Internet of things: Applications in business field in foreign countries and implications to Vietnamese enterprises
INTERNET OF THINGS: APPLICATIONS IN BUSINESS FIELD IN
FOREIGN COUNTRIES AND IMPLICATIONS TO VIETNAMESE
ENTERPRISES
Assoc. Prof. Dr. Do Thi Dong
National Economics University
Abstract
This paper investigates Internet of Things (IoT), one of the most popular
technologies of The Four Industrial Revolution. Based on the concept of IoT,
characteristics and structure of IoT system as well as application of IoT in doing
business in foreign countries, some implications are drawn to Vietnamese
enterprises in applying this technological trend.
Key words: The Four Industrial Revolution (Industry 4.0 or FIR), Internet of
Things (IoT), sensor, virtual - physical system.
1. Introduction
The term Industrial Revolution 4.0 – FIR or Industry 4.0 was first introduced in
2012 in document originated from 2012 Hannover Exhibition Fair in Germany.
Industry 4.0 became the shared concern all over the world after the meeting of the
World Economic Forum in January 2016. With the theme of “Mastering the Fourth
Industrial Revolution”, the 46th Annual Meeting of WEF in Davos Klosters,
Switzerland mentioned the shaping of Industry 4.0 and it challenges to human.
Industry 4.0 is creation in the base of digital revolution, especially the use of
internet. It refers to the development of cyber- physical system by the integration of
Internet of Things, Cloud Computing, service innovation, Artificial Intelligence,
Big data, and other technological advances. Industry 4.0 created challenges to
people in doing business as it makes a lot of changes in business system, such as
change in communication between people and machine (people to people, people to
machine and machine to machine), change in organizational structure to vertical
networking (of smart production systems) and horizontal integration (via a new
generation of global value chain network), etc. (Hoa, 2017). Thus, understanding
the key technologies of Industry 4.0 and their applications is important for
enterprises. Internet of Things applications helps companies gain profits to better
survive and compete in the market by saving costs, enhancing productivity and
quality and finally making customers more satisfied. It, thus, contribute to
enterprise’ sustainable development.
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The purpose of this secondary research is to investigate Internet of Things (IoT),
one of the most popular technologies of The Four Industrial Revolution. Based on
the concept of IoT, characteristics and structure of IoT system as well as
application of IoT in doing business in foreign countries, some implications are
drawn to Vietnamese enterprises in applying this technological trend.
2. Internet of Things - IoT
Internet
Nowadays, people all over the world are familiar with the term “Internet”, a
powerful global communication medium. When the concept of internet first
introduced, it was mentioned as computer network connecting two or more smaller
networks. Internet originated with the U.S. Government. It was known as
ARPANET, a computer network that was built by the U.S. Government in the
1960s. The internet was brought to the public on a larger scale at around 1995.
English Oxford Dictionary defined internet as a global computer network providing
a variety of information and communication facilities, consisting of interconnected
networks using standardized communication protocols. Internet is a network of
networks that consists of millions of private, public, academic, research, business,
and government networks, of local to global scope, those are linked by a broad
array of electronic, wireless and wired networking technologies.
Internet has been considered the most cost- effective communication method in the
world. Through internet, a lot of services are available, including email,
conferencing services, online movie and gaming, data transferring or sharing,
messaging, forums, social networking, online shopping, financial services, etc.
Internet has great impact on people’ lives since it formed new styles of social
interaction, activities and associations. There has been a tremendous growth in
internet usage. According to International Telecommunication Union (ITC), the
number of Internet users has increased from 738 million in 2000 to 3.2 billion in
2015. That’s a seven-fold increase that brought Internet penetration up from 7% to
43% of the global population (ITC, 2016). Figure 1 shows the number of individual
using internet worldwide. Regarding to the figure, the number of internet users rose
from 1 billion in 2005 to 2 billion in 2010.
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Figure 1: Individual using the Internet worldwide
Source: International Telecommunication Union, 2016
The comparison of proportion of young people aged 15-24 using the Internet and
the total population is shown in Figure 2. Regarding to the figure, the proportion of
young people (71%) is significantly higher than the proportion of the total
population using the Internet (48%). The percentage of individuals using the
Internet in developed countries is higher that of developing countries and, of
course, less developed countries.
Figure 2: Proportion of individuals using the Internet, by age, 2017*
Source: International Telecommunication Union, 2017
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Note: * Estimates. CIS refers to the Commonwealth of Independent States.
