How integrating IoT with ERP systems transforms logistics and transportation: 5 key benefits

In 2023, the market of IoT in logistics was estimated at $42.3 billion and is projected to reach $146 billion by 2033. Logistics companies are increasingly adopting IoT and telematics in order to streamline their operations by collecting data on vehicle activities, routes, and delivery state and conditions.

By integrating IoT devices with their ERP systems, transportation and logistics companies enable a smooth data flow, maximizing the usage and efficiency of telemetry data.

There are five key benefits to connecting an ERP system with IoT and telematics systems, but also a couple common challenges logistics companies should know.

Defining telematics, IoT, and ERP in logistics

Before detailing the benefits, let’s get some terminology straight.

• IoT solutions in logistics refer to an ecosystem of sensors, actuators, and telematics devices that collect, share, and analyze real-time data throughout the logistics supply chain, such as data on inventory levels, vehicle performance, or cargo conditions.
• Vehicle telematics, as a part of the logistics IoT ecosystem, refers to the integration of GPS technology and vehicle onboard diagnostics to capture data on the location, movements, conditions, and behavior of each vehicle in the fleet.
• ERP systems used by logistics companies refer to a platform for managing the core aspects of their business processes, including finance, human resources, fleets, orders, and sales. ERP systems provide a unified view of logistics business operations, streamlining day-to-day workflows and facilitating better decision-making.

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Benefits of integrating IoT, telematics, and ERP

Integrating telematics and IoT with an ERP system creates a synergistic effect that boost the capabilities of all the technologies. This integration enables the consolidation of vehicle data in the ERP system, which allows logistics companies to get real-time visibility over their transportation processes.

For example, by relying on data about real-time cargo and vehicle location, logistics specialists can get precise estimations of the delivery time, plan fulfillment operations, as well as keep their clients informed on delivery timelines.

Here are other benefits that IoT, telematics, and ERP integration can bring to logistics companies:

1. Increased vehicle lifespan

Companies with large fleets have to invest significant effort and resources to ensure effective fleet maintenance. By equipping delivery vehicles with telematics systems, logistics companies can continuously monitor their vehicles’ location, speed, mileage, and critical technical parameters, like engine hours, faults, and overall engine health.

After integrating this data into the ERP system, fleet managers can plan out maintenance activities, as well as keep track of fleet maintenance costs, and store vehicle maintenance logs to identify recurring issues and predict future maintenance needs.

2. Optimized route planning and fuel consumption

Telematics devices gather data on delivery routes and vehicle fuel consumption throughout delivery. By aggregating and analyzing historical and real-time fuel consumption levels and checking them against the delivery routes in the ERP system, transportation managers can identify the most optimal itineraries to cut fuel-related costs.

3. Better cargo monitoring

With IoT sensors, logistics companies can get real-time updates on cargo conditions. IoT sensors attached to product pallets and installed inside cargo compartments can transmit real-time data on the temperature and pressure inside as well as alert on physical damage to the product. Companies can analyze the aggregated data on cargo conditions within an ERP solution to improve delivery conditions and optimize related transportation costs.

4. Improved driver management

In-vehicle telematics systems can collect and transmit information on the driver’s hours of service and the vehicle’s idle time to the ERP software. Relying on the gathered data, companies can, first of all, make sure that drivers don’t spend extra hours driving, putting their lives at risk. Second, the financial department can use the data on the number of logged working hours to calculate the payroll for drivers.

5. Better warehouse management

Logistics companies can also equip their warehouses with IoT sensors and devices to track inventory levels in real-time and avoid overstocking, as well as monitor warehouse conditions, like temperature and humidity, and maintain an optimal storage environment. IoT systems also transmit data on the health of warehouse equipment, like forklifts, conveyors, or pallet jacks. By consolidating and analyzing the collected IoT data within an ERP system, logistics providers can identify ways to improve inventory management and warehouse operations.

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But wait, watch out for these potential pitfalls

While telematics and IoT systems bring many tangible benefits to logistics companies, implementing and integrating them with ERP systems can present certain challenges.

1. Data security

The ecosystem of telematics and IoT devices significantly increases a company’s attack surface. Unprotected telematics and IoT devices integrated with an ERP may become a target for cybercriminals who can exploit these endpoints to access sensitive corporate data.

This integration must be implemented with a strong focus on security aspects to protect your business data as well as your customer’s sensitive information. Security measures include updating the devices’ firmware, encrypting connections, applying network segmentation, and setting up multi-factor authentication.

2. Data integration and compatibility

Establishing seamless integration between the systems can put all the benefits that telematics brings to logistics companies at risk if not done strategically. When selecting and implementing telematics and IoT systems, focus on communication protocols that the devices use at the physical, networking, and software layers. Using compatible protocols helps ensure complete interoperability between the devices and the ERP system, as well as full data compatibility.

IoT and logistics software experts can help you eliminate possible system incompatibilities and thoroughly secure IoT endpoints and your data.

Overall, gearing up your fleets with telematics and IoT devices and sensors and connecting them with your ERP solution helps ensure real-time visibility into your delivery workflows, reduce transportation costs, improve customer satisfaction, and establish better control over driver performance.