Guillaume Roels
http://smartdatacollective.com/rick-delgado/285576/scary-security-concerns-internet-things
By some projections, there will be 30 billion interconnected devices in 2020. These devices will be able to anticipate what you need or want, depending on the context, and they will respond accordingly. In your car, these devices will give you access to content stored in the cloud, such as multimedia and real-time 3D navigation with traffic, and they may also communicate with other vehicles’ devices to improve your safety. In your home, they will automatically adjust the temperature or the lighting, turning on and off other devices, such as your coffee machine when you wake-up or your AC unit when there is too much workload on the grid. They will automatically lock your door, perhaps using biometric monitoring, or help you get a good night of sleep. They will also fundamentally change the way cities operate by monitoring and managing energy in real time on the smart grid, by alleviating congestion through smart transportation systems, reducing waste with intelligent water and recycling systems, and improving safety with smart LED lighting. Welcome to the Internet of Things (IoT)!
How is IoT going to change the way supply chains operate? Based on what I have observed, many supply chain managers understand how IoT could improve supply chains, by making them more efficient, reliable, secure, and sustainable. However, very few think about how IoT could radically transform their supply chains, by completely redefining their business models. So how do you plan to leverage IoT? Are you up for improving your business model or radically transforming your business model?
Improving Your Supply Chain
There is no doubt that IoT will achieve dramatic gains in supply chain efficiency. Let me offer two particular examples. By having sensors on every pallet in the supply chain, combined with GPS information, fleet routes could be dynamically optimized by monitoring traffic in real time. In factories, lighting and temperature can be adjusted depending on whether the manufacturing operations are left unattended or not.
In addition, dramatic improvements in customer service can be achieved by monitoring inventory in real time and anticipating stockouts.
IoT will also make supply chains more reliable by putting sensors on every engine that has a risk to break down and in every pipe that has a chance to leak and dispatching the maintenance teams before such breakdowns occur.
Another great potential benefit of IoT is to make supply chains more sustainable, not only by reducing energy and fuel consumption as described above, but also by reducing the emissions of pollutants or wasting water.
While all these improvements would already be quite impressive, they are mostly aimed at improving existing business models, that is, they will not be game-changers.
Transforming Your Supply Chain
Instead of using IoT to improve your supply chain, some companies have used IoT to radically transform their supply chain and fundamentally redefine their business models. Such business model transformations have typically three characteristics:
- Through IoT, firms better understand what customers really want or need; in fact, they learn so much about customer needs that they can even anticipate them.
- As a result, relationships with the customer (B2B or B2C) evolve from being purely short-term and transactional to being long-term and relationship-based.
- To fully deliver value, a whole ecosystem is created by building alliances and partnerships with other vendors.
Effectively, companies that fully leverage the potential of IoT are transforming their business model from manufacturing to services.
To illustrate those principles, let us compare Nest with any other company that makes standard thermostats. While the traditional company has certainly developed a lot of expertise in developing control systems, Nest goes much further than that. Nest constantly collects information about how the product is used to the point that it anticipates the needs of the consumers. It not only helps consumers improve their energy consumption and their use of their time, it has radically transformed the way a home operates. When Nest notices you are away, it can have your Whirlpool washing machine switch to a refresh mode when its cycle ends, so that your clothes stay fresh and wrinkle-free, it will tell your Ooma Telo to forward your calls, and it will notify your LIFX lighting to automatically turn on and off your lights throughout the house to make it look as if someone is home.
To take another example, this time in a B2B setting, let us consider Caterpillar’s Product Link solution, which enables customers to manage their fleet more effectively and efficiently. Specifically, the solution enables customers to track the fuel usage for each of their vehicles, to monitor their utilization (idle time), to define site boundaries and set up security alerts when a vehicle leaves a site, and to connect with part dealers, order parts, and track maintenance.
For another example in B2B setting, consider Rolls Royce’s engines and their celebrated “power-by-the-hour” business model. Under a traditional “cost-plus” contract, airlines pay engine manufacturers a fee every time an engine needs to be serviced. In contrast, under a power-by-the hour contract, Rolls-Royce is paid for “continuous uptime.” Although such contracts would be difficult to implement in a traditional transaction-based arm’s length relationship, the development of IoT has enabled Rolls Royce to monitor its engines’ performance in real time, schedule preventive maintenances and, in the long run, improve their reliability.
Be Willing to Experiment
Overall, do you want to leverage IoT to simply improve your supply chain, or do you want to fully exploit its capabilities to radically transform your supply chain?
The biggest roadblock to transforming business models is not technical. In fact, most of the IoT technologies (wireless technologies, Micro-Electromechanical systems, and the Internet) have been around for quite some time. Instead, it is a willingness to experiment with new business models. Supply chain managers who aspire to transform their business models must be willing to experiment, which may involve some failures from time to time, and use data analytics to learn as much as possible from each experiment. That way, they will be able to leverage the full potential of IoT.
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