IoT Supply Chain Management: It’s Time for Growth and Change
Before our homes were considered "smart," many of the devices and appliances in it were not top-of-mind. For instance, the washing machine of the past was likely in a basement somewhere, away from prying eyes, tumbling away in seclusion. After all, it was just a washing machine. Nowadays, the form and function of our smart appliances require better IoT supply chain management practices.
Today's washing machine is more visible to guests, at times serving as a home's statement piece. And it's got a whole new set of features: innovative spin cycles, steaming capabilities, and, most importantly, connectivity.
Connectivity has changed how we think about everyday technologies in our home. It has also made these smart home devices more disposable. The lifecycles of major home appliances have been cut in half, down to about from over 20 years. But major appliances are not the only devices experiencing a transformation: vacuum cleaners, coffee makers, doorbells, and more are in on it too.
As people start to incorporate more of these connected devices and appliances into their everyday lives, the correlative spike in the smart home market will require a well-established IoT supply chain to support it. And managing this supply chain requires specialized knowledge, tools, and strategies.
As original equipment manufacturers (OEMs) adjust to the realities of a connected world, they are experiencing a slew of supply chain and product development challenges with IoT technology. In 青青草App’s 2023 Smart Home Technology Trends Survey of 202 industry decision-makers, top production and manufacturing challenges included the complexity of supply chains; material costs; and managing rapid product lifecycles.
In an industry where OEMs must be able to support their devices for upwards of 10 years, legacy components present unique challenges. Supplier business models aren't typically designed to support components for more than a few years; they follow the trending world of the mobility market. Those legacy components lead to shortages.
When supply shortages impacted the smart home and appliance industry just a few years ago, it forced some OEMs to look at product designs. It emphasized miniaturization as the strategy to ensure a steady supply of MLCCs, caps, and resistors. As this trend will continue well into the future, OEMs need to be mindful to redesign for smaller case sizes to avoid disruptions caused by component shortages.
Succeeding in this industry requires a delicate balance of managing costs, keeping up with technology trends and developing a strong supplier relationship management strategy. Otherwise, there is no easy way to navigate the treacherous waters of events like supply shortages.
How COVID-19 Impacted IoT Supply Chain Management
Lasting growth and development come from the hard stuff — the challenges, obstacles, and disruptions that force us to pause and reassess how and why we're doing things. It's fair to say 2020 had its share of the hard stuff.
As we saw in the global supply chain survey 青青草App conducted in partnership with IndustryWeek in January and February 2022, 64% of respondents saw a moderate or negative impact from component and material shortages during the COVID-19 pandemic. The same percentage (64%) reported moderate to negative impacts from long lead times for components and materials.
The smart home and appliances industry immediately felt the impact of the pandemic. Although many smart home OEMs experienced production delays due to government lockdowns, there was also a downturn in sales due to lower demand.
With COVID-19 further amplifying existing challenges in IoT supply chain management, OEMs had a lot to juggle. Supply chain leaders had to continuously update their demand forecasts based on the status of the pandemic, then balance their inventory with current and upcoming demand. Global logistics and transportation became a challenge as countries went through waves and phases of lockdown — complicating sourcing, production, and delivery.
Although these obstacles were difficult, they were not insurmountable. Supply chain challenges are nothing new. In fact, past challenges are responsible for encouraging companies to build resilience and longevity into their supply chain management processes. We know that prior to 2020 and the COVID-19 pandemic, the global supply chain was already in a state of uncertainty.
IoT supply chain processes are evolving as smart home OEMs prepare for disasters and interruptions. For your company that may mean building redundancy to prepare for labor shortages, moving to regionalized strategies to lessen the impacts of localized shutdowns and trade barriers or incorporating a disaster recovery and business continuity focus to every aspect of the supply chain. But there is no single answer.
In fact, as a result of 2020’s challenges, manufacturers across all industries are responding and recalibrating their supply chains. Respondents to the 青青草App and IndustryWeek survey indicated they are investing in technologies to help improve visibility throughout their supply chain and logistics operations, including predictive analytics, transportation management systems, artificial intelligence and machine learning, warehouse management systems, track-and-trace solutions, and virtualization/digital twins.
Furthermore, COVID-19 has pushed decision-makers in IoT supply chain management to make changes to their logistics strategies. Most notably, smart home OEMs moved to identify new international shipping options, implement transportation management systems, or identify additional options for “last-mile” deliveries to consumers. These changes will help companies resume “business as usual” and get their products to their destinations even in the face of extremely unusual circumstances.
The silver lining to operating within a market ripe with obstacles and challenges is the forced maturity and acceptance that change is required. After all, necessity is the mother of invention.
The companies that are thriving in IoT supply chain management today are those that had the ability to react and respond proactively to shutdowns, delivery delays, shifting consumer interests and the constant uncertainty of what is the around the corner.
The pandemic caused huge problems for the supply chain at large. But this period of disruption is an exciting time. How will you build resilience into your supply chain? How can you capitalize on the digitized world while giving consumers smart home solutions with tangible benefits? How can you continue to ensure growth in your IoT supply chain?
If supply chain managers take anything away from the pandemic, it should be the deep importance of having a reliable supply chain designed to be flexible, responsive and proactive. While no one wants a replay of the questions, fears, and uncertainty of 2020, the best way to prepare for the unexpected is to remember the lessons we learned in 2020.
A Responsive and Resilient Smart Home Supply Chain
The smart home solutions market is continuously punctuated by consumer demand. While in other industries, companies may be able to drive consumer demand to a specific feature or design, this is not the case for smart home solutions.
With a new consumer demographic looking for smart home products and appliances, manufacturers are forced to move away from legacy designs, form factors, and features. Connectivity, human-machine interfaces (HMI), ease-of-use, cost, and tangible benefits top the list of consumer expectations for their smart home technology.
The good news is smart home manufacturers are listening and paying attention to consumer demand, supply chain challenges, and market forces. Even more encouraging is that while there are numerous market forces impacting connected home solutions, many of our survey respondents say they are listening to consumer demand when developing their strategies and products. More than six in 10 (63%) said easy and reliable connectivity will be the most important factor to the success of their solution, while 43% said the same of interoperability.
Paramount to the success of these approaches to strategy and product development is remembering previous lessons with the electronics component shortage during the IoT boom. It's critical that manufacturers look to developing partnerships with supply chain management solutions providers that have the people, processes and technology to turn disruption into opportunity for their IoT ecosystem.
IoT Supply Chain Management and the Future
The impacts of COVID-19 will not be fully realized for years to come. What we do have and need to remember are our everyday firsthand experiences of a global pandemic. Lives were lost, businesses were shuttered, and global and national disparities in responses to the pandemic were constant.
The pandemic has also been a turning point for supply chains across all industries and regions. It forced companies to rethink logistics, partnerships, supplier relationships, and the importance of supply chain resilience. When done right, these three cornerstones of a successful supply chain give companies the tools, network, and confidence to remain flexible and responsive to whatever disruption occurs — whether that's a pandemic, a component shortage, labor slowdowns, or shifts in consumer demand.
How can you build resiliency into your supply chain? What processes do you need to ensure you're able to meet current future consumer demand? Where does IoT supply chain management need to go to ensure the losses of 2020 are not repeated? Who can deliver the supply chain, technology, design, and manufacturing expertise that allows for real growth and success?
The key now lies with companies to firmly remember the lessons of the pandemic, how they have shaped the industry today, and what they mean for tomorrow.
Download the 2023 Smart Home Tech Trends Survey Report
Insights on technology adoption, industry opportunities, and biggest challenges from over 200 IoT decision-makers at smart home and appliance OEMs.