Proportions in this chart refer to the number of people using the Internet, as a
percentage of the total population, and the number of people aged 15-24 using the
Internet, as a percentage of the total population aged 15-24, respectively.
Sensor
Nowadays, sensor becomes increasingly familiar with people. A sensor is a device
that converts a physical phenomenon into an electrical signal. A sensor is often
placed inside a protecting coverage to create a test probe which may or may not
include supporting circuit. This system is often called sensor also. Sensors are
important devices in virtual- physical system. They represent part of the interface
between the physical and virtual worlds.
Sensors have some characteristics. At first, it has ability to transfer from physical
input signal to electrical output signal. Secondly, sensors have ability to ensure
accuracy and precision. Sensors are expected to represent the correctness of its
output and give the same reading when repetitively measuring the same measurand
under the same conditions. Sensors are also expected to have ability to produce the
same output value when measuring the same measurand over a period of time.
Thirdly, sensors have sensitivity. It shows the relationship between input physical
signal and output electrical signal. Any change in input will cause in parallel
change in output. Fourthly, sensors have reproducibility, the ability to produce the
same responses after measurement conditions have been changed. Next, error exists
in sensors. It is the difference between the actual value of the measurand and the
value produced by the sensor. It can be caused by the variety of internal and
external sources and can be systematic or random. When the error is the largest, the
uncertainty appears in the sensing system. Noise also exists in sensors. It is
unwanted fluctuations in the output signal of the sensing system, when the
measurand is not changing. In addition to these characteristics, sensors have some
more such as stability, drift, resolution, etc.
Internet of Things (IoT)
The term Internet of Things was introduced in 1999 by Kevin Ashton, one of the
founders of MIT’s Auto ID lab. The concept is simple but powerful. If all objects in
daily life were equipped with identifiers and wireless connectivity, these objects
could communicate with each other and be managed by computers (Lopez, 2013).
According to Ashton, if people have computers that knew everything, using data
they gathered without any help from people, people would be able to track and
count everything, and thus, greatly reduce waste, loss and cost. People would know
when things needed replacing, repairing or recalling, and whether they were fresh
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or past their best. People need to empower computers with their own means of
gathering information, so they can see, hear and smell the world for themselves, in
all its random glory (Ashton, 2009).
IoT describes a system where items in the physical world, and sensors within or
attached to these items, are connected to the Internet via wireless and wired Internet
connection (Lopez, 2014). IoT is defined as an open and comprehensive network of
intelligent objects that have the capacity to auto- organize, share information, data
and resources, reacting and acting the face situations and changes in the
environment. It refers to the use of intelligently connected devices and systems to
leverage data gathered by embedded sensors and actuators in machines and other
physical objects (GSM, 2014). In the term IoT, things are interchanged with the
word “object”. They could be living things and non- living things, including
people, animals, plants, birds, servers, applications, cars, coffee machines,
electronic devices, etc. Sensors are the most important hardware in IoT system
since they have function of transferring input physical signal into output electrical
signal as mentioned previously.
IoT has some key characteristics as follows:
Intelligence: IoT is a combination of computers and algorithms. The system makes
things smart, having capabilities to respond to changes in the environment in
intelligent way.
Connectivity: Everything in IoT are connected in three ways including people to
people, people to machine and machine to machine. Connectivity helps individual
objects contribute to collective intelligence of IoT.
Dynamic changes: Since IoT is intelligent and has capability to react to changes in
the environment, the system is dynamic. Status of each object in the system may
change continuously and so does the environment. Signals reflecting the changes
are continuously updated.
Enormous scale: As objects in IoT can be people, animal, plants, machines and any
other physical things and they can be combined by wireless or wired internet, the
scale of IoT system can be enormous. Manufacturing IoT system even has
thousands of things.
Heterogeneity: Devices and / or objects in IoT are different from others in term of
structure, hardware platform and software. Thus, each object can interact with other
in different ways.
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Sensing: As mentioned previously, IoT would not be possible without sensors,
which are the most important hard objects of IoT system. Sensing technology is
specific characteristic of IoT.
One IoT system consists of four different layers of technologies supporting IoT.
They are smart device/ sensor layer, gateways and networks, management service
layer, and application layer. Technologies used in IoT are categorized into three
groups including technologies those impact the devices and microprocessor chips,
technologies those support networking sharing and address capacity and latency
issues and technologies those impact the management services which support IoT
application (Keyur and Sunil, 2016).
