Sigfox Breaks Cost Barriers to Gain Early Foothold in Enterprise Track and Trace Solution Market

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3Q 2019 | IN-5556

On June 19, 2019, Deutsche Post DHL Group announced its partnership with Alps Electric Europe and Sigfox to implement Internet of Things (IoT) sensor devices to improve supply chain efficiency of its German DHL parcel network. By the end of 2019, DHL Germany will retrofit 250,000 roll containers with asset trackers that were jointly developed in partnership with Alps Electric. The battery-powered asset trackers are designed to operate autonomously for up to six years and will allow DHL to track the location and movement of the roll containers used within its parcel centers and customer locations. These roll containers are critical resources used in DHL’s day-to-day operations and are used in the transportation of letters and parcels. According to its 2018 annual report, DHL’s Post-eCommerce-Parcel (PEP) division processed 5 million parcels a day across 35 parcel centers in Germany. In 2018, DHL’s German parcel business volumes witnessed 7.1% year-over-year growth to reach 1.479 billion parcels; the growth was primarily driven by the e-commerce market.

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DHL Announces Partnership with Sigfox and Alps Electric Europe

NEWS


On June 19, 2019, Deutsche Post DHL Group announced its partnership with Alps Electric Europe and Sigfox to implement Internet of Things (IoT) sensor devices to improve supply chain efficiency of its German DHL parcel network. By the end of 2019, DHL Germany will retrofit 250,000 roll containers with asset trackers that were jointly developed in partnership with Alps Electric. The battery-powered asset trackers are designed to operate autonomously for up to six years and will allow DHL to track the location and movement of the roll containers used within its parcel centers and customer locations. These roll containers are critical resources used in DHL’s day-to-day operations and are used in the transportation of letters and parcels. According to its 2018 annual report, DHL’s Post-eCommerce-Parcel (PEP) division processed 5 million parcels a day across 35 parcel centers in Germany. In 2018, DHL’s German parcel business volumes witnessed 7.1% year-over-year growth to reach 1.479 billion parcels; the growth was primarily driven by the e-commerce market.

According to DHL, the initial objective of the track-and-trace solution is to reduce loss of the roll containers that can cost up to US$200. DHL believes using its IoT platform, the location data collected from these assets over time will help achieve greater visibility of the work flows within its supply chain and would, in turn, help improve asset utilization and reduce operational costs. For DHL, the asset-tracking application is part of its broader ambitions of integrating robotics, autonomous vehicles, digital twins, and other IoT applications to transform its traditional linear supply chain to a more intelligent and agile digital supply network.

First Mover Advantage

IMPACT


Over the last 18 months Sigfox has gained substantial momentum as the leading Low-Power Wide-Area (LPWA) network technology to enable asset-tracking applications. Track-and-trace solutions are witnessing early adoption not only from logistics solution providers but also from enterprises that want to improve visibility of their own supply chain. While the DHL project is perhaps one of the largest deals with 250,000 connected assets, there have been other, similar implementations in the last 18 months from logistics service providers and industrial enterprises. These are listed below.

Industrial Enterprises

• Airbus: In early 2017, Airbus started implementing an asset-tracking solution to track various assets indoors and outdoors. The solution was initially rolled out to track the location of machine parts and tools that are transported from its supplier and Airbus factories located in United Kingdom, Germany, France, and Spain. The tracker device uses Global Positioning System (GPS) for outdoor geolocalization, Bluetooth Low Energy (BLE) beacons for indoor geolocalization, and Sigfox for Wide Area Network (WAN) connectivity. According to Airbus, on average the tracker device transmits 20 messages per day for a battery autonomy of three years.

