Technology has diligently paved its way into every aspect of our lives and business is no exception. We are surrounded by smartphones, smart refrigerators, smart bulbs, smart cars, and now, smart procurement.
Internet of Things refers to all the physical devices connected to the internet, and it works by collecting and sharing the data. Super-cheap computer chips have made this wireless network a part and parcel of our lives. With the Internet of Things (IoT), the physical and digital worlds have been perfectly blended and it has opened a new arena of opportunities to explore.
How can the Internet of Things positively transform the process of procurement?
Before understanding the role of the Internet of Things in procurement, let us talk about the present conventional process of procurement. So, the process begins when a need for goods or services arises. The procurement specialist will devise a list of vendors to fulfill the specific requirement of goods or services. The vendor would eventually be shortlisted and would be asked to submit a quote. Following a few rounds of bargaining with the vendor, the contract would be signed. After the contract is executed, the invoice would be validated by the finance department and the vendor would be duly paid.
1. The Internet of Things will enable the company to gain real-time insights into the entire procurement process, making it easier to trace the position of the product from its site of initiation to delivery. This transparency in the process would be beneficial in studying the customer’s service consumption pattern.
2. The transparent supply chain process, would help in noticing leakages and stoppages in between, which could be resolved by sending specialized personnel.
3. The losses incurred by the company due to delays, mismanagement would all be minimized by adopting the Internet of Things in the supply chain.
In short, one of the biggest benefits of implementing the Internet of Things in procurement is to track and monitor the movement of goods across the supply chain.
Uses of the Internet of Things in Procurement
Almost all areas of the procurement process can be uplifted with the help of the Internet of Things.
1. Management of Assets
Instead of using the traditional asset management method and manually uploading the data, one can smoothen the process with the involvement of the Internet of Things. By using sensors, the goods can be tracked seamlessly and the managers can get insights about the content, expected delivery, and storage manuals of the goods.
2. Automation of Warehouse
A fully automated warehouse is still a distant dream, but the incorporation of the Internet of Things in managing the warehouse efficiently is underway. This process of automation would prevent any kind of loss and increase resilience.
3. To Decode Supply and Demand
By tracking the goods using the Internet of Things and with automated warehouses, the goods shelf could be easily managed. Frequently consumed customer goods and the supply pattern of a particular product can be studied. This would prevent wastage, at the same time would prevent unnecessary consumerism.
4. Extensive Management of Resources
The Internet of Things would detect machine failure, faulty systems, and leakages in the supply chain. Thus, preventing further mishaps and enabling solving of the issue at the grassroots level. The resources can be managed and properly maintained by scheduling frequent maintenance rounds.
5. Promotes Sustainability
From the previous points it is clear that the Internet of Things majorly prevents losses and this would eventually make the entire process sustainable. Green strategies can be included in the process to further benefit the environment.
Thus, it can be seen that the involvement of the Internet of Things is aimed at increasing speed, enhancing accuracy, introducing flexibility, and thus increasing the overall efficiency of the process. Even though the Internet of Things in procurement is loaded with benefits, there are certain challenges associated with implementing it in reality.
What is inhibiting the Internet of Things from entering the procurement scene?
1. Lack of Skills
‘Internet of Things’, might be an easy way out for the young generation but for the working-age group, it might come across as an unnecessary advancement. The reluctance to adapt to technology is the major issue amongst the warehouse workers, as they refrain from opening up to new opportunities. The only way to circumvent this problem is to hire skilled professionals but the process of recruitment can be both time and cost demanding.
2. Big Data and the Internet of Things
Adopting the Internet of Things in procurement would generate large amounts of data that would require management. Hiring a data scientist or analyst could be the way out of this issue. As with the Internet of Things, good quality data would be generated and the organization would be left with the task of deriving insights, and significant benefits out of the data.
3. Risk of Cyber Attacks
The implementation of technology into any process comes with a price of vulnerability to cyberattacks. These attacks can hamper the quality of work and can affect the reputation of the company.
4. Network Connectivity Issues
As the name implies, the Internet of Things heavily relies on good internet connectivity. A bad internet connection would bring the supply chain management to a complete halt. And, to ensure good connectivity, the company would be required to chip in some extra cash.
The Internet of Things is all set to revolutionize procurement. Well-established companies like Amazon, Volvo, and Nissan have already adapted the Internet of Things in their supply chain systems. Apart from the devastating effects of the pandemic, one good thing it did was it paced up the process of digitization. Now, all companies big or small are finding ways to implement the Internet of Things in their systems. the Internet of Things might come across as an expensive substitute for cheaper manual work but in times to come, it would prove to be an asset to an organization.