Remember the Occupy Wall Street movement that swept across the U.S. in 2011? The idea behind this was to highlight earnings inequities between the highest paid one percent of Americans and the other 99 percent of American workers.
After a viral start, the movement faded, although there are still sporadic rallies around the country.
I’d like to discuss a different one percent philosophy, one sweeping the industrial world. I’m referring to the incredible cost savings that can be gained by eliminating one percent of waste across numerous industry verticals.
GE has been talking a lot lately about the “Industrial Internet,” or its vision for how the rapidly emerging Internet of Things can benefit industrial companies in asset-heavy industries like healthcare. On its website, GE notes that the healthcare industry could save $63 billion over 15 years — or more than $4 billion annually — by reducing capital expenditures by just one percent.
Think about that. If we were lucky enough to triple that reduction in capital to three percent – still a highly attainable figure — the healthcare industry stands to save some $12 billion a year. RFID, which is being rapidly deployed across healthcare, will play a major role in helping to achieve those financial gains, which could be substantial, considering that the global health care industry accounted for 10 percent of global GDP in 2011.
It has been estimated that more than 10 percent of those health expenditures are wasted from inefficiencies, such as expired products or items that end up in the dumpster because they are not stored at the required temperatures during transit or at the healthcare facility. That means the global cost of health care inefficiency is at least $731 billion per year, according to data from PricewaterhouseCoopers.
According to the GE report, clinical and operations inefficiencies, which can be most directly impacted by the Industrial Internet, account for 59 percent of healthcare inefficiencies, representing $429 billion per year.
It is estimated that deployment of the Industrial Internet can help to drive these costs down roughly 25 percent, or about $100 billion per year in savings, according to Ibid.
The GE report also says that the Industrial Internet application opens the possibility of creating a “care traffic control system” for hospitals. Hospitals are comprised of thousands of pieces of critical equipment, much of which is mobile.
GE says that the key is knowing where it all resides, and having a system that can alert doctors, nurses and technicians to changes in status, and provide metrics to improve resource utilization and patient and business outcomes.
Although the GE report surprisingly doesn’t mention RFID as the key enabler to solving the above problem, the RFID-based solutions being deployed today to track highly expensive assets like heart monitors and hospital beds play a major role in the beginning of the Industrial Internet in health care.
GE Healthcare estimates that these innovations can translate into a 15 to 30 percent reduction in hospital equipment costs and permit healthcare workers to gain an additional hour of productivity on each shift.
That’s an incredible amount of cost savings, not to mention the ability for each healthcare worker to gain one hour of productivity per shift. Hospitals run 24-7, so this adds up to substantial soft cost savings over three shifts.
Here at Terso Solutions, we’ve seen the benefits gained from deploying RFID-enabled freezers and refrigerators to more than 100 customers around the globe. In addition, Promega, our own parent company, has saved close to $2 million since deploying RFID-enabled refrigerators and freezer solutions into its daily operations. Prior to using RFID storage solutions from Terso, Promega was losing approximately 15-18 percent of its on-site inventory to shrinkage, equal to $1.2 million per year.
The use of an RFID storage system for on-site stocking has virtually eliminated shrinkage in the field. In addition, Promega was forced to write off $400,000 of expired products each year because the company had no visibility into expiration dates on-site. This expense has been eliminated through the use of the RFID storage system for on-site stocking
And it’s not just healthcare that can reap gains from the Industrial Internet movement. According to the GE report, the oil and gas industry has the potential to save $90 billion over the next 15 years by reducing its capital expenditures by just one percent through automation. And a one percent fuel savings delivered by more efficient jet engines, enabled in part by RFID-tagged engine parts, would save the aviation industry $30 billion.
So here’s to the Power of One Percent! However, I’m advocating that one percent is too conservative of a goal. I hope in a few years time we’re toasting to the Power of Five Percent and the billions saved each year. Through continued innovative gains in technology, I’m sure we can get there.