Roadmap to Industry 4.0 What it takes to build the factory of the future

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1 Roadmap to Industry 4.0 What it takes to build the factory of the future Bangkok, July 20, 2017 Note: this presentation leverages findings from the BCG study: "The Factory of the Future"; for the full study, please click here

2 BCG deeply involved in driving Industry 4.0 worldwide Manufacturers I4.0 suppliers Governments How to make the most of Industry 4.0? What will the market need in the future? How to prepare the economy for the future? Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 1

3 We operate our own I4.0 model factories to drive research and offer clients an immersive learning experience Aachen Kaiserslautern Paris Stuttgart Boston Singapore Coming soon Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 2

4 Agenda CONTEXT what is it & what makes it so disruptive? ROADMAP what does it take to get it done? ENABLERS what are key success factors? TMA - Roadmap to Industry presentation - vff.pptx 3

5 Agenda CONTEXT what is it & what makes it so disruptive? ROADMAP what does it take to get it done? ENABLERS what are key success factors? TMA - Roadmap to Industry presentation - vff.pptx 4

6 It's no longer science fiction BUILDING BLOCKS OF THE DIGITAL REVOLUTION UBIQUITOUS CONNECTIVITY COLLABORATIVE ROBOTS SHIFT TO THE CLOUD INNOVATIVE USER INTERFACES / AR IOT / CONNECTED DEVICES + SENSORS AI / COGNITIVE COMPUTING 3D SCANNING AND PRINTING Source: BCG SOCIAL, LOCAL, MOBILE BIG DATA + ADVAN- CED ANALYTICS Mass market maturity + Performance + Ease of use + Flexibility + Safety + Cost TMA - Roadmap to Industry presentation - vff.pptx 5

7 THE FACTORY OF THE FUTURE Integrating the value chain from raw material to customer From isolated, optimized cells Integrated auto value chain Suppliers Component manufacturing Press, body, and paint shops Final assembly Customers Reduced conversion cost Improved flexibility Higher quality standards Safety Source: BCG analysis...to fully integrated data & product flows across borders New business models TMA - Roadmap to Industry presentation - vff.pptx 6

8 EXAMPLE USE CASE Self-driving logistics vehicles Source: company information TMA - Roadmap to Industry presentation - vff.pptx 7

9 Powerful enough to ring in fourth industrial revolution 4. Industrial revolution 3. Industrial revolution 1. Industrial revolution 2. Industrial revolution Automated industrial robots in manufacturing Connection between physical and digital systems Digitally integrated value chain Ford Model T mass production IT and (rigid) automation Historical loom Electricity, division of work Mechanization, water & steam power Late 18th century Early 20th century Early 1970s Today / near future Source: BCG analysis TMA - Roadmap to Industry presentation - vff.pptx 8

10 What makes Industry 4.0 so disruptive? Massive impact Impact on conversion cost Now is the time Automotive Component mfg. Press shop 30% 40% 50% New revenues Body shop Paint shop 25% 25% Global 'equalizer' Final assembly Engineered products 40% 50% Strong interest Process industries 25% Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 9

11 What makes Industry 4.0 so disruptive? Massive impact More sensor data than ever in real time Now is the time New revenues Algorithms to make sense of all that data Global 'equalizer' Strong interest Simple, affordable hardware to link algorithms back to reality Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 10

12 What makes Industry 4.0 so disruptive? Massive impact Now is the time New revenues Besides cost, flexibility, quality, and safety opportunity to expand business from selling 'only' products to selling services Global 'equalizer' Strong interest From selling tractors to selling end-2-end yield optimization services Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 11

13 What makes Industry 4.0 so disruptive? Massive impact Mature economies now can compete on cost Now is the time New revenues Global 'equalizer' Strong interest Developing economies now can compete on quality??? Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 12

14 What makes Industry 4.0 so disruptive? Massive impact Now is the time Govts. eagerly seeking ways to support companies E.g. New revenues Global 'equalizer' Strong interest Companies developing first Industry 4.0 concepts 47% of auto players with first I4.0 concepts Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 13

15 Agenda CONTEXT what is it & what makes it so disruptive? ROADMAP what does it take to get it done? ENABLERS what are key success factors? TMA - Roadmap to Industry presentation - vff.pptx 14

16 FROM POSSIBILITY TO REALITY Despite high ambitions, industry struggles to build momentum BCG wanted to find out why, and to make it real, we've asked % 74% We can benefit from Industry 4.0 Plans to implement in next 5 years production managers from leading industrial companies in three sectors: Automotive Engineered products Process industries 25% Achieved related targets last year Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 15

