ARC WHITE PAPER. Siemens Integrated Drive Systems is a Total Lifecycle Solution VISION, EXPERIENCE, ANSWERS FOR INDUSTRY OCTOBER 2018

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1 ARC WHITE PAPER By ARC Advisory Group OCTOBER 2018 Siemens Integrated Drive Systems is a Total Lifecycle Solution Executive Overview... 1 Flawless Startup Depends on Drive Train Design... 3 Driving Additional Revenue Streams with Aftermarket Services... 6 Drive Train Analytics Extends Technical Service Agreements... 8 Siemens Integrated Drive Systems VISION, EXPERIENCE, ANSWERS FOR INDUSTRY

2 Executive Overview Owner operators in heavy industries such as mining, oil & gas and cement now perceive production machinery and equipment as a direct source of revenue generation rather than an ancillary cost of running the business. Paper Drying Line $31,000/hour Rotating machinery that utilizes a combination of gearbox, motor and variable speed drive will be expected to minimize downtime so that systems can maximize the production time. OEM machine builders have not prepared for the change in the way their customers are operating. Visionary OEMs will see this as an opportunity to lower costs, improve cash flow, and create new revenue streams. There is a business and technology shift underway that each OEM needs to address to remain a viable business entity. Each OEM needs to offer solutions and services that provide greater value to manufacturing customers; particularly as they shift their business metrics that measure the value of machinery as a source of revenue generation, rather than just a capital expenditure. Providing faster response times with field service is one option, but that is only putting a band aid on your underlying business issues. OEM machine builders need to consider altering internal business practices by identifying opportunities within the business that improve reliability and productivity of machinery as well as lower Oil Platform Crude Separation $20 million/incident costs from concept through the entire lifecycle of the machinery: 1) Design, 2) Startup & Installation and 3) Operation. By reducing costs, each OEM can focus on creating additional revenue streams throughout the entire life of the machinery whether it is offering custom-tailored aftermarket services or machinery output as a service. OEMs that purchase motors and drives from multiple vendors as individual components, require additional overhead to manage each vendor from specification to delivery. In many cases, the responsibility for purchasing components is divided between the OEM and customer. In many cases, OEMs deliver a skid mounted motor and optional coupling which is then integrated with a pump, fan or compressor on site. The end user completes the system by assuming responsibility for sourcing the Variable Frequency Drive (VFD). 2 Copyright 2018 ARC Advisory Group ARCweb.com

3 As an OEM, this is not ideal as there is a limited opportunity to optimize the solution due to the difficulty of using a system engineering approach. The result is a drive train that is suboptimal, and performance is compromised. Compromises in performance such as resonances and coupling misalignment are often incurred. Installation at the customer s site can produce unexpected problems when confronted with real world dynamic loads. Finally, failures in the field can lead to finger pointing when multiple vendors are used in the electromechanical drives system. OEMs looking for new business opportunities are turning toward integrated drives systems where gearbox, motor and drive are sourced as a package solution. The benefits of an Integrated Drive System will be discussed in the remainder of this paper highlighting the value from startup, aftermarket services, and digital transformation. Flawless Startup Depends on Drive Train Design Integrated Drive Systems (IDS) are solutions where the specifications for the OEM is the shaft output. The selection and design of the individual drive train components are the responsibility of Siemens. Integrated Drive Systems are not simply a collection of individually sourced components. IDS can be a multivendor solution developed with a third-party system integrator, however these tend to be much more complicated. More often, these applications are extremely demanding in harsh environments where multivendor components integrated as a solution often result in compromises leading to either reduced production capacity or increased maintenance cycles. When an application is in the range of Process Industry Services 1000HP or greater for a drive train the design challenges are an order of magnitude greater as these systems generally require Medium Voltage Variable Frequency Drives, custom motors, and gearboxes which are custom engineered for the application. Copyright 2018 ARC Advisory Group ARCweb.com 3

