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How the Internet of Things Could Help Solve the Chip Shortage

Supply chain disruptions have become a common occurrence in the wake of 2020, and will likely remain so for some time. The recent computer chip shortage has created problems across industries, leading companies to reassess how they mitigate supply chain risk.

The confluence of a global pandemic, weather-related disruptions at a Texas chip-manufacturing facility, and a fire that disrupted operations at a Japanese semiconductor manufacturer all played a part in the sudden lack of materials, as well as the surging demand for semiconductors beyond manufacturers’ supply capacity. When these events inevitably disrupted intersecting supply chains, many companies were left vulnerable.

Among those hardest hit have been appliance, computer, electronic instrument and smartphone manufacturers — with the automotive industry taking the biggest blow. Ford cautioned that the shortage will reduce production this year by 1.1 million vehicles, reducing the company’s profit by some $2.5 billion. Though the global demand for chips was expected to be up last year, it came crashing down with the onset of the pandemic, prompting automakers to halt new production. When travel opened up again and the demand for vehicles increased, chip manufacturers were unprepared to meet the unexpectedly strong push.

Avoiding Shortages

When COVID-19 induced the need for a contactless environment, businesses came to rely on digital transformation to remain open and survive. Due to mandated restrictions, the majority of customer and employee interactions had to take place virtually, and companies that could not accommodate this need risked failure.

Though digital transformation saved many businesses from bankruptcy, it also led to at least one unforeseen consequence — supply chain disruption. Whether from the pandemic, harsh weather conditions, cyber breaches, or other human and natural disasters, a disruption in the supply chain can result in catastrophic losses. In order to mitigate those losses, supply chains must have reliable technology solutions.

The internet of things may be the key to those solutions. IoT is an ecosystem of interactions between devices, sensors, actuators, applications, data, analytics and networks, all communicating with one another. It’s anticipated to grow in the trillions of dollars over the next few years, in areas such as medical devices, wearables, cars, military, space and smart home devices. According to IHS Markit, the number of connected IoT devices worldwide will increase to 125 billion by 2030.

Industrial IoT originally found its way into manufacturing through its use in equipment such as computer numerical control (CNC) machines, air compressors and HVAC equipment. Now manufacturers use IoT to optimize fab and factory operations by rigging their precision tools, robotics and machinery with sensors and actuators.

Using IoT to collect and analyze data is key to avoiding supply chain disruptions before they happen. A manufacturing or fabrication plant with smart, connected equipment can share real-time data with operators, quality-control personnel and plant managers. In order to achieve this communication, they can connect sensor- and actuator-enabled equipment to on-premises and multi-cloud environments. Back-end functions analyze data from these devices to help manufacturers make informed decisions that ultimately reduce waste, improve product quality and delivery, and make the company more resilient to unpredictable supply chains.

A Unified View

The computer chip supply chain is far from simple. It includes research and development, production design, manufacturing, assembly, testing, packaging, inventory and distribution. It further encompasses semiconductor manufacturing equipment, materials and design software. Despite the complexity of the computer chip supply chain, IoT can help simplify the process of management and protection. The orchestration of IoT elements, along with the data collected and analyzed, creates an empirical assessment of supply chain performance, which manufacturers can then use to identify root causes behind performance issues, develop improvement plans and quantify progress.

In practice, managing supply chain elements at scale and in real time remains a considerable challenge. The difficulty lies in coalescing multiple systems to obtain a comprehensive view that, ultimately, allows one to analyze the right data and take the appropriate action. Complex supply chains require IoT systems that support a diverse ecosystem of technology, people and processes through a unified platform.

By integrating IoT with business workflows and systems, IoT orchestration provides a unified view of end-to-end supply chain data. An industrial IoT platform achieves this by integrating heterogeneous systems, software and sensors into one centralized management view. This visibility allows chip manufacturers to make more sophisticated use of the information collected, analyzing and acting on multiple data elements that were previously in siloed applications. Analytics derived from the data provide detailed insights into the end-to-end performance. These can include insights into demand forecasts, production, scheduling and inventory along the entire supply chain.

While controlling the global supply chain might seem overwhelming, the key is bringing the right information to the proper teams in a succinct format, so they can quickly make decisions. A single view with different conduits brings together data from multiple sources, including enterprise resource planning (ERP), customer relationship management (CRM) and IoT assets.

This is how a unified industrial IoT platform operates. It provides complete visibility under one fabric, to orchestrate, anticipate and remediate supply chain elements at the right time. An industrial IoT platform will holistically analyze the performance of business operations, from robotics and manufacturing equipment health, to inventory and shipping status, all in real time.

The holistic view enabled by an industrial IoT platform can be essential in preempting the cascading impact associated with material shortages, production disruptions and cyber breaches. An industrial IoT platform can additionally reduce operational downtime by identifying supply chain issues early on. It provides performance slowdown alerts and prevents inventory shortages by making data immediately visible. This allows manufacturers to be proactive rather than reactive and create self-healing systems.

Performance Matters

Customers and distributors of computer chip manufacturers are directly influenced by the impact of supply chain performance. Industrial IoT platforms enable companies to better compete, by unlocking a chain of capabilities within distributed facilities. They bring more intelligent operational efficiencies and competitive advantages. When the pandemic hit, enterprises that were already on their digital transformation journey had a competitive advantage over those that were slow to embrace it. Similarly, companies that preempt supply chain disruptions with industrial IoT platforms will be in a position to leapfrog competitors.

As IoT becomes integrated with artificial intelligence, manufacturing will see a reduction in many tedious and time-intensive manual tasks. Through the use of machine learning, real-time predictive recommendations can give plant engineers a heads-up before production workers experience problems. As more data is collected, AI will continually build its intelligence through assimilation. Virtual production assistants will help guide engineers to make improvements, before operators even know an issue exists.

Over time, as more data is collected and analyzed, the intelligence of the industrial IoT platform will increase to help predict points of failure and improve efficiencies. Locating the possibilities of IoT in response to the computer chip shortage is only the beginning.

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