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! 



The Internet of Things: Turning $3 Lightbulbs Into A $60 Billion Opportunity

Shelly Dutton

Over the past year, we’ve seen IoT-enabled innovations enter our homes, cars, phones, and air space – and even appear on our bodies. Will they make our lives safer, simpler, healthier, and more environmentally responsible? Only time will tell. But on rare occasions, an innovation comes along that can transform our world right before our eyes.

This is the case for Koninklijke Philips N.V., one of the world’s largest manufacturers of lighting. During his SAPPHIRE NOW session, “Find Out How Philips Used IoT Strategies to Unlock the $60B Connected Lighting Market,” Vasanth Philomen, public segment leader at Philips Lighting, observed, “This was just an idea three-and-a-half years ago. When you take a look at your innovation from the perspective of the customer, you can achieve a lot in a short amount of time.”

What was this idea? It was a reimagined commodity that we all rely on, opening the door to a $60 billion market opportunity. Philips is refurbishing streetlights, parks, bus stops, buildings, and bridges around the world with LED lightbulbs. But these are not just standard $3 lightbulbs – they’re connected and controlled through a remote management system.

Cities can now keep their residents safer by monitoring storm drains during heavy rains. They can even adjust lighting levels to strike a balance between public safety and costs related to energy consumption and maintenance. More important, they’re making the world safer, brighter, and a little more beautiful.

Watch this replay of the SAPPHIRE NOW session “Find Out How Philips Used IoT Strategies to Unlock the $60B Connected Lighting Market” to learn how the company is setting the stage for the connected lightbulb market while helping cities and towns benefit from digital transformation.

SAPPHIRE NOW + ASUG 2016 is over, but you can still watch on-demand replays of keynotes, strategic sessions, press conferences, and more from the event on-demand.


The Internet Of Things That Matter: Integrating Smart Cities With Smart Agriculture

Hu Yoshida

By 2050, the world population will grow from 7 billion today to 10 billion, and most of the population will be living in mega cities. This is triggering interest in smart cities around the globe to ensure that these cities are healthy, safe, and sustainable.

While a lot of technology and innovation is focused on urban transportation, energy, healthcare, waste management, and carbon emissions; some companies are also focused on agriculture and the ability to feed these billions of people. By 2050, we will need to double food production while arable land is shrinking, and farm workers are migrating to the cities.

How farming has changed

I was raised on a farm, where we started with less than 5 acres of strawberries and everything was done by hand labor. As the farm grew and we were able to acquire more land and farm machinery, we grew lettuce, tomatoes, and green beans. When we planted lettuce, we mounted a seed hopper on the tractor, which dropped seeds at a rate that was regulated by a mechanical cog, followed by a small plow that threw soil on top of the seed. Since we did not know how successfully the seeds would germinate, we planted redundant seeds (sound familiar?). After the seeds sprouted, we went back with a hand hoe and thinned out the spouts to give room for the best sprouts to develop into mature heads of lettuce. For every 5 seeds we planted, we destroyed 4 seeds in the thinning process.

Today, modern planting machines plant individual seeds based on GPS and computers that ensure each seed is planted at the optimal depth and spacing with the right moisture content to ensure germination. However, planting is only the first step in a very complicated process of bringing food to our table.

Utilizing the Internet of Things that matter to increase food production

Agriculture, like everything else, is based on data. Hitachi, for example, has developed an agriculture information management system called GeoMation Farm that is based on various inputs, including satellite data. This not only helps farmers with the use of water, weather, and chemicals to optimize production, but it is also used to minimize environmental impacts like carbon emissions, soil erosion, nitrate leaching, the loss of biodiversity, and the growth of antibiotic-resistant bacteria.

Agriculture: A science and an art

In Japan, farming is also an art. Rice must be harvested with the just the right amount of moisture—not too wet and not too dry. Japan is the only place I know where you have to pay $100 for the perfect melon with the right curl in the stem! While the farms in Japan are usually smaller than my father’s original 5 acres, some larger farms in Australia are developing precision farming based on satellite signals to robotic tractors.

The sustainable business of farming

After growing food, that food needs to be distributed.  A few years ago I was visiting the University of San Paolo in Brazil, where they are working on Smart City projects. One of the problems they are trying to solve is the distribution of food. In Brazil, which is one of the richest agricultural countries in the world, 40% of the fresh food spoils before it reaches the table of residents in San Paulo due to distribution problems. This is an infrastructure problem, not an agriculture problem.  This is part of the reason that futurists say that we need to double food production while the population grows by 50% in 2050. Smart agriculture must be integrated into smart city infrastructure to ensure that people in these mega cities have access to fresh foods.

A recent IEEE Spectrum article claims that even after the food is distributed, in the United States, we waste 40% of that food while many people are starving.  Doubling food production will not solve this problem. In the U.S., we need to be more conscious of the portions we serve. My wife and I often share meals when we go out to restaurants because the portions are just too large. How many people can really eat a 16-ounce steak?

The point  is that we can solve many problems with innovative technology, but we also need to take individual responsibility to build a sustainable society.

For an in-depth look at how the digital era is affecting business, download the SAP eBook, The Digital Economy: Reinventing the Business World.

