IoT capabilities could also be used to manage staff hours through a better understanding of where staff are best used, e.g. checkouts vs replenishment.

The use of sensors to provide accurate, real-time information through the supply chain can help almost every aspect, and some benefits are already being seen; we are clearly only in the early stages of what will ultimately be possible. It is critical to driving improvements in waste, emissions, and inventory management and thus driving revenue growth and cost efficiency throughout the supply chain.

IoT's impact

At the food production stage, IoT technology can drive better yields through monitoring of external factors and better quality control.

Through transportation, better information can drive improved product flows, optimising logistics utilisation and improving product quality through monitoring factors like temperature, etc. on an end-to-end basis. Lower food waste and emissions are critical to the ESG goals of many consumer businesses and can be helped by IoT capabilities. For example, the connectedness this technology brings will help retailers target Scope 3 emissions, which is currently a challenge.

In the retail supply chain, better information around inventory levels can improve availability (helping sales and customer satisfaction), monitoring promotions in real time, helping retailers and suppliers drive better ROI. IoT capabilities could also be used to manage staff hours through a better understanding of where staff are best used, e.g. checkouts vs replenishment.

Even in consumers’ homes, while it has been slower to take off than expected, more connected devices can improve factors such as food waste (most of which happens in consumers’ homes).

Mr. Jeremy Fialko, Head of Consumer Staples Research, Europe, HSBC Bank plc said a digitally connected supply chain can help consumer goods companies in a number of ways evolve in order to better meet customers’ needs. The key is being able to combine agility with significantly greater complexity arising from the fragmentation of consumer needs and channels. Increasingly, what makes the difference is not only the products and services companies bring to the market but the way they are able to adapt them to deliver bespoke solutions which better fit consumers’ needs. The competitive environment is becoming more complex, and companies are investing more in consumer and category insights. This is to better understand the way consumers shop and behave in order to anticipate and better respond to these changes.

Supply chain sustainability and traceability

Factors such as energy efficiency, waste and water usage are tracked via sensors, allowing for effective management of resources and more accurate, granular results. In supply chains, IoT device monitoring assists in tracking these metrics globally, giving real-time carbon data and predictions. This provides stakeholders with an accurate understanding of impacts, allowing companies to effectively record data and provide greater visibility for investors.

This is key to apparel retailers, including fast fashion, which remain at the forefront of investor concerns over the impact that clothing manufacturing is having on the environment from a water usage and pollution perspective.

"We highlighted the challenges facing investors in terms of screening retailers for their sustainability and other ESG credentials. Retailers that have extensively mapped their supply chains—beyond Tier 1—and publicly reported the accompanying code of conduct and supplier information, have already made themselves more accountable to investors, customers, and the media. Use of IoT could allow retailers to take greater responsibility for the practices in their supply chains", Mr. Jeremy Fialko said.

Warehouses and logistics

As noted on page 10 of this report, only 5% of manufacturing companies used automated warehouses in 2016, with only 15% mechanized and 80% manually operated. This is an area of operational focus for an increasing number of retailers looking to streamline the time it takes to receive deliveries from suppliers, and then better allocate/manage that inventory through increasingly sophisticated omni-channel routes to market.

If successfully implemented, the benefits are multiple: improved availability, higher full price sales/reduced markdowns, and higher gross margins; Reduced operating/labour costs through via automaton and resulting cost to serve; Increase in stock utilisation, resulting in lower required inventories, i.e. doing more with less.

The development of new warehouse management solutions such as THG’s newly developed, next generation ‘FIR/ST’ (Fulfilment & Inventory Retrieval/Storage Technology) solution is one such example. FIR/ST is a cross-border software solution formed through the integration of AutorStore’s proprietary Automated Storage Recovery System and THG Ingenuity’s propriety Voyager Warehouse Management System, and will deliver meaningful operating and cost improvement, including reduced fulfilment cost per unit, increased implementation speed, and reduced integration risk compared to comparable products in the market place.