •• Dynamic discounting from real-time
productivity of human labor. inventory data and competitive
Primary potential benefits pricing information
Sensor-enabled labor monitoring also
helps reduce idle workforce by optimizing
assignments. Likewise, autonomous
driving enabling sensors can help reduce
transportation costs through dynamic
Increase operational
routing and improved safety. Smart
efficiency through
sensors can also identify root errors
automation
in manufacturing and drive process
enhancements, thereby maximizing
production quality.9
Reduce repair costs and
maintenance downtime Assembly lines that use wearables during
through better monitoring quality inspection are able to send their
photos to design engineers in real time
through smart sensor technology. This
Perform real-time closes the physical-digital loop in minutes—
inventory tracking with not hours or days—and allows engineers
improved demand to identify the root cause of manufacturing
planning issues at the time of assembly.10
Inform product Asset management
development and Companies that have integrated smart
strengthen product life sensors in their manufacturing operations
cycle management have achieved competitive advantage
through improved asset management
and predictive maintenance of industrial
machinery. At Harley-Davidson’s production
Enhance customer service
facility, for example, every asset is
by connecting more
connected, allowing management to track
closely to the customer
each step of production in real time in a
performance management system and
monitor critical equipment to proactively
address potential interruptions.11
06Using smart sensors to drive supply chain innovation
Real-time inventory tracking Product design Case study: Ericsson’s connected
RFID sensors, which allow for touch-free Connected products also offer insights vessel16
identification and tracking of items, into customer behaviors and preferences,
have transformed traditional inventory allowing for more responsive product Accounting for 80 percent of global
management. RFID enables a more development. Their data can seamlessly trade, maritime shipping represents a
automated approach that can offer feed into product life cycle management critical component of international
increased accuracy and real-time inventory systems to stimulate innovation and supply chain networks. The isolated
tracking at a very low cost.12 accelerate speed to market on product nature of cargo ships, however,
updates.14 Product developers are then able presents supply chain fragmentation
These improvements allow for more to optimize R&D spend and minimize risk of challenges for the industry.
traceability of inventory, potentially reducing overengineering.
the risk of inventory shrinkage or loss. With the help of smart sensors and
Customer service satellite communication, one
More reliable and current information By bringing the company closer to its communication company, Ericsson,
can also strengthen demand-planning consumers, smart sensors can help forge has developed a solution to this
capabilities, potentially reducing out-of- unique relationships. The company will challenge. Through ongoing sensor
stock and overstock situations. Moreover, likely become better equipped to react to monitoring, stakeholders receive
advancements in smart sensor technology customer demands and respond to critical real-time data around vessel position
have generated savings from inventory theft events like food contamination. Real-time and cargo container status to finally
protection and reduced spoilage. product usage data from embedded smart close the loop in the industry’s supply
sensors could also improve companies’ chain logistics.
Smart sensors also have more flexible after-sale service offerings by allowing them
distribution models. By providing customers to anticipate future problems, such as This end-to-end connected vessel
multiple options in the purchasing process part failures. introduces the following benefits:
through real-time information flow, smart
sensors enable omnichannel retailing. This transparency goes two ways. •• Location and movement data
Products and packaging embedded with Customers now have added visibility and that provides logistics to a fleet
smart sensors make automatic reorders can track products throughout the supply management system similar to that
and refills possible. Likewise, connected chain. Further, smart sensors allow for a of on-road shipping trucks
appliances trigger sales at the point of disintermediated distribution channel and •• An integrated supply chain system
consumption, such as grocery orders from therefore a more fluid exchange between that enables shipping companies
the refrigerator.13 the customer and the supplier. Tesla, for and producers to make informed
example, relies on smart sensors to perform decisions
remote diagnostics and software upgrades,
•• Software-based route planning
thereby cutting out traditional third-party
that improves fuel efficiency and
service networks and deepening the
increases productivity
relationship with customers.15
•• Temperature data on refrigerated
cargo to help recipients prepare in
advance
•• Sea-to-shore connectivity for crew
to communicate
07Using smart sensors to drive supply chain innovation
Criteria for evaluation
and adoption
Operational considerations
A smart sensor strategy has the ability to disrupt current operating models and transform a company’s supply chain. Success in this journey
starts with asking the right questions in the following areas to create an understanding of a company’s unique position and an awareness of
how smart sensors can be employed.