To learn more about the multiple factors driving digital transformation, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

Learn more about IT Trends That Matter in 2016


Hu Yoshida

About Hu Yoshida

Hu Yoshida is responsible for defining the technical direction of Hitachi Data Systems. Currently, he leads the company's effort to help customers address data life cycle requirements and resolve compliance, governance and operational risk issues. He was instrumental in evangelizing the unique Hitachi approach to storage virtualization, which leveraged existing storage services within Hitachi Universal Storage Platform® and extended it to externally-attached, heterogeneous storage systems. Yoshida is well-known within the storage industry, and his blog has ranked among the "top 10 most influential" within the storage industry as evaluated by Network World. In October of 2006, Byte and Switch named him one of Storage Networking’s Heaviest Hitters and in 2013 he was named one of the "Ten Most Impactful Tech Leaders" by Information Week.

4 Ways to Digitally Disrupt Your Business Without Destroying It

Christopher Koch

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 (1MB)



About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing.


Digital Transformation Needs More Than Technology

Andreas Hauser

Digital transformation is a hyped-up topic these days. But it is much more than a buzzword. Technology trends like hyper-connectivity, Big Data, cloud, Internet of Things, and security provide new opportunities for companies to re-imagine their business and how they engage with their customers and users.

But what happens if you develop an amazing technical solution that people cannot use?

Let me tell you a story.

On a business trip recently, I had an experience that some of you might have also encountered from time to time. I wanted to enter the parking garage of a hotel and had to get a parking ticket to get in — sounds simple. The machine looked pretty modern. It had an integrated monitor and several buttons on the side. First I touched the screen, but nothing happened — it was not a touchscreen. Then I pressed some buttons on the side, and again, nothing happened. The rounded button at the bottom finally got me a ticket. Great technical solution … but not usable.

Endurance testing experiences like this one are actually easily preventable when taking into consideration human needs (desirability). This makes very clear that we need to connect three elements—viability, feasibility, and desirability—to be successful and remain competitive in the digital era.

Wikipedia defines digital transformation as “application of digital technology in all aspects of human society.” This is why companies with the most successful digital transformations have focused on people and applied a design-led approach.

One company that has excelled at creating a pleasant experience is Uber. Their app not only tells you how long it will take the car to arrive, but you can also watch the arrival on your mobile device. I like the user interface. But here’s what I personally like most about the Uber experience: You get out of the car, keep your mobile phone in your pocket, do nothing, pay automatically without thinking about how much you need to tip the driver, and get the receipt via e-mail.

That is the difference between simply focusing on the user interface and providing a great customer and user experience. To design and develop such a solution, you need to know what people really desire. Technology certainly plays a very important role to make this experience a reality, and you must be clear about the business model.


Design-led digital transformation means leveraging breakthrough technology trends, re-imaging business processes and business models, and re-imaging the customer and user experience to achieve design-led innovations.

In today’s digital economy, companies understand that the experience their customers and users have must be the core focus of its brand and survival. Customers and users drive the current and future state of any business. Products and services, whether they are delivered to internal or external customers, must create a value for them and the company. Therefore, customers and users need to be an integral part—not an afterthought—of the entire product development process.

Design thinking to focus on human needs

To better understand what that experience can be, companies are using design thinking – a human-centered approach to innovation – and are putting the customer and user into the center of all activities. Design thinking focuses on human needs, problem finding, working in inter-disciplinary teams across the innovation lifecycle, and a fail-fast, fail-early approach.

My observation from about 500 customer projects is that more and more IT organizations are starting to apply design thinking within their organization. They are hiring designers to better understand the needs of their customers and users and are translating these needs into an experience design. In the past, they simply collected requirements from the business and implemented functions, features, and business processes. This was sufficient in last-decade enterprises, but consumerization of IT requires re-thinking of this approach.

Create business value with human-centered design

The goal is to create business value by engaging with customers and users throughout the end-to-end process—from discovery to design to delivery—and apply design thinking combined with agile methodologies. It is not about simply creating a cool design; rather it is all about creating business value and outcomes.

To do this, business and IT need to work hand in hand to take the company toward that single consumer’s experience.Slide2.JPG

Let’s look at an example.

As part of its business strategy, Mercedes-AMG, the sports car brand of Mercedes-Benz, aimed to increase its production drastically while keeping the excellent quality standards that have always characterized its products. In a co-innovation project, we have engaged on an intensive research plan and applied the principles of design thinking and agile software development to bring the Mercedes-AMG vision to life: a customizable collaborative planning solution that supports cross-functional competence teams and increases efficiency during the three-year production process. The solution, based on SAP HANA, provides access to relevant data in a holistic way and enables a seamless team collaboration in the remodeled process. One of the key success factors was engaging with users throughout the entire process by observing how they work and iterating on solutions with them.

Digital transformation is a journey, not just a one-time project. Ultimately, enterprises want to prepare their organization for sustainable design-led digital transformation.

So how can you embrace the human aspect of design in your digital transformation? This is our credo: Apply design thinking to engage with your customers and most importantly, with users, right from the beginning, in an iterative, user-centric design process.

If you are interested in more customer stories, check out the UX Design Services website. You can also find more information in this presentation, or check out this video recording.

This article originally appeared on SAP Business Trends.


Andreas Hauser

About Andreas Hauser

Andreas is global head of the design and co-innovation center at SAP. His team drives customer & strategic design projects through Co-Innovation and Design Thinking. Before he was Vice President of User Experience at SAP SE for OnDemand Solutions.