Cyber- physical system (CPS)
Cyber- Physical System or cyber physical system is a mechanism that is controlled
or monitored by computer- based algorithms. It is integration of computation,
networking, and physical processes. CPSs are systems that link the physical world
through sensors. If we consider IoT the basic infrastructure, cyber physical system
is coming on the top of that infrastructure. In cyber physical system, there are two
key components including IoT and Cloud Computing. IoT acts as “machine” to
create data whereas cloud provides a “door lead to a room” to storage data.
3. Application of IoT in business field
Although the term IoT was introduced nearly 20 years ago, it has been paid
attention for several years, since the development of smart phone, tablets and
wireless connection. IoT can be applied in a number of areas. Among them, eight
popular areas are retailing, vehicles, home, offices, factoties, cities, human,
outsiders. The followings are some examples of IoT applications.
Factories
IoT provides a strong means of monitoring various processes in manufacturing. IoT
helps manufacturers to optimize operations, transport production materials,
assembly components, check product quality, enable preditive maintenance, predict
deffects, etc. It can be a base for a company to create smart factory in which a
numbers of sensors are embedded to people and machines. Each sensor records
data about the situation of the object and send signal to others, who receive and
understand the sender’s conditions and react to the situation. By using IoT, the
system run smoothly as long as the signal show that things’ situation are controlled.
IoT brings manufacturers benefits such as improving visibility across their
manufacturing operation, improving resources utilization, reducing wastes, saving
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costs, and finally improving productivity and quality. It leads to a higher level of
customer satisfaction.
Application of IoT can be seen in a number of factories. Rich data, ubiquitous
connectivity, and real- time communication are chaging the way companies work
(Box 1). An example of applying IoT in quality checking in Daimler and
Volkswagen is shown in box 1. According to the box, by applying IoT, Daimler
can reduce the deffect rate and make the production more cost- effective where as
Volkswagen can better make decision in processes management since they have
right information at the right place and at the right time. According to many
manufacturers, application of IoT is a must, but not an option.
Box 1- Application of IoT in the automotive sector
The automotive sector is also using Industry 4.0 successfully. Daimler, for instance,
evaluates machine data to improve the quality of cylinder head production. The
persons in charge can thus detect deviations and irregularities at an early stage in the
manufacturing process and take action quickly. As a result, they reduce the error rate
and make the production process more cost-effective. Volkswagen is pursuing
another exciting approach: In an Industry 4.0 project, it uses RFID (radio frequency
identification) technology to capture data from components in test vehicles faster.
The components are already fitted with RFID chips by the suppliers. When the
vehicles are tested, engineers can identify the installed prototype parts effortlessly
and display detailed information they need for development. They thus have the right
information at the right place and at the right time.
Source: Infineon, 2018
Outbound logistics
Sensors are embedded to things such as people, trucks, containers, ships, etc. in
order to monitor the transportation process. By receiving signal from on- board
sensors, containers and packages can be tracked and data about environmental
conditions in terms of temperature, hazardous, humidity, etc. can be recognized to
ensure the containers and packages are in safe conditions. Sensors also helps
carriers to prevent theft and product damage. They also helps drivers easy for
parking as they can easy access parking lot via virtual system. Example of IoT
application in The Port of Hamburg is presented in Box 2. According to the box,
the Industry 4.0 project helps to simplify the processes and the port can transship
goods faster than before.
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Box 2- Application of IoT in The Port of Hamburg
The Port of Hamburg is one example of IoT application in logistics. 140 million
tons of goods are transshipped there every year, a figure that will likely double by
2030. However, there’s not enough space at the port. The Hamburg Port Authority
therefore faced the challenge of shifting the containers faster. People, trucks,
containers, ships, cranes and traffic management systems were connected with each
other in an Industry 4.0 project. They all communicate with each other and supply
business-related data. The upshot: Trucks reach their destination faster and the
drivers know where they can unload their consignment more quickly. Shipmasters
can plan their trips in advance. All that has simplified the processes, allowing the
Port of Hamburg to transship goods more swiftly.
Source: Infineon, 2018
Offices
IoT can be intensively adopted in office. Beacons, mobile applications, and sensors
are making employees easier to work, whether in the office or remotely, and for
companies to increase productivity levels. They all create smart office in which,
people and equipments are connecting to others via internet. Smart office is
considered an intelligent ecosystem, which bases on sensors equiped devices that
monitor, control, and manage various operations and working conditions. Adopting
IoT in office can bring companies such benefits as:
9 Energy savings. Sensors are equipped in electronic devices to adjust the
light and perceive temperature and humidity in office. They also help people
to turn of the water tap and send warning signal if there is any threat of fire.