• Michelin: In Q3 2017, Michelin conducted a 12-month container tracking solution pilot in partnership with Argon Consulting to track the movement of intercontinental containers from a supplier’s distribution warehouse to the final delivery location. According to Michelin, the pilot was initially tested on 50 containers, resulting in reduced transit stock by 10%, improved estimated time of arrivals by 40%, and reduced stock outs by four times. The solution used the Sigfox Monarch service that allows the tracker devices to seamlessly roam across different regions by adapting to local Industrial, Scientific, and Medical (ISM) radio frequencies. According to Michelin, track-and-trace solution was used to successfully track container movement from warehouses in multiple locations, including France, South Africa, the United States, the Caribbean, Malta, Australia, New Zealand, the Middle East, and Singapore. The solution is currently being deployed by Michelin to track its own fleet of containers. In April 2019, Sigfox, Michelin, and Argon Consulting announced a joint venture to create a new company called Safecube to commercialize its intercontinental container tracking solution.

• Group PSA: In collaboration with IBM and Alps Electric, Group PSA, one of the largest European automotive manufacturers, introduced a container tracking solution that was initially incubated in IBM’s ScaleZone program. The track-and-trace solution is used to track the location of reusable plastic containers that are used to transport material from suppliers to the manufacturers’ assembly plants. The asset tracker device designed by IBM and Alps Electric is claimed to operate autonomously for up to 10 years on a 3.4AH non-rechargeable battery, with three data transmissions a day. The pilot project involved tracking the containers across multiple supplier sites from Morocco, Spain, France, Germany, and Czech Republic using retrofitted asset trackers that sent periodic location data using Sigfox connectivity to the IBM Cloud and IBM Watson IOT platforms. The solution was initially implemented in 2018 to track nearly 10,000 containers and is expected to scale tracking to over 200,000 containers in the next three years across 1,500 production sites.

• Guerlain: On May16, 2019, Guerlain (part of LVMH Group), in collaboration with Argon Consulting, announced plans to roll out an asset-tracking solution to track supply flow of packaging components used in its skin care products. With the initial rollout of the IoT asset-tracking solution, Guerlain claims that it has improved packaging lead times by over 50% and that increased visibility of the supply chain has helped reduce restocking time by half.

Logistics Service Providers

• ID Logistics: Ideo, a subsidiary of ID Logistics, partnered with French startup Everysens to implement the Operail solution to track its rail wagons and containers across Western Europe. In 2017, Ideo and Everysens started implementing its Operail solution to track Danone Water’s fleet of 1,200 rail cars. The Danone rail freight manages over 150,000 transportation orders and 5,000,000 pallets every year.

• Dachser (Iberia): In December 2018, Dachser, in collaboration with Minsait (an Indra company), announced that it successfully tested a track-and-trace solution to track the location of roll containers used to transport nonpalletized or high-value merchandise. The track-and-trace solution uses Minsait’s Onesait platform that analyzed data collected from tracker devices using Sigfox connectivity. According to Dachser, the primary objective of the solutions is traceability and tracking the location of assets. But it will evolve to improve operational efficiency through maximizing asset usage and to optimize work flows within its logistics operations. The solution is planned to be commercially rolled out in 74 warehouses in the region by the end of 2019.

While most of the above asset-tracking implementations have been in Europe, Sigfox network operators outside of Europe can leverage these early successes to validate the tangible value from asset-tracking applications and therefore drive regional adoption among enterprise customers. Logistics service providers and industrial enterprises are at a digital crossroads as they standardize supply chain operations and improve quality Key Performance Indicators (KPIs) while systematically increasing existing infrastructures capacity utilization and reducing operational costs. Third-party logistics (3PL) service providers in particular are uniquely positioned to provide new value-added tracking services to improve supply chain transparency and efficiency in a multi stakeholder ecosystem. According to DHL’s supply chain report, which surveyed over 350 supply chain and operations experts, 60% of the participants expected 3PL companies to make investments in physical technologies, while 56% preferred to build in-house capabilities on data management and analytics platforms. The DHL survey also finds that over the next three years, a key benefit of digitizing the supply chain will be to help organizations reduce costs and improve profitability. LPWA network technologies are distinctively placed to address the growing opportunities in the track-and-trace solution market.

Can Sigfox Sustain This Early Momentum and Further Scale?

