An Update on Wireless Communications and Mobile Commerce
A recent Forrester Research survey showed that 40 percent of the Fortune 2,500 businesses in the U.S. have equipped or are equipping their workforces with wireless tools.
Another 30 percent are considering using wireless systems.
Third-generation, or 3G, wireless networks, which promise fast mobile Internet connectivity, real-time video, and streaming audio, will invade Europe and Asia by next year. In the interim, European carriers are upgrading to packet-based networks, giving wireless Internet users faster and “always-on” access – the type of performance that has helped Japan’s NTT DoCoMo lure nearly 18 million subscribers with its i-mode service.
Up to this point, marketers have tried to sell consumers on the idea that mobile commerce means using your cell phone to buy a can of Coke from a vending machine or to call real-time stock orders into a wireless visor. The hype has led to disappointments for consumers who were promised the wireless Web. What they received instead was text on four-line, black-and-white screens or shopping menus that require extraordinary patience.
Further, a collection of competing and slow wireless network standards and a devotion to desktop Internet access has hampered U.S. adoption of the mobile Internet. Researchers state that development of wireless networks and mobile commerce in the U.S. lags behind development in Europe and Japan by two years, and 3G networks will not appear in the U.S. until 2004. Meanwhile, Finnish motorists are using Web-enabled phones to buy gas and Japanese subscribers are paying to download Pokemon cartoon screen savers for their mobile phones.
However, the real value of mobile commerce lies in business applications. Domestic U.S. mobile commerce (m-commerce) – that is, consumers making purchases with mobile devices – is expected to generate $600 million in revenue by 2003, according to researchers. That is a tiny fraction of overall online spending, which researchers expect to top $78 billion during 2003. Companies are turning to wireless systems to boost productivity, cut operating costs, improve competitive advantage, and cultivate customer loyalty. About 50 software companies, ranging from startups to IBM, Oracle, and Microsoft are beginning to market “wireless application gateway” software, which will basically offer client companies cohesive, ready-to-use, wireless technology.
Examples of Mobile Commerce
Federal Express executives say that in some areas, the company increased productivity 30 percent in the early 1980s when it launched its Digital Assisted Dispatch System. FedEx was able to more efficiently route pick up and deliveries, keeping couriers on the road. Coupled with the SuperTracker, a handheld device that communicates location, shipping, and other information about deliveries to customers and FedEx, the company was able to pick up and deliver packages in real time after 1986. One of the immediate benefits was that the wireless system eliminated the need to write down numerous addresses per day, saving time and money.
Office Depot teamed with Aether Systems to develop a way to track the retailer’s vehicle fleet and to capture customer signatures via a Palm- or Pocket PC-based handheld from Symbol Technologies. Office Depot cannot charge a customer until a signed bill is logged in the system. With the mobile device, the signature and bill are shipped to the Web and delivered, in real time, back to the customer. The system has rapidly improved Office Depot’s cash flow.
Networkcar is taking advantage of legacy technology and warehoused information and transporting them to a wireless world. The newly launched company sells a plug-in device that connects to computer diagnostic ports that are standard-issue in cars made after 1996. The device beams vital signs to a dealer, who can remotely diagnose or spot trouble. The advantage is that dealerships can achieve competitive advantage by maintaining a closer bond with their customers.
Kemet Electronics is the nation’s largest manufacturer of tantalum capacitors (small heat- and corrosive-resistant components that regulate electricity in devices such as radios and DVD players). The firm made a deal with IBM’s pervasive computing division to deploy a wireless network that allows its sales force to access Lotus-based e-mail, calendar, scheduling, and other corporate information through PDAs, pagers, and cell phones. The system has increased the effectiveness and efficiency of Kemet’s salespeople.
California utility firm, Sempra Energy, is equipping its engineers with wearable computers. The engineers currently return to an office to enter information about heating, ventilation, and air conditioning units run by big users such as hotels. The wearable computers allow engineers to transmit and receive data and to make necessary equipment adjustments without leaving customer sites. The company says the devices will save a “ton of money.”
iMetrikus is an online medical treatment provider that is planning on taking their monitoring services mobile during 2001. The company allows doctors and patients online access to medical records. Patients can report any medical problems and update their health-care provider on what type and quantity of drugs they are taking. This is information that physicians routinely monitor. One iMetrikus client, age 62, checks his blood-sugar level as many as eight times per day, regularly uploading results onto the Web so his health-care provider can monitor his status. When he is on the road, which is often, he ducks into cybercafes when possible or stops at public libraries to obtain some free Internet time. He complains about the trouble he has maintaining a virtual link to his physician when he is on the road – a link that grows more tenuous the deeper he goes into back roads. But he sees hope in wireless. As a Verizon cellular subscriber, he says he had a decent connection throughout most of his travels, although reception was spotty in parts of Canada.
