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The Internet of Things Enables Precision Logistics (And Could Save The Planet Too!)

David Stephenson

A degree of precision in every aspect of the economy that was impossible before the IoT is one of my fav memes. That’s in part because it should encourage companies that have held back from IoT strategies to get involved now (because they can realize immediate benefits in lower operating costs, greater efficiency, etc.), and also it brings with it so many ancillary benefits, such as reduced environmental impacts (remember: waste creation = inefficiency!).

 Zero Marginal Cost Society

Zero Marginal Cost       Society

I’m reminded of that while reading Jeremy Rifkin’s fascinating Zero Marginal Cost Economy, which I got months ago for research in writing my own book proposal and didn’t get around to until recently.  I’d always heard he was something of an eccentric, but, IMHO, this one’s brilliant.  Rifkin’s thesis:

“The coming together of the Communications Internet with the fledgling Energy Internet and Logistics Internet in a seamless twenty-first-century intelligent infrastructure, “the Internet of Things (IoT),” is giving rise to a Third Industrial Revolution. The Internet of Things is already boosting productivity to the point where the marginal cost of producing many goods and services is nearly zero, making them practically free.”

Tip: When the marginal cost of producing things is nearly zero, you’re gonna need a new business model, so get this book!

At any rate, one of the three revolutions he mentioned was the “Logistics Internet.”

I’m a nut about logistics, especially as it relates to supply chain and distribution networks, which I see as crucial to the radically new “circular enterprise” rotating around a real-time IoT data hub. Just think how efficient your company could be if your suppliers — miles away rather than on the other side of the world — knew instantly via M2M data sharing what you needed and when and delivered it at precisely the right time. Or if the SAP prototype vending machine notified the dispatcher, again on a M2M basis, so that delivery trucks were automatically re-routed to the machine that was most likely  to run out first!

I wasn’t quite sure what Rifkin meant about a Logistics Internet until I read his reference to the work of Benoit Montreuil, “Coca-Cola Material Handling & Distribution Chair and Professor” at Georgia Tech, who, as Rifkin puts it, closes the loop nicely in terms of imagery:

“.. just as the digital world took up the superhighway metaphor, now the logistics industry ought to take up the open-architecture metaphor of distributed Internet communication to remodel global logistics.

Montreuil elaborates on the analogy (and incidentally, places this in the context of global sustainability, saying that the current logistics paradigm is unsustainable), and paraphrases my fav Einstein saying:

“The global logistics sustainability grand challenge cannot be addressed through the same lenses that created the situation. The current logististics paradigm must be replaced by a new paradigm enabling outside-the-box paradigm enabling meta-systemic creative thinking.”

Wooo: meta-systemic creative thinking! Count me in!

Montreuil’s answer is a “physical Internet” for logistics, which he says is a necessity not only because of the environmental impacts of the current, inefficient system (such as 14% of all greenhouse gas emissions in France), but also its ridiculous costs, accounting for 10% of the US GDP according to a 2009 Department of Transportation report!  That kind of waste brings out my inner Scotsman!

Rifkin cites a variety of examples of the current system’s inefficiency based on Montreuil’s research:

  • Trucks in the US are, on average, only 60% full, and globally the efficiency is only 10%!
  • In the U.S. they were empty 20% of miles driven
  • U.S. business inventories were $1.6 trillion as of March, 2013 — so much for “just in time.”
  • Time-sensitive products such as food, clothing, and medical supplies are unsold because they can’t be delivered on time.

Montreuil’s “physical Internet” has striking parallels to the electronic one:

  • Cargo (like packets) must be packaged in standardized module containers
  • Like the internet, the cargo must be structured independently of the equipment so it can be processed seamlessly through a wide range of networks, with smart tags and sensors for identification and sorting (one of the first examples of the IoT I wrote about was FedEx’s great SenseAware containers for high-value cargo!)

With the Logistics Internet, we’d move from the old point-to-point and hub-and-spoke systems to ones that are “distributed, multi-segment, intermodal.” A single, exhausted, over-worked (and more accident-prone) driver would be replaced by several. It’s a  little counterintuitive, but Montreuil says that while it would take a driver 240 hours to get from Quebec to L.A.under the current system; instead 17 drivers in a distributed one would each drive about 3 hours, and the cargo would get there in only 60 hours.

Under the new system, the current fractionated, isolated warehouse and distribution mess would be replaced by a fully integrated one involving all of the 535,000 facilities nationwide, cutting time and dramatically reducing environmental impacts and fuel consumption.

Most important for companies, and looping back to my precision meme, Montreuil points out that an open supply network allows firms to reduce their lead time to near zero if their stock is distributed among some of the hundreds of distribution centers that are located near their final buyer market. And once we have more 3-D printing, the product might actually be printed out near the destination. How cool is that?