Company profile Security and risk
•• What standardization and governance
Several company attributes—strategy, Adding sensors to the supply chain
requirements will be needed for
business model, finances—play a critical could potentially create hundreds, if not
enterprise-wide alignment?
role in the choices a company must make thousands, of new surfaces for cyberattacks.
about smart sensor deployment. Key Deployment of sensors across the supply •• Is there sufficient talent to support smart
considerations include: chain requires heightened awareness sensor installation, maintenance, and
of vulnerability and an intense focus on management?
•• How can smart sensor integration support
protecting systems. Key considerations
your supply chain strategy?
include: Operating environments and locations
•• What challenges in data collection and Identifying how and where the sensors will
•• Are you capable of defending against
aggregation do you currently face? How operate can provide valuable understanding
the types of cyberattack vulnerabilities
can automated data generation and edge of the type of sensors required, the
introduced by smart sensors?
computing support improvements? infrastructure needed to support smart
•• How well do you know and understand sensors, and the variety of supply chain
•• Are the financial and operational goals for
your current data? insights to be gained. Key considerations
the supply chain clearly defined?
include:
•• How will your data governance need to
Functional expertise and readiness be amended to include smart sensor •• How do current environmental conditions
Smart sensor integration requires a high information? impact your supply chain?
level of expertise to ensure interoperability.
•• What type of capital assets do you own
Moreover, extracting the full benefits of Investment
and how can they be smart sensor
smart sensor data requires functional Though technology advances are driving
enabled?
readiness to internalize the information and down the cost of smart sensors, building the
put the insights to work. Key considerations technology stack to enable a smart sensor •• Are your supply chain resources
include: ecosystem requires significant investment concentrated in one area or are they
in product software and hardware, security distributed nationally or globally?
•• Are your current IT and data management
tools, networking, storage, and systems
resources capable of effectively integrating
integration. Key considerations include:
and managing a smart sensor ecosystem?
•• What additions to your current IT
•• What analytics capabilities exist to create
infrastructure will be required to support a
insights from data?
smart sensor ecosystem? Should you build
•• How is technology being used when these additions internally or outsource?
making data-led decisions today?
•• How should you be structured to support
longer-term growth and agility in the face
of continuous technology advances?
•• Are there sensors or connected devices
already being used today? If so, how are
they being integrated?
08Using smart sensors to drive supply chain innovation
Framework for decision making Investment impact metrics solution for the buyer and reduces the
Companies should consider their supply time, difficulty, and up-front cost associated
Smart sensor success factors chain goals and identify the appropriate with building a smart sensor ecosystem;
Yielding the full benefits of smart sensors level of investment required to get started. however, companies may lose some
requires an approach that is founded on Many organizations can and should start influence over sensor features and uses.
broader ecosystem integration and is small, using their business objectives Furthermore, this service-based model
oriented toward achieving clearly defined to prioritize and pursue smart sensor can result in surrendering some ecosystem
analytics-driven objectives. This approach pilots from which they can quickly value to partners.
also requires decisions that are specific to learn. Organizations capable of larger
the business, industry, and circumstances. implementations should deeply investigate Service-based models are growing and
and detail their goals to create clear becoming more diverse.17 In addition to
priorities and a well-defined road map. solutions-based offerings, providers are
offering a la carte options as well (e.g., asset-
Smart sensor procurement only services).
