How can sensors and smart devices help companies implement circular business models?
by
Livia Formisani
06 February 2020
6 min read
by
Livia Formisani
06 February 2020
6 min read
Too often, transitioning to a circular business model is viewed primarily as an investment in the company’s image. While there surely is an advantage in that sense, this type of thinking misses the point. Going circular in industrial settings means saving a considerable amount of time, raw materials and money, while opening up all kinds of opportunities to innovate, diversify and develop additional revenue streams.
Today’s connected/smart industry solutions allow companies to easily monitor, optimize and improve their production processes. Industrial Internet of Things (IIoT) devices such as sensors and connected systems provide decision-makers with new sets of data, shedding new insights on KPIs, primary products, by-products and waste management. By taking advantage of these tools, companies can increase their competitiveness along their entire value chain, ultimately leading to higher profits, all while helping the environment.
As explained by the Ellen MacArthur Foundation, IoT and smart devices in industrial settings help companies unlock the circular economy potential thanks to three main value drivers:
Knowledge of the location of the asset
Knowledge of the condition of the asset
Knowledge of the availability of the asset
Having an overview on these data in real time is of immense value to businesses. For instance, knowing the location of an asset allows for optimized routes for loading/unloading, maintenance and storage of spares.
Knowing the condition of an asset – let’s say, that of an industrial machine monitored by a connected device – can lead to high uptime, as it allows for predictive maintenance instead of routine interventions. Parallelly, downtime is quickly detected and handled more efficiently.
Thirdly, knowing the availability of an asset allows companies to optimize energy and other resources like raw materials based on usage patterns. But the sky really is the limit: It all comes down to using the new insights to rethink the production process and set more granular KPIs.
Tapping into these sets of data, which were seldom available before the advent of IoT, empowers businesses to perform all kinds of optimizations. What’s more, IT companies such as IBM, Oracle and SAP are also offering supply chain analytics solutions to analyze data and further identify optimization opportunities.
Going circular is not just about saving money. It also opens new and exciting business opportunities for companies to increase their competitiveness and identify additional revenue streams.
For instance, a growing number of companies are transitioning to circular business models by offering turnkey solutions to their existing customers. It is the case of PaaS, “product-as-a-service” business model, in which businesses offer clients a subscription to use their goods, taking charge of the entire product lifecycle: maintenance, repairing and recycling.
Due to their convenience, these solutions are highly attractive for both consumer and business customers. After the initial investment, they can be more profitable for manufacturers, as they retain ownership of the products all while gathering data about their usage, which is used to further optimize design and production processes. Similarly, companies can develop tighter relationships with customers by providing the added value of a consultancy service. Improving products and processes and creating long-lasting relationships with end customers is everything companies need to future-proof their businesses in a highly volatile global market.
As consumers, we are already experiencing the growing success of the sharing economy, in which goods are not owned, but leased for a period of time. This type of business model maximizes the use of assets, practically eliminating downtime. A 2015 PwC study forecasted that global revenues for the sharing economy in five key sectors have the potential to increase from approximately $15 billion USD in 2015 to $335 billion USD by 2025. The growing success of companies such as AirBnb, Uber, WeWork and others show that the general public is highly interested in shared solutions, especially in urban settings where space is scarce.
A number of companies around the world have seized the opportunities offered by the Industry 4.0 to transition to the circular economy, even at an enterprise level. Whirlpool Corporation, for instance, integrated energy monitoring equipment down to the individual machine level in their production plants to obtain an accurate picture of energy usage. In one of their plants, this has led to reducing consumption by 750,000 kWh per year.
Employees in another Whirlpool facility noticed one of their processes was consuming more energy due to heat loss, so they implemented thermal blankets, a move that saved the company an additional 1 million kWh per year. The company is also collecting data on material composition in a global online tool that’s used by engineers to make sustainable choices at the design level. This enhancement helps fulfill their commitment to use 100% recycled content on major plastic components by 2025.
“We know that a more sustainable Whirlpool Corporation is also a more competitive Whirlpool—an organization better positioned for long-term success” says CEO Mark Bitzer.
At the intersection of smart industry and circular economy, new opportunities flourish. SmartBin, a provider of intelligent remote monitoring systems for waste management, offers IoT sensors that fit any waste container in order to assess the fill-level of bins in real time. This enables the powers-that-be to organize collection based on effective need. The company also provides software that suggests optimized routes for waste collection and calculates the weight and the value of the collected material, among other features. The sensors have been implemented by Goodwill in more than 1000 containers across North America, cutting collection costs by 50%.
Thanks to the potential for increased profits, enhanced productivity and/or improvements in sustainability, the circular economy empowers companies to advance, flourish and thrive.
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