One supply chain leader in my network recently messaged me the statement, "Supply chain resilience is the sea level conversation."
To that, I noted, "The seas are still pretty choppy."
Most people agree that the global supply chain is in the midst of a perfect storm. Thus supply chain resilience is a hot topic.
Modernizing the supply chain via digitization and automation helps achieve resilience. We're beyond the shock and awe phase of COVID-19. We're well into the assess, adapt, and prevent phase.
Put another way, when we talk about supply chain resilience, we're really talking about human resilience. When that instinct kicks in, ingenuity follows. As such, we'll explore one example of supply chain resilience today: the smart facility.
What Is a Smart Facility?
A smart facility can be defined as a commercial building or facility that utilizes technological tools like IoT, big data, AI, and digitization to optimize and track a facility's performance and overall efficiency. The goal of a smart facility is to improve the visibility of your supply chain, increase cost efficiency, and mitigate risk. Smart facilities help supply chain leaders make better decisions.
Let's dig a little deeper into this topic. Today we're asking, what is a smart facility and how can companies make their facilities smarter? What are their history, motivation, and benefits? What roles do IoT, AI, and digitization play in smart facilities? And finally, what companies and brands are already adopting smart facilities?
Ready? Let's get smart!
How To Ride Out A Perfect Storm
First of all, I admit it makes me happy that the supply chain conversation has shifted from doom, gloom, shock, and awe. Granted, things sometimes get worse before they get better. But in general, I find topics like supply chain resiliency and smart facilities to be tremendously optimistic.
How did we get here? Glance backward and note the many factors that aligned to put the global supply chain in a tight spot. How bad is it? Consider the cost of moving a container from China to Dubai. According to SCMP, that price has ballooned to $5,000, which is a 400% increase in shipping costs from last year.
In general, we understand most supply chain issues to be related to the COVID-19 pandemic. There's the e-commerce boom from everyone sitting at home, as well as labor scarcity (or constraints) due to COVID-19 (and possibly government aid). This includes the truck driver shortage, which, along with China's growing trade surplus, has lead to container shortages. This, in turn, has added to lengthy shipping delays, not to mention increased prices, and the current boom in conversations about supply chain resilience.
A History Of Smart Facilities: From "Surfing the Web" to "Head In the Clouds"
According to SpaceIQ, the advent of smart facilities surfed in on the wave of big data and internet of things (IoT). Steve Case, former CEO of America Online, called this the third wave of digitalization. To summarize, the third wave of digitalization is said to have started in 2016 with the introduction of cloud computing.
According to techopedia.com, SMART technology as a category means "Self-Monitoring, Analysis, and Reporting Technology."
The inherent promise of smart facilities is that the power of cloud-based big data, collected by an IoT network, will allow smarter facilities management. In short, tech can help supply chain leaders understand every aspect of how a facility operates.
For example, smart facility controls integrate, track, and refine the operation of HVAC, lighting, and security systems. But so does a smart house! So beyond that, the AI and IoT-enabled asset management systems in smart facilities also track and analyze the performance of every vital asset and piece of machinery.
It's easy for humans to miss the types of abnormalities that AI can detect. So another way to think about it is as backup. These programs run in the background, looking for ways to achieve continuous improvement objectives.
The bottom line? Smart facilities lead to smarter decisions!
The Role of IoT and AI Within Smart Facilities
But what makes a smart facility truly smart? If you've ever walked the floor of a smart facility, the mechanisms of IoT might not pop out at you. In truth, smart facility IoT simply refers to the integrated network of sensors, barcodes, digital data collection tools, and beacons. That's how the sausage is made.
These tools collect raw data, which is then fed through applications and software. In turn, an integrated network of software tools—aka, your control tower—provides management teams the visibility to quantify throughput, identify bottlenecks, and find areas of weakness.
Here's an example of how a smart facility is more efficient and mitigates risk. Vector's digitization software eliminates the need for paper. That means gates, docks, and drivers are no longer required to sign and exchange paper bills of lading. During COVID times, that allows a business to stay open—and the supply chain moving.
A surge of sick dockworkers at the Port of LA and Long Beach is one reason those ports experienced such long delays. They didn't have the physical manpower to unload containers. By now, we understand how those delays caused ripples throughout the entire supply chain system. A simple but powerful smart facility tool, like Vector's, could've helped avoid it all.
In short, smart facilities are all about making better decisions.
The Gold Standard of Smart Facilities Today
Not everyone suffered during COVID. Amazon did okay. Regardless of what you think about Jeff Bezos and his behemoth, you must admit Amazon really delivered the goods. Amazon rode the wave of e-commerce throughout the pandemic to great success.
Sure, Amazon had their share of hiccups along the way. But in general, Amazon didn't just survive the pandemic; it thrived. Amazon's smart facilities were the cog in the wheel that kept the world turning. Indeed, one senior Amazon executive described their facilities as a symphony of humans and machines working together.
In truth, the majority of Amazon's smart facility infrastructure was already in place when the pandemic hit. It's as though Amazon anticipated what the world would need in the future. That isn't just hyperbole. It's been noted that Amazon stocks its smart facilities with the help and power of AI and deep-learning algorithms. This technology allows it to accurately anticipate trends and demand.
One famous example of this is that in January 2020, Amazon correctly anticipated and prepared for high incoming demands for face masks. The symphony of an Amazon fulfillment center includes human pickers, work stations powered by automation tools, and fleets of robots.
It's estimated that Amazon's smart facilities have increased efficiency to hold 50% more stock, which can be retrieved three times faster. Clearly Amazon is leading the charge when it comes to smart facilities. The takeaway is simple. Their increased efficiency reduces overhead and eliminates bottlenecks. That streamlined process means more affordable products for end users like you and me.
And as we think about building our own smart facilities, why not learn as much as we can from those who are doing it best?
The Future of Smart Facilities
The water may be choppy for a while. But calm seas will return.
Beyond that, imagine a world where smart facilities aren't the outlier but instead the norm. The global supply chain would be much more resilient. So let's honor the lessons of the pandemic and use the tools of smart facilities like IoT, big data, AI, and digitization to improve our resilience.
If the supply chain industry truly wants to achieve resilience, I encourage us all to use the old goal-setting SMART acronym. Specific, Measurable, Achievable, Realistic, and Timely.
What is a smart facility? A facility that helps us achieve our SMART goal of supply chain resilience!
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.