Smart sensor procurement decisions should
Impactful strongly consider device compatibility with Pricing factors
Clearly define strategic goals current and emerging systems. Successful Sensor pricing ranges widely depending on
and value opportunities, achieve
deployment is contingent on the ability to capabilities and complexity. While highly
executive-level sponsorship
integrate with both legacy ecosystems as sophisticated sensors can cost hundreds—if
well as innovative new IoT platforms, such not thousands—of dollars, less complex
as GE Predix and Uptake. Procurement devices are currently available for as low as
Tailored
Determine sensor capabilities decisions should also consider tradeoffs $20.4,18 Technology advances and increasing
and features unique to the regarding purchase models and cost. market competition are perpetually
supply chain goals and needs driving down prices. Commoditization of
Direct purchase smart sensors will likely continue to exert
Organizations can purchase smart sensors downward pressure on pricing and make
Flexible directly and self-deploy them throughout deployments more practical and feasible in
Adopt an agile approach, iterating
the supply chain. These sensors can the near term.
often and considering new
products as they emerge be off-the-shelf or tailored solutions.
Purchasing sensors directly will likely require
additional investment in the technologies,
Transparent
infrastructure, and skills to develop the
Articulate goals, impacts, and technology stack to support. This in-house
benefits to all stakeholders to gain approach provides the advantage of greater
alignment control over sensor features and data, as
well as a learning curve that the company
can leverage in future developments.
Implementable
Create achievable implementation Sensing as a service
plans with strong program Smart sensors can also be deployed
management through a Software as a Service (SaaS)
model, leasing the equipment and
outsourcing data capture and management.
This model generally provides a customized
09Using smart sensors to drive supply chain innovation
Key levers for smart sensors
in your supply chain
Supply chain applications
Significant opportunities exist for smart sensor implementation in each stage of the supply chain.
01 02 03 04 05 06
Develop Plan Source Make Deliver Support
Develop: High volumes of usage data Deliver: Smart-sensor-enabled, real-
from connected products identify time inventory tracking helps optimize Smart sensors have the
performance criteria and conditions warehouse throughput, improve order potential to improve supply
that lead to enhanced product design management for perfect order fulfillment, chains end to end
and development. The ability to share and monitor deliveries. This technology
•• Replace manual with automated
information in real time also allows industry also makes it easier for companies to sell
processes and thus drive added
partners to actively collaborate with one the same products in-store and online,
efficiency and reduced labor costs
another on shared prototypes. thus enabling a more flexible distribution
model. •• Provide asset performance
Plan: Real-time inventory tracking from and predictive maintenance
smart sensors improves inventory and Support: Connected products can enable capabilities
supply planning. aftermarket sales and service opportunities
•• Introduce real-time inventory
by capturing and communicating
tracking to improve demand
Source: A well-functioning digital supply impending maintenance needs.
planning
chain better identifies substitute materials
and helps procure from lower-cost These are all examples of ways in which •• Offer data around customer
sources by leveraging the data revealed by smart sensors are improving supply chains behavior to inform product
smart sensors. Better transparency and today; however, they represent only a development and accelerate
traceability of raw material flow also helps few of the many opportunities for cost speed to market
ensure accurate and consistent supply. reduction and value creation.
•• Enable closer connection to
the customer for better service
Make: Manufacturing asset utilization Motivation for action
offerings
increases as a result of improved The time for companies to assess their
monitoring and predictive maintenance supply chains for piloting smart sensors
of machinery from a fully connected is now. Connecting devices with smart
production facility. Inbound material sensors can provide managers insights into
management improves through more all phases of the supply chain and therefore
dynamic management of dock deliveries. drive efficiencies, reduce costs, and
introduce new revenue opportunities.
