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Bringing the power of IoT to supply chain management

The world of manufacturing is forever changing with the help of Internet of Things (IoT) devices, which are enabling visibility and real-time insights that can lead to new revenue and business opportunities. IoT use cases in supply chain management and manufacturing are expanding at a rapid pace. Indeed, worldwide spending on IoT is expected to grow 16.7% year over year in 2017, reaching just over $800 billion, and the manufacturing industry is spending the most at $183 billion.1

From driving predictability, efficiency and agility to monitoring equipment and improving field service, IoT is integral to enterprise digital transformation that extends beyond the manufacturing shop floor and across your supply chain management. Starting with IoT and edge analytics, digital supply chains can transform using the concepts of an Operational Digital Twin, use Artificial Intelligence (AI) and Cognitive Services to make analytics smarter, along with an advanced level of security and compliance.

Together with our partners, Microsoft works with manufacturers to enable digital supply chain capabilities and bring the power of IoT to life. The following four scenarios are intended to open your mind to show you can leverage the power of IoT for supply chain management:

Collect data from internal and external IoT devices

Manufacturers have myriad data sources from sensors—whether providing information on shipments, warehouse inventory levels, customer-owned assets or the quality of ingredients in your manufacturing recipes. All this data is of incredible value as advanced machine learning and artificial intelligence models require huge amounts of multi-variate data to be well-trained and stable.

Microsoft’s Azure platform can enable communication among a broad range of devices to build correlation models across a wide variety of sub-systems. A vibrating production machine, for example, could affect product quality. This insight can be coupled with a predictive machine learning model that computes the probable quality loss from one machine into a shortage of supply, which can impact your supply chain management. With algorithms quantifying and communicating the magnitude of impact, you can take corrective actions, such as using inventory optimization tools and determine alternative stocking strategies.

Bring contextual relevance to your data

Manufacturers often say they are data-rich but insight-poor. Here’s where Microsoft can help. A supplier shipment delayed due to weather or other events, for example, may impact on-time delivery performance. A temperature drop in the warehouse may lead to the un-usability of components or ingredients. Since most companies are unable to build a cause and effect relationship in these examples, it’s important to bring business context to demonstrate the impact of these digital supply chain anomalies.

Our partners at Element Analytics help manufacturers unlock industrial data with digital twins that enable true digital transformation. Based on Azure, its solution integrates data from IoT devices and/or the data historians—combined with data form the SCADA, MES, ERP, CRM and other such systems—to offer the additional contextual information required. An alert from an IoT device can point you to the related area, the nature of impact and potentially recommend steps to mitigate risks. Beyond seeing the impact, you can simulate and create what-if scenarios within the operational digital twin of your supply chain. Also, often having just a digital twin is not enough. There needs to be a capability behind the digital twin to ensure continuing data integrity for both the data models as well as the data values, due to changes in the underlying equipment and the environmental or usage conditions. This perpetual evolution and adaptation needs to be addressed to guarantee the quality of the analytics, something that Element Analytics also handles well.

Understand what IoT messages mean to your S&OP

A strong sales and operations planning (S&OP) alignment is fundamental to a stable business plan and underlying digital supply chain efficiency. IoT devices can bring additional insights on both ends of the S&OP process, such as predicting demand patterns and building correlative insights. Within the mix of your customer demand across various demand streams, the more the proportion of the “known demand” the more stable is your operating plan. Michelin Solutions, an organization formed by tire manufacturer, the Michelin Group, leverages IoT in its design, development and marketing of value-creating business models such as its EFFITIRES™, which is a “tire as a service” offering for the cost-effective outsourcing of tire management. Sensors in a car or truck can provide data and visibility into the miles driven and the tire and oil change needs of a particular vehicle. Such insights enable tire manufacturers to bring to life such new, efficient and transformative business models.

Another partner, o9 Solutions, is empowering organizations to move their entire S&OP process from spreadsheets to its state-of-the art cloud platform, based on Microsoft Azure. o9’s supply management solutions are powering digital supply chain strategies that make complex supply chains dramatically more responsive, cost effective and reliable in meeting market needs.

Hedge for the uncertainties that remain with inventory optimization

While data from IoT devices can provide great supply chain visibility, some variables such as changing customs regulations or compliance requirements are still hard to predict.  To deal with such events, manufacturers maintain inventory to ensure a continuity of supply. Beyond relying on sophisticated statistical formulations, manufacturers are implementing multi-item and multi-echelon inventory optimization techniques to determine months of supply while minimizing their inventory investment and maintaining service levels across the business.

By gaining real-time or predictive visibility into customer demand, manufacturers can reduce the overall expected variability, even with large product mixes and slower moving product lines.  Microsoft partner, ToolsGroup, provides market-drive demand analytics and supply chain optimization software that’s enabling customers to achieve stable and very high service levels, usually with about 20 percent less global inventory, according to ToolsGroup.

With digital transformation disrupting industries, it’s truly an exciting time for IoT in manufacturing solutions. These four scenarios are just the start of how you can capitalize on the opportunities of supply chain digital transformation today, so you don’t fall behind tomorrow. With end-to-end capabilities around our intelligent cloud, Microsoft and our partners are ready to make your vision a reality.


Learn more by visiting:

Microsoft Manufacturing:

EFFITIRES™ – Michelin Solutions

Element Analytics

O9 Solutions



1Worldwide Spending on the Internet of Things Forecast to Reach Nearly $1.4 Trillion in 2021, According to New IDC Spending Guide, International Data Corporation press release, June 14, 2017.