Trucking is such an emblematic aspect of the 20th-century economy, yet as with the neat things that Union Pacific and other lines are doing with the 19th-century’s emblematic railroads, they can be transformed into a key part of the 21st century “precision economy” — but only if we couple IoT technology with “IoT thinking.”

Now let’s pick up our iPads & head to the loading dock!

I’ll be addressing this subject in one of my two speeches at the SCM2016 Conference later this month. Hope to see you there! 

 

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What Support Looks Like In The Era Of The Cloud And The Internet Of Things

Fred Isbell

As we near the end of this year’s spring event season, one thing is clear: Digital transformation is in the air.  The annual SAPPHIRE NOW and ASUG events are now behind us, but people are still buzzing about the sessions, stories, lessons learned, and best practices shared. There’s profound interest in how innovations are adopted, such as running a Live Business, digital boardrooms, and enabling the latest technology.

After listening to customers, practitioners, and analytics throughout the first half of this year, I was inspired to invite the following panel of subject-matter experts for the third installment of a webcast series sponsored by Digital Business Services from SAP:

  • Elaina Stergiades, research manager of IDC Software and Hardware Support Services
  • Michael Rieder, senior vice president and global head of SAP Enterprise Support & Premium Engagements
  • Sei Drake, chief architect of Co-Engineering and Innovation at SAP America

To kick off the conversation, we discussed the rise of the 3rd Platform that IDC says is a factor driving growth of innovations, new business opportunities, and more. Yes, digital transformation is front and center, but with it comes a need for simplification, not increased complexity. And on top of it, there’s an incredible explosion of data from a variety of places, including the fast-accelerating Internet of Things (IoT).

What should businesses do? The idea of tackling these issues and providing the support needed to succeed is reminiscent of Edvard Munch’s “The Scream” painting!

Future of Support-1

According to Elaina Stergiades, the promise of the 3rd Platform and the evolution of solutions that support it are transformational. Moving away from a reactive, manually intensive, and linear process, businesses are steadily adopting a proactive and more predictive model. In fact, this new brave world is bringing great technology to innovate the support process and customer experience, including:

  • Cloud solutions: Delivers wider access to support data from anywhere to share across the entire user experience and with new levels of integration
  • Social technology: Supports collaboration far above traditional hierarchical (and inherently slower) support processes
  • Enterprise mobility: Enables support monitoring anywhere and remote support and resolution without traditional, closed boundaries
  • Predictive analytics: Forecasts issues before they reach crisis level while offering a better and more direct, personal response

Michael Rieder continued the discussion with insightful observations about the market dynamics that businesses are facing. He supported Elaina’s perspective and the need for proactive support for on-premises, cloud, and hybrid environments. He noted that it is critical for businesses to reimagine support by keeping six foundational pillars in mind:

  • Mission-critical support
  • Total cost of ownership
  • Continuous improvement
  • Accelerated innovation
  • Integrated support
  • Business service support

Sei Drake has weighed in on this topic before in his blog post on “How to Prepare Your IT Landscape for the Digital Economy.” From his perspective, the evolution of support is happening against the backdrop of changes in the IT industry and the marketplace. The rise of cloud-based solutions and the growth of the Internet of Things (IoT) are bringing a whole host of new considerations, especially the need for DevOps and co-innovation. We found his suggestions for customers’ considerations quite helpful with examples across several industries.

Like the webcasts I hosted before it – Unlocking the Potential from the Internet of Things and Transforming Digital Visions into Reality – this third in our series was another insightful thought-leadership webcast from Digital Business Services. Be sure to view the on-demand replay and share with your colleagues.

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About Fred Isbell

Fred Isbell is the Senior Director of SAP Digital Business Services Marketing at SAP. He is an experienced, results- and goal-oriented senior marketing executive with broad and extensive experience & expertise in high technology and marketing. He has a BA from Yale and an MBA from the Duke Fuqua School of Business.

The Internet Of Things And The Explosion Of Life At The Periphery [INFOGRAPHIC]

Kai Goerlich

Facts about the Internet of Things (IoT) are clear and have been widely published. The number of IoT sensors will grow to 50 billion by 2020, according to Cisco, and Intel estimates that we’ll have 200 billion Internet-connected things by 2030. Data will be the new sunlight as we create, replicate, and consume 44 zettabytes (or 44 trillion gigabytes) of data by 2030, according to EMC and IDC. And as if all this wasn’t enough, the speed of analytics will intensify thirty-fold by 2030 – with 95% of queries answered in mere milliseconds, according to SAP estimates.

If these trends continue (and they likely will), our lives will soon be powered by ambient computing, where most things, devices, and machines sense the world around us, communicate and analyze data, and more or less, act independently.

