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Analyzing the "Internet of Things"
Delaney Turner 270002T14M firstname.lastname@example.org | | Tags:  internet_of_things cognos business_analytics rfid spss ibmsoftware
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In the first of two feature articles this week, we look at the role of business analytics software in helping companies understand the Internet of Things, that ever-growing and increasingly interconnected web of sensors, data and systems surrounding the globe.
Science fiction has a hard time keeping ahead of reality. In the futuristic Steven Spielberg film “Minority Report,” electronic billboards scanned shoppers' retinas to identify them and offer up promotions customized to their buying preferences. In Japan, such billboards are now a reality.
Business processes are having a hard time keeping ahead of reality too. Decision-makers are inundated by a deluge of data that is flowing in from all over the enterprise. And in addition to the email, voice mail, reports and spreadsheets sent by customers and co-workers, information is now coming at business people from the physical objects themselves, through what the McKinsey Quarterly calls the Internet of Things.1
"A global data field"
We’re all familiar with the Internet that brings email, music, and videos to our computers and mobile phones. But the Internet of Things refers to a set of tools that only a short time ago was the stuff of science fiction. It is a network of information that exists in the rapidly growing number of sensors and microchips embedded in the objects and machines that are all around us every day. In the video below, IBMers Mike Wing, Andy Stanford-Clark and John Tolva explain what the concept means to them:
For more, check out George Faulkner's blog post over on the Smarter Planet blog
RFID tags adding data volumes daily
One good example is the RFID tag, which is a device that consists of a microchip combined with a tiny antenna. It can be as small as a grain of rice, and it carries data such as a product serial number or other information, which is read by a scanner. RFID (radio frequency identification) tagging is being piloted by major big-box retailers, some of whom are mandating that their suppliers include the information-packed tags with shipments to their stores and distribution centers.
So far, RFID tagging has been mainly at the pallet or case level—not at the level of individual items for retail sale. But the profit and productivity potential of RFID could soon cause the tags to spread across store shelves at the item level.
Driving the adoption of “item-level RFID,” as it’s called, are financial changes at both ends of the RFID equation. In the past, the high cost of the tags themselves was an obstacle to item-level use. A few years ago, the cost of each tag was 50 cents. At that price, item-level RFID was attractive to high-end clothing retailers and the pharmaceutical industry, but not to mass merchandisers. Now, the cost per tag has fallen to less than half that, making them cost-effective for a much wider range of products.
Keeping costs down
On the other side of the equation are the cost savings and increased profits to be gained from the use of item-level RFID. Retailers can use RFID tags to manage inventories more efficiently—keeping supplies lean, but always adequate. The RFID Research Center (based, interestingly enough, at the Sam M. Walton College of Business at the University of Arkansas) conducted a 13-week test of item-level tagging at two Bloomingdale's stores, comparing the accuracy of inventory management using bar codes to a process using RFID. Researchers and found that the RFID process improved inventory accuracy by 27 percent.2
RFID-based inventory processes can reduce “out-of-stock” situations substantially. That means that more customers will be able to find what they want, instead of walking out of a store empty-handed. In addition, RFID has shown that it can play a major role in reducing retail “shrinkage” (a.k.a. theft).
Why business analytics?
In the words of McKinsey Quarterly, “As the new networks link data from products, company assets, or the operating environment, they will generate better information and analysis, which can enhance decision making significantly.” And this is where business analytics software comes in.
If you're considering the implementation of RFID or another process involving the Internet of Things, business analytic solutions can help you in two important ways. First, by modeling your processes and business scenarios with a solution such as IBM Cognos TM1, you can answer the threshold question of whether such tools are worth the investment at this time. After all, it doesn’t always pay to be an early adopter. But if you do choose to make the investment, then, once the information is flowing in, a solution such as IBM Cognos 8 Supply Chain Performance Procurement Analytics can help you make full use of that information to make smarter purchasing decisions and get the maximum ROI.
As with any successful business strategy, today’s innovation becomes tomorrow’s standard practice. So the sooner that any business evaluates and (if prudent) adopts the tools of the Internet of Things, the longer that business will enjoy the benefits—and the competitive advantage—that they provide.