Capgemini’s PoV on Industry 4.

0 and its
business implications for Siemens
Siemens Digital Transformation Executive Forum
June 5th 2014, Udo Lange

TRANSFORM TOGETHER
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

Copyright © 2014 Capgemini Consulting. All rights reserved.

2
 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 2012 1 Digital Transformation is a value-

adding challenge that drives future
manufacturing competitiveness

First Second Third Fourth Degree of

Industrial Industrial Industrial Industrial complexity
Revolution Revolution Revolution Revolution
through the intro- through the intro- through the use through the use With the appearance of
duction of mechanical duction of a division of electronic and of cyber-physical
production facilities of labour and mass IT systems that systems Internet-of-Things,
with help of water production with the further automate Industrial
Our study revealed that and steam help of electrical production
power energy
Manufacturing
in 2012 Manufacturing companies are stepping
companies were rather up the maturity ladder.2
laggards in regards of First programmable
logic controller (PLC),
Digital Transformation First mechanical
First assembly line Cincinnati
slaughter houses, 1870
Modicon 084, 1969
loom, 1784

Time
1800 1900 2000
1 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?

Copyright © 2014 Capgemini Consulting. All rights reserved.

3
 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 M2M* Big data/

analytics

 Global markets and global Internet of Things Social

media
manufacturing networks and Services

Virtual and Advanced

 Increasing organization complexity Augmented Reality Analytics

 Increasing product complexity Technology

Innovations
 Expectation for instant (real-time) Machine
Intelligence
Decentralization
response &
and autonomous
control
Robotics
 Need for more customization Additive
Cloud Manufacturing Mobility
 New competitors and cost
pressure
*Machine-to-Machine communication

Copyright © 2014 Capgemini Consulting. All rights reserved.

4
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

Copyright © 2014 Capgemini Consulting. All rights reserved.

5
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 … … THE LINKING ELEMENT OF AN INDUSTRY 4.0 ENVIRONMENT

 Physical object with embedded system possessing  The virtual model of the CPS serves as simulation object,
own machine intelligence (CPU, memory) in order to enable decision making
 Additional sensors and actuators
 Connectivity via standardized interfaces to other
IT or CPS (M2M-communication)
 Connecting all relevant physical objects with
virtual (“cyber”) counterparts  Sensors and actuators provide real-time information and
control options during production and field usage
Physical/ Mechanical Systems
Embedded Systems

Sensors & actuators Virtual

Model
Electronic hardware
Software  Interfaces and communication platforms enable M2M
Interface to Human- communication and human influence across different
other Machine product lifecycle stages
systems interface
M2M
Device
Intranet/ M2M M2M M2M
M2M Area Business
Internet Network
Gateway Communication Server
application
Agent Network platform
M2M
Device
IT Systems Device domain Network domain Application domain

Copyright © 2014 Capgemini Consulting. All rights reserved.

6
The combination of Cyber-Physical Systems in lead to the concept of the Smart Factory
where products and systems are interacting and taking decentralized decisions

Smart Factory

SMART FACTORY

 Central integrated business planning

Cyber-physical for demand management
Transport
System  Order-specific variants (“lot-size 1”) to
C-P Vehicle enable customization
Augmented Embedded Electronics
human operator Sensors & actuators
Electronic hardware
 Machine-to-Machine communication
Software
Machine Human
between Cyber-Physical-Products and
interface interface
Cyper-Physical Production-Systems
Secured Intranet/
data
exchange
Internet  Embedded analytics
IT Systems
 Decentralized decision making for
production control
Cyber-Physical Cyber-physical
Production Product
1010110101
 Real-time decision making
Systems 1100101101

C-P Product
 Multi-agent technology
C-P Machine 1
Embedded Electronics
Sensors & actuators
Electronic hardware
Software  Corrective actions based on quality
Electronic hardware
Software
Machine
interface
Human
interface data analytics
Machine Human
interface interface

Copyright © 2014 Capgemini Consulting. All rights reserved.

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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 Smart Factory to Agile Value Chains

 Service-oriented Business Architecture
 Business functions as self-contained/
Development independent services (internal and
Services Product
external)
(Product/ definition
Production  Cross-company, flexible process flow
System)
Production  Process instances (products/orders) as
Systems self-organized ‘agents’
 Standardized or common interfaces/
Production protocols
Services  A common 'data lake‘ as platform for
analytics functions (Big Data)
Purchasing  Supply-Chain-Control tower providing
Services
extended supply chain transparency
Assembly Delivery
Services Services

Quality
Mgmt. Erection &
Services Installation Maintenance
'Data lake' Services Services

Copyright © 2014 Capgemini Consulting. All rights reserved.

8
 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

 Increased revenues through new services and

 Active/ autonomous cyber-physical objects business models
(products and production systems)
 Better utilization of production capacities
 Decentralized decision making across global manufacturing networks
 Elimination/ reduction of logistic costs
 Process flexibility to enable customer-specific  Improved profitability/ reduced costs for small
solutions (‘lot-size-1’) batch sizes
 Vertical integration from ERP and Planning to  Improved quality / reduced quality costs
individual sensors  Reduced lead-times
 Increased flexibility
 Cross-factory and cross-company process flow
(horizontal integration)  Improved customer value and satisfaction

 Virtual model and integrated/ embedded “Cisco and GE estimate that the size of
analytics capabilities the IoT pie is over $10 trillion.”1

1 Capgemini Consulting: The Internet of Things: Are Organizations Ready For A Multi-Trillion Dollar Prize?

Copyright © 2014 Capgemini Consulting. All rights reserved.