Every night in the warehouses of McKessonHBOC, the nation’s largest drug wholesaler, product pickers walk an average of 10 miles through labyrinths of shelves. In a single shift, each picker tracks down as many as 4,000 products, using computers that the pickers strap to their wrists. Receiving data over a wireless network, the wrist computers display detailed order information. If there are several products on a list, the computers map the quickest route to find them. Pickers then pull the items from the shelves and scan product bar codes with devices worn on their fingers like rings, allowing their computers to verify that the correct items have been selected. On occasion, the computers ask pickers questions such as, “How many boxes are left in the bin?” Pickers type in answers and their computers send out inventory updates.
This is one of many ways that companies are using wireless technology to solve a fundamental problem: finding their own products. Wireless devices such as wearable computers and tags that send homing signals are helping companies keep track of assets, from small warehouse items to truckloads of parts traversing international ports. Wireless technology saves companies millions of dollars by providing reliable inventory numbers, improving order fulfillment, reducing in-transit theft, and by accurately tracking goods as they move through the supply chain. (The warehouse industry estimates that shipping the wrong product and processing the return costs an average of $100).
Soon, companies will have reliable access to their entire inventory – no matter where the goods are located in the shipping and storage process. However, creating a wireless warehouse is not cheap. McKesson spent about $52 million to arm about 1,300 warehouse pickers with wearable computers and to equip 31 distribution centers with wireless local area networks. The system, though, has paid for itself quickly and many times over. McKesson, which did $36.7 billion in sales during 2000, saw an 8 percent gain in productivity, an 80 percent drop in incorrect items shipped, and a 50 percent drop in product shortages. The company no longer does physical counts of stock and has increased its inventory accuracy to 99.5 percent.
The U.S. military has one of the largest supply chains in the world. Of the 40,000 containers of munitions and supplies shipped by the Department of Defense (DoD) to the Middle East during the Gulf War, 25,000 were opened prematurely simply to determine the contents. This confusion resulted in a huge amount of money wasted. Today, the DoDuses Savi Technology’s technology to attach homing devices to its goods. Savi’s technology can read all variety of data-collection devices, from bar codes to global positioning (GPS) units, to track containers of munitions and supplies shipped around the world. For example, a soldier in the field with a handheld reader can point it at a container and know exactly what is inside.
Savi uses a wireless technology called radio frequency identification (RFID). RFID uses electronic tags that emit or reflect signals from nearby readers that are part of a wireless network. The tags range in size from a matchstick to a brick, can store as much as 128K worth of data, and are used to track relatively stationary goods such as library books as well as more mobile inventory such as roving animals and expensive hospital equipment. When used with cargo, the tags are attached to pallets and containers and can be used to identify a container’s contents and shipping history, including where it has been, who has handled it, and where it needs to go.
RFID tags are read b wireless readers installed at “choke points” along the supply chain, at ports, warehouses, airport runways, etc. The readers employed by the DoD, for example, beam data over a local network to a site server, which feeds military systems that enable authorized users to log on to a Website and check where everything is at any given time.
Singapore Airlines, one of the world’s largest air cargo carriers, has equipped its distribution hub at Singapore Changi Airport with a wireless LAN and RFID. The hub, an enormous multi-level building, routes thousands of heavy cargo containers imported and exported each day. Scanners mounted along conveyor belts read passing RFID tags embedded into the containers, recording each shipment’s location and contents, creating data that can then be accessed online. The company is aiming for 100 percent accuracy of shipments routed through the terminal.
Security is another benefit of wireless tracking. One major computer company uses Savi technology to secure goods in containers sealed with electronic locks. The locks, fastened on the inside of a container, can be controlled only by RFID signals beamed from readers positioned within 300 feet of the containers. Authorized personnel can operate the locks online. They can also determine who has opened a container, when it was opened, and where. The Savi technology has helped prevent theft from containing shipments worth as much as several million dollars.
Wireless technology is generating increased cash flow for Trinity Development andConstruction Services, a construction management firm. Late in 2000, the company began using wireless Windows CE-based handheld computers and software that extend Trinity’s billing system out to its job sites.
