4C Associates’ Jeremy Smith considers how the internet of things is changing the way businesses and consumers interact.
The internet of things is not a new concept. The idea of countless devices connected to each other via the web has been around since the late 1990s. In fact, Kevin Ashton, Executive Director of Auto-ID Center, coined the phrase in 1999 during a presentation about opportunities in the supply chain.
He predicted that computers would rapidly progress from being devices that simply store data to becoming objects that can gather and interpret information. Fast forward to today and there are roughly two billion smart phones able to collect, analyse and share data, across the globe.
In addition, more and more homes are equipped with smart central heating systems, washing machines that automatically reorder washing powder and connected entertainment hubs. These developments have all received much attention, but how are businesses leveraging this technology?
When it comes to the internet of things, some industries are ahead of others. Manufacturing, for example, is already using this technology to organise and track machines, tools and even employees to ensure maximum efficiency. The farming industry has also benefitted from the advent of connected devices and some businesses are able to monitor livestock and crops in real time.
However, one of the biggest opportunities lies within supply chain optimisation. Monitoring goods across vast and complex routes has the potential to expose numerous areas to improve. Last year, Cisco and DHL estimated that the use of connected devices and tracking solutions could create $1.9 trillion worth of economic value in global supply chains.
Take the retail industry. The rapid growth of online shopping, combined with the uncertainty surrounding Brexit has led to a drop in the number of new shops in the UK. In fact, closures outnumbered openings by almost 2,000 from January 2016 to the end of June, according to Local Data Company. Not a sign of a booming industry.
However, connected technologies can help retailers drive business growth. One of the most obvious ways to do so is by increasing supply chain visibility. Real time inventory figures, combined with customer data and machine learning will lead to reduced storage and transport costs, better customer service and increased profits.
Retailers are also looking to personalise consumer experiences by creating a seamless journey that incorporates digital and bricks and mortar shops. Data gathered from smart devices has already opened the doors for dynamic pricing, tailored promotions and targeted messaging.
Efficiency and cutting costs
Trenitalia, Italy’s national rail company, recently demonstrated another way in which businesses can leverage the internet of things. The company worked with SAP to create a new solution called Dynamic Maintenance Management Systems (DMMS). This system collects data in real time from hundreds of sensors throughout its trains.
As a result, the company no longer relies on guidelines to determine when it needs to carry out maintenance on a train. Repairs are never undertaken where they are not necessary. Trenitalia predicts that it will cut maintenance spending by 8-10% per year and cut €10-20 million off penalty payments due to service failures.
New challenges and consumer confidence
Of course, the internet of things is not without its own challenges. Different devices employ different operating systems and bringing them all together is likely to prove a challenge. In this context, the risk of data theft will need to be carefully managed in order to avoid fraud and maintain consumer trust.
Products such as the Amazon Dash are a window to what the future might hold in terms of developing a direct-to-consumer channel.This new device allows consumers to order a set product via a click of a button on a lost-cost, connected device. For example, you might have one which orders new razors when you see you’re running low.
In my previous blog The Dash for innovation in B2B commodities I consider the impact of this integrated supply chain service which is run on the principles of Lean Consumption.
A tempting proposition, however, research firm Slice Intelligence estimates that less than half of people who bought Dash buttons use them. One of the key issues is the cost of delivering single items. At present Amazon Dash products are only available to subscribers to its Prime service, however, costs will need to drop if the system is to appeal to the mass market. Supply chains are effectively still playing catch-up to this new technology.
First movers have most to gain
It is difficult to overstate the impact that the internet of things will have on our lives. A recent study by Gartner estimates that by 2020, the number of connected devices will increase by up to 30 times. That’s 21 billion devices with the potential to connect and share information in real time.
The combination of this data with increased capacity for analysis will revolutionise the way the world works. Leading businesses need to move quickly if they are to understand and take full advantage of these new possibilities.