Logistics management and inventory tracking have always been vital to business success. Historically, these methods were more functional than efficient, with companies relying on manual counting, punch cards and simple bar codes to track goods. More recently, new technologies made tracking easier with the introduction of radio frequency identification (RFID), which monitored location and conditions in near real time. This paved the way for the internet of things (IOT), a network of connected devices that would ultimately transform logistics.

What is the IOT for logistics?

The IOT for logistics refers to using a network of internet-connected sensors, devices and software to gather and exchange data throughout the supply chain. These devices can be embedded in products, vehicles, warehouses and more to collect real-time information on location, temperature, humidity and other key data points. This information is then sent to the cloud, providing unprecedented visibility into every step of a product’s journey.

How is the IOT useful in logistics?

The IOT for logistics offers significant benefits, particularly in a complex and unpredictable global environment. First, these devices provide real-time visibility, which is crucial for modern supply chain risk management. With sensors providing data about the condition and location of goods, logistics managers can identify and respond to disruptions immediately, improving supply chain resilience. This real-time data visibility also dramatically improves the planning process by providing accurate, up-to-the-minute information.

Second, the data from IOT devices offers valuable insights for operations. For example, with the IOT in warehouse management, connected devices can track inventory with pinpoint accuracy, optimizing workflows and improving efficiency. The constant flow of data from these devices is foundational to visibility in supply chain logistics and helps companies move from manual systems to a data-driven, automated approach.

Finally, IOT solutions are enabling greater supply chain traceability and security. From edible microchips in luxury foods to smart labels and unique QR codes, these devices create a digital twin for each product. This helps combat counterfeit goods and guarantees authenticity. As a result, the ability to fulfill an order quickly, accurately and with full transparency is becoming as important as the product itself.

Choosing the right device

Today, IOT devices are becoming smaller, cheaper and more functional, offering far greater capabilities than previous solutions. According to a McKinsey report, the IOT market could be worth up to $12.6 trillion globally by 2030, with a significant portion of that value concentrated in supply chains. 

The options for devices are plentiful, and seleting the appropriate tool depends on the use case. RFID or Bluetooth may work well to track inventory in and out of facilities in a closed-loop supply chain, whereas a device with wide-area network connectivity and additional sensors is better for understanding where in a multi-leg journey supply chain goods get damaged or held up. Smart packaging is ideal when the supply chain manager or consumer needs to be sure a product is authentic, and smart labels specifically are becoming much more widespread: ABI Research estimates that 581 million smart labels will be shipped in 2028.

QR codes gained popularity with consumers during the pandemic due to their simple format and integration with smartphones. And unlike bar codes, the information stored in a QR code is extensive: up to 7,000 characters, making them useful for supply chain managers seeking product data as well as customers interested in understanding more about their purchase’s authenticity.

An evolution in inventory tracking

From manual counts and bar codes to today's smart sensors and data analytics, logistics has evolved to a point of unprecedented intelligence and efficiency. The IOT for logistics is not just a trend; it's the foundation of a new era, enabling real-time visibility and traceability that fortify the modern supply chain. While this technological leap introduces challenges, the potential for improved supply chain resilience, greater security and more precise operations demonstrates that the future of logistics will be defined by an ever-smarter, more connected world.

Develop a working knowledge of the emerging technologies that are affecting supply chains with the ASCM Supply Chain Technology Certificate.

Editor's note: This article has been updated to reflect current supply chain topics and trends. The original publication date was September 2023.