9
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 Vertical integration and
value networks networked manufacturing
systems
Agile Value Chain

Company 1 Company 2 Company 3

Goods flow
End-to-end digital integration Manage the people, culture
of engineering across the Financial flow and leadership transfor-
entire value chain mation (‘People 2.0’)
Service Information flow
Production
Machine
Product

As fundamental challenges, data security and communication standards are to be established.

Copyright © 2014 Capgemini Consulting. All rights reserved.

10
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

Copyright © 2014 Capgemini Consulting. All rights reserved.

11
Industry 4.0 is essentially empowered by digital technologies. Manufacturing companies
can drive growth and efficiency by addressing 8 key value drivers

The Capgemini Consulting Industry 4.0 Framework

Future Manufacturing Business Model

Agile Operation Model

(Decentralized, Modular, Flexible, Boundless)

GROWTH DRIVER EFFICIENCY DRIVER

Smart Customer Smart Supply Smart

People Leadership

Solutions Integration Chain Factory

Governance
& Processes
& Change

Agile Decentralized
Smart Collaborative
Collaboration Production
Products Innovation
Network Control

Data-driven
Smart After Sales Connected
Operational
Services Integration Supply Chain
Excellence

Infrastructure
(connects Cyber-Physical Systems)

Technology Enabler (Selection)

Mobile Cloud Analytics M2M Social Robotics

Copyright © 2014 Capgemini Consulting. All rights reserved.

12
Industry 4.0 is essentially empowered by digital technologies. Manufacturing companies
can drive growth and efficiency by addressing 8 key value drivers

The Capgemini Consulting Industry 4.0 Framework Presented as Case

example in breakout

Future Manufacturing Business Model

Agile Operation Model

(Decentralized, Modular, Flexible, Boundless)

GROWTH DRIVER EFFICIENCY DRIVER

Smart Customer Smart Supply Smart

People Leadership

Solutions Integration Chain Factory

Governance
& Processes
& Change

Agile Decentralized
Smart Collaborative
Collaboration Production
Products Innovation
Network Control

Data-driven
Smart After Sales Connected
Operational
Services Integration Supply Chain
Excellence

Infrastructure
(connects Cyber-Physical Systems)

Technology Enabler (Selection)

Mobile Cloud Analytics M2M Social Robotics

Copyright © 2014 Capgemini Consulting. All rights reserved.

13
 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 Solution Benefits

 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
 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
 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

Copyright © 2014 Capgemini Consulting. All rights reserved.

14
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 Real-time processing and Increased flexibility and

improved remote accessibility improves network monitoring improved decision-making

Digital platform integration backbone

Master Data Tracking & Tracing Supply Chain Event

Management
System

ASN GPS RFID & ASN &

ASN & RFID &
GPS GPS GPS
GPS

RFID
ASN 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.

Copyright © 2014 Capgemini Consulting. All rights reserved.

15
 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 Solution Benefits

 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-in-
class carriers and become less dependent on
their LSP’s
 Activities on the tactical level (e.g. carrier
management, high level planning, contracting)  Carrier (selection, evaluation, invoicing) and inbound Freight
will be executed by a Control Tower
 Integrated management organisation (LSP ‘s and  More efficient, integrated organisation
Samsung) for steering, planning & controlling IT  Increases load efficiency
product flow from Port-to-Customer  Improved tracking and customer services
 Develop and implement logistics buying function for  Improved customer satisfaction
procurement and contract management of  Improved transport efficiency using best-in-
warehousing and transport services class carriers and redesign transport solutions
 Set up new administrative organisation in such a way (e.g. x-border domestic)
that all required cost data is captured automatically  Improved Performance Measurement and
(terminal planning, customs status) integration
Copyright © 2014 Capgemini Consulting. All rights reserved.
16
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
Cross-functional resource allocation
and capacity planning enhances
workforce management
Real-time operational decision-
Cascading strategy across the
organization enhances trust making optimizes performance
and capital costs

Cloud
Strategy insights for
R&D provide orientation
on profitability

Big data/
Improved planning and
analytics Market simulation leads to forecasting due to cross-
improved portfolio decision-making functional 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.

Copyright © 2014 Capgemini Consulting. All rights reserved.

17
 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 Solution Benefits

 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
 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 Demand-
to Production Planning (modules: DP, SNP,
PP/DS, gATP)
 Accelerated order confirmation and
improved on-time-delivery
 Reduced inventory levels and order lead-
times
 Reduction of transport costs due to
improved material availability
Copyright © 2014 Capgemini Consulting. All rights reserved.
18
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

Copyright © 2014 Capgemini Consulting. All rights reserved.

19
 To exploit the opportunities of Industry 4.0, the various Siemens divisions should evaluate
all dimensions of the Industry 4.0 framework

Implications for Siemens Business

 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 stan-
dards for M2M-communi-
cation across the portfolio
 Develop and establish
security standards capable
 New services reaching out to end-
customers (B-2-B-C) e.g.
healthcare or drives
 Evaluate value chain for data
driven business models (e.g.
energy efficiency management)
Products
Services
 Establish stable digital
Integration process management to
& Standards GROWTH DRIVER
Future Manufacturing Business Model

Agile Operation Model

(Decentralized, Modular, Flexible, Boundless)

EFFICIENCY DRIVER
ensure fast response and
for Industry 4.0 scenarios Smart Customer Smart Supply Smart

People Leadership
Solutions Integration Chain Factory

process compliance

Governance
& Processes
& Change
Agile Decentralized
Smart Collaborative
Collaboration Production
Products Innovation
Network Control

 