IoT helps people use power resources more efficiently and reduce wates.
9 Efficient business operations and safe working environment. Sensors helps
people in office learn devices’ situation or environment conditions. If there
is any signal to show that the device or environment are going to become out
of control, the system will recognize and react by solutions. IoT, thus, makes
business operations run smoothly and automatically.
9 Employee productivity enhancement. As a result of energy saving, efficient
business operations and safe working environment, IoT helps companies
increase productivity interms of labour, capital, and other input resources.
9 Increased customer satisfaction. The ultimate achievement of the above
benefits is high level of customer satisfaction.
However, adoption of IoT also has some disadvantages such as raising costs of
purchasing and setting up IoT office devices and softwares, raising concerns for
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information privacy, and the dependency on a steady power supply and internet
connection. The last disadvantage may lead to the risk of system damage if there is
a lack of power or connection.
An example of IoT application in office is presented in box 3.
Box 3- IoT application in Edge
The Edge in Amsterdam is not just the greenest building in the world; it is also one of
the smartest.
The toilets flush with rainwater, 28,000 sensors measure temperature, light, motion and
humidity, each of the LED light panels requires only a tiny amount of electricity, and workers
can control temperatures, lighting and blinds via apps on their smartphones. Even the coffee
machines are connected to the internet so the facilities team can spot when they are running
low on supplies and top them up.
In the summer, hot water is stored in wells in the ground and is then used to help heat the
building in winter, while cold water comes the same way thanks to an aquifer thermal energy
storage system. Forget radiators, cables run through the ceilings with one carrying data and
the other water to provide an ambient temperature.
Winner of the highest ever BREEAM (Building Research Establishment Environmental
Assessment Methodology) score for its sustainability, the Edge, designed by London-based
architects PLP Architecture for Dutch firm OVG, is powered by solar panels on its roof and
the roofs of nearby buildings.
The only problem it faces is people. Deloitte, the building’s main tenant, allows staff to
connect to The Edge via an app, so before they have even left home it can check their
schedule and find them a desk depending on the tasks they need to perform. When they arrive
at the building, it recognizes their car and directs them to a parking place. The app even
knows their preferences for light and temperature. However, usage to book desks has been
low as people tend to want to work in the same place every day and sit with the same people.
Some staffs have even booked rooms they do not intend to use, to gain an extra parking space.
Source: Niki Chesworth, 2016
Regarding to the box, a large number amount of 28,000 sensors are embeded in the
Edge to help people work more effeciently. From the time that people working in
the Edge wake up, they are connected. IoT shows them their schedule, the building
recognizes their cars when they arrive and directs them to the parking lot. IoT helps
them to find desks as no one in the office has their own desk. Desks are only used
when they are needed. Their desk ownership is based on their schedule of the day.
IoT also knows people’s preferences for light, temperature, and even the amount of
sugar they would like to take in their coffee. IoT created a new way of working. It
results in high efficient use of office as 2,500 workers share 1,000 desks. Now,
Edge became the smattest building in the world.
Retailing
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Nowadays, there are a numbers of companies applying IoT in retailing. They can
benefit from this technology. For example, a company has several even hundreds of
stores. Each connects to others via internet. Within a store, there are several or even
hundreds of sellers, who invidually owns a cell phone, tablet, or personal computer
connecting to others via internet. Whenever a customer shows his or her concern
for a given product, a seller can immediately search to know whether it is in the
store. If not, he or she can also immediately know the store in the company has the
product. It makes sellers easy for serving customers because the data is always
available. Suppose a customer places an order and it is processed by a seller, other
sellers immediatelly know that the product is purchased. It also helps company to
enable real- time financial transactions and automate sale collection. Recording
data about purchase in terms of time, good, and personal information about
customer are also helpful to company for cutomer care.
In addition to that, IoT can be adopted in retailing in another way. Sensors
embedded in store space can helps companies to detect whether the space is
available or occupied. Virtual system makes drivers easy to run in store and find
space he or she would like to access. IoT helps company to utilize store
arrangement, increase safety, reduce costs, increase purchase from cross selling,
and the most important is enhancing customer shopping experiences.
