It’s been over 20 years since the term ‘Internet of Things’ was coined by Kevin Ashton in a presentation to senior management at Procter & Gamble convincing them to optimise the company’s supply chain by placing RFID chips in their products. Since then, the notion of connecting things to the Internet to improve decision-making and operational efficiency has captured imaginations around the globe.
In 2020, as businesses begin to think about returning to work after COVID-19 lockdowns, there is little doubt that some of the ways in which we work will be irreversibly changed by the global pandemic. Many businesses are challenged by developing strategies that support business recovery and growth while keeping employees, partners and customers safe. And more and more businesses see the recovery phase as a chance to rebuild sustainably, in ways that grow business, improve retunrHow on capital and protect the future of the planet.
Impactful recovery strategies demand the need for fast change, transparency to reliable data to make well-informed decisions and technology solutions for rapid adoption. Increasingly, businesses are looking to technology to automate and digitise operations with more use of distributed and remote management to improve asset utilisation and extend life cycles. In turn, that is renewing focus on the need for better returns on capital.
Industrial IoT has moved beyond the test phase and is already fueling transformative change to help businesses recover and grow with renewed operational efficiency, better customer experiences, cost control and sustainability.
Industrial IoT and return on capital
Most organisations invest capital in some kind of physical assets to run a business, including heavy plant and machinery, vehicles, buildings, re-usable packaging items and even livestock. The business value of industrial IoT lies in building connections between physical assets and their digital world. These connections allow data to be gathered from almost any physical asset, to improve the efficiency of operational processes which, in turn, increase the return on capital invested.
Finding ways to improve the use of physical assets unlocks significant business benefits. For example, increased savings of time and cost, predicting maintenance, improving safety, reducing equipment downtime and more. Those benefits translate into clear business value, including better customer experiences, improved efficiency, stronger competitive advantage and enhanced return on capital.
How IoT solutions drive improved return on capital for business
The core of how industrial IoT solutions improve return on capital is by gathering and using data directly from the assets to improve asset utilisation without manual processes. There are two key ways that better asset utilisation improves return on capital: asset intensity and asset efficiency.
Asset intensity. Asset intensity describes the amount of assets a company needs to drive sales. Research shows companies that improve asset intensity can increase shareholder returns by an average of 7.6 per cent per year more than companies with declining asset use. This means companies that increase asset utilisation can deliver the same, or more, amount of business using the same, or fewer assets. Return on capital improves because the business can extract more value from the pool of assets bought with investment capital.
Industrial IoT solutions are powerful for improving asset utilisation on a large-scale. DHL, the German-based international courier, parcel and express mail service, delivers around five million shipments across Germany every day. DHL uses 250,000 roll cages, loaded with mail items for transport, to reliably manage those shipments. Roll cages need to be available in enough quantities at customer warehouses, 35 different German DHL parcel centres and other countries to enable DHL’s seamless delivery service.
To ensure the right availability of roll cages in each centre, DHL worked with Sigfox Operators and their solution partners to attach smart trackers to monitor roll cage locations. Precise location insights mean DHL can use each asset more fully by ensuring the right availability in each location and understanding lack of availability or bottlenecks. Insights to asset utilisation allows DHL to reduce the number of roll cages needed to support its delivery network, thereby improving return on capital.
Asset efficiency. Asset efficiency describes how efficiently a business uses its assets to drive sales. The more efficient the use of assets, the better the return on capital.
Industrial IoT delivers significant improvements to asset efficiency by using devices connected to physical assets to gather and share data updates to a central platform. The device data shares useful insights into how physical assets are working for a company which would be too time-consuming, expensive or logistically impossible for a human to do manually. Such insights are invaluable for increasing asset efficiency across lifespan, usage, maintenance, repairs and replacements.
There are terrific, creative examples of how extracting data from connected assets with industrial IoT improves asset efficiency. Automatic location tracking shows how often, when and where a business actually uses assets. A logistics company transporting retail goods can use tracking devices on pallets to understand the location, arrival and delivery times and temperature of goods in-transit. A trolley operator transporting luggage around an airport can use data from devices on trolleys to understand usage hours to better manage maintenance and avoid costly downtime.
Fit-for-purpose industrial IoT solutions have outstanding potential to improve return on capital by improving how efficiently assets are used across operations, new business opportunities and customer engagement models.
Ralph Stonell, Chief Financial Officer, Thinxtra
The first step to improving your return on capital with industrial IoT
Return on capital shows how much money an organisation can make for every dollar it spends. The higher the return on capital, the better. For organisations with large volumes of physical assets, industrial IoT solutions can help improve return on capital by increasing asset utilisation and driving operational efficiency. Contact us to explore how to improve return on capital with IoT solutions.