4 An Integrated Drive System has distinct advantages, whereby the design employs a system engineering method combined with application engineering expertise to ensure that the proper selection of gearbox, motor and drive along with application software and commissioning are optimized. For an OEM, the advantage is lower risk, reduced internal engineering costs, and improved cash flow. Industry Expertise Ensures an Optimum Solution OEMs that have relied on multivendor solutions have found it extremely challenging to realize an ideal solution that achieves business goals and maximizes machine performance. Multivendor solutions are high overhead solutions for OEMs. Each individual vendor must be supported with a project manager to ensure specifications of the components are realizable. This is a significant burden, especially when trying to optimize the system solution. It requires coordination between each vendor and this is not trivial exercise. Management often drives the organization to seek the lowest individual component cost, but this is a very poor business decision when there are alternatives, such as Integrated Drive Systems. Siemens Integrated Drive System seeks to find the optimal solution from an economic, efficiency, performance, and reliability perspective while eliminating the costly coordination with multiple vendors. The systems engineering approach employs an electromechanical analysis that relies on virtual models of the complete machine dynamics. Additional models provide thermal analysis to eliminate any stresses induced because of thermal changes. Scenario analysis is used to exercise the virtual system as if the actual system was in the field. An OEM that utilizes multiple vendors for the drive system would be responsible for the system analysis. OEMs are often aware that multivendor solutions are falling short of design goals. The cause is that expertise is isolated in silos across each vendor. Optimization requires engineering expertise that is acutely aware of what design changes can be made in each component of the drive system. Siemens IDS is not just an off the shelf drive train, but an engineered solution that has absolute control of design specifications for each component. Integrated Drive Systems Designed to Work in Harmony Integrated drive systems that work in harmony is comparable to a musical duet that have the perfect fit - when you hear the perfect harmony it is a unique experience. Perfect harmony is critical in a drive train design as the 4 Copyright 2018 ARC Advisory Group ARCweb.com

5 performance of the entire system depends upon the interaction between individual components. The ideal design solution when integrated into a machine will minimize vibration, push resonance points out of the operating range, and will can handle a wide range of dynamic loads. Integrated drive systems eliminate the unexpected challenges OEMs confront during integration into the machinery. These systems undergo live validation and verification prior to delivery to the OEM, ensuring that the system meets the performance, environmental, and electrical requirements as a complete system. In contrast, when integrating multi-vendor drive train solutions, the burden of factory acceptance testing of subsystem is placed on the OEM. Final assembly of many systems are done at the production site where the miscommunication among component vendors and delivery delays create glitches in getting the machinery to an operational state. Thus, the benefits offered by a supplier of an integrated drive system are the support and services available throughout the selection and integration process that resolve issues rapidly. Miscommunication among component vendors and delivery delays can become critical paths in getting the overall facility into operation. Thus, when we refer to perfect harmony in a drive train solution it spans across the design, validation, testing, and delivery phases. Startup and Commissioning Services Startup and commissioning of machinery is a complex event as the skills from electrical, mechanical, and software engineering all converge to ensure that unexpected problems are resolved. The profitability of a project is highly dependent upon the smooth commissioning whether it is in the field or at the OEM s site. Siemens integrated drive systems are full end-to-end solutions that eliminate a common occurrence - the unwillingness of a single vendor to accept responsibility for a design flaw in any type of complex electromechanical system integration. Determining who is responsible requires diagnostic skills across multiple disciplines to perform a root-cause analysis. However, the challenge is that each vendor has a limited scope of engineering knowledge, leaving the analysis to the OEM s engineering group. These types of problems can be virtually eliminated by relying on a single vendor which offers an Integrated Drive System. In addition, a holistic view of the Integrated Drive System performance data will not create bias toward an individual component vendor; can achieve optimal system performance; and reduce the project s time to delivery. Reducing the time to Copyright 2018 ARC Advisory Group ARCweb.com 5

6 delivery improves cash flow in the OEM s business, which is a strong motivation for streamlining a relatively complex part of the design cycle. Driving Additional Revenue Streams with Aftermarket Services OEM machine builders have downsized since the global recession in Other industries such as the upstream oil & gas industry have been strained by the collapse of oil prices in 2014 as OPEC sought to drive the oil exploration businesses in the US into insolvency. The consequence of all these cataclysmic events is that virtually every OEM in the heavy industries downsized and as a fallout lost valuable expertise. Additionally, an aging workforce and early retirements have contributed to lost expertise in the machine building sector. The question is whether organizations can survive another unexpected downturn and support both the installed base and future equipment sales? Supplementing Service and Support Economic strains have forced machine builders to consider supplementing their internal support and service operations. Aftermarket service and support are critical to owner operators dependent on maximizing the availability of the machinery. For OEM machine builders, services are an annuity-based revenue stream throughout the total lifecycle of the equipment. But, machinery must be supported worldwide and in many cases in remote, difficult to access areas. This requires a global service organization which is costly to operate. Alternatives are emerging on the market that enable OEMs to improve services without building organizational infrastructure worldwide. Drive and motor suppliers have responded to OEM s needs with varying degrees of service agreement offerings. Service agreements generally apply to off-the-shelf components, such as programmable logic controller (PLC), switchgear, or variable frequency drive. A service agreement of this type would not be very effective for an Integrated Drive System as these are application specific solutions that require technical expertise regarding the application and the custom-engineered solution. Technical Service Agreements Ensure Total Lifecycle Support Siemens Integrated Drive Systems are supported by a customizable Technical Service Agreement designed to provide the expertise to diagnose and 6 Copyright 2018 ARC Advisory Group ARCweb.com

