Smart Meter Lessons for a Smarter Supply Chain

IBM Corp. says it wants to help manufacturers build smarter supply chains.

It's a worthy goal and one the company is pursuing with zeal as it expands its non-hardware offerings in continuation of a reorganization program that has seen the company exit the PC manufacturing market. To achieve this objective, manufacturers can also glean some lessons from the mini-revolution of smart meters occurring in the power market.

The concept of smart metering has been around for years but the product is finally arriving at customer and within years I believe they will dramatically alter the relationship between users and producers of electricity and gas. Power companies in the United States are replacing old electricity meters with the first-generation of smart meters, reproducing what has been going on in Europe for quite awhile.

The main difference between smart meters and traditional products is that the new ones offer two-way communications between the consumer and the power authority in addition to a slate of easily accessible information that can help the user modulate consumption, track wastage, and avoid sticker shock when the bill arrives.

Brilliant: Accuracy, early conflict resolution, and cost savings come with smart meters.
Isn't this what we want in the manufacturing supply chain?

For the purpose of this blog, let me restate some of the advantages of the smart meters as highlighted by Consumer Focus, an industry and consumer association in the United Kingdom:

Accurate bills: The smart meter sends information to the energy supplier on usage.

Standard, in-home energy display: A small screen shows how much energy is being used at any one time.

Cost savings: Knowing what you're using, and having an idea of which appliances use the most energy, you may be able to reduce your energy usage and save money.

Reduced theft of energy: From being able to prevent and detect theft of energy more easily.

Faster problem resolution: Technical problems and faults with the supply of energy are easier and quicker to identify and fix, translating into less inconvenience and time without energy supply.

The above advantages are in sync with the goals for the Smarter Supply Chain of the Future that IBM identified in a major study in which it polled more than 400 companies. The smarter supply chain of the future, IBM said, must meet five key goals: increased visibility, satisfy customer demands, control costs, manage and reduce risks, and address opportunities in emerging markets.

The five key challenges facing supply chains as identified by IBM in the document discussed above in some ways remind me of the advantages advocates of smart meters believe their product will help customers and power generators achieve. The challenges are as follows:

Cost containment: Rapid, constant change is outstripping supply chain executives' ability to adapt.

Visibility: Flooded with more information than ever, supply chain executives still struggle to "see" and act on the right information.

Risk: CFOs are not the only senior executives urgently concerned about risk; risk management ranks remarkably high on the supply chain agenda as well.

Customer intimacy: Despite demand-driven mantras, companies are better connected to their suppliers than their customers.

Globalization: Contrary to initial rationale, globalization has proven to be more about revenue growth than cost savings.

I realize many in the technology and manufacturing sectors would rather focus on opportunities in software, services, and consulting because these -- unlike hardware -- promise higher margins, but as the power industry has shown with the introduction of smart meters, the merger of hardware, software, and the latest technology innovations can help companies achieve the same goals.

Electricity and gas companies, perhaps because they are not really in the hardware business, harnessed the strengths of their suppliers to come up with solutions (smart meters) that are helping them solve a myriad of problems while offering customers palpable advantages. That's a strategy for success that could easily be copied by the manufacturing industry if it wants to create cost-efficient systems and the smarter supply chain for the future.

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