Inventory is the lifeline of retail. But ever-evolving customer expectations and changes in business
models are putting a serious strain on an enterprise’s ability to operate streamlined inventory supply
chains. The Internet of Things (IoT), with its propensity to drive unprecedented inventory visibility
across shelves, transit and warehouses, can help businesses achieve efficiencies, cost reduction and
superior customer experience.
According to reports, the remote asset management market will be worth USD 26.99 Billion by 2021,1
growing at a Compound Annual Growth Rate (CAGR) of 25.1 percent. Adoption of IoT will be a key
contributor to this momentum. By 2021, 70 percent of retailers are planning significant investments
in IoT.2 These numbers reflect how IoT is primed to become a potent and strategic tool for retailers,
helping them pre-empt as well as drive demand.
Same-day delivery turned out to be
a milestone in the retail supply chain
space and is continuing to grow exponentially
as a market. A significant number of shoppers
are now willing to pay for faster or same-day
delivery. While leading e-retailers with deep
pockets are putting their foot on the
accelerator on same-day delivery offers,
start-ups are leveraging same-day delivery
to build their customer base. This has left
other retailers playing catch-up in re-inventing
their supply chain to enable faster delivery.
Another customer behavior that is rocking
the retail supply chain boat is expectation
of a hassle-free, no-questions-asked return
policy. A study3 found that nearly 51 percent
of customers avoid shopping at retailers
with strict return policies.
Products are returned for a variety of reasons
ranging from damaged goods to customers
buying multiple sizes to try at home to
fraudulent purchases where the customer
intended to use and return the product.
Distribution center networks of retailers
were not originally designed for same-day
delivery. Same-day delivery requires retailers to
have adequate inventory of the product and the
ability to track products closely. Further, return
policies are placing pressure on reverse
logistics, which has traditionally not been an
area of strength for retailers.
Returned goods take a few weeks before they
find their way back to the shelves. Retailers also
need to evaluate the condition of the returned
products and sort them across various channels of liquidation such as rack stores and
Apart from changing customer needs,
supply chains face other challenges that
impact inventory, cost and fulfillment
abilities. Businesses in the U.S. alone lose
USD 15-30 Billion annually in cargo thefts,4
with food and beverage, and electronics
being the most targeted categories.
Retailers also need to deal with fleet repair
and maintenance costs which constitute
a significant portion of the operational cost.
This becomes even more relevant given
the fact that large retailers have begun
maintaining their own fleet to fulfill
IoT – Boon for
IoT is enabling retailers to drive innovation
in their supply chains. It is opening up new
avenues for companies to curtail costs and
better serve customers. A delivery start-up
that facilitates both national and cross-border
e-commerce deliveries in the EU leverages
common travelers to deliver packages.5 Items
are packaged in bags with automatic locks
and interior sensors to monitor weight,
humidity, shock and temperature – all with
the singular objective of preventing damage.
In case of any kind of tampering, an alarm
notifies both the company and sender.
By adopting such innovative methods,
companies can achieve their business
imperative of faster delivery.
There are several instances of how IoT
is helping companies get rid of typical
supply chain problems. A leading e-commerce
company which used to scan each of its products manually in the warehouse now
leverages wi-fi connected robots to identify
products by reading quick response codes
using built-in cameras.
GPS tracking is being actively used to monitor
fleet transporting products. Apart from
providing greater visibility of the inventory in
transit, GPS tracking is also helping prevent
IoT is enabling on-demand repair of fleet
through remote monitoring and diagnostic of
fleet, as well as signaling their location for
better route management. This saves both
time and money for retailers. Further, retailers
can also use the information to update
customers about the arrival of their product
from shipment to doorstep delivery.
IoT can help proactively diagnose product
issues, thereby significantly reducing the
possibility of returns and associated costs.
Diagnosing problems remotely can be a
win-win situation for both customers and
retailers. While customers are spared the
hassle and derive greater value from their
purchase, retailers can both save costs and
reduce the burden on their supply chains.
A leading hypermarket chain has filed a
patent6 to integrate IoT tags to monitor
product usage at customers’ homes. It will
have the capability to replace products as
necessary and monitor product expiration.
Retailers are using geo-fencing to send push
notifications to customers in the vicinity of a
store, prompting them to visit the store
or updating them on ongoing offers. A
customer’s presence is detected through
GPS, wi-fi or Bluetooth.
Smart shelves, cameras and Radio Frequency
Identification (RFID) chips on products in
stores or warehouses are helping update the
inventory records instantly. It is also enabling
faster coordination across touch points for
But Not Without
While IoT has opened the door to a streamlined
and intuitive supply chain, retailers will need to
carefully chart the implementation journey. The
adoption of IoT is still at its early stages. A part
of the challenge is that the technology itself is
evolving. According to a study, 50 percent of
executives were concerned about the absence
of industry-wide standards for IoT, cost, security
Retailers will need to find solutions to
some challenges unique to this industry.
For example, while equipment and machinery
can be tagged for monitoring, not all retail
products lend themselves to tracking without
issues. While customers might be okay with
the monitoring of detergents or food in the
fridge, there might be concerns about
monitoring other products such as clothes.
For example, a leading clothing and outdoor
recreation company sought to sell boots
and coats with IoT sensors allowing them
to gather information such as usage and
washing. However, it withdrew the project
offering clarifications to customers.8
Further, IoT alone is not sufficient to transform
retail supply chain. Retailers will need to build
a holistic transformation plan with clear goals
and milestones. For IoT to be effective, a mature
analytics system needs to be a precursor. Also,
the role of other technologies will need to be
laid out. Finally, team preparedness, process
alignment and leadership support will also play
a key role.
The global connected retail market is
anticipated to grow at a CAGR of 19.8 percent,
with the valuation estimated to reach
USD 82.31 Billion by 2025.9 IoT will play a key role
in this transition, helping connect all the nodes
of the new-age retail supply chain.