7 troubleshoot each engineered system. The Technical Service Agreement makes this a total lifecycle solution; however, it cannot be extended to the entire machine as this is out of scope of these contracts. However, an Integrated Drive System is a major component of the machine which requires in depth knowledge regarding the original design goals. Up until now, Siemens Technical Service Agreements were only available to the end users to continue support for the equipment after expiration of the initial OEM warranty. However, OEMs can now offer Technical Service Agreements directly to customers after the initial warranty expires to generate an additional revenue stream. From a commercial perspective, the OEMs retain a customer facing role by taking the service call from the end user and route it directly to call center for Siemens Technical Service Agreement. This provides an OEM with the ability to be a single point of contact for the service and support of the entire machine. The Technical Service Agreement is a relatively unique offering in that it encompasses an entire electromechanical system. Application engineering, diagnostics, and identifying component replacement are integral to Technical Service Agreements. Integrated drive systems are designed to be remotely accessed directly through the variable frequency drive. This enables the application experts at call centers to analyze the problem with diagnostic software tools. Diagnostic software tools integrated as part of the variable frequency drive are used to identify a wide range of problems from failure of electrical components in the variable frequency drive to degradation in any of the electro-mechanical components. Feature Customization Flexibility Faster Technical Support Exclusive Discounts Annual Preventative Maintenance Description Customized agreements that align the right support with the right machines. Extends the lifecycle of Siemens components within an IDS solution. A unique customizable SIEPRO service package for OEM s customers differentiates an OEM from their competition Add-on services available for Condition Assessment or Drive Train Analytics. Maintenance schedule designed to coincide with planned outages. Flexible service period and payment plans Service calls move to the front of the queue, with a priority response time of 30 minutes or less during normal business hours Siemens OEM spare parts, drive services, and upgrades Ensures Siemens equipment is operating at its peak performance at all times by field service experts. Extends the life of the equipment Technical Service Agreement Commercial and Operational Benefits for and Integrated Drive System Copyright 2018 ARC Advisory Group ARCweb.com 7

8 The Technical Service Agreement is intended to prevent a total failure that would prevent the equipment from operating. While the standard Technical Service Agreement includes Field Service Support and discounted spare parts, contracts can be extended to incorporate annual preventative maintenance programs intended to avoid any catastrophic component failure. The Technical Service Agreement supplements the OEM s call center support services. OEMs continue to navigate the business challenges, particularly with the growing in-house knowledge gap they are determining what expertise can be outsourced to third parties. Expertise from a motor and drive supplier serves as a valuable option to augment OEM s service personnel in identifying, analyzing, and resolving problems more rapidly. Technical Service Agreement is a remote monitoring service that should be incorporated as an outsourcing strategy that provides unequalled 24/7 call center support for the worldwide machinery business. Drive Train Analytics Extends Technical Service Agreements Siemens continues to develop the full scope of digitalization; and the first offering in this portfolio is a service referred to as Drive Train Analytics (DTA). DTA is an extension to a Technical Service Agreement, and equally important, it is a starting point for digitalization. Drive Train Analytics is intended to be proactive in identifying equipment degradation rather than reactive. Feature Remote Monitoring and Diagnostics Expert Insight Real-time Intelligence Description End users utilize Siemens experts that are continuously monitoring and analyzing the health and operating conditions of their drive train equipment remotely Siemens equipment experts provide valuable insights into equipment health as a service to end user maintenance personnel, which enables them to be notified and to act, often before the equipment breaks down Drive train experts work with maintenance personnel 24/7 and take care of drive train equipment Drive Train Analytics Support for Siemens and Third Party VFDs (Low Voltage Motors and Drives in Development) 8 Copyright 2018 ARC Advisory Group ARCweb.com

