The 7 key factors to IoT success

 Internet of things (IoT)The supply chain pipeline has seen a lot of hype over recent months regarding the Internet of Things (IoT) or the Internet of Everything (IoE) as others prefer to call it. But does all of this hype actually represent what is really happening?

The thing about all of the recent hype is that a lot of it looks at the future. It is true of course that the potential for the IoT is enormous, but it relies entirely on how quickly all of the individual elements are linked into the internet, and how companies begin to go about the business of accessing this information and putting it to good use. It’s only then that global supply chains will be able to reap the full benefits.

The Tata report on the status of the IoT

Tata Consultancy Services Limited is an Indian multinational information technology service company, offering consulting and business solutions, and is headquartered in Mumbai. They have just released a significant report regarding the current state of play with the IoT, identifying the 7 trends of IoT success that are frequently adopted by companies leading the trend race.

Tata begin their report by summarizing where we are with the IoT today. They say that it encompasses:

  • The hardware and software that is being incorporated into various products from cell phones to coffee makers, and from cushions to hi-tech aircraft.
  • The communication channels that facilitate products being able to link up to the net, and report their status back to businesses, supply chains and the global consumer network.

According to Tata’s report, there will be some 4.9 billion devices and pieces of apparatus connected up by the end of this year, 2015. But this is just the tip of a very large iceberg. According to Gartner, by the year 2020, there will be an astounding 25 billion devices connected and linked up, feeding into supply chains and consumers all over the world.

IoT trend setters GE and Caterpillar

Two of the important IoT trend setters are General Electric (GE) and Caterpillar. Apparently GE has already invested in excess of £1 billion in IoT research, development and equipment, which has reportedly already generated a similar sum in service revenue.

Meanwhile Caterpillar has stated that it is their intention to have all 3 billion of their machines linked up to the IoT within the next few years.

In Tata’s report they identify four specific types of monitoring.

  • The monitoring of premises whereby recording devices are placed strategically around premises such as banks, factories, hotels, and stores, and even mobile platforms such as busses and airplanes.
  • The monitoring of products which involves incorporating recording devices into products that are sold-on such as dish washers, fridges, washing machines, trucks and aircraft engines. Anything and everything that is sold and whereby the product itself, its status and its performance, would benefit by being reported on through the IoT, for supply chain purposes, manufacturing planning purposes etc.
  • The monitoring of the customer, via devices implanted into products like mobile phones, transportable health measuring equipment etc. This could be used to report on consumer demographics, consumer behavior, and to track a person’s medical health and even call the emergency services if needs be.
  • The monitoring of supply chains; achieved by installing recording devices into the various production processes, shipping channels, distribution functions, warehousing facilities and the retail environment.

A little clarification needed

Some of the above monitoring methods could do with clarification in terms of whether they are IoT, or existing other technologies such as RFID (Radio Frequency Identification) and things like bar-coding in supply chains. The only reason for saying this is that according to the Tata report, when questioned 44.9% of businesses said they were utilizing IoT technology. But this figure is far too high for IoT aone. It is still in its infancy as far as deployment is concerned, so it’s very likely that in the report, IoT technology and some standard supply chain technology have been intermixed.

The same could be said in terms of clarifying the distinction between IoT technology and devices like video recorders and mobile phones which could be classed as devices used for recording Big Data.

Key points from Tata report

The full Tata report is a significant document that totals 180 pages. To download a full copy of this report you can follow this link to the TRC website. In terms of this short article, Supply Chain Station has highlighted several key factors of interest.

Many large global corporates are committed to embracing the IoT

The IoT is one of the most significant events in decades for many large global corporates. The companies that were approached during the survey carried out by Tata, advised that on average they would each be investing in the region of $86 million per company, which relates to approximately 0.4% of their revenues. These investments will be on IoT related projects over the course of this year. The global supply chains will have to be updated accordingly. Looking forward, all of these businesses expect their IoT budgets to be increased by a significant 20% to $103 million per annum.

Businesses with more expensive products will invest more

It is foreseen that the businesses that offer higher priced products will be spending significantly more money on the IoT this year than companies whose produce lower priced products. This is because of the fact that IoT expenditure aligns strongly with the prices of a company’s products and/or services. So for example businesses whose products sell for more than say $10 million each on average, (products such as engines for aircraft and power turbines etc) will each spend approximately $335 million in 2015 on IoT projects. When we look at companies whose products are priced at the other end of the scale, at $100 per product for example; their spend will be significantly less, at only approximately £39 million per company per annum.

If you stop and think about it this is quite logical. It’s because the more valuable that a product is, the more value can be gained from improved tracking and accounting, and the more acceptable its cost will be in terms of IoT enablement when viewed as a percentage of the overall product costs. In a nutshell it leads to a higher return on investment.

For trend setters the IOT has a significant impact on increased revenue

Many of the companies covered within the survey that already had IoT programs in place, said that revenue increased by 16% on average back in the year 2014, in those areas within the business where IoT initiatives were already in place. On top of this approximately 9% of companies reported an average increase in revenue of over 60%. If this data proves to be realistic it will be a significant revelation that will in turn boost further interest, resulting in launching larger investments in IoT technology than is presently the case.

7 common factors shared by IoT trend setters

The so-called IoT trendsetters (the organizations who in many instances realized significant improvements in revenue) stand apart from organizations who only gained a little from their dalliance with IoT in seven major ways.

  • They think about their businesses in digital terms
  • They translate their digital thinking through the introduction of new business models, and innovative product and service offerings
  • They fully appreciate and embrace the phenomenal potential of the IoT
  • They realign their businesses to enable them to react rapidly to the data flow from the IoT
  • They are more open-minded when it comes down to accepting the changes that the IoT reveals about consumer behavior
  • They have a firm ethic of ensuring their IoT installations in the field are 100% reliable
  • They have a policy of making specific investments that win them small but significant gains

Don’t get left at the starting gate

Judging by this Tata report it certainly seems to be the case that appropriate investment in the IoT will not only lead to increased revenues, but also to increased market share. It will therefore be of considerable importance to any company of any size that wishes to at least retain its share of the market, to invest in IOT technology. The cold fact of life is that if they do not, they are likely to be left at the starting gate and as the take-up rate in IoT continues to accelerate, they will founder.


 

Has the company you work for yet made any investment in IOT technology? If so perhaps you would be willing to share some information with Supply Chain Station and your peers as to what those investments are, how much they have cost, and what effect (if any) they have had overall on revenue. Please also comment on what changes (if any) have been made in the supply chain processes as a result of IoT influence.

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