One of the biggest challenges, when a company adopts an IoT solution, is to monetize in terms of benefits. How can IoT help make money? It would have to either increase the revenue or decrease the cost. Some experts predict that the IoT will save businesses close to £1 trillion in productivity costs alone.
Let us, therefore, look at the aspect of reducing cost, as the “money saved is money earned”!!
Cost – the other side of the balance sheet
Cost is definitely an important aspect of any business, we tend to look at how good a business is running by looking at the operating efficiency which is nothing but the operating ratio of cost to revenue, how much % of 1 dollar earned do we spend to earn it!! Thus this is no brainer that saving costs will help the operating efficiencies.
Costs can be of two types – direct and indirect. Direct cost is all the cost directly incurred for producing the product manufactured. Indirect cost is all the cost incurred to run the show, but not directly for producing the product e.g. HR, Security, IT, etc. Thus the opportunities for reducing costs is wide open in both these areas.
IoT Indirect Cost reductions
IoT can significantly look at reductions in Indirect costs like Energy consumption. Simple things automatic switching off lights and air conditioning where there is nobody around in the rooms, warehouses, etc could pave ways to make small but consistent savings. Even this made semi-automatic might help by allowing the control of thermostats and lights remotely may be even centrally. This could be extended to our being able to monitor energy consumption in different parts of the plant to understand where the consumption is high and is constant or is it during a certain period etc.
One can look at reducing the cost of Security with systems in place where is continuous monitoring is possible with the ability to track people as well as the ability to pre-warn as soon as there is an illegal presence or intrusions detected.
IoT Direct Cost reductions
There would be a multitude of ways in which there can savings here. In some industries, it is important to store the finished products in certain temperatures if this does not happen then the business faces loss due to damages to items especially industries like food that needs cold storage.
Increased productivity due to live data available. The inventory can be kept up to date using IoT and thereby the production and ordering can be made more efficient and streamlined. There will be lesser loss of work and unused inventory carry. The order fulfillment process now becomes more prompter because of the ready availability of information.
Optimize on the staffing requirements like in a retail environment by looking at the footfalls and traffic within the outlet and adding analytics to this data to come out with the optimal numbers. Additionally, you would be able to optimize the after-sales support but adding innovations in the product to self-monitor or detect conditions that would lead to the breakdown of the equipment.
IoT – new impetus to SAVE
IoT brings in more possibilities and hence a new impetus to look for ways and means to optimize and save on the operational costs as well as the cost of revenue. IoT thus slowly makes businesses more profitable in the long run.
Read more on How is Productivity Improvement Achieved Using IoT.. and How does IoT/Automation stop Loss or Theft? as to how it will help reduce cost directly.