Press Release - M2M will have a transformational effect on the Manufacturing and Supply Chain sector

01 July 2013

Machina Research today published its report on M2M in the Manufacturing & Supply Chain. This comprehensive qualitative and quantitative study examined five key industry sectors: Extractive, Transport & Logistics (including fleet management), Warehousing & Storage, Manufacturing, and Vending Machines.

The key findings of the research were as follows:

  • Service delivery, not connectivity, generates revenue - Service revenue forms the larger part of the total revenue pie in 2022 but more importantly the service wrap and not the provision of connectivity generates the lion’s share of the service revenue. The service wrap constitutes 94% of the USD19.3 billion service revenue, and over 75% of all revenue. Hence, the message is clear. Players in this market do not focus on the provision of connectivity but rather the raft of services that are deployed in order to deliver the complete solution. Communications services providers (CSPs) and satellite and mobile operators in particular should identify those verticals where there are opportunities for specialist players. Some MNOs will be able to leverage their brand especially in their home market to form partnerships and to build a solution. Telefonica, for example, has entered the transport and logistics market by partnering with Masternaut in its home market. Orbcomm, the satellite player, has adopted a verticalisation strategy which it is developing through acquisition. It acquired StarTrak in 2011 enabling its entry into the cold chain telematics market for example.
  • Connectivity leads to new business models and new opportunities - Industry is witnessing a shift from a box-selling model to a services model as vendors seek to take a share of the service revenue and form a continuous relationship with the end-user. End-users are also embracing this model as it represents a move from CAPEX to OPEX for the customer who purchases an on-going service. The service will often comprise a layer of support as well as the monitoring and processing of data outputs. The way in which companies pay for industrial equipment from heavy plant (e.g. cement mixers, cranes) to production line equipment to jet engines can be adapted to fit with a services model.
  • Operational efficiency drives M2M in the Supply Chain - The manufacturing and supply chain sector comprises a diverse group of applications, most of which run on very tight margins. The adoption of M2M technology is driven by the requirement to achieve efficiency savings. Investment in M2M is largely driven by the desire to reduce wastage and consumption of fuel as well as render operational otherwise economically unviable assets such as remote wells. The overall market for M2M technologies in the manufacturing and supply chain sector is worth USD24 billion in 2022, growing from USD7 billion in 2012 at a CAGR of 13%. Transport & distribution drive the lion’s share of the revenue and constitute around 71% of the total in 2022. 
  • Moderate growth in connections reflects maturity of the sector - Overall the Manufacturing & Supply Chain sector had 84 million connections at the end of 2012. This is set to increase to almost 219 million by the end of 2022. CAGR of 10% is moderate since this is already a relatively mature sector. 

Commenting on the findings, co-author Matt Hatton said "While this is already one of the most sophisticated M2M sectors, there is still an enormous opportunity for connectivity to drive massive efficiencies and furthermore to fundamentally change the ways in which companies do business. If we think about what companies like Sealed Air and Gerber Technology have managed to achieve in refocusing their business models, the sky really is the limit for how M2M can affect industry". 

This report is available to subscribers to Machina Research's Advisory Service. Click here for more details on how to access the service.

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