10Using smart sensors to drive supply chain innovation
Key Deloitte contacts for
smart sensors and supply chain
management
Joseph Fitzgerald Adam Mussomeli
Principal, Supply Chain & Principal, Supply Chain &
Manufacturing Operations Manufacturing Operations
Supply Chain Innovation Consumer & Industrial Products
Deloitte Consulting LLP Deloitte Consulting LLP
+1 415 519 2115 +1 203 905 2646
josfitzgerald@deloitte.com amussomeli@deloitte.com
Andrew Daecher Mahesh Chandramouli
Principal, Deloitte Digital IoT Senior Manager, Deloitte Digital IoT
Deloitte Consulting LLP Deloitte Consulting LLP
+1 415 783 6525 +1 214 840 1559
adaecher@deloitte.com mchandramouli@deloitte.com
The authors of this paper would like to thank the following contributors:
Adam Volini, Manager, Deloitte Consulting LLP; Alisa Sommer, Manager, Deloitte Consulting LLP;
Drew Shackleton, Senior Consultant, Deloitte Consulting LLP; Bryan Whitmer, Senior Consultant,
Deloitte Consulting LLP; Sophia Moradian, Consultant, Deloitte Consulting LLP.
11Endnotes
1. Deloitte University Press, 2016 Tech Trends.
2. Raynor, Michael E. and Cotteleer, Mark J, “The more things change: Value creation, value capture, and the Internet of Things,”
Deloitte Review 17, July 27, 2015, http://dupress.com/articles/value-creation-value-capture-internet-of-things.
3. Deloitte University Press, Inside the Internet of Things, 2015.
4. “Smart Sensor Market Expected to Reach $60 Billion, by 2022, Globally,” Sensors Online, 20 January 2017, http://www.
sensorsmag.com/components/smart-sensor-market-expected-to-reach-60-billion-by-2022-globally.
5. Yurish, Sergey Y. and Gomes, Maria Teresa S.R. (2003), Smart Sensors and MEMS, Kluwer Academic Publishers.
6. http://government-2020.dupress.com/driver/sensor-technology/.
7. ABI Research, Best Fit Use Cases for LPWANs, August 2016.
8. http://engineering.nyu.edu/gk12/amps-cbri/pdf/Intro%20to%20Sensors.pdf.
9. Deloitte Analysis.
10. Riley, Sean, “Wearables in the Warehouse,” Manufacturing Business Technology, February 17, 2016, https://www.mbtmag.
com/article/2016/02/wearables-warehouse.
11. O’Connor, Mary Catherine, “Bringing Smart Technology to Old Factories Can Be Industrial-Size Challenge,” Wall Street
Journal June 7, 2016, https://www.wsj.com/articles/bringing-smart-technology-to-old-factories-can-be-industrial-size-
challenge-1465351322.
12. “40% Warehouse Labor Costs Reductions with RFID,” Advance Mobile Group, December 17, 2014, http://www.
advancedmobilegroup.com/blog/how-does-modern-rfid-technology-improve-warehouse-performance.
13. Bohn, Dieter, “Samsung’s New Fridge Can Order Fresh Direct Groceries from its Humongous Touchscreen,” The Verge 2016,
http://www.theverge.com/2016/1/5/10708380/samsung-family-hub-fridge-mastercard-app-groceries-ces-2016.
14. Martin, Jean-Francois, “How IoT Will Transform Product Lifecycle Management,” mnubo 2016, http://mnubo.com/product-
lifecycle-management-connected-object/.
15. Brisbourne, Alex, “Tesla’s Over-the-Air Fix: Best Example of the Internet of Things?”, Wired 2014, https://www.wired.com/
insights/2014/02/teslas-air-fix-best-example-yet-internet-things/.
16. ”IoT Case Studies: Companies Leading the Connected Economy,” AIG 2016, https://www.aig.com/content/dam/aig/america-
canada/us/documents/brochure/iot-case-studies-companies-leading-the-connected-economy-digital-report.pdf.
17. Gaddis, Ben, “How Sensors will Revolutionize Service Businesses,” Wired 2016, https://www.wired.com/insights/2013/05/
how-sensors-will-revolutionize-service-businesses/.
18. Miller, Ron, “Cheaper Sensors will Fuel the Age of Smart Everything,” Tech Crunch, 10 March 2015, https://techcrunch.
com/2015/03/10/cheaper-sensors-will-fuel-the-age-of-smart-everything/.
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