The Internet of Things (IoT)

Published in El Mundo Newspaper on February 12, 2014

Recently in Silicon Valley the Internet of Things has become trendy. The term the Internet of Thing (IoT) has its roots in the famous Auto-ID Center at Massachusetts Institute of Technology (MIT) and refers to the Internet connection of sensors, vehicles, machines , and all kinds of objects. These connections allow maintenance and improve safety in cities, houses, shops, factories, utilities and transportation infrastructures saving time, money and even lives. Imagine a system that adjust timing traffic lights depending on who is crossing the street, a house that learn the habits of its inhabitants and optimizes temperature. The power grid will notify you when is cheaper to turn on washing machine or the insurance company will offer a discount for driving responsibly and activate frequently your home alarm system.

Big companies based in Silicon Valley already offer products for the Internet of Things such as Cisco Systems, Intel , Oracle and more recently Google after Nest acquisition. For the part of the Internet of Things that deals with smart cities, Spain has achieved international internet of thingsrecognition through innovative projects such as Santander, Barcelona and Malaga. While large companies such as Endesa and Telefonica and global leading IoT projects or Machine -to -Machine (M2M ) and other small are becoming known as Libelium , Carriots or Urban-M, an startup incubated in Malaga Bolt accelerator that is about to launch a smart bike with more than 50 sensors that interact with the city.

According to Gartner, in 2020 the number of objects connected to the Internet will be 26 billion. This represents 30 times the 900 million objects connected in 2009 (this number doesn’t include 7,000 million smartphones, tablets and laptops that is estimated for 2020). The Internet of Things will have an extraordinary impact on our lives and economies. 2020 is expected to furnish itself a value of $2.6 trillion to the global economy.urban-m

To understand these data and what is coming suffice to stop and observe what has brought into our lives the Internet we know today : in 2009 a global Internet economy generated $2.2 trillion, 2.9% of GDP according to a study from McKinsey . The report noted that if Internet consume and spending were a sector of the economy it would be greater than agriculture or energy. According to eMarketer, in 2012 30% of the Spanish population spent an average of $1300 per person shopping in Internet, which mean 2% of total purchases. Although Spain is the European country with the highest growth in online shopping, it is still far from the 13% in the UK according to Forrester. Moreover social networks have transformed the way we communicate and socialize at a speed and scale never seen before.

Undoubtedly Internet is a technological revolution that contributes to economic growth, productivity and employment. As in 1990 still was not clear how the Internet would affect us, now in 2014 the same process is happening for the Internet of Things. In Silicon Valley thousands of entrepreneurs have already begun to shape the new economy based on the interconnection of objects and analysis of data generate to improve decision making.

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Winning the Beer Game with The Internet of Things (IoT)

Published in Cisco Blog on Dec 10, 2013

Supply Chain Management (SCM) has always been critical to business operations and success. Executives in large corporations remember lessons from their SCM courses back in business school. For those who have forgotten, consulting companies and universities teach SCM using well-known games such as the Beer Distribution Game. The problem the Beer Distribution Game highlights is the lack of insight people along the distribution chain have beyond a few steps.  However, I’d posit that the Internet of Things (IoT) provides us the opportunity to holistically visualize and play with our entire supply chain.  In effect, IoT may make the Beer Distribution Game a relic of the past.

Beer Distribution Game!

The Beer Distribution Game is a role-player table game created by Jay Forrester at MIT Sloan School of Management in the early 1960s to teach principles of management science. The game is played by teams who simulate the supply chain of the beer industry during 40 weeks. Each team represents a brand and the goal is to meet customer demand. Each player represents a specific area of the supply chain: retail, wholesale, distributor and factory. Within each team players cannot communicate each other and information is only passed through orders and shipments notes every week. The winner of the game is the team with lower total cost of capital employed in stock for everyone in the supply chain while avoiding out-of-stock situations.

The most frequent problem during the game is accumulating excessive inventory due to the bullwhip effect – small changes in customer demand can result in large variation in orders placed upstream. Anyone can play this game from business school students to top supply chain executives. However the results are similar: once the game concludes, factory players who often accumulate 600+ stock units cannot believe that during the last 35 cycles the end customer demand remained completely constant with 4 units per week.

The purpose of the game is to illustrate the key principle that structure produces behavior, a concept from System Dynamics. Structural and communicative dysfunctions in many organizations that deal with material flows, stocks and time delays are responsible for high operational costs and market failure.

If downstream agents of the chain don’t receive the data about consumer behavior in real time, they cannot adjust production.

The good news is that today advanced information technologies; such as wireless sensor networks, mobile embedded systems, telemetry and ubiquitous computing can be connected to ‘things’ across the entire supply chain (beer taps, distribution trucks, warehouses, factory control rooms, offices, etc…) creating an automated system able to seamlessly adjust offer to demand.

Cisco Systems and its partner ecosystems provide the technologies that help organizations to migrate from forecast-driven supply chains to real-time information-driven supply chains.

According to a Forrester Consulting survey, 53% of enterprises from industries where SCM is critical are planning to implement IoT solutions within the next 24 months.

The majority of IT decision makers are turning to IoT solutions to provide more visibility in the supply chain, reduce carbon emissions, improve customer interactions, and ultimately minimize operational expenses to be more competitive.

——— And now, interviews with two companies making IoT a reality for businesses! ——

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