Proceedings of the 2012 IEEE ISMOT

The Internet of Things Technology in Logistics Application:

Stages, Trend and Drive Modes
D. X. Ruan, D. Wu, X. B. Wu
School of Management, Zhejiang University, Hangzhou, P.R.China
(dxruan@163.com, wudong@zju.edu.cn, xbwu@zju.edu.cn)

global positioning systems, laser scanners and other

various devices. The purpose of IOT is to make all items
connected to the network, which can facilitate the
identification and management. There are many related
technologies of IOT from its definition, but it is generally
believed that the core of the IOT technology is RFID,
which identifies the target by its non-contact two-way
data communication through radio frequency. From the
functional point of view, the key advantages of RFID is to
achieve the following five functions: First, to achieve
Non-contact, in visual recognition, and complete product
identification without human intervention, make
automation be easier; Second, to have long-distance
Reading, high-speed recognition, remote monitoring of
cargo fast- storage; Third, multi-objective reading, which
greatly accelerates the identification efficiency; Fourth,
can be identified on a single product, to facilitate
real-time access to specific information via the Internet;
Fifth, able to implanted objects, monitoring during the
entire process, .no-damage and real-time. Specifically, the
IOT system consists of three parts, shown in table I.

Abstract - The application of Internet of Things(IOT)

technology has brought the transformation of wisdomlogistics, and also has provided a new development space for
the logistics enterprises. But, it should be a clear
understanding that the application of IOT is still in its
infancy in the field of logistics, where there are still many
immature in its technology, safety and mode. According to
the understanding of situation, this article systematically
analyzes the current obstacles in the application of IOT in
logistics enterprises, as well as the development stages and
characteristics of near-medium-term trend of IOT in them.
Besides, the article also proposes three drive modes in
Logistics field, on the purpose of providing some references
for the logistics enterprises, who could seize future
opportunities and meet challenges.
Key Words - Logistics enterprise, Internet of Things,
stage, trend, drive modes

I.

INTRODUCTION

In 2011, the total social logistics costs in China were

as high as 158.4 trillion RMB, which achieved an
increase of 12.3% according to the constant price.
However, the total social logistics costs amounted to 8.4
trillion RMB, accounting for 17.8 percent of GDP.
Compared with 10% of the developed countries of Europe
and the United States, 7-8% of Japan, it reflects high cost
and low efficiency of the logistics operation in China.
In this regard, the logistics industry restructuring
and revitalization plan clearly brought up the direction to
accelerate the development of modern logistics industry.
However, many problems such as the development
methods of modern logistics, the use of which technology,
how to break the shackles, which paths and steps to
choose and so on, have not been very well solved. The
recent rise of the IOT, although still in the concept of
import stage, its great potential deserves us to pay enough
attention to it, which will also bring answers to the
questions above to some extent.

II.

TABLE I
THE COMPOSITION OF THE IOT SYSTEMS

SYSTEM
COMPONENTS
The coding system
of the global
Electronic Product
Code

Radio frequency
identification
system

Information
network system

NOTE

Electronic Product
Code (EPC)

Unlike the
one-dimensional bar
code, can identify the
specific
two-dimensional code
of the target

EPC LABLE
(including RFID
label, Sensor,
Bluetooth, Bar
Code, etc.)

Attached to the items on

or embedded in the
items being

Tag reader

Reading EPC tags

Savant/ALE

EPC system software

support system

Object Name
Service (ONS)

INTERNET OF THINGS AND IOT SYSTEM

The Internet of Things, which can also be called The

Sensor Network, is a huge network, which combines the
Internet and a variety of sensing devices, such as radio
frequency identification devices (RFID), infrared sensors,

978-1-4673-4593-4/12/$31.00 2012 IEEE

NAME

452

Physical Markup
Language (PML)

