The Internet of Things is poised to change how the nonliving world interacts. Whether that occurs through more optimized maintenance schedules for household appliances or more profound advances, machine-to-machine communication has many of the hallmarks of a transformative consumer technology. The benefits are likely to be widespread.
For instance, General Electric (NYSE:GE) believes the Internet of Things could be a game changer for industrial manufacturing. The company estimates what it calls the Industrial Internet could add $10 trillion to $15 trillion to global GDP by 2035 -- roughly the equivalent of adding another China or United States, respectively -- through more efficient maintenance schedules, lower-cost repairs to industrial equipment, and other gains. How much longer do we have to wait for it to arrive? Actually, it's already here.
Meet the factory of the future
General Electric recently opened a new $200 million "flexible factory" in Pune, India, that covers 67 acres, will employ 1,500 workers, and will wield modern and next-generation technology ranging from 3D printers to laser inspection tools. What makes it "flexible"? Consider that, for the first time, one manufacturing facility will produce parts and products for four different General Electric businesses. That includes building components for jet engines and locomotives, and assembling wind turbines and water treatment units for oil and gas and agriculture applications.
As advantageous as that sounds on the surface, the benefits for the surrounding region cannot be understated, either. General Electric uses many small suppliers that would struggle to scale operations to meet the needs of a large, specialized facility (one that makes only wind turbines, for instance). The flexible factory allows the company to realize higher utilization rates for its equipment -- thereby lowering production costs -- and tool production in response to suppliers as they gradually grow into larger roles.
Indeed, Indian Prime Minister Narendra Modi has outlined plans to increase the importance of manufacturing in the country's economy and add 100 million new jobs in the process. To put that in perspective, there are 148 million employed Americans total. General Electric's flexible factory model could help India meet its ambitious goals on the way to helping itself in a big way.
Put another way, the Pune facility most definitely earns its "flexible factory" title. But what, exactly, allows such a diverse array of products to be manufactured under one (very large) roof? The Industrial Internet, of course.
The facility will make itself better over time by adapting to changes in downtime (scheduled and unscheduled), optimizing inventory (ordering parts and supplies automatically), and even learning from the habits of workers on production lines.
The advantages don't stop there. Consider that day-to-day operations will allow General Electric to gain invaluable real-world experience with its Industrial Internet software platform, called Predix. Learnings can be applied to build new tools, fix bugs, and make the software platform more robust -- all of which could further catalyze growth for Predix once put in customers' hands.
General Electric expects the software to generate $1 billion in sales in 2015 as it is applied to monitoring aircraft, deep-sea oil wells, power plants, telecom networks, railroads, and more. If that doesn't demonstrate that the Internet of Things has arrived, then perhaps nothing will. You just have to know where to look.
What does it mean for investors?
The facility in India will very likely reshape how General Electric approaches manufacturing, and has the potential to become the new "default." It can help position the company to leverage the country's pursuit of ambitious manufacturing goals, provide additional "in-house" experience with its Predix software platform, and grow the Industrial Internet "as a service" into a valuable growth avenue for investors. The factory of the future has arrived.