17 Transforming into the Factory of the Future really means the combination of changes along three dimensions PLANT STRUCTURE PLANT DIGITIZATION PLANT PROCESSES Important? Important? Important? 43% 86% 13% 70% 70% 97% Today 2030 Today 2030 Today 2030 Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 16

18 PLANT STRUCTURE Three key themes for the future plant structure % "Important by 2030" Multi-directional plant layout 80% Modular production lines 92% Sustainable production 85% Products placed on driverless transport systems coordinated autonomously Inter-changeable line modules, configurable machinery that is multi purpose and simple Focus on energy and material efficiency, e.g., lighting, cooling, production processes AUDI R8, Heilbronn, Germany Toyota factories, Mexico and China Webasto factory, Arad, Romania Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 17

19 PLANT DIGITIZATION Seven dominant technologies for I4.0 use cases % "Important by 2030" Big data & analytics 72% Smart / flexible robots 85% Additive manufacturing 72% Production simulation 81% 80% Decentralized production steering Collaborative robots 85% Augmented reality 65% By now, it is use cases that matter, not the underlying digital technologies Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 18

20 PLANT DIGITIZATION Seven dominant technologies for I4.0 use cases % "Important by 2030" Big data & analytics 72% Smart / flexible robots 85% Additive manufacturing 72% Production simulation 81% Mercedes Benz test 600 cylinder head production quality drivers Changan Ford 18 sec change over for welding of six models BMW 10,000 parts for Rolls Royce Phantom Faurecia test changes to material flow to evaluate options 80% Decentralized production steering Bosch tools understand location / context, adjust actions Collaborative robots Volkswagen support screw tightening in difficult places 85% Augmented reality Volkswagen 3D glasses to facilitate logistics (order picking) 65% By now, it is use cases that matter, not the underlying digital technologies Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 19

21 PLANT PROCESSES Lean production lifted to the next level through I4.0 Lean production principles lifted to next level through digital Customer centricity Better understanding of customer needs through big data Higher degree of customization enabled by integrated value chain Continuous improvement Substantially more data due to vast number of connected sensors Advanced analytics algorithms to identify optimization potential Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 20

22 PLANT PROCESSES Lean production lifted to the next level through I4.0 Lean production principles lifted to next level through digital Customer centricity Better understanding Daimler of customer needs through big data Aims to allow customers to make last minute modifications, e.g., changes to Higher degree of customization color while on the way into paint shop enabled by integrated value chain Continuous improvement Substantially more data due to vast Bosch number of connected sensors Builds continuous improvement functionality right into its production Advanced analytics algorithms to identify machinery optimization for fuel potential injectors Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 21

23 Agenda CONTEXT what is it & what makes it so disruptive? ROADMAP what does it take to get it done? ENABLERS what are key success factors? TMA - Roadmap to Industry presentation - vff.pptx 22

24 What do practitioners think are the key challenges to overcome in order to put I4.0 in place by 2030? "Major challenge by 2030?" 35% Strategy & leadership Industry 4.0 affects the whole organization, not just the technology dept. 38% Employee skills At the highest level: from routine jobs to flexible judgement 40% Safe and ubiquitous IT infrastructure The technologies are there, the implementation not yet, and safety is a major concern Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 23

25 STRATEGY & LEADERSHIP I4.0 needs to be part of the overall business strategy Strategy & roadmap Clear vision + Clear strategy, anchored in overall business strategy + Commonly understood roadmap Org / governance Org structure + Clear roles and responsibilities + Change mgmt. process to control implementation Leadership style More 'advisory' leadership + More team focused leadership Less 'authoritarian' style directions ~33% ~33% ~40% say this will be a major challenge by 2030 Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 24

26 EMPLOYEE SKILLS It's (not just) about IT / programming skills x Percentage points Technical competencies Social competencies Important today vs. 2030? Important today vs. 2030? IT skills Mechatronical skills Electronic skills Mechanical skills Learning capacity Teamwork Taking responsibility Problem solving Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 25

27 EMPLOYEE SKILLS Shift from routine jobs to jobs requiring flexible judgement Existing jobs New jobs Machine operators Data scientists Robot coordinators Key activities Today Transfer WIP products into and monitor 1 machine Check WIP products quality Clean and conduct physical checks of machine Perform SOP activities Perform simple data extraction and analysis (using Excel) Conduct manual analysis typically from silo sources of data N/A I4.0 Transfer WIP products into and monitor multiple machines Run QC queries on system Resolve downtime after automated diagnosis (via AR or remote instructions) Run big data analysis collating unstructured realtime data from multiple sources Identify patterns such as bottlenecks and make actionable recommendations Oversee several robots in production Carry out routine and emergency maintenance Mitigate production downtime by introducing alternative robots in case of robot failure Source: BCG Analysis TMA - Roadmap to Industry presentation - vff.pptx 26