Although most organizations still classically store and analyze their data on laptops, smartphones, and data centers inside and outside the cloud, it’s safe to assume that data collection and analytics will eventually move into the periphery as well, at least partly. For example, smart machines – such as those used in connected vehicles – generate a massive amount of data, and we have yet to make most things intelligent.

The opportunity is boundless.

Economic impacts within your reach

Most of us who have spent a lifetime in the traditional IT industry will find it difficult to consider how an ambient computing economy and society will operate and appear. Even millennials born into the age of smartphones will probably be surprised when the focus shifts from the phone as the primary device to other levels.

We know from evolution and chaos theories that the highest level of creativity reveals itself within a system’s border. Because we are creating new boundaries for the IoT right now, businesses will eventually explode at the periphery of their current IT and business systems. In fact, the IoT will fundamentally create more sensors and receptors on the outside of our business systems, allowing us to gather and analyze more and better data. And as we cooperate with other companies and organizations to share this information, new business models will emerge with unprecedented diversity.

In the short term, changes are happening across strategic asset management, customer and consumer experience, product management, and services – bringing savings through lower carbon emissions, improved asset management, reduced replenishments, and downtime prevention, among others. However, over the long term, IDC research indicates that nearly 25% of all companies view the IoT as strategic and over 30% of industry leaders believe they will be disrupted by it at some point.

The economic impact will only become more significant as our reliance on the IoT grows. And when it comes to long-term transformation, you’ll know where to look: The periphery.

IoT and Digital Transformation

For more on how our increasingly connected world is changing lives, see Three Ways The Internet Of Things Can Improve Citizens’ Lives.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Idea Director of Thought Leadership at SAP. His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

SAP_Disruption_QA_images2400x1600_3

qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

Fawn Fitter is a freelance writer specializing in business and technology. 

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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Internet Of Things: Where Is All The Data Going?

Tim Clark

The Internet of Things (IoT) is no longer happening in a galaxy far, far away. It’s happening right here, right now. It may be in your pocket, on your wrist, in your clothes – heck, it might even be helping you drive your car.

In fact, IoT is moving so fast, we’re actually on the third wave, according to a panel of experts who weighed in on the topic during a recent episode of Internet of Things with Game-Changers, presented by SAP.

However, a nagging questions arises when it comes to this third IoT wave: What’s going to happen to all the data that’s being collected?

Coping with IoT reality

Gray Scott, futurist and founder/CEO of seriouswonder.com believes serious questions remain around IoT data collection because technology is moving faster than we can cope with.

“The main thing I’m concerned with right now, is getting people to understand that the Internet of Things is already in their lives,” said Scott. “So if you look around your house, either your television, refrigerator, or some of your appliances – they are probably already connected.”

And because IoT is now permeating our everyday lives, it must provide tangible results to consumers and businesses, according to JR Fuller of HP Enterprises.

“It can’t just take our data and subject us to additional advertising, which is one of the ways that it pays for itself,” said Fuller. “It has to provide something to us. It has to provide convenience.”

Evangelizing IoT convenience

The conveniences of IoT, such as a refrigerator that breaks down and automatically alerts the manufacturer to send a repairman, needs to be evangelized during this critical time, said Ira Berk, Vice President of Digital Transformation Solutions, SAP. Making proper use of the massive amounts of data IoT generates also plays a critical role in evangelizing its benefits.

“Think about what happens when you start to mix and match different sources of information,” said Berk. “You start to understand the data behind the world around you. In your house, car, environment, earth, public transportation, smart cities and factories. What questions can you ask that you wouldn’t even imagine being able to ask before, because you can start to synthesize the information?”

Gray Scott believes synthesizing different data sources “is a continuum of everything,” a great example being traffic in urban areas. Apps like Waze and Google Maps help drivers circumvent traffic.

“It’s a physical thing that can grab a hold of data and literally rearrange our lives by changing the direction you take your car in,” said Scott. “This continuum is going to keep building on itself as we move forward into the future.”

Living in a post-privacy world

While the general populace may not want to admit it, we are living in a post-privacy world. Anything put online is made public and everything that can be hacked, will. The question is what do we do with all of that data? Can we rise to a higher state of humanity and not just use data for advertising purposes, but to make our lives more convenient?

“I think we don’t mind giving up some of our personal information if it benefits us,” said JR Fuller. “It makes for a very interesting time, especially companies that can add value to bridge the gap and help enterprises achieve the benefit that we know are possible with IoT.”

Internet of Things with Game-Changers, presented by SAP, is hosted by Bonnie D. Graham. Listen to this broadcast in its entirety here.

This story originally appeared on SAP Business Trends.

Top image: Shutterstock

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About Tim Clark

Tim Clark is the Head of Brand Journalism at SAP. He is responsible for evangelizing and implementing writing best practices that generate results across blog channels, integrated marketing plans and native advertising efforts.