The Internet of Things, Manufacturing, and the Supplier Network

In a forward-thinking article, McKinsey’s Markus Löffler and Andreas Tschiesner discuss the future of manufacturing with Siegfried Dais, deputy chairman of the board of management at German engineering company Robert Bosch GmbH, and Heinz Derenbach, CEO of Bosch Software Innovations GmbH. Front and central is the concept of the Internet of Things, which, through sensors and actuators, allows the physical world to become a type of information system. “The Internet of Things has already set in motion the idea of a fourth industrial revolution—a new wave of technological changes that will decentralize production control and trigger a paradigm shift in manufacturing.” The question is how will this shift affect production processes in manufacturing, and in particular the supply chain and supplier network. A couple highlights (directly quoted):

  • [The Internet of Things] will make logistics and the supplier network grow enormously more complicated. Although lean manufacturing can certainly reduce inventories, manufacturers will need to coordinate with more and more suppliers—often globally, and with longer transport times, more manufacturing steps, and significantly more parties.
  • Most companies think of physical flows—meaning the flow of material components through the supply chain—as separate from information flows and then consider how and where to coordinate and synchronize them. After the fourth industrial revolution, there will no longer be a difference between information and materials, because products will be inextricably linked to “their” information.
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