Capgemini s PoV on Industry 4.0 and its business implications for Siemens

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1 Capgemini s PoV on Industry 4.0 and its business implications for Siemens Siemens Digital Transformation Executive Forum June 5 th 2014, Udo Lange TRANSFORM TOGETHER

2 Contents INDUSTRY 4.0: Drivers for an industry on the verge into a new industrial era of connected enterprises FROM SMART FACTORY TO AGILE SUPPLY CHAINS: How technology solutions are shaping the future industry value chain THE CAPGEMINI FRAMEWORK FOR INDUSTRY 4.0: Business & Technology Transformation in the digital age TRANSFORM TOGETHER: Business Opportunities for Siemens to nurture the value chain 2

3 Industry 4.0 is considered the fourth industrial revolution materializing Digital Transformation in the Manufacturing Industry Digital Transformation in Manufacturing: The fourth industrial revolution Digital maturity, by industry Digital Transformation is a valueadding challenge that drives future manufacturing competitiveness Our study revealed that in 2012 Manufacturing companies were rather laggards in regards of Digital Transformation First Industrial Revolution through the introduction of mechanical production facilities with help of water and steam power First mechanical loom, 1784 Second Industrial Revolution through the introduction of a division of labour and mass production with the help of electrical energy Third Industrial Revolution through the use of electronic and IT systems that further automate production First assembly line Cincinnati slaughter houses, 1870 Fourth Degree of Industrial complexity Revolution through the use of cyber-physical systems First programmable logic controller (PLC), Modicon 084, 1969 With the appearance of Internet-of-Things, Industrial Manufacturing companies are stepping up the maturity ladder Capgemini Consulting: The Digital Advantage: How Digital Leaders Outperform Their Peers in Every Industry 2 Capgemini Consulting: The Internet of Things: Are Organizations Ready For A Multi-Trillion Dollar Prize? Time 3

4 Companies are leveraging technology innovations to respond to the Paradox of contradicting market challenges: increasing performance vs. reduced costs Market challenges and Technology Innovations MARKET CHALLENGES: THE PARADOX Global markets and global manufacturing networks M2M* Internet of Things and Big data/ analytics Social media Increasing organization complexity Virtual and Augmented Reality Advanced Analytics Increasing product complexity Expectation for instant (real-time) response Need for more customization New competitors and cost pressure Machine Intelligence & Robotics Cloud Technology Innovations Additive Manufacturing Decentralization and autonomous control Mobility *Machine-to-Machine communication 4

5 Contents INDUSTRY 4.0: Drivers for an industry on the verge into a new industrial era of connected enterprises FROM SMART FACTORY TO AGILE SUPPLY CHAINS: How technology solutions are shaping the future industry value chain THE CAPGEMINI FRAMEWORK FOR INDUSTRY 4.0: Business & Technology Transformation in the digital age TRANSFORM TOGETHER: Business Opportunities for Siemens to nurture the value chain 5

6 Through the emergence of cyber-physical systems together with other technology trends, the future manufacturing process will be organized and orchestrated differently The core element: the Cyber Physical System (CPS) CYBER-PHYSICAL SYSTEMS (CPS) ARE Physical object with embedded system possessing own machine intelligence (CPU, memory) Additional sensors and actuators Connectivity via standardized interfaces to other IT or CPS (M2M-communication) Connecting all relevant physical objects with virtual ( cyber ) counterparts Physical/ Mechanical Systems THE LINKING ELEMENT OF AN INDUSTRY 4.0 ENVIRONMENT The virtual model of the CPS serves as simulation object, in order to enable decision making Sensors and actuators provide real-time information and control options during production and field usage Interface to other systems Intranet/ Internet IT Systems Embedded Systems Sensors & actuators Electronic hardware Software Human- Machine interface Virtual Model Interfaces and communication platforms enable M2M communication and human influence across different product lifecycle stages M2M Device M2M Device M2M Area Network M2M Gateway Agent M2M Communication Network M2M Server platform Business application Device domain Network domain Application domain 6

