Sensors everywhere: six stories of incredible profits and artificial intelligence (part 1)
The world has entered the digital era: information technology helps companies earn billions, and those who do not have time for progress, the new economy punishes without mercy
Practice shows: who does not adapt, he dies. A recent example is the American toy company Toys “R” US, which had 800 stores in the US and the same in other countries. Instead of developing online trading, the company opened new high-value stores. Some of them were with amusement parks and attractions. The company had no profit since 2013 and eventually lost to retail stores with online sales channels. At the end of 2017, Toys “R” US filed for bankruptcy, and in 2018 announced the closure and sale of its stores.
The fact that business has realized the changing reality, says the increase in investment in new technologies. The costs of technology companies in the US (including Amazon and Netflix) in the R&D direction, coupled with capital investments, rose from $100 billion in 2007 to $250 billion in 2017 (from 13% to 18% increased the share of these costs in company revenue). According to Morgan Stanley forecast, in 2018 the costs of it projects related to network equipment and artificial intelligence will increase the most.
How do investments in new technologies help companies earn money? Here are six stories from life.
The story of the first. Sensors for agriculture
The technology with the installation of sensors that capture and remove information from various objects is referred to the Internet of things (IoT). In 2003, only 500 million devices were connected to the Internet. According to Cisco forecasts, by 2020 they will be about 50 billion IDC estimated business spending on IoT in 2017 at $772.5 billion, which was 14.6% more than in 2016. By 2021, total spending will reach $1.1 trillion.
One of the fields of application is agriculture. Farmers are using sensors attached to the cows, unable to detect disease, to monitor the status of cows during pregnancy, during calving, she died. All this in the end gives an economic effect. For example, in Brazil there are of 211.8 million head of cattle, valued at $7.2 billion, the price of the sensor together with its service is $3 per cow per month. The return on these investments (ROI, return on investment) exceeds $27 billion per year.
Another example is a farmer from California Kurt Bantle growing avocados, I decided to experiment with IoT in order to reduce water consumption. He invested $8,200 in a system with soil moisture sensors and one-time irrigation automation. The cost of watering its 900 avocado trees before installing the system was $47,300 per year, and then decreased to $11,300, that is, by 75%. The farmer was able to recoup investment in IoT in just six months.
The second story. Sensors for shipping
The marine division of Caterpillar serves operators of the American fleet. The company has installed sensors on ships that control literally everything: the power of generators, engines, GPS system, air conditioning system and fuel meters.
By installing sensors, in one case Caterpillar found that the fuel meter readings correlated with the amount of energy used by refrigerated containers. Based on this data, the company changed the operating parameters. The company has launched more low-power generators instead of a few with maximum power. Savings from this action amounted to about $30 per hour. This may seem like a small amount, but given that the fleet consists of 50 vessels operating 24 hours a day and 26 weeks a year, the savings amounted to $650 million a year.
In addition, Caterpillar used the instrument data that was attached to the housing. During the movement of the ship’s hull is polluted, and it affects its maneuverability. Sensors allowed to establish a correlation between the cost of cleaning the body and improved maneuverability. As a result, Caterpillar recommended its customers to clean the case every six months, not every two years, as they did before. It was found that for a fleet of 8 ships, the inefficiency of the vessel due to dirty hulls cost $ 5 million per year. By switching to a different hull cleaning mode, the fleet was able to save up to $400,000 per year on each ship.
Third story. Sensors for logistics and oil production
Big data is called “new oil”. Boston Consulting Group predicts that the value of personal data will grow from $316 billion in 2011 to $1 trillion in 2020. Big Data helps to forecast demand, optimize logistics, improve and speed up communication with customers, make them personal offers or track customer reviews on social networks.
The UPS logistics company uses data to optimize routes in real time. The company also collects information about the behavior of drivers, errors are analyzed, drivers undergo additional training. UPS technical Director Dave Barnes said that saving one mile per day per driver could lead to savings of 1.5 million gallons of fuel per year. In money, it is about $50 million per year — 2% of the operating profit for 2017. The company has been using data since 2001, saving 364 million miles and 39 million gallons of fuel. Meanwhile, the well-known oil company BP is investing in data collection from all oil and gas wells. Analyzing this information, the company is able to predict possible problems, and the use of technology has already allowed the company to reduce annual costs by $7 billion.
The fourth story. Big Data and artificial intelligence for retail
The use of big data in trading allows us to predict customer demand, effectively build communication with customers and eventually increase sales.
A major American retailer Walmart after hurricane sandy in 2004 analyzed the structure of sales: along with flashlights and emergency equipment in some stores jumped sales of strawberry cakes. By the next hurricane, sandy, in 2012, Walmart had organized additional deliveries of these goods and successfully sold them.
On the basis of big data, you can build algorithms for chatbots. This is a digital channel-communication with the client using artificial intelligence, which potentially increases the percentage of feedback from 10-30% to 85% compared to email-mailing. Today, chatbots are used by small and medium-sized businesses to increase sales, as well as by media businesses to increase traffic. For example, a Shoe retailer Alterkickz Elite (Philippines) using a chatbot was able to increase sales of goods three times (from $3800 to $10 000) in a month. A Mexican furniture dealer Decen Muebles Infantiles after installing a chatbot sold furniture for $4000 per month. Prior to that, there were almost no sales for six months.