Revealing the hidden potentials of Internet of Things (IoT) - An integrated approach using agent-based modelling and system dynamics to assess sustainable supply chain performance

Abstract

The Internet of Things (IoT) brings new opportunities for creating intelligent and streamlined supply chains that have better environmental and cost performance as compared to conventional ones. In this paper, we quantify such improvements for a specific logistics chain case. To support the inventory of cost and emission data, we utilize system dynamics (SD) and agent-based modeling (AB) to define the structure of the two logistical systems, simulating and estimating differences in e.g., required storage levels, efficiency of transport, etc. In particular, we assess the difference in carbon emissions, cost, and market performance of a battery delivery chain in the delivery process between a two-tier IoT-supported supply chain (users are served by an IoT retailer directly connected to the producer) and a conventional three-tier supply chain (include an additional wholesaler to connect retailer and producer). The results demonstrate that IoT supply chains have significant advantages in minimizing average product storage and shipment fluctuations. IoT suppliers can estimate market demand to adjust production and transportation strategies for new orders. Consequently, the overall profitability of the IoT supply chain increases by more than 30%. Heating and lighting emissions in the storage process and direct emissions in transportation per functional unit (one unit of a Li-ion cell module) are reduced by 60%–70% under middle- and low-demand scenarios, and by at least 50% under high-demand scenario. However, the increasing use and higher loading rates of heavy trucks will weaken the advantages of IoT. Moreover, IoT products occupies a 10% lower market share compared to conventional ones under the same pricing strategy but achieves similar market share under the same value-added strategy.