 "Figure 1: Benefits of digital factories")
Automotive manufacturing is increasingly going digital. Customers have already started experiencing digitisation in the form of connected cars, autonomous driving and new business models such as Uber. The next digital revolution is however going to be about productivity. Digitisation of manufacturing processes promise greater efficiency, reduced cost as well as addresses the three critical aspects of the auto industry - increasing vehicle derivatives, market volatilities and labour intensive/inflexible production.
Industry 4.0 will mark the emergence of digital factories. Digital factories will produce higher quality products, including a far greater number of derivatives with fewer failure parts (PPM), faster time to market and most importantly, lower costs. Productivity gains will occur not only within the factory during production but can be expected all along the value chain, starting with engineering and product development, supplier management, logistics, and much more. These changes result not only in better utilisation of capacities and balanced plant but also optimal staff deployment.
The Fraunhofer Institute for Manufacturing Engineering and Automation (IPA) has analysed the benefits of digital factories in detail and estimates a savings potential of 10-20 percent of the addressable costs, which includes spending for manufacturing, logistics, inventory, quality, complexity and maintenance. The savings estimated per production function are shown in the Figure 1.
Three major groups of players need to work together to make it happen: Providers of infrastructure, such as telcos, Cisco or Amazon need to provide supporting structures and services, eg cloud computing or storage for big data. Technology companies, such as Siemens, GE or ABB need to provide collaborating robots or remote maintenance systems. And globally operating automotive manufacturers such as Ford, General Motors, FCA and all other major global OEMs can be at the center of Industry 4.0. These three groups can thus create a new six dimensional industrial landscape.
Figure 1: Benefits of digital factories
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However, India faces several challenges to make this a reality and this needs to be addressed jointly by the industry and Government. Key requirements for digital factories to become a reality are conducive ecosystem, modern infrastructure, educated labour force and government support.
India has the basic framework for a good ecosystem, though much work needs to happen on this front to be able to reap the benefits. For instance, we have several top information technology companies, including technology clusters such as Hyderabad, Pune and Bangalore. These clusters are crucial for the necessary talent pool and are supported by good educational institutions and facilities. A large number of venture capital firms have presences in India and this provides opportunities for experimentation and explorations, beyond research grants and corporate funding.
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Digital factory elements
Six characteristics of the new industrial landscape are
Source: Roland Berger |
However infrastructure remains a key improvement area. Higher integration with suppliers necessitated in modern manufacturing practices have made infrastructure a basic hygiene factor, and on this front India has to make significantly more progress. India also has a highly educated labour force but industries need to work together to ensure the right skills are imparted and workers can meet the changing requirements in the new age factories.
The Government also needs to encourage investment via federal or local incentives as has been followed in the US or Europe. In US, for instance, the Federal Government's Advanced Technology Vehicle Manufacturing programs provide loans to auto OEMs and parts manufacturers to support the cost of re-equipping, expanding or establishing manufacturing facilities to produce advanced technology vehicles or qualified components, and the associated engineering integration costs.
While digitisation of industry is not expected to happen overnight and will be more evolutionary in nature, India needs to already prepare for it. Digitisation will diminish the cost advantage and make manufacturing in their home countries attractive and viable again for Western OEMs. India needs to develop an enhanced approach to protect the future of India's competitiveness. We need to move from ‘Make in India’ to ‘Make it smart in India’ through adoption of Industry 4.0 and digitisation in a well-structured manner. For doing this effectively we need to:
- Create an environment to drive low cost manufacturing through innovation and adoption of world class processes
- Create awareness that Industry 4.0 has the potential to dramatically change the manufacturing world map
- Develop a concept and strong incentive program to increase automation across the country
In doing so, we will ensure that Industry 4.0 does not remain a threat, but instead becomes an opportunity to evolve Indian manufacturing to the next level.
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Wilfried Aulbur is managing partner India of Roland Berger Strategy Consultants. He is also the chairman Middle East & Africa, and head automotive Asia at the global strategy consulting firm. Prior to joining Roland Berger in 2011, he was the managing director and CEO of Mercedes-Benz India where he was responsible for the production, sales and after sales of Mercedes-Benz passenger cars, buses and trucks.
Wilfried Aulbur is managing partner India of Roland Berger Strategy Consultants. He is also the chairman Middle East & Africa, and head automotive Asia at the global strategy consulting firm. Prior to joining Roland Berger in 2011, he was the managing director and CEO of Mercedes-Benz India where he was responsible for the production, sales and after sales of Mercedes-Benz passenger cars, buses and trucks.