For example, now, when $300,000of materials arrive at the site of a state highway project, a worker enters the shipment details into the handheld, transmits them to the billing system at headquarters, and generates a bill for reimbursement by the Ohio Department of Transportation in the same day. This allows the state to pay Trinity weeks before Trinity must pay its supplier. And because the money gets there in time, 3 percent of Trinity’s revenue that used to go to interest payments now contributes to the bottom line. Also, Trinity can often pay its suppliers so quickly that it earns a 2.5 percent early-payment discount.
At Northeast Utilities, wireless networks are helping the company tackle damage that could interrupt service or harm the environment in its western New England territory. When storms cause power transformers to leak, workers hurry out to the sites to assess damage and to begin collecting data required by regulators. But because these workers now have laptops in their trucks that connect wirelessly to headquarters, information begins flowing immediately to the managers, government regulators, and cleanup crews who need it most. Also, if the storm knocks out power, another wireless application lets managers in any location see on their cell phones where power restoration crews are most needed.
General Motors’ in-car wireless service, OnStar, has fallen behind schedule on consumer adoption, and drivers are annoyed by limited services and poor voice-recognition features. GM has made OnStar standard equipment in about 20 percent of the vehicles it produces(all upscale models), and provides free basic telematics services such as notifying the authorities if an air bag is deployed. An undisclosed proportion of subscribers also is paying $200 per year for the premium plan that includes “concierge” services provided by human operators, such as making dinner reservations.
The problem for OnStar is that it is behind where GM hoped to have it by now. For example, GM promised to deploy the OnStar Virtual Advisor, its wireless-Web service, in 2000 but barely has begun rolling out the service during the first quarter of 2001, and at this point only in the Northeast. Also, a demonstration of OnStar’s state-of-the-art voice-based Web-access system in November 2000, underscored GM’s continuing difficulty with the noise-polluted environment of a vehicle interior.
However, OnStar remains ahead of rival telematics applications. Ford Motor developed the first telematics system several years ago, but mysteriously, never followed up on that effort. Ford got back around to a serious telematics effort only in 2000, establishing a joint venture with Qualcomm called Wingcast. The team does not expect to have anything rivaling OnStar until sometime in 2002. DaimlerChrysler has not disclosed any telematics plans despite that fact that corporate cousins Freightliner and Mercedes-Benz are among the leaders using the technology. And Japanese automakers have taken a wait-and-see attitude. Toyota and Honda actually have to borrow the first telematics systems for their Lexus and Acura luxury brands from OnStar.
GM sees OnStar for the fees the system generates and for how it expands the company’s relationships with customers into everyday, on-the-road dialogue. New applications that OnStar will begin deploying in 2001 include remote diagnostics that track conditions from tire pressure to how much oxygen the engine is getting and providing “air time” for other brand marketers for Web-based, location-specific advertising.
But while Detroit and Japan struggle to realize the early promise of wireless services in cars and SUVs, new automotive telematics applications are proliferating in other industries.
Progressive Casualty Insurance, for example, recently finished a 30-month trial of its telematics network, called Autograph, which feeds information to the company about how far and when participating drivers operate their cars. By verifying the low-usage claims of policyholders who otherwise could not escape pigeonholes of insurability, the test reduced premiums by as much as 25 percent for most of the several hundred volunteer drivers. And what about Big Brother? “People do not have to have this,” says a company spokesperson. “It’s about choosing a way that more accurately reflects your driving habits.” While Progressive has not decided whether to expand use of the technology, it could give the company an advantage in the hypercompetitive car-insurance market.
Theft-prevention businesses are making moves in telematics as well. Beginning in February 2001, for $995, a security-conscious car owner can install a new system that serves as a wireless pinpointing beacon to police if the car is stolen. While existing radio-frequency-based systems can take precious minutes to transmit a location to police, the new device, developed by InterTrak Tracking Services works so fast that it gives officers a decent chance to find the thieves. Once the police have the car in view, they can let the company know and the company will stop the engine.
Trucking companies have been using telematics applications for several years. Thanks to a system that pieces trucks and their routes together like a nationwide puzzle and keeps track of vehicles in real time, drivers for Schneider National already know what their next load will be before they drop the load they are carrying. And now Freightliner, a leading cab manufacturer plans later in 2001 to begin installing a telematics system that integrates radio, CD player, an LED screen, voice-recognition capabilities, and access to the wireless Web, on a rig’s dashboard. The system will boost drivers’ efficiency and safety, Freightliner says, by providing weather, traffic, load-related information, and e-mail – which drivers can access without having to take their eyes off the highway or hands off the wheel.