FUTURE MANUFACTURING SANDVIK COROMANT. Per Nilsson, Sr. Manager Digital Business Nevzat Ertan, Sr. Manager & Chief Architect

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1 FUTURE MANUFACTURING SANDVIK COROMANT 1 Per Nilsson, Sr. Manager Digital Business Nevzat Ertan, Sr. Manager & Chief Architect

2 47,000 EMPLOYEES 89 BILLION SEK INVOICED SALES 60 R&D CENTERS GLOBALLY SALES IN OVER 150 COUNTRIES AROUND THE GLOBE 3 BILLION SEK INTO R&D EACH YEAR 8,000 ACTIVE PATENTS Copy right Sandvik Coromant

3 PORTFOLIO OF BUSINESSES SANDVIK MACHINING SOLUTIONS 36% 57% SANDVIK MINING 30% 28% SANDVIK VENTURE 9% 5% SANDVIK MATERIALS TECHNOLOGY 15% 7% SANDVIK CONSTRUCTION 10% 3% Share of Sandvik Group s total invoicing Share of Sandvik Group s adjusted operating profit 2015, excluding Group activities 3

4 SANDVIK MACHINING SOLUTIONS is the Business Area focused on products and solutions for the metal cutting industry 4

5 Sandvik Coromant by the numbers Click to add text Level two Level three Level four Level five New products annually to all customers in all our markets at the exact same time Countries represented in. Global online sales in 193 countries Twice The R&D investments of the industry average 8000 Employees globally

6 Significant sources of waste Pre-machining productivity In-machining and system utilization Energy flow through machinery Degree of automation Traceability <50% utilization of individual machines Key intelligence captured in experienced industrial practitioners, who cannot process data as effectively as algorithms Lacking ability to optimize design due to poor input data quality Only 1/3 of energy used for actual forming of manufactured parts, Only a fraction of data recorded and even if recorded, even less analyzed and used for improvement and prediction Significant opportunity to reduce capital intensity and OPEX of the metal based manufacturing industry Source: Expert interviews, customer benchmarks

7 Value Creation by Digitalization TOP-DOWN ESTIMATES Phase: Define Product Define Process Execute 100 Input Waste per step Suboptimal design Product definition Wrong process & operation Wrong tooling & path Process plan Unscheduled Unproductmachine time ive machine time Excess operation costs Scrap & rework 10-30% 10-30% 15-35% 20-40% 20-50% 10-30% 1-8% Output 7 Source: Customer benchmarks, expert interviews, SMS Digital initiative 2015

8 Dark Data The window of opportunity Collect Process Sort Analyze Customize Display Feedback New information Data sensors provide information previously not available Connectivity Information from new parts of a business process Processing affluence Limitless computing capabilities everywhere for everyone

9 Productivity Opportunity Spaces Problem solving and avoidance in both visible and invisible spaces create new productivity Use new methods and technologies for problem avoidance. Problem solving for well-defined problem, best practices and standard work. Solve Avoid Utilize new Knowledge / Technologies for Value-added Improvement Problem Solving through Continuous Improvement and Standard Work Value Creation using Smarter Information for Unknown Knowledge Utilize New Methods/ Techniques to Solve the Unknown Problems Efforts in new eco system-based approach will produce many new value creation opportunities. Develop new methods and techniques to the unknown problem and further provide value-added solutions. Visible Invisible

10 ICT in Manufacturing EFFICIENCY ADAPTABILITY - INTEGRATION 1. Digital manufacturing Products life cycle management, modeling, design and optimization. 2. Virtual factories and enterprises End-to-end integrated ICT allowing for efficiency in networked collaborative value chain. 3. Smart factories including application Experiments of control and sensor-based systems, laser systems and industrial robots. Sources: Horizon 2020 and RWTH Aachen Univ.

