Impact of Internet of Things (IoT) on Industry and Supply Chain

Full text

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Impact of Internet of Things (IoT) on

Industry and Supply Chain

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Agenda

• Safety Message

• Part One

CPS Energy Story

• Part Two

The Digital Wave and the Internet of Things (IoT)

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CPS Energy Overview

Largest municipally owned, vertically integrated electric & gas utility in the nation- 756K Electric & 334K gas customers

Lowest energy rates among the top 10 largest U.S. cities

Designated by Bank of America Merrill Lynch as the “Premier Credit Rating” in industry

Innovative public private partnerships have yielded 600 jobs &

$800M in economic impact to-date in local San Antonio community

$11B in asset base, $2.5B in annual revenue

14% of customers are on a Demand Response program, equivalent total 135MWs

San Antonio Ranks 6th in Nation for Solar Energy *

*Source :Environment Texas Research & Policy Center, April 2014

generation portfolio.

Vision 2020 transitions CPS Energy from a company that is highly dependent on power from traditional generation sources to a company that provides competitively priced power based on a diverse

generation portfolio.

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Why CPS Energy is changing……

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Why CPS is changing…..

Declining Demand

-5%

0%

5%

10%

15%

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038

U.S. Electricity Demand Growth (Annual and Moving Average in %)

Three-Year Moving Average Trendline

Primary product of electric utilities continues to decline year over year

Historical Projected 2012

Latest EIA projection*

2011–2040 Average: 0.9%/year

Sources: *EIA, Annual Energy Outlook 2013; EIA, Monthly Energy Review (Dec. 2013); ScottMadden analysis

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Why CPS Energy is changing….

Low Barriers to Entry

3%

97%

Electricity and Gas

Everything Else

*Table : Size of consumer unit: Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 3rd quarter 2012 through 2nd quarter 2013 (Four Person Family)

Share of Wallet

New Game Players

Analytics and understanding customer behavior is critical to future growth

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Why is CPS Energy is changing….

Technology

Digital 10 years No Technology

100 years Analog

89 years

Emerging technologies will continue to be more automated and less invasive while providing greater value.

Change is Inevitable OT/IT Convergence

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Why CPS Energy is changing….

Declining Solar Costs

*Source: Lawrence Berkeley National Laboratory

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THE CPS Energy Story

Interoperability by open architecture

Future Energy System

Interoperability between providers and customers creates most value: “prosumers”

The Grid

Traditional Energy System

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THE CPS ENERGY STORY Adapt and Innovate

Diversity of Generation

Natural gas bridge fuel

Incremental integration of renewables

Grid of the Future

Interoperability via Open Architecture Data Analytics

Public Private Partnerships

Technology/Innovation

Economic Development / Education

Human Capital Investment

Training & development “De-bureaucratizing”

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The Digital Wave and the Internet

of Things (IoT)

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The Digital Wave and the Internet of things (IoT)

…….and what is IoT?

IoT is basically connecting any device with an on and off switch to the internet. This includes:

Cell phones

Coffee makers

Washing machines

Wearable devices

Machines

Purchasing systems

Grids

Games

And everything else……

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IoT Key Facts

4.9 billion connected things will be in use in 2015 (up 30% from 2014)

By 2020, the amount of Internet-connected things will reach 50 billion, with $19 trillion in profits and cost savings coming from IoT over the next decade, according to Cisco Systems

Gartner predicts 250 million connected vehicles with automated driving capabilities by 2020

Only 0.06% of things that could be connected to the Internet currently are, which means 10 billion things out of the 1.5 trillion that exist

globally are currently connected.

Connected homes will be a huge part of the Internet of Things. By

2019, companies will ship 1.9 billion connected home devices, bringing in about $490 billion in revenue.

GE estimates that convergence of machines, data, and analytics will become a $200 billion global industry over the next three years.

By equipping street lights with sensors and connecting them to the network, cities can dim lights to save energy, only bringing them to full capacity when the sensors detect motion. This can reduce energy costs by 70% to 80%.

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The Internet of Things:

50 Billion Things by 2020

Not primarily controlled by humans

Unique IP address

Permanent connection to Internet

Examples: Smart meter

Act as gateways or aggregators

Unique IP address

Permanent connection to Internet

Examples: Smart hub

No direct connection to Internet

No unique IP address

Access through gateway

Examples: Connected lights (mesh network)

Source: Gartner

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The Digital Wave and the Internet of things (IoT)

Everyone is going “digital,” but what does that mean?

Digital

Social

Mobile

Big Data Cloud

Digital is made up of four aspects:

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Digital and the IoT

How does this impact you?

The new rule for the future is going to be, “anything that can be connected, will be connected.”

Why should we change?

 Opens the door to a lot of opportunities

 Remain competitive

 Technology “consumerization” is driving transformation in the utility business model

Source: ITU, adapted from the Nomura Research Institute, “Ubiquitous Networking:

Business Opportunities and Strategic Issues”, August 2004

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Digital and the IoT impact on Supply Chain

How does Digital and IoT impact supply chain organizations?

• Greatly broadens the number of locations along every product’s value chain that will now be monitored.

• Dramatically improve marketers’ ability to sell desired products to specific customers exactly when they need or want them.

• Speed up the product cycle – all of which will dramatically increase the pressure on supply chains to perform faster, more efficiently and at lower cost.

• Changing how supply chain teams need to be organized and managed

• Potentially changes a companies control points for managing the value chain

• Changes the role and value of data

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Digital and the IoT impact on Supply Chain

How are Supply Chain organizations handling digital today in general?

• Many are working to introduce Digital capabilities into their operations with small successes in general

• Welding digital capabilities onto traditional supply chain structures that combine paper-based processes and newer optimized processes

• Re-fitting, re-wiring and re-adapting instead of re-inventing

• Overall, results yield unrealized performance because of inconsistent data and a myriad of inefficiencies

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Digital and the IoT impact on Supply Chain

Where does Supply Chain go from here?

Social

Mobile

Big Data Cloud Digital

The Emergence of the Digital Supply Network

• Social Media can help companies tap outside the walls of the organization

• Mobile Communications can provide real time support for the field

• Analytics can help companies analyze behaviors and improve efficiency

• Cloud can provide remote access by experts to help organizations

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Digital and the IoT impact on Supply Chain

How does Supply Chain benefit from the Digital Supply Network?

• Has the power to drive the convergence of supply chain elements

• Help companies capture larges savings both financial and efficiency

• Fosters network processes optimizing the complete enterprise to include:

 Designers  Distributors

 Manufacturers  Logistics

 Suppliers  Customers

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Digital and the IoT impact on Supply Chain

Rapid

Enhanced responsiveness

Proactive prevention

Last mile postponement

Scalable

Maximum efficiency

Organizational flexibility

Personalized experiences

Intelligent

Actionable insights

Automated execution

Enhanced and accelerated innovation

Connected

Real time visibility

Seamless collaboration

Highly evolved operating models

What are the key attributes of the Digital Supply Network?

Source: Accenture

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Summary

• Envision the Power of the Network. At the outset, it is essential to define the digital supply network vision for the organization.

• Forget Functional Excellence. Once the

vision is defined, the next step is to conduct a value chain analysis to identify the value-

creating activities that will to be at the core of the digital supply network.

• Map Your Digital Journey. With the vision defined and the core activities revealed, a digital blueprint for the organization can be created

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THANK YOU!

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