Four ways IoT is boosting business profits today

Internet of Things (IoT) is taking the business world by storm. And it’s little wonder why. According to Frost and Sullivan’s IoT Actualisation Quotient (IoT AQ), businesses that are leveraging IoT have seen, on average, more than 8.7% gains in profits and revenues. Productivity and efficiency also rose by at least 9.6% and 8.5% respectively. These numbers were based on inputs from 112 senior decision makers across multiple industries in Australia, Hong Kong and Singapore.

In particular, Cognitive Enterprises (businesses that combine AI with IoT) have achieved substantial gains in profit margins (18.9%) and revenue (18.6%). Their efficiency also increased by 16.9% and productivity by 16.7% on average.

One thing is clear – businesses have much to benefit from IoT, especially in the areas of profit margins and employee productivity. Here are four ways that IoT technology can help companies improve.

1) Retail
A study¹ by McKinsey estimated that the uses of IoT within the retail space – optimisation of store layouts, fully automated checkout, customer tracking, real-time personalised promotions, inventory management etc. – could have an economic impact of $410 billion to $1.2 trillion per year in 2025.  Just automated checkout alone could reduce cashier staff requirements by up to 75% and result in potential savings of up to $380 billion a year in 2025. It would also reduce checkout queue times by 40%–80% and result in potential economic benefits of $30–$135 billion of saved time in 2025.

An example² of how IoT has resulted in greater productivity and client service in retail is the use of a retail sensor platform by Levi Strauss. The jeans brand has an Intel-based gateway at the back end of the store which senses the RFID tags on all items in the store and forwards the data to the cloud. This has resulted in near 100% accuracy for Levi’s team on their real-time inventory state, making it easy for their staff to locate items or check stock for customers. McKinsey estimates that offering customers the exact items they are looking for, particularly luxury items – can raise sales by up to 11% in some areas. 

Key takeaway: IoT adopters in retail environments could see revenue gains as well as cost reductions from leaner inventories, lower operating costs, better use of floor space and even preventing theft.

2) Predictive maintenance 
Predictive maintenance is the next step in factory or equipment management using IoT. Sensors monitor the condition of machines in real-time, detecting and learning when a fault or breakdown is likely to occur. For example, the sound a pump component emits may be monitored and analysed. When unusual noises – louder than usual vibration, knocking noises etc. – are detected, the acoustic sensor picks it up and alerts a central dashboard on a computer or mobile device. The operator then checks the machine before a possible breakdown can occur.

With predictive maintenance, McKinsey expects the maintenance costs of factory equipment to be reduced by 10%–40% and downtime by 50%. In addition, companies using predictive maintenance can also extend the useful life of machinery to further cut equipment investment by 3%–5%. In all, these savings have a potential economic impact of nearly $630 billion per year in 2025.

In his speech³ at IoT Asia 2018 Conference, Senior Minister of State for Ministry of Trade and Industry & Ministry of National Development Dr Koh Poh Koon stated that the adoption of digitisation and IoT could add $36 billion in total manufacturing output and boost labour productivity by 30%. 

Key takeaway: IoT adopters can look forward to higher productivity and lower capital investment, leading to higher profits.    

3) Energy savings 
Research has shown that approximately half of the energy consumed by companies is spent on heating, cooling and lighting unoccupied offices. Inefficient energy use can translate to much higher utility bills – an expense that businesses could be avoided. That’s where IoT is applicable.

Smart technology and intelligent lighting controls can monitor and react to empty rooms, automatically turning off lights and air-conditioners to eliminate unnecessary usage. In fact, McKinsey estimated that intelligent energy management systems can reduce energy use in offices by 20%, producing a potential economic impact of $11.7–$20.5 billion per year in 2025. More importantly, ZDNet stated in an article⁴ that LEED-certified smart buildings have 34% lower CO2 emissions, a key in abating global warming. 

Key takeaway: IoT adopters can enjoy lower energy costs while doing their part for the environment.

4) Vehicle management 
One of the biggest problems faced by logistics companies or vehicle providers is monitoring their fleet. Without proper fleet management, businesses run the risk of losing their cargo, experiencing unexpected vehicle breakdowns, or even having their vehicles involved in serious accidents. 

IoT can provide real-time vehicle usage data and control so that fleet managers can remotely monitor the location and condition of their vehicles to improve resource usage and maintenance. A good example is SkyFy Technology⁵, a Singapore fleet management systems provider that uses Singtel SIM cards for connectivity. Their system has enabled clients to save up to 40% in fuel and maintenance costs by managing their fleets more efficiently. 

Beyond cost savings, fleet management IoT also enables logistics and transport companies to do driver behaviour monitoring and plan the shortest available routes based on traffic conditions. As a result, IoT enabled-fleets are safer and more productive in their daily operations.  

Key takeaway: IoT adopters can reduce fuel consumption, optimise routes, minimise the risk of accidents and lower vehicle downtime for improved productivity and lower running costs.