11 People, machines and systems will be much more integrated

12 Intelligent Machining System Digital Machining Machining Application Know-How Cutting tools Performance Embedded Systems Cloud Services Computing & Control

13 Manufacturing System Intelligence Digital Twins The digital twin Predictive Real time Monitoring & Control Monitoring & Control CAM The real Pre-machining Reliability Availability Security Profitability Traceability Quality

14 Strategy Digital manufacturing Cloud based transformative manufacturing; customer solutions, operational processes and business models Customer Intelligent manufacturing Bi-directional data Real-time Automation coromant.sandvik.com Partner sign up Agreements Data and APIs Sandvik Coromant Partners Real time analytics Solution marketplace

15 Ecosystems with new dynamics - value chain transformation IoT World Forum Reference Model Eco system / Value System Traditional value chains Disruptive Technologies are predicted to turn into ecosystems serving the Customers, often formed around one dominant player that possesses the standard COMMODITY Coloured DIFFERENTIATION CUSTOMER time

16 Levels of the Digital Maturity $ 6% 5 Optimized Digital Disruptor Business models Product 20% 12% 29% 4 3 Managed Digital Transformer Repetable Digital Player 33% 2 Opportunistic Digital Explorer Business process Work 20% 1 Ad Hoc Digital Resistor 16 Quelle: IDC, Juli 2015: n= 202 Unternehmen (> 500 Beschäftigte) aus allen Branchen in Deutschland; IT- und Fachbereichsentscheider

17 Sandvik Coromant Cloud based IoT platform IoT Platform Applications Machine Integration IoT Service #2 Backend integration Process Integration Back-end systems ERP, MES, CRM etc. #1 Runtime #4 #3 Collect data Analyze Big Data Platform Give feedback

18 Device Gateway Factory Gateway capabilities Machine Operator Portal Smart Supply Platform integrations Cloud capabilities Adveon Platform integrations Customer Portal/ Dashboard and PBI Sandvik Admin portal Integration to Customer Backend Open APIs Machine Integration to Factory GW Stream analytics near real-time Integration to Ghost Agent Edge Component SW Integration to Device GW factory real-time Stream analytics Ghost Agent Edge Component SW IIS, SQL Server Integration to Cloud IoT Hub Device Management Stream Analytics Storage / Archiving Notification Hub Worker roles/service fabric etc. Cold analytics Machine Learning Sandvik Coromant Backend integrations OS, security & patching OS, security & patching Billing Monitoring Hardware Hardware User Management Customer premise Customer off-premise (Cloud)

19 Think BIG... ERP, MES Customer Cloud(s) Sandvik Coromant Back-end (onprem or cloud) & Others Business App. Gateway Alerts/Events (shown on console) e.g. knowledge, algorithms, social-, marketing & other data #3 Machine Operator Dashboard (Live data) Event Hub Machine Learning R Designer Management & Analytical Dashboard Stream Analytics Stream Job #2 Stream Job #3 Stream Job #n Device Gateway Factory Gateway Cloud Entrance #4 External data sources (loggers, historians, databases etc.) Close to -Machine capabilities #1 Onpremise database (optional) Factory capabilities #2 Meta-data Queue Cloud Apps Cloud capabilities Device management Storage Analytics/ Reporting Open APIs

20 Key Takeaways from a recent Mapping: Customer insights Customers trust Sandvik Coromant, also beyond being the traditional tool partner Most customers have heard of digital, but the maturity of implementation, awareness and thinking is generally low Not only technological / IT infrastructure maturity limits digital adoption - cultural issues are as important (e.g. monitoring altering power balance in shop) Customers are frustrated by the myriad of IT solutions offered to them, with little focus on integration and communication between software

21 Conclusions New players/competitors try to capture strategic control points in the digital machining landscape Make sure to be digitally present early in the customer value chain (planning phase) New business and payment models has to be considered ( pay-per-use, subscription etc.) Adapt organization structure and capabilities Participate in and influence standardizations Develop partnerships with software, cloud platform providers etc. (consider acquisitions) Work with customers that are early adaptors 21

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