Digitally prepared? A view on the industry s readiness for Industry 4.0, and Digitalization in the value chain

Transcription

1 Digitally prepared? A view on the industry s readiness for Industry 4.0, and Digitalization in the value chain Graz, May 16 th, 2018

2 Disclaimer The information provided in this document is based on the responses of the survey participants and does not necessarily reflect StepChange Consulting views StepChange Consulting is not in any way responsible for the survey results StepChange Consulting merely provides a summary of the survey results and an interpretation thereof 2

3 Who we are Management consultancy specialized in the pulp, paper and packaging industry Focus on sustainable performance improvements Interdisciplinary and collaborative project approach International team of industry experienced consultants Primarily top tier paper & packaging companies among client base (> 1bn in revenue) Vienna office founded in 2006 US operations started in 2010 Projects in more than 30 countries DRIVING CHANGE TO DELIVER RESULTS 3

4 Agenda A view on the Industry s readiness for Industry 4.0 Digitalization in the Paper and Packaging value chain 4

5 Objectives of the study Evaluate state of the industry regarding Industry 4.0 / Digitalization Priority of Industry 4.0 / Digitalization on the agenda of companies Readiness of the pulp, paper and packaging industry Maturity level of Industry 4.0 / Digitalization projects Perceived benefits and challenges related to the implementation The PPP industry s performance compared to other industries All results presented focus on answers from participants from the forest-based industry (>65%), unless otherwise stated. Results are compared to the study conducted in 2015 to show the development of the industry during the last two years. Study results shall trigger action planning to leverage the vast unrealized potentials from the digitalization of industrial processes, products and services 5

6 Background: Industry 4.0 study from November 2017 Geography 85% of participants from Europe 12% of participants from Austria 15% of participants from Americas, Asia, Australia and Africa Participants by functions 35% Board members & C-level incl. General Manager 41% Department Manager 24% Other Participants by sub-industries 73% from the pulp, paper and packaging industry (PPP) 27% of participants from other industries (incl. FMCG, machinery & technical services, chemicals, IT, etc.) 6

7 Industry 4.0 has become a well known term. The majority of Austrian participants do not see Industry 4.0 as game changer Q: Have you heard the term Industry 4.0? [%] 2017 AUT 93% 7% 2017 Total 78% 22% 2015 Total 50% 50% Q: Do you expect Industry 4.0 to be a game changer for your company? [%] 2017 AUT 33% 2017 Total 57% 2015 Total 46% 67% 54% 43% Yes No In 2017, two thirds of Austrian respondents do not expect Industry 4.0 to become a game changer, while the majority of global respondents expects it to become a game changer Results show Pulp, Paper & Packaging Industry (PPP) participants viewpoint 7

8 Austrian respondents expect less industry impact and less supplychain impact by Industry 4.0, compared to the total Q: Do you expect Industry 4.0 to impact your industry? [%] 2017 AUT 2015 Total 82% 18% 2017 Total 94% 6% 98% 2% Q: Do you expect Industry 4.0 / digitalization to transform your supply-chain? [%] 2017 AUT 2017 Total 2015 Total 70% 30% 89% 11% 85% 15% Yes No 89% of the respondents expect Industry 4.0 to transform their supply-chain, Austrian participants are less determined with 70% Results show Pulp, Paper & Packaging Industry (PPP) participants viewpoint 8

9 High expectation on benefits from Industry 4.0, but low priority Q: Industry 4.0 Benefits Q: Industry priorities Cost reduction 77% 79% 1. Cost reduction 31% 45% Δ14pp New business models Energy efficiency 49% 38% 48% 69% Δ20pp 2015: 36% 2. Product dev. & Innovation 3. Sustainability dev. 31% 38% 38% 28% Sales growth 32% 54% Δ22pp 4. Supply chain dev. 38% 28% 2015: 11% 2017 AUT 2017 Total Low priority 9. Industry % 23% 2015: 12% (Rank 9) Cost reduction is perceived as the highest benefit from Industry 4.0 by almost 80%. However, Industry 4.0 is still not among top industry priorities. Risk of missing the opportunity? Results show Pulp, Paper & Packaging Industry (PPP) participants viewpoint. Multiple answers possible. 9

