A recent Wall Street Journal feature on how Johnson Controls solved a vexing logistics problem with the use of RFID (radio frequency identification) tags is of interest for a number of reasons. There's the story of the actual problem and how Johnson Controls found an answer, and then there's what its experience says about how enterprises can develop and evolve their IoT (Internet of Things) strategy.
First, here are some of the key details from the WSJ's report:
Johnson Controls Inc. had a logistics mystery on its hands: thousands of reusable shipping boxes and storage racks were disappearing every year.
The auto-parts maker, which was spending a small fortune to replace the equipment, launched an investigation. It showed some were squirreled away at factories by Johnson Controls’ own plant managers, others were kept by customers. One box was discovered at a Michigan gun range; another had wound up storing bait on a fishing boat in Seattle.
The missing containers and racks are one example of the costly detours in logistics that vex the automotive industry’s sprawling supply chain. Under the just-in-time model—in which parts arrive at an auto plant just before they are needed on the production line—every delivery must arrive without fail.
To solve their missing-box problem, [Johnson Controls supply chain manager Brian] Kelly and Mark Klenczar, the Milwaukee-based company’s North America packaging-engineering manager, in 2012 started sticking radio-frequency identification, or RFID, tags on the sides of the containers. More than 830,000 containers and racks now have the tags, and soon all will.
The tags, which cost between $1 and $5 each, emit signals that allow hand-held readers or towers to track their whereabouts as they move from shipping and receiving sites. As of last year, all Johnson Controls’ North American plants and warehouses were equipped with tag readers, Mr. Kelly said, and the company is now ordering fewer of the $150 containers and $1,500 racks as a result.
It might be surprising to some readers to find out a manufacturer as large and sophisticated as Johnson Controls hadn't yet been using RFID in a pervasive manner. But as the WSJ report notes, RFID tag accuracy has come a long way in more recent times, justifying the cost.
"A lot of the companies you'd assume been doing it for a while have been doing it piecemeal but they haven't taken the full plunge," says Constellation Research VP and principal analyst Guy-Frederic Courtin.
RFID, of course, is a crucial component of IoT. As Johnson Controls' internal IoT strategy evolves and expands, the next logical step is to consider how IoT makes sense externally, as a new business model, Courtin says.
"It's a two-sided coin, so to speak," There's a use case that's happening which is better asset management, better runtime, the second side of it is, can you put IoT on the actual products you make?" For example, Johnson Controls could begin adding sensors to its products and even offering a data-collection, management and analysis service to automakers, which would be a clear value-add.
"IoT is a new source of information and data, and it opens up new business models," Courtin says. "That's what's exciting about it."
You can download an excerpt of Courtin's in-depth research report, The Five Interconnected IoT Business Models, at this link.
