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The Industrial Internet of Things (IIoT) – a collection of network-connected machines, sensors, and data processing platforms – promises to revolutionise the way almost every industry functions. And the process is already well under way: worldwide IIoT spending was estimated at about $20bn in 2012, and is forecast to reach $500bn by 2020.
The reason for this level of investment is clear: the returns on offer could be huge. The value created by the IIoT could be as high as $15tn by 2030, according to an Accenture report.
The use of this technology could be a massive boost to profitability.
Josh Jarvis · Dolfin
How can the IIoT provide such astonishing returns? “I am seeing huge improvements in efficiency thanks to the use IIoT, so the use of this technology could be a massive boost to profitability for large manufacturers ,” says Joshua Jarvis, Investment Adviser at Dolfin.
A simple example of this is the use of sensors in equipment that needs periodic maintenance to provide transparency into their physical state. By analysing the data from these sensors, companies can predict when particular components need servicing or are close to failing.
That means that they can bring forward or postpone scheduled maintenance on specific machines to ensure that service engineers don’t have to visit remote sites more often than necessary, and equipment only receives attention when necessary. That could lead to huge savings in areas such as remote wind farms, where maintenance involves sending an engineer on a ship to a dangerous environment.
But this type of transparency can be taken a stage further by adding an element of collaboration, according to Florian Gueldner, Director of Research at ARC Advisory Group, a technology research and advisory firm. He suggests a scenario where data from sensors on specific pieces of equipment that a company uses is shared in applications both internally and with other companies. By doing this it would be possible to provide efficiency benchmarks, giving each participating company the opportunity to measure themselves and improve their efficiency in line with them.
In fact, Michelin has already launched an initiative that works along those lines. It takes the data from sensors located in its truck tyres and analyses it to provide truck fleet drivers with tips on how to save fuel by driving more efficiently.
Another way in which the transparency provided by the IIoT promises to improve efficiency in the future is by combining it with artificial intelligence (AI). That’s because – while it is relatively easy to manage a small number of assets more efficiently by altering the maintenance schedule, as described above – optimising the management of a large number of interconnected pieces of equipment and scheduling maintenance while ensuring an appropriate level of redundancy is maintained is a hugely complex operation.
AI promises ‘self-optimisation.
The use of AI promises the possibility of ‘self-optimisation’: an entire system – such as a power station, an airline or a mining operation – could send sensor data to an AI system. This would react to the state of assets in real time, scheduling maintenance or bringing entire pieces of equipment offline where redundant systems exist in order to minimise disruption, or cost, or whatever else the AI is asked to optimise.
Yet another way in which AI might be used imaginatively in conjunction with IIoT technology is to help companies match their outputs to expected demand. For example, Gueldner points out that in many countries there is always a shortage of winter tyres when the weather turns cold. AI could be used to analyse all sorts of data that could predict a surge in demand for winter tyres – anything from temperature readings to the sales of warm clothes – to help ensure that enough are manufactured to meet this predicted demand.
Pay as you play
One final way that the transparency provided by IIoT sensors may transform the way companies do business is by helping them move from large and risky capital expenditure transactions to a more predictable series of small operational expenditures that match their requirements in the same way that ‘software as a service’ allows companies to make or receive small payments for software according to usage rather than a single up-front payment for a packaged software license.
Thanks to the IIoT, machine builders have the opportunity to move from selling the hardware they make to selling usage in a variety of ways, such as guaranteed uptime, flat fee, performance-based, or throughout-based. This also offers the machine builder the chance to secure the lucrative after-sales service market of maintenance, repair and modernisation.
For example, an aero-engine maker could switch from selling engines to a ‘propulsion as a service’ business model based simply on operating hours, or it could create a more complex hours and speed offering, while an industrial robot maker could combine operational hours with guaranteed uptime to match the requirements of customers.
The IIoT is still in its infancy, and many of the benefits derived from it so far have been the ‘low hanging fruit’. But there seems little doubt that the potential benefits to companies in all areas of the economy are limited only by how imaginatively the technology is applied.