10 Almost 75% of the Austrian respondents don t have a clear digitalization strategy, which is reflected in IT budgeting as well Q: Does your company have a clearly formulated strategy for Industry 4.0 / digitalization? [%] 2017 AUT 2017 Total 27% 25% 73% 75% Yes No Q: How did the IT budget of your company change during the last two years? [%] 2017 AUT 40% 40% 20% 2017 Total 65% 29% 6% Increased Didn t change Decreased 60% of Austrian respondents reported decreasing or unchanged IT budget, while over two thirds of the respondents in total having increasing IT budgets. Risk of falling behind? Results show Pulp, Paper & Packaging Industry (PPP) participants viewpoint 10

11 L e v e l o f e n g a g e m e n t Mixed view on the level of engagement with Industry 4.0, but significant improvement since 2015 Q: How is your company currently engaged with Industry 4.0? [%] No work in progress Strategic awareness Single, uncoordinated projects Research phase Business plan development Roadmap definition Implementation 0% 5% 8% 8% 9% 12% 17% 22% 15% 15% 16% 23% 19% 2015: 29% 31% 2015: 7% 2015: 6% 2017 AUT 2017 Total Austrian respondents show a higher level of engagement with Industry 4.0 compared to the total of participants, however, just 38% are already engaged in specific projects in Austria Results show Pulp, Paper & Packaging Industry (PPP) participants viewpoint 11

12 Self-perception of the Pulp, Paper & Packaging industry is more positive compared to self-perception of other industries Q: How do you consider your industry to be performing compared to other industries in terms of Industry 4.0 / digitalization? [%] 2017 AUT PPP 31% 23% 2017 Total PPP 35% 22% 2017 Total non-ppp 37% 20% Worse Better Around one third of the PPP participants considers their Industry 4.0 performance worse compared to participants from other industries Delta to 100% representing respondents considering same performance of their industries regarding Industry 4.0 / Digitalization, compared to other industries 12

13 Key take-aways of Industry 4.0 / Digitalization study results Industry has become a well known term is not expected to be a game changer in Austria, contrary to the perception of the rest of the world is expected to transform the supply chain is of low priority, however, significant benefits are expected (e.g. cost reduction, sales growth) is rarely part of a company s strategy is showing a scattered picture regarding industry engagement performance self-perception of the PPP industry is more positive compared to other industries 13

14 Agenda A view on the Industry s readiness for Industry 4.0 Digitalization in the Paper and Packaging value chain 14

15 Digitalization is about more than just manufacturing 1 st Industrial Revolution 2 nd Industrial Revolution 3 rd Industrial Revolution 4 th Industrial Revolution Steam Mass production Digitization Digitalization Late 18 th century Steam power, mechanization, hydraulic power Late 19 th century First use of assembly lines, electric energy 1970s Automation of existing manual processes, enabled by the digitization of information; from analog to digital Today People, machines, systems & industrial processes are intelligently networked AND Interact autonomously within and across production plants & companies, triggering automatic mutual optimization Digitalization creates value-add by connecting digitized industrial processes, products & services across the entire value chain 15

16 Digitalization rests on five pillars Digitalization Smart equipment Today People, machines, systems & industrial processes are intelligently networked AND Interact autonomously within and across production plants & companies, triggering automatic mutual optimization Networking & connectivity Value chain integration Smart products Data analytics To leverage the full potential of digitalization, corresponding initiatives need to be evaluated, planned and implemented consistently and holistically across the whole value chain A holistically integrated digitalization strategy enables companies to leverage the full potential Source: CEPI / StepChange / Sitra Industry 4.0 Brochure

17 The forest products value chain is full of interfaces, from forest to end customers. Digitalization helps to leverage value. Operations Illustrative Forests Suppliers Equipment Chemicals Services Energy Sawmills Paper mill Quality Pulp mill SHE Manage Supply Administration Planning Nonwoven mill Maintenance HR Manage Demand IT Converting Converting Finance Retailers Merchants Social media Brand owners Banks Governments Consumers Recycling Stakeholders Each Player is mostly both, Supplier and Customer, within an interwoven value chain 17

18 Digitalization enables the industry to leverage untapped value opportunities along the value chain Benefits that can be captured from Digitalization in the European PPP industry: ~ 5 Billion in Inventory ~ 10 Billion in Costs Figures for the European Pulp, Paper and Packaging Industry based on the TOP 31 listed companies in Europe which are covered in StepChange Consulting Financial Benchmarking: B3nch 18