7 The combination of Cyber-Physical Systems in lead to the concept of the Factory where products and systems are interacting and taking decentralized decisions Factory SMART FACTORY Augmented human operator Secured data exchange Cyber-Physical Production Systems C-P Machine 1 Embedded Electronics Sensors & actuators Electronic hardware Software Machine interface Human interface Intranet/ Internet Cyber-physical Transport System C-P Vehicle Embedded Electronics Sensors & actuators Electronic hardware Software Machine interface Human interface IT Systems Cyber-physical Product C-P Product Electronic hardware Software Machine Human interface interface Central integrated business planning for demand management Order-specific variants ( lot-size 1 ) to enable customization Machine-to-Machine communication between Cyber-Physical-Products and Cyper-Physical Production-Systems Embedded analytics Decentralized decision making for production control Real-time decision making Multi-agent technology Corrective actions based on quality data analytics 7

8 Extending the concept of the smart factory across the whole value chain, creates agile end-to-end processes leveraging multiple internal and external business services From Factory to Agile Value Chains Development (Product/ Production System) Purchasing Product definition Production Production Systems Assembly Delivery Service-oriented Business Architecture Business functions as self-contained/ independent services (internal and external) Cross-company, flexible process flow Process instances (products/orders) as self-organized agents Standardized or common interfaces/ protocols A common 'data lake as platform for analytics functions (Big Data) Supply-Chain-Control tower providing extended supply chain transparency Quality Mgmt. 'Data lake' Erection & Installation Maintenance 8

9 Industry 4.0 is characterized by maximized efficiency, interconnectivity and highly dynamic environments Summary: Characteristics and Benefit Potentials of Industry 4.0 COMMON CHARACTERISTICS OF INDUSTRY 4.0 BENEFIT POTENTIALS Active/ autonomous cyber-physical objects (products and production systems) Decentralized decision making Process flexibility to enable customer-specific solutions ( lot-size-1 ) Vertical integration from ERP and Planning to individual sensors Cross-factory and cross-company process flow (horizontal integration) Virtual model and integrated/ embedded analytics capabilities Increased revenues through new services and business models Better utilization of production capacities across global manufacturing networks Elimination/ reduction of logistic costs Improved profitability/ reduced costs for small batch sizes Improved quality / reduced quality costs Reduced lead-times Increased flexibility Improved customer value and satisfaction Cisco and GE estimate that the size of the IoT pie is over $10 trillion. 1 1 Capgemini Consulting: The Internet of Things: Are Organizations Ready For A Multi-Trillion Dollar Prize? 9

10 In order to achieve the Industry 4.0 target scenario, several key elements need to be resolved/ established Challenges on the way to Industry 4.0 Horizontal integration through value networks Agile Value Chain Vertical integration and networked manufacturing systems Company 1 Company 2 Company 3 End-to-end digital integration of engineering across the entire value chain Service Production Machine Product Goods flow Financial flow Information flow Manage the people, culture and leadership transformation ( People 2.0 ) As fundamental challenges, data security and communication standards are to be established. 10

11 Contents INDUSTRY 4.0: Drivers for an industry on the verge into a new industrial era of connected enterprises FROM SMART FACTORY TO AGILE SUPPLY CHAINS: How technology solutions are shaping the future industry value chain THE CAPGEMINI FRAMEWORK FOR INDUSTRY 4.0: Business & Technology Transformation in the digital age TRANSFORM TOGETHER: Business Opportunities for Siemens to nurture the value chain 11

12 Industry 4.0 is essentially empowered by digital technologies. Manufacturing companies can drive growth and efficiency by addressing 8 key value drivers People Leadership & Change Governance & Processes The Capgemini Consulting Industry 4.0 Framework Future Manufacturing Business Model Agile Operation Model (Decentralized, Modular, Flexible, Boundless) GROWTH DRIVER EFFICIENCY DRIVER Solutions Customer Integration Supply Chain Factory Products Collaborative Innovation Agile Collaboration Network Decentralized Production Control After Sales Integration Connected Supply Chain Data-driven Operational Excellence Infrastructure (connects Cyber-Physical Systems) Technology Enabler (Selection) Mobile Cloud Analytics M2M Social Robotics 12