RECOMMENDATIONS


Sigfox has been a strong proponent of using public LPWA network infrastructure to enable massive IoT applications. Sigfox built its first public network in France, and as of 2Q 2019, the Sigfox network is now available in over 60 countries in various stages of commercial deployment. Until 2017, Sigfox primarily focused on deploying large nationwide networks through its regional Sigfox Network Operator (SNO) partnerships; in some countries, it deployed networks on its own. While Sigfox continues to expand its geographical coverage, SNOs are deploying networks in a more phased manner rather than through blanket, nationwide coverage. Additionally, when deploying a Sigfox network in new markets, SNOs prioritize network coverage, starting with transportation hubs (ports, airports, train stations, bus stops, truck terminals), then to cities, and then gradually to rural areas. In Q4 2018, Sigfox introduced a microbase station retailing at US$525 to provide deep-indoor coverage for large buildings or to cover large rural areas in a cost-efficient way. Finally, in 2019 Eutelsat is conducting trials to connect Sigfox devices using low earth orbit satellites, and by 2021, Eutelsat plans to launch a constellation of 50 nanosatellites to provide global coverage. Sigfox believes its LPWA network is the most apt technology for global asset-tracking applications, and over time it has adapted its network deployment strategy to address immediate end-market requirements.

The ABI research report Asset Tracking: Market Opportunities in the Era of LPWAhighlighted the high cost of connecting nonpowered assets as one of the initial barriers to adopting it. Sigfox’s early success in this market can be significantly attributed to its ability in addressing the cost barrier. In collaborating with its ecosystem partners, Sigfox has significantly decreased the total cost of connecting assets by bringing the battery-powered asset-tracker hardware costs to below US$22 per device. According to Alps Electric, the device Original Equipment Manufacturer (OEM) for both the Group PSA and DHL projects, the OEM can commercially produce tracker devices at US$6 to US$22 per unit depending on the required battery capacity and device features. Batteries are the highest cost component in asset-tracking devices, so the battery capacity is carefully selected based on the minimum viable message budget required for the applications. While Sigfox witnessed initial adoption from logistics service providers and enterprise customers, the challenge is whether Sigfox can expand its tracking use cases to increase customer stickiness and consistently deliver on its quality Service Level Agreements (SLAs) to capture a larger share of enterprise customers’ technology spending in the coming years. In asset-tracking applications such as package-level tracking, which could potentially scale to millions of connections, the cost of tracker devices will need to come down below US$5to drive adoption.

To address the challenges of package-level tracking applications, Oscaro, a French e-commerce company that specializes in the sale and distribution of automotive parts in Europe, partnered with technology research institute CEA-Leti to develop a low-cost tracking solution. In July 2018, Leti and Oscaro jointly announced the Foxy chipset, which uses Sigfox connectivity to develop a US$2.30 or 2€ sensor device to track packages. Oscaro claims its tracking solution which is currently being piloted in France can provide location precision of up to a few tens of meters and can measure shock and send alerts if a package is opened during transport. According to Oscaro, a commercial version of the reusable tracker device will be available for large-scale deployment by early 2020. Additionally, in October 2018 Sigfox also announced Bubbles, a new beacon-based indoor location and proximity sensing solution that will be commercially available by early 2020. According to Sigfox, the solution can provide geolocation with an adaptive range of 1 to 10 meters. The battery-operated beacons can work for three to five years, and the low-cost tags can send up to 1,000 messages. The proximity sensing technology is currently being tested for a luggage tracking solution in collaboration with Amadeus IT Group, a leading solution provider for the travel and tourism industry.

Sigfox has its largest network footprint in Europe—accounting for more than three-quarters of all connections in 2018—and will continue to contribute the majority of connections until 2026. For Sigfox to continue to grow and scale in the asset-tracking market, it will also need to significantly expand its presence in the Asia-Pacific region, especially China and India. Sigfox’s lack of presence in China has been a severe drawback, as it has missed out on substantial growth opportunities that have benefited NB-IoT and LoRa. However, Sigfox expects to announce SNOs for both China and India by the end of 2019. According to ABI Research's latest Low-Power Wide Area Network Market Datareport, Sigfox will witness a compound annual growth rate of 70% with asset-tracking contributing over 2/3rd of the 431 million connections by 2026.

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