19 Think beyond. Today! The potential optimization benefits from digitalization within the value chain functions are high Manage Safety, Health & Environment Up to 50% loss time incident reduction Reduction/Avoidance of uncontrolled emissions Higher asset utilization Higher service levels Higher effectiveness Manage Demand 5-10% increase in contribution up to 80% forecasting accuracy optimization Manage HR 10-30% reduction in headcount Manage Finance 10-30% receivables optimization Process throughput/improve allocation/ liquidity Manage Order Fulfillment 5-10% distribution cost reduction 10-40% finished goods inventory reduction Interconnected alerts Smart Heat-maps development Connected recruiting Automated budget proposal Connected AR Real time reporting Blockchain Finance Blockchain Transparency HR Order Fulfillment Dynamic planning SHE Predictive maintenance Digital R&D Self-service portals Blockchain Dynamic pricing Demand Operations Blockchain Dynamic production planning Supply Intelligent countermeasures Lower cost Lower risk Lower working capital Automated replenishment Integrated forecasting Integrated processes Manage Supply 5-15% TCO spend reduction 30% inventory reduction Manage Operations up to 50% reduction in downtime 5-10% productivity increase 10-30% maintenance cost reduction 19

20 Assessment of Digitalization Net Benefits requires a multidimensional approach Digitalization Value Assessment Cube Illustrative Required Level of Digitalization High Low Value Chain Functions Demand Supply Operations Order Fulfillment Finance HR & SHE Low Digitalization Net Benefit High 20

21 Digitalization of supply management processes reduces spend and inventories, and lowers overall value chain cost and risk Manage Supply CHALLENGE Example Growing supply chain complexity in a globalized world Big amounts of data collected, but mostly stored in individual silos lacking the connection across the value chain Predictive cross-value chain analysis and forecasting rarely in place Forests Equipment Chemicals Suppliers Services Energy Sawmills Operations Paper mill Converting R&D Quality Planning Maintenance Pulp mill SHE Nonwoven mill IT HR Manage Supply Administration Converting Manage Demand Retailers Merchants Finance Banks Governments Social media Consumers Recycling Brand owners Stakeholders SOLUTION Digitalized supply chain network to allow for integrated forecasting and automated replenishment Integrated and shared performance data across multiple internal and external systems via a Supply Chain control tower Automated mutual optimization and real-time responses through autonomous interaction of supply chain players systems BENEFITS Increased forecasting accuracy and optimized spend management Prompt & agile actions, higher flexibility, reduction of bullwhip effects Reduced TCO spend, lower inventories Reduced supply cost and risk 21

22 Digitalization of order fulfillment processes enables delivery of right goods, at right place, at right time at optimal costs Manage Order Fulfillment CHALLENGE Lack of supply chain transparency drives complexity and causes inefficiencies at all stages of the order fulfilment process (e.g. high inventories, increased warehousing costs, low truck utilization) Transport cost volatile and often unpredictable, due to lack of visibility, especially in case of small order sizes or rush orders SOLUTION Cross value chain transport planning by intelligently connected logistics planning, fulfillment and execution systems Increased end-to-end visibility by connecting (existing) sales forecasting, real order book, warehousing, transport sourcing and track and trace monitoring applications Optimized load planning by leveraging sensor data such as actual weight and dimensions of merchandise BENEFITS Forests Suppliers Equipment Energy Chemicals Sawmills Services Pulp mill Paper mill IT Manage Supply Quality Administration Operations HR R&D Maintenance SHE Nonwoven mill Planning Converting Converting Manage Demand Finance Example Retailers Merchants Social media Consumers Brand owners Governments Banks Recycling Stakeholders Shorter delivery times at reduced inventory Increased truck utilization for single & combined loads Optimized fulfillment performance (e.g. OTIF) Lower working capital Reduced transport cost and Muda Increased service levels & customer satisfaction, reduced claims cost 22

23 Think Beyond. Today! Benefits that can be captured from Digitalization in the European PPP industry: ~ 5 Billion in Inventory ~ 10 Billion in Costs Figures for the European Pulp, Paper and Packaging Industry based on the TOP 31 listed companies in Europe which are covered in StepChange Consulting Financial Benchmarking: B3nch 23

24 Thank you! For any inquiries, requests or feedback, please contact us! Alexander Wirth Senior Manager StepChange Consulting GmbH Köstlergasse 1/40, 1060 Vienna Valentin Schenkenfelder Consultant StepChange Consulting GmbH Köstlergasse 1/40, 1060 Vienna DRIVING CHANGE TO DELIVER RESULTS 24