13 Industry 4.0 is essentially empowered by digital technologies. Manufacturing companies can drive growth and efficiency by addressing 8 key value drivers People Leadership & Change Governance & Processes The Capgemini Consulting Industry 4.0 Framework Future Manufacturing Business Model Presented as Case example in breakout Agile Operation Model (Decentralized, Modular, Flexible, Boundless) GROWTH DRIVER EFFICIENCY DRIVER Solutions Customer Integration Supply Chain Factory Products Collaborative Innovation Agile Collaboration Network Decentralized Production Control After Sales Integration Connected Supply Chain Data-driven Operational Excellence Infrastructure (connects Cyber-Physical Systems) Technology Enabler (Selection) Mobile Cloud Analytics M2M Social Robotics 13

14 For a world-class aircraft and rocket engine manufacturer we established an end-to-end engineering platform to enable extended-enterprise engineering collaboration Example: Collaborative Innovation Background Need to globally collaborate all along product life cycle with more suppliers and partners Real time collaboration of internal and external users around digital mock up must be improved Communication must be facilitated Partners and suppliers don t have a direct access to product configuration Solution Implementation of a collaborative platform to share configurations and digital mock up with external partners and suppliers Definition of product data model Reengineering of modification processes in order to find the right balance about the rhythm of evolution into digital mock up and PLM corresponding configurations Benefits Global transparency about demand and resource availability through consolidation across all levels of the network Validation of plans by checking sales plans against network planning quantities Reservation of agreed quantities to ensure delivery reliability Triggering the investment process at an early stage 14

15 Manufacturing companies can target supply chain complexity by connecting physical commodity flows with digital platforms Horizontal Integration: Supply-Chain Control Tower Electronic interfaces Big data analysis Instant cloud access Increased transparency and improved remote accessibility Real-time processing and improves network monitoring Increased flexibility and improved decision-making Digital platform integration backbone Master Data Tracking & Tracing System Supply Chain Event Management ASN ASN & GPS GPS RFID & GPS RFID & GPS ASN & GPS ASN RFID RFID Supplier Logistic service provider Internal Logistic service provider Cyber-physical supply chains interconnect and map value networks and thus provide a transparent and unique view for breaking down operational issues. 15

16 Using a Control Tower provides E2E supply chain visibility, reduces transport costs and increases supply chain and LSP control Example Connected Supply Chain : Supply Chain Control Tower Background Warehouse and distribution activities are outsourced; further supply chain optimisation within current organisation is complex Purpose is to increase E2E supply chain control, improve efficiency by using best-inclass carriers and become less dependent on their LSP s Activities on the tactical level (e.g. carrier management, high level planning, contracting) will be executed by a Control Tower Solution Integrated management organisation (LSP s and Samsung) for steering, planning & controlling IT product flow from Port-to-Customer Develop and implement logistics buying function for procurement and contract management of warehousing and transport services Set up new administrative organisation in such a way that all required cost data is captured automatically Carrier (selection, evaluation, invoicing) and inbound (terminal planning, customs status) integration Benefits More efficient, integrated organisation Increases load efficiency Improved tracking and customer services Improved customer satisfaction Improved transport efficiency using best-inclass carriers and redesign transport solutions (e.g. x-border domestic) Improved Performance Measurement and Freight 16

17 With the help of digital technologies, integrated business planning transforms counteracting functional goals into an overall value orientation for the entire organization Vertical Integration: Integrated business planning Operations Cascading strategy across the organization enhances trust Cross-functional resource allocation and capacity planning enhances workforce management Real-time operational decisionmaking optimizes performance and capital costs Strategy insights for R&D provide orientation on profitability Cloud Big data/ analytics Market simulation leads to improved portfolio decision-making Improved planning and forecasting due to crossfunctional connection leads to an increased EBIT IBP consolidates planning activities of supply chain, marketing, production and finance and optimizes operational performance as well as capital costs. 17