Programming language
of description of the
product attributes and
related state

IPv6 Network
protocol

A definition of the
address space of the
agreement, now is IPv4

Proceedings of the 2012 IEEE ISMOT

At present, the United States and Japan walk in the

relative forefront of the development and application on
the IOT technology, but on the whole it is still in the
research and the preliminary stages, cause its
development, application scope and depth is very limited.
Chinas application is mainly in terms of license security,
electronic payment, access control, according to 2010
statistics, they accounted for respectively 45.2%, 24.9%
and 15.9%. With the states promotion strategy of IOT
carrying out, the label cost lowering, the technology
development and industrial transformation and upgrading
implemented, thus, IOT in the field of supply chain
management, intelligent transportation, tele-medicine,
environmental protection and other deep-level application
will be rapidly developed.

Shanghai Hua Hong, Invengo, Cvicse, Tsinghua

Tongfang. It may also be the leading international service
providers such as IBM, Palantiri System, 7Layer, etc.
Besides, it may also be professional parks or government
organization platform integration, such as the Innovation
Park of Wuxi sensor network or the Internet of Things
Industry Research Institute etc.
TABLE II
PREDICTION OF STAGES OF IOT IN LOGISTICS APPLICATION

STAGE

III. STAGES AND MEDIUM-TERM TREND OF IOT

IN LOGISTICS APPLICATION
We should clearly recognize that, although IOT is
considered to be an important tool for the logistics
industry to upgrade, but its application still exists five
major problems--standards, technology, cost, safety and
industry interoperability. According to this, EPC global,
CCID, China Mobile IOT laboratories and other research
institutions predicted that IOT technology could not be
matured until at least 2020, and universal application may
be required by 2030. According to the forecast data
compilation of the research institutions, this paper
considers that the application and popularization of IOT
in the logistics industry will follow the five stages as
follows shown in table II, the corresponding logistics
industry in various stages of the following features.
As seen in table II, in recent years, we have basically
completed the first and second stage of development of
IOT. We believe that with the further promotion and
application of IOT, the logistics industry will get a series
of shallow-to-deep change. Especially in the last
mid-term (2010-2020), the third stage, IOT still show
some features, such as the upstream and downstream to
accelerate the promotion, deepening the development of
multi-industry, the advantages continue to strengthen the
standards to develop a unified, technology is still perfect,
the use of the relatively high cost and other features.
During this period, it may also occur the following
modern logistics business model.
A.

CHARACTERISTICS

The realization of the

basic recognition
capabilities

2. 2000-2010

Anti-collision (to
improve stability),
replication, and an
external antenna
identification

3. 2010-2020

Semi-automatic,
automatic digital
processing, and
automated
communications, power
management (address
energy issues)

Extended to the
purchasing agent,
terminal sales and
circulation, more
industries, as well as
e-commerce, the
emergence of new
market segments and
business models

4. 2020-2025

Raise the degree of

automation, automatic
data processing to
enhance the energy
consumption problem
solving, automatic
positioning

Supplying in chain
integration, and expand
the one stop solution
services in the area of
the whole industry chain

5. 2025-2030
(And after)

Smart devices, automatic

network connection,
automatic positioning,
the user interface
processing

A modular, systematic,
network, and the virtual
into the characteristics
of the supply chain
network management
organization to achieve

B.

Warehousing,
transportation, loading
and unloading part of
the link a small number
of high-priced industry
(alcohol and tobacco,
medical care, luxury
goods) application

Booming E-commerce Distribution and Logistics

Industry Cluster

On the one hand, the IOT and e-commerce have a

natural fit. IOT brought about the rapid response, security,
support goods to verify and improve supply chain
efficiency, which makes up for the deficiencies of the
current development of electronic commerce; On the
other hand, the IOT has the total costs are high, but the
marginal and low cost. The characteristics of large
quantities of many varieties of e-commerce and logistics
business clusters, make the application have a higher cost
performance. Just like todays IT enterprises cluster
development, logistics industry cluster based on the IOT
may form a set of things of each functional module
manufacturers, consulting service providers, rental
service providers, as well as the logistics platform for
enterprises, operators and research institutions as one of
the modular industry cluster.