28 EMPLOYEE SKILLS How do manufacturers aim to answer these skill challenges? "How to overcome skill gap?" Training 53% What type of training will be important? (%) Learning by doing E-learning +59 Immersive training Traditional training Recruiting 29% Reeducation 18% Do you expect net / net to hire or fire? IT Maintenance Quality control Prod. planning Logistics Supply chain (%) Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 27

29 IT INFRASTRUCTURE Two topics dominate practitioners' concerns I4.0 requires plant-wide connectivity & data storage Data is poised to become evermore valuable under I4.0 Issues today: lack of network standards + poor network infrastructure Concerns today: general data security + uncertainty about ownership of data Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 28

30 ROADMAP What production managers expect Preparation / pilots Implementation Cont. improvement Short term Medium term Long term Plant structure Modular production line Sustainable production Multidirectional layout Plant digitization Plant processes Big data & analytics Collaborative robots Production simulation Augmented reality Decentralized steering Smart robots Additive mfg. Overall Source: BCG (BCG Perspectives: The Factory of the Future) TMA - Roadmap to Industry presentation - vff.pptx 29

31 ACCELERATING THE START BCG proposes to start with a holistic I4.0 health check Comprehensive I4.0 health check at plant level PROJECT EXAMPLE Source: BCG TMA - Roadmap to Industry presentation - vff.pptx 30

32 ACCELERATING THE START followed by selecting from already proven use cases Simulation New product line simulation Autonomous robots Self-driving logistics vehicles Software integration Smart supply network Novel software allows for virtual assembly line simulation & optimization Industrial internet Predictive maintenance Fully automated transportation systems navigate smartly within the factory Self-organizing production Monitoring of entire supply network allows for better supply decisions Big Data and analytics Big Data-driven quality control Remote monitoring via sensors allows for repair prior to breakdown Source: BCG Line automatically coordinates and optimizes utilization asset-by-asset Algorithms reduce product failures by correlating outcome to quality data TMA - Roadmap to Industry presentation - vff.pptx 31

33 Please reach out in case you have any questions, comments, or would like to discuss the topic further Thank you! Benjamin Fingerle Principal, Bangkok Industrial Goods & I4.0 TMA - Roadmap to Industry presentation - vff.pptx 32

34 Disclaimer The services and materials provided by The Boston Consulting Group (BCG) are subject to BCG's Standard Terms (a copy of which is available upon request) or such other agreement as may have been previously executed by BCG. BCG does not provide legal, accounting, or tax advice. The Client is responsible for obtaining independent advice concerning these matters. This advice may affect the guidance given by BCG. Further, BCG has made no undertaking to update these materials after the date hereof, notwithstanding that such information may become outdated or inaccurate. The materials contained in this presentation are designed for the sole use by the board of directors or senior management of the Client and solely for the limited purposes described in the presentation. The materials shall not be copied or given to any person or entity other than the Client ("Third Party") without the prior written consent of BCG. These materials serve only as the focus for discussion; they are incomplete without the accompanying oral commentary and may not be relied on as a stand-alone document. Further, Third Parties may not, and it is unreasonable for any Third Party to, rely on these materials for any purpose whatsoever. To the fullest extent permitted by law (and except to the extent otherwise agreed in a signed writing by BCG), BCG shall have no liability whatsoever to any Third Party, and any Third Party hereby waives any rights and claims it may have at any time against BCG with regard to the services, this presentation, or other materials, including the accuracy or completeness thereof. Receipt and review of this document shall be deemed agreement with and consideration for the foregoing. BCG does not provide fairness opinions or valuations of market transactions, and these materials should not be relied on or construed as such. Further, the financial evaluations, projected market and financial information, and conclusions contained in these materials are based upon standard valuation methodologies, are not definitive forecasts, and are not guaranteed by BCG. BCG has used public and/or confidential data and assumptions provided to BCG by the Client. BCG has not independently verified the data and assumptions used in these analyses. Changes in the underlying data or operating assumptions will clearly impact the analyses and conclusions. TMA - Roadmap to Industry presentation - vff.pptx 33

35 Thank you bcg.com bcgperspectives.com

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