A number of retailing companies such as Amazon, Alibaba, Aliexpress, Tabao, etc.
in the world are now applied IoT. Fashion companies like Burberry Group, Hugo
Boss AG, Louis Vuitton Malletier; automotive companies such as Toyota,
Bayerische Motoren Werke (BMW), Ferrari N.V., Huyndai Motor Group; and
others in electronic industry, transport and logistics like Kaa, Grupo Radar GPS,
etc. are typical cases applying IoT in retailing. One example of company
developing IoT application is presented in Box 4.
Box 4 - IoT application developed by Kaa
Kaa is the leading open-source IoT platform that can enable these benefits for retail companies
and serve as an IoT backbone for numerous smart retail services and solutions. It allows you to
quickly implement necessary applications for tracking goods with RFID tags, ensure items on-
shelf availability, utilize Bluetooth beacons to provide customers with personalized mobile
shopping experience, and set up digital signage in the store to attract visitors and help them
navigate through your products, discounts, and loyalty programs. IoT retail solutions powered by
Kaa can help you ensure that your customers have thorough information on everything they might
like in your store, and thus bring them closer to a buying decision.
Featuring enterprise-grade security mechanisms, Kaa is also a safe choice for mobile payment
solutions, mobile POS systems, and smart vending machines. Mobile payment applications
built with Kaa can be used with all modern mobile devices and easily integrated with a retail
management system in place to enable automated items inventory processing.
Source: Kaa, 2018
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The above examples show that IoT applications developed by Kaa has been applied in
various processes in various bussiness fields. Inaddition to retailing, IoT applications
by Kaa are in various sectors such as consumer electronics, automotive, healthcare,
industrial IoT, smart city, telecom, wearables, smart energy, logistics, sport and
fitness, and agriculture. Adoption of IoT now is a must, but not an option. Companies
should apply latest techonologies to enhance productivity and finally to better meet
customers’ requirements.
4. Implications
IoT has been recognized a leading technology trend in Vietnam. Vietnam’s rapid
technological developments have led to substantial demands for IoT technologies in
the country. However, Vietnamese enterprises are now having some limitations in
accessing the core and latest trends of Industry 4.0. They are not fully aware of the
revolution. Its influences to enterprises’ operation have not been clearly seen.
Enterprises’ technological capacity is also not strong enough to adapt to IoT system.
Their ICT infrastructure and processes are not ready to change. Overall, their business
model is not easy to change to meet the new requirements of IoT system (CMC, 2017).
According to information technology experts and managers, who participated into the
11th Asia IoT Business Platform 2016 held in Hanoi on November 29 and 30, the
potential of IoT in Vietnam is huge but it is nonetheless essential to have more
supportive policies from the government. This is the best time to develop IoT solutions
in Vietnam. However, several challenges to IoT deployment are as follows:
- High costs: setting up a system with connected devices and employees often
raise costs such as buying sensors, connected devices, training people, upgrade
information structure so that the IoT system can work. It leads to an investment
and thus, not all enterprises can be affordable to adopt.
- Hardware compatibility issues: hardware compatibility issues are also
difficulties for enterprises to overcome.
- Requirements of users: Not all customers are able to understand the necessity of
IoT adoption and thus, share with manufacturers by accepting the goods.
- Data connectivity issues: IoT system requires for common standard of
connected devices and people.
- Data security issues: Since everything is connected to internet system, data
about each device and/ or person will be recognized by the system. There is a
challenge that enterprises have to ensure the data security.
To overcome face the above challenges, enterprises should have some solutions such
as:
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- Considering applying IoT to their operations. As said previously, applying IoT
is considered a must, but not an option for a numbers of manufacturers in
foreign countries. Understanding the benefits brought by IoT, Vietnamese
enterprises should think of applying IoT to adopt IoT to their operations.
Vietnamese enterprises should evaluate their current IT architecture and
determine how to update the existing architectures and operations to capitalize
on this technological trend.
- Choosing partners carefully. To overcome the above challenges, Vietnamese
companies should choose partner carefully. Since partners are in charge of
developing and implementing the safe and secure networks, they are should be
capable of ensuring reliability, trustworthiness, sustainability and innovation.
- Engaging their existing workers and future employees. Vietnamese enterprises
should prepare for employees, who are able to work with IoT system. They
should focus on training, recruiting, partnering with universities and
government to proactively upgrade employees’ knowledge, skills and attitude
toward information technology.
Regarding to existing workers, they have to prepare themselves for being able to work
with IoT system. They are required to have good professional knowledge, information
technology skill and English.
References
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International Telecommunication Union (2017), ICT facts and figures 2017.
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