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Putting IoT to Work in Procurement

March 7, 2022
How procurement teams can leverage the power of the Internet of Things to solve challenges and work smarter, better and faster.

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A system of interrelated computing devices, mechanical and digital machines, objects, animals or people that can transfer data over a network without the need for human-to-human or human-to-computer interaction, the Internet of Things (IoT) uses processors, sensors and communication hardware to collect, send and act on data acquired from specific environments.

IoT devices do the heavy lifting of sharing the collected sensor data via a gateway or device, and again without human intervention (although people can interact with the devices, if they so choose). IoT can be applied across numerous different applications. For example, smart thermostats, smart appliances, connected heating, lighting and electronic devices are being used to control a home’s systems remotely, while the Industrial Internet of Things (IIoT), connects machines, tools and sensors on the shop floor to give process engineers and managers better production visibility.

IoT in Procurement

The connected, sensor-based systems that make up IoT are finding their way into the procurement space, where Kissflow Procurement Cloud’s Mohammed Kafil says the ability to transfer data without the need for person-to-person or person-to-device contact helps speed up the process of gathering, assessing and acting on data.

As procurement departments adopt new technologies to improve productivity, enhance customer service and save money, Kafil says more of them are looking for new ways to embed IoT technology into their processes.

For example, he says IoT can improve spend visibility and help procurement professionals better understand supply and equipment utilization. “By understanding precisely what is being utilized and what is required, your procurement team will be able to optimize catalogs and manage spending,” Kafil writes in “How Procurement Teams Can Benefit From IoT.”

“The capacity to foresee demands more precisely through analytics can significantly improve budget and contract management,” he adds. “Moreover, data generated through IoT sensors and other devices can help make informed decisions.”

Making Significant Contributions

Kafil says IoT sensors can “significantly contribute” to an effective inventory management system by combining RFID tags with IoT devices to track physical inventories while eliminating the need to scan barcodes or labels. 

“Additionally, businesses can track the days before items expire using interconnected IoT devices,” he points out, “which is particularly valuable when a company has a vast inventory, and there’s a threat that the products may expire.” In this scenario, IoT devices can alert management when those due dates are looming, saving inventory from being discarded as waste. And because IoT also helps companies track the location of their inventory, they can more readily thwart product pilferage.  

According to SoftCo, mobile devices are now commonly used in the procurement function to gain instant access to analytics, order data, and requisition and invoice approval. Now, a more “experimental group” of procurement leaders are realizing the broader use for IoT and mobile technology in their operations.

SoftCo says IoT can also help increase the traceability of products and materials across the entire supply chain. “Understanding where products or materials are at any stage throughout the supply chain can be critical to success for organizations,” it points out. “In many industries, tracking materials that make up a finished product could be compulsory to meet regulatory requirements.”

IoT in Action

In one example of how procurement can leverage IoT for better decision-making and to increase process efficiency, SoftCo says one company is putting sensors and tracking devices on its delivery trucks. The goal is to flag when those vehicles may break down or fail before these problems actually occur. The sensors offer real-time information on each vehicle’s condition and repair requirements.

“IoT presents an opportunity for procurement professionals to improve spend visibility,” SoftCo adds, “and better understand their supply and equipment usage.” When they have this information at their fingertips, buyers can make better and faster decisions. IoT can also be used to automate tasks and free up time that procurement professionals can use to focus on more important projects.  

As IoT continues to evolve and as more companies embrace it, expect to see more applications of IoT in the procurement sector, where smart sensor-based decision making can help companies save money, be more productive and operate more efficiently.

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.