cases. The cost of physical sensors and RFID tags has dropped considerably, as have the costs of smart sensor software applications, connectivity options and deployments.
Smart sensor benefits
The three use cases of IoT sensors outlined above lead to three categories of benefits, said Paul Miller, a senior analyst at Forrester Research.
First, the increased visibility IoT sensors provide into existing workflows and processes enable companies to see where things are thanks to real-time data. For example, logistics companies can outfit their fleet of vehicles with sensors to detect the location of each truck.
As companies begin to mine data from those sensors, Miller said, the second benefit emerges: predicting what comes next. In the same logistics example, collecting real-time data about where a fleet has been and how long trucks take to complete their routes can enable the company to predict when drivers will deliver packages. Smart sensors in logistics can also gather information about a driver's driving style and the size and weight of packages, as well as external data, such as traffic or weather conditions that may affect delivery.
"Now you build a rich and, hopefully, accurate model that can be used to improve communication with customers, optimize loading and routing, or reduce costs and emissions," Miller said.
In another example, smart sensors in manufacturing can collect historical machine data that companies can use to build models to predict when machine components are likely to fail.
"Instead of facing the potentially huge cost of unplanned downtime for a production line or factory, suspect components can be proactively replaced during scheduled periods of time," Miller said.
The third benefit of smart sensors relates to revenue generation; IoT creates a number of new business models. With data about how a machine operates, how it is used and how it wears out, manufacturers can offer outcome-based services to customers, Miller said. Manufacturers can now include consumables, servicing and even replacement parts in the price of a machine.
"Companies like Kaeser Compressor in Germany, which traditionally made and sold compressed air machines, are now able to offer compressed air as a service and charge customers by the liter of compressed air consumed," Miller said. "Consumables, spare parts, servicing and even the machine itself are only paid for when they're needed and used."
RFID and IoT
RFID tags are IoT sensors that collect data about the specific object to which a tag is attached. Commonly used in supply chain management, ID badging and access control, RFID tagging involves sending data using specific radio wave emissions.
RFID has two forms, Chandler said: active and passive. An active RFID tag contains an onboard power supply, enabling a tag to communicate data at any time and over larger distances. A passive RFID tag may not communicate unless it is activated by a radio frequency emission. It then uses the radio wave captured by the antenna in the tag to activate data collection and power the return communication path.
The future of smart sensors
Forrester Research predicts that smart sensor-based, track-and-trace and smart products will be the fastest-growing use cases, with 24.2% and 24% compound annual growth rates respectively. But the applications won't stop there.
"Sensors are increasingly being built into products at the point of manufacture," Miller said. "Industrial equipment, trains, planes and buildings increasingly arrive with hundreds or even thousands of sensors already connected."
However, internet of things sensors aren't limited to only new products.
"In markets like industrial manufacturing, where machines may have a life span measured in decades, there's also a healthy market in retrofitting sensors to older equipment," Miller said, noting that lowered sensor costs combined with the growing prevalence of infrastructure that can support IoT data flows will result in companies deploying sensors in greater numbers.
"Where today, a logistics company might install sensors in a truck, tom