18 For a global component manufacturer we established a platform for integrated business planning in order to enable optimized demand and production planning Example Vertical Integration : Integrated Business Planning Background Customer was operating in an optimized global supply chain network Delivery performance was below industry standard Low degree of supply chain planning process integration Supply chain cost transparency was missing, the real logistic costs were not taken into account although they were forming a crucial part of the total costs Solution The entire S&OP process was re-designed, following an IBP logic and based on the principle one plan - one number Development of an integrated business planning (IBP) process aligning all sales and supply activities with financial planning Implementation of IT solution to support integrated planning process from Demandto Production Planning (modules: DP, SNP, PP/DS, gatp) Benefits Accelerated order confirmation and improved on-time-delivery Reduced inventory levels and order leadtimes Reduction of transport costs due to improved material availability 18

19 Contents INDUSTRY 4.0: Drivers for an industry on the verge into a new industrial era of connected enterprises FROM SMART FACTORY TO AGILE SUPPLY CHAINS: How technology solutions are shaping the future industry value chain THE CAPGEMINI FRAMEWORK FOR INDUSTRY 4.0: Business & Technology Transformation in the digital age TRANSFORM TOGETHER: Business Opportunities for Siemens to nurture the value chain 19

20 To exploit the opportunities of Industry 4.0, the various Siemens divisions should evaluate all dimensions of the Industry 4.0 framework People Leadership & Change GROWTH DRIVER Future Manufacturing Business Model EFFICIENCY DRIVER Technology Enabler (Selection) Mobile Cloud Analytics M2M Social Robotics Governance & Processes Review the product portfolio and determine the level of integration (e.g. sensor vs. turbine vs. control system) Implement multi-agent technologies Develop and establish standards for M2M-communication across the portfolio Develop and establish security standards capable for Industry 4.0 scenarios Establish cross-enterprise integration platforms (e.g. 3D-printing grid) Leverage and develop more cloud-based solutions to increase flexibility Establish Industry 4.0 processes in own factories Implications for Siemens Business Integration & Standards IT & Technology Products Solutions Products Agile Operation Model (Decentralized, Modular, Flexible, Boundless) Customer Integration Collaborative Innovation After Sales Integration Supply Chain Agile Collaboration Network Connected Supply Chain Infrastructure (connects Cyber-Physical Systems) Factory Decentralized Production Control Data-driven Operational Excellence People & Culture Process & Organization New services reaching out to endcustomers (B-2-B-C) e.g. healthcare or drives Evaluate value chain for data driven business models (e.g. energy efficiency management) Establish stable digital process management to ensure fast response and process compliance Establish agile team culture Enable agile and decentralized decision making Prevent not-invented-here culture 20

21 Leveraging our broad cross-discipline capabilities, Capgemini is committed to support Siemens in the exploitation of the business potential of Industry 4.0 How can Capgemini support Siemens in this Transition? STRATEGY & ROADMAP PRODUCT & SERVICE OPERATIONAL EXECUTION TRANSFORMATION Assess your digital maturity and market potential Identify and develop business opportunities Design the business model Develop the roadmap towards Industry 4.0 Review of the product and service portfolio for adaptation requirements Re-engineering of product portfolio to CPS Service innovation and implementation Apply customer value analtics to improve revenue and profit Design, implementation and operation of digital platforms (e.g. the service cloud) and infrastructure Integration platforms (vertical and horizontal integraztion) Referenzarchitekturen Design and implementation of digital business processes People and culture transformation Leadership skills transformation Transform towards endto-end engineering integration Definition & establishment of security and communications standards (e.g. security solution on device level and corporate M2M-communication standards) 21

22 Thank you for our attention! 22

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