Add 11% to your bottom line. Sounds good doesn’t it? Worth an estimated $11 trillion over the next decade* it is not surprising that the Internet of Things (IoT) is tagged as the “Next Big Thing”. First reported in 2009 by the RFDI Journal, a Mckinsey report recently estimated it had a potential economic impact to factories of USD$1.2 to $3.7 trillion, or 11%.
What actually is the IoT? Forbes concisely describes it as “anything with an off switch that can be linked via the internet”. From desk lamp to coffee machine. But why bother? Why does a coffee machine need the internet? Imagine your fitness watch informing your coffee machine to switch on because its sensors detect you have woken up. Or your office espresso machine automatically reordering coffee capsules. Analyst firm Gartner reports that 26 bn devices will have this kind of capability within just 5 years.
How does it affect my business?
The technology is already in use. In fact, you may already have elements within your business. Here in Sydney, the Harbour Bridge has monitors that transmit data about the variations in vibrations on the bridge. This information is used to detect wear in the bridge’s structure to inform the maintenance schedule. In a recent conversation with a chief engineer at Qantas, I learned how sensors collate a plane’s real time data and transmit this back to HQ so as to anticipate maintenance requirements. The transmitters even store the data whilst the plane is over the sea where transmission is not possible.
Turning to the manufacturing environment, one of the most obvious areas for implementing this concept is in maintenance and PPM routines, although IoT is also applicable in a wider context.
Is it really going to happen?
In the mid-1980’s the Nobel Laureate economist Robert Solow observed the Productivity Paradox. Millions of $ of spending on I.T had failed to provide evidence of any financial gains. Some of this was due to the intrinsic quality of output – better customer service and closer liaison with suppliers – which, at the time, were not factored into calculations. However the true value of investment was harnessed when the skillsets caught up with the technology, a critical mass of users was reached and the running of paper processes in parallel was eliminated.
As technology becomes cheaper and ubiquitous, the sources of data will become infinite. And this is the point. Ultimately the IoT will only provide data. We will have access to a plethora of information. It is our ability to interpret and use this data to make and deliver on decisions that will create the value, in the same way knowing how to use a computer makes the difference, not the existence of the computer on its own. All too often we encounter sophisticated real-time data capture systems where the majority of the data is left untouched in storage. How will IoT be any different?
Equipment manufacturers or third parties are likely to incorporate the data management as part of an outsourced maintenance function. Their specialism in specific data sets will enable the customer to gain real value whilst benefiting from economies of scale. The impact on working capital from spares, from spares storage, reduced downtime and requirement for in-house engineers is obvious.
Decisions on equipment suppliers will need to incorporate the quality of the outsourced maintenance function, perhaps their proximity and ability to service the equipment with minimal lead times. It takes years to retrofit legacy equipment. Will that be your issue? Will more dynamic or new starters gain an advantage? Are machines in the current CAPEX pipeline likely to be supported by IOT in the medium term? When the benefits are realised will your current plans for contracts for long term warehousing or plans for purpose built warehousing look quite so good? Would shorter term contracts make more sense?
Interoperability is one of the chief concerns. With two thirds of current devices not using internet protocol, the ability to collate, digest and gain meaningful insights will be limited. Aligning your technology platforms with customers and suppliers will be critical. As a child being bought up in a home with Betamax video recorder, the incorrect choice of an earlier adopter still haunts me!
First Steps. Designate a site Champion who can keep abreast of industry developments and opportunities so you can capitalise before the competition. Begin to align with forward-thinking suppliers. Cross-functional departments will require collaborative systems – how will this be managed? The boundary between I.T and Maintenance, Operations and H&S will become a little blurred and skills will start to overlap with data interpretation. In short, it is time to educate your business in IoT. Understand the implications and prepare for the opportunities. The impact of connecting anything to anything requires a new way of thinking.
Written by Leon Chandler, Coriolis Ltd