The Internet of Things − the connection of buildings, vehicles, machines and personal devices to the Web − will deliver a much-needed long-term boost to Canada’s flagging productivity, experts say.
Indeed, efficiencies brought by IoT technologies have already started helping Canadian companies improve their bottom line, according to Nigel Wallis, Canadian research director of International Data Corporation.
In a recent report, IDC estimated that spending on “key addressable use cases in Canada” on IoT would increase from $2.88-billion in 2013 to $6.5-billion in 2018. Its survey of 298 IT executives found that the number one driver for adopting IoT solutions was “lower operational costs,” Wallis says.
“The second most common response? Business process efficiency,” Wallis adds. “On the growth side, the third most common driver for IoT was ‘better customer service and support,’ which helps keep existing customers, but with connected products, also enables new ways to monetize that support.”
He explains: “What’s different with IoT is the tie-in to the greater Internet enables not just companies, but networks of companies, to be able to see data in real time but also expose it across a broader array to be able to do more analytics, (and) get more out of it.”
Although the phrase “internet of things” was first coined in 1999 (it also now goes by the name Industrial Internet), it’s the application of the technology to leveraging huge amounts of ‘big data’ in industry and commerce that has seen its growth take off.
One example of how IoT is making companies more productive is in the trucking industry, where telematics software programs like Telogis enable delivery services like UPS to solve the “travelling salesman problem.” Delivering 150 packages in a day can yield 200,000 or so permutations, Wallis says. “So having the guy driving the truck do it in his head is not the most efficient way to do it.”
However, quantifying the productivity improvements and return on investment from IoT remains a challenge. Of the firms IDC surveyed that haven’t yet installed IoT technology, 23 per cent reported “unclear and unproven ROI” as main reason for not having done so.
‘It touches just about everything’
One Canadian IoT technology company that has figured out the ROI from its products is RtTech Software, a Moncton, N.B. firm. The company has developed apps that help industrial clients − ranging from window and door manufacturers and bottling plants to corporate giants such as Michelin, Rio Tinto and Potash Corp − improve their operational efficiency, says CEO Pablo Asiron. In all, about 1,900 machines in 60 plants in 14 countries are currently connected to RtTech software. About 20 per cent of the company’s customers are in Canada.
RtTech’s products, which include a cloud-based system, access real-time data from equipment to monitor for such things as downtime events, bottlenecks that prevent machines from reaching their design capacity, and energy use.
There are several ways to define productivity. One them, says Asiron, is overall equipment effectiveness (OEE). The world class standard for OEE is around 85 per cent.
“Most companies that we are starting with, it’s 40 to 50 per cent, and very quickly we’re able to get them to 60 to 80 per cent,” Asiron said. “And that is a huge gain. Depending on the revenues, depending on the cost of the raw materials, a 1-per-cent or 5-per-cent increase could be in the millions (of dollars).”
RtTech software has saved Flakeboard, a New Brunswick-based manufacturer of fibreboard and particle board, about $450,000 a year in energy costs at its St. Stephen mill, says Pat Burke, who was Flakeboard’s electrical system coordinator when the software was installed in 2009.
Burke says RtTech enabled Flakeboard (which is now owned by Chilean forestry giant Arauco) to determine the energy usage for each of the St. Stephen mill’s five production lines and identify where waste was occurring – helping the mill to reduce its energy consumption from 16 megawatts to 12.
The software was also used to set targets for energy consumption. And by identifying where and when usage was high, the company could, for example, pinpoint which crews were using the most energy and then develop standard operating procedures to correct the problems.
Burke estimated that the ROI on implementing RtTech was about a year, leaving aside the year it took to refine the system. Asiron says ROI can be as little as six months.
Asiron believes that IoT is the answer to Canadian firms’ long-documented productivity lag, noting that federal and provincial governments have incentive programs to help companies adopt productivity software solutions.
“This is one of the ways that we are going to be able to compete against Mexico or compete against Asia,” says Asiron. “At the end of the day we do have good resources; we do have a talented work force. We just need to help them to be more efficient.”
“I think that the industrial Internet of Things is helping companies, small and medium (sized) manufacturers, to get solutions like ours that before were not available to them,” Asiron adds. “So until there was an all-encompassing cloud computing and we were actually able to co-load that information hosting in the cloud, there was a large capital investment associated with putting in these systems.”
Karna Gupta, president and CEO of the Information and Technology Association of Canada, says “It is very big because it just touches just about everything.” Comparing IoT to the growth of the Internet two decades ago, he says: “It is going to be that pervasive.”
It is too early to predict its full impact, “but it will disrupt the underlying business model very dramatically,” Gupta says.
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