9 To incorporate Drive Train Analytics as part of the service offering, it is best if the variable frequency drive can be accessed remotely. The variable frequency drive periodically sends time stamped data via the network into a secure repository in the Cloud. Time stamped data includes alerts and trend information on internal signals that are analyzed by a team of specialists in motor and drive systems. DTA incorporates algorithms that predict the need for maintenance of the motor. For drives it provides a rapid analysis of what went wrong, thereby enabling a system to be put online faster. Specialists periodically review logs compiled in the Cloud on a monthly or annual basis. By reviewing alarms, alerts, and trending data the specialists can identify components that may be degrading. If a trend indicates that a component is degrading, the specialist will recommend the replacement components and will be able to get the system up and running quicker. Digitalization and Virtualization is the Future Digitalization and virtualization of an Integrated Drive System along with the entire machine, from inception to retirement is technologically viable. OEMs in industry sectors such as elevators, cranes, machine tools, compressors, and pumps are all exploiting the benefits of digitalization of machinery to drive new revenue streams and increase the availability of the equipment. This is an opportunity to improve the value proposition of the machinery because it extends beyond the initial purchase with technology that can identify component degradation well before it fails. With digital services, OEMs can drive new revenue streams in field service, maintenance, and support; more importantly, OEMs are able to deliver greater value to customers by ensuring machinery remains operational. All of this is achievable at a much lower cost than ever before. Digital modeling and virtualization, which is fundamental to the system engineering approach, and is employed in the design and development of every Integrated Drive System results in efficiencies in the initial design; and provides benefits to operations, and maintenance. Underlying digitalization is the digital twin technology. Siemens digital twin technology is a virtual model of an individual piece of equipment, entire machine or even a production operation. Digitalization involves making smart digital representations of physical information and objects. This digital information about a piece of equipment can include engineering information, drawings, technical specifications, serial numbers, maintenance records, and dynamic simulation models. Together the in- Copyright 2018 ARC Advisory Group ARCweb.com 9

10 formation describes the asset. Ideally, this digital asset lifecycle information is accurate, accessible, up-to-date, and provides visibility into previous changes and maintenance activities. Specific digital representations can mimic part of the properties of the physical objects. These are referred to as simulation models. They can be an entire machinery simulation model or simply a subsystem in the machine. By understanding how the process works it can be run in a more efficient manner to save energy. Better process control is the best for energy conservation in the future. Having digital engineering information and asset documentation across the asset lifecycle is a great step on the digitalization journey where the potential benefits include: Improved engineering efficiency Improved field service response time Shorter time to market Reduced downtime and avoided equipment damage Avoid catastrophic failures Reduced energy consumption Improved operational and asset performance Machine builders that pursue digitalization are on the forefront of the innovation cycle. There is a high potential for realizing significant efficiency gains in engineering, maintenance, field service, troubleshooting, incident management, and operation of the machinery. Problem resolutions are resolved rapidly as the digital twin can be subjected to the same loads and input along with environmental conditions to provide valuable diagnostic information. In equipment service, one of the biggest benefits of digital transformation is to provide prescience of equipment status in addition to quickly arriving at answers. 10 Copyright 2018 ARC Advisory Group ARCweb.com

11 Analyst: Sal Spada Editor: Sharada Prahladrao Acronym Reference: For a complete list of industry acronyms, please refer to IDS TSA Integrated Drive System Technical Service Agreement DTA Drive Train Analytics Founded in 1986, ARC Advisory Group is the leading research and advisory firm for industry. Our coverage of technology from business systems to product and asset lifecycle management, supply chain management, operations management, and automation systems makes us the go-to firm for business and IT executives around the world. For the complex business issues facing organizations today, our analysts have the industry knowledge and first-hand experience to help our clients find the best answers. All information in this report is proprietary to and copyrighted by ARC. No part of it may be reproduced without prior permission from ARC. This research has been sponsored in part by Siemens. However, the opinions expressed by ARC in this paper are based on ARC's independent analysis. You can take advantage of ARC's extensive ongoing research plus experience of our staff members through our Advisory Services. ARC s Advisory Services are specifically designed for executives responsible for developing strategies and directions for their organizations. For membership information, please call, fax, or write to: ARC Advisory Group, Three Allied Drive, Dedham, MA USA Tel: , Fax: Visit our web pages at Copyright 2018 ARC Advisory Group ARCweb.com 11

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