Professional IOT services providers Spring up

Everywhere

Because of the barriers in technical methods, means

of operation and cost of on-line in the promotion of IOT,
it is difficult to achieve internal promotion of professional
logistics operators, which makes the supplementation IOT
service providers for the field of logistics arise, to provide
technical advice, equipment leasing, software design and
other related services. These service providers may be
domestic RFID manufacturers and system integrators, e.g.

978-1-4673-4593-4/12/$31.00 2012 IEEE

TARGET

1. Before 2000

453

Proceedings of the 2012 IEEE ISMOT

C.

Various Segments
Flourishing

of

Industry

Circulation

From the aspect of IOT application in the United

States, we can see that the characteristics of the terminal
sales circulation drive are obvious. The first large-scale
put out the IOT application undoubtedly due to the retail
giant--Wal-Mart, who required Sams Club suppliers to
Wal-Mart goods transported on pallets, must carry an
RFID tag, before January 31, 2008. In 2010, Sams Club
stores had achieved the RFID tag of a single product, but
this plan failed due to high costs and resisted suppliers.
However, in some of the products and areas, Wal-Mart
has practiced the application of IOT skillfully.
As You can see, because of the existence of a strong
terminal for Wal-Mart, the costs can be allocated to the
supplier and the body of the upstream and downstream
enterprises in the practice of the U.S. Wal-Mart.
Therefore, the United States shows the flow of
business-driven mode of terminal sales of its business
model, which is pay based on suppliers business model.
These are all related to the global operations of U.S.
enterprises. Their supply chain is quite long and suppliers
all over the world, as well as strong terminal industry
characteristics. Similarly, some European countries such
as Frances Carrefour, begin to use a wireless real-time
management solutions based on IOT.

The IOT is difficult to fully swing in all industries in

circulation at the beginning, just as mentioned previously.
Firstly, the high-value-added circulation industries such
as alcohol and tobacco, medical care, luxury goods,
automobiles, ship will be the first to use, cause the gains
brought about by IOT will be far more than the cost;
Secondly, on the circulation of commodities such as steel,
lumber, building materials, oil, electrical and mechanical
products etc., IOT may also be followed soon; Finally, in
the flow of sales terminals, Wal-Mart management
aspects of the supply, Shanghai Lianhua convenient
distribution centers and so, begin to apply Physics
networking technology to improve efficiency, and will
promote in the future. It may even be born of things
logistics providers, networking and settlement of sale
terminals or trading center, such as the formation of
European franchised supermarket frozen food cold chain
logistics as the core, the formation of the franchise of
things smart supermarket.

IV. DRIVE MODES OF IOT FOR LOGISTICS

APPLICATION

B.

Although the changes and benefits of IOT to the

logistics industry are comprehensive, but it can be said
that this road is not a vast flat because of many obstacles
and stage conditions and other factors. Especially for the
logistics industry, not only exist the afore-mentioned five
major obstacles, but because the physical attributes of
goods in circulation, packaging shape, object size,
movement speed, and the environment so vary, there are
still obstacles on the promotion of IOT. Difficulties
encountered in the implementation of Wal-Mart RFID
program Hong Kong Airport Authority RFID projects,
shows that the IOT technology needed to be further
improved. The promotion of a new technology requires a
long time, the bar code development to the present day
such an extent has spent more than 20 years.
However, despite many difficulties, some scholars
and industry-insiders believe that the key is not these
problems of costs, standards and techniques, but the
formation of a profitable business model in the logistics
industry and the formation driven by an inner driving
force. If there is a drive mode, which allows enterprises to
obtain phase drive mode for the cost of high-yield, it will
not be a problem in the hardware supplying capacity even
if the cost is higher and the technology is more complex.
Therefore, according to the current literature and the
development of the global IOT, we can be divided it into
the following three drive modes.
A.

Japan has always been known for technological

innovation capability of the manufacturing enterprises,
and the development and application of IOT are no
exception. Japanese enterprises have not supply chains as
complex as the American Enterprise, however, the
high-income-levels Japanese consumers have high pursuit
of product quality, which makes the Japanese
manufacturer widely used intelligent control technology
in the manufacturing of many household appliances and
other fields, and the increase costs are paid by the
consumers.
Advocated by the UID Center, the intelligent
application of RFID was ubiquitous, and the technology
will be integrated into the electrical equipment to enhance
its intelligence (such as the Tag RFID smart washing
machines, Automatically set the wash program when
detected clothing), Chinas Little Swan IOT washing
machine is the joint research and development with the
Japanese manufacturers. The additional costs brought
about by RFID are paid by consumers in the end. The use
of RFID attracts many consumers, because of the
affluence of the Japanese and the pursuit of quality of
goods, making them more willing to pay the costs arising
from the use of RFID. Therefore, Japan can be called the
drive mode of the front-end manufacturing, a business
model which is based on consumers to pay. Similarly, in
this regard, South Koreas Samsung, LG R & D
investment is also a similar drive mode.

Terminal Sales Circulation Drive Mode Represented

by the United States

978-1-4673-4593-4/12/$31.00 2012 IEEE

Front-end Manufacturing-driven Mode Represented

by Japan

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Proceedings of the 2012 IEEE ISMOT

C.

Government-driven Mode and Multi-party Co-drive

Mode Represented by China

Zhejiang Provincial Natural Science Foundation of China

(Grant No. LQ12G02015).

China has neither the complex supply chain nor

strong sales terminals, and also there is no spending
power of the intelligent electrical equipment and a large
number of powerful manufacturing enterprises. From the
current point of view, the characteristics of the
application in China reflect the push of the government.
For example, the redemption of the second generation ID
card, vehicle scheduling system of RFID application in
the Ministry of Railways, part of government oversight,
supervision and management, etc., are all governmentdriven applications. Besides, the promoting of the smart
grid recently, intelligent transportation construction,
Experience China development strategy, logistics parks
and bases all over China, etc., are all closely related to the
strong support of the central and local government.
Investment in IOT has the characteristics of public
goods investment in the logistics field, and it also exists a
common phenomenon that upstream invests, the
downstream benefits. So it is expected that Chinas recent
IOT will still be the government-driven model-based.
Some capacity-owned ports, airports, highways,
large-scale logistics enterprise groups and Internet of
Things parks and bases will become the investment body.
Therefore, we can expect that in the near future, China
will form a government-driven model and a business
model based on the government to pay.
However, the simple government-investment drive
mode is difficult to sustain. It is expected that the
multi-parties driven in the industry chain model may also
simultaneously occur under the context of development of
the domestic industry chain is not yet mature and perfect
conditions, due to the inherent profitability of Things
attractive. Such as the field of terminal sales in China,
Shanghai Lianhua began the construction of things.
Among the front-end manufacturing enterprises,
Maanshan Iron & Steel, Haier, Little Swan and other
manufacturers also have begun the application. At the
same time, due to logistics enterprises in the middle
reaches of the supply chain, it gets the strengths and
channel advantages of the information intermediary, so
whether it is upstream or downstream investment in
advancing will bring the welfare spillover effects on the
middle logistics chain. Of course, there may be spillover
of such benefits, which make logistics enterprises of the
upstream and downstream enterprises be pulled into the
investment. Even, the application of supply chain of
large-scale logistics of IOT may occur, which will benefit
the multi-parties to share investment income.

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ACKNOWLEDGMENT

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This research is supported by China Postdoctoral

Science Foundation (Grant No. 2012M511896), National
Natural Science Foundation of China (Grant No.
71232013, 70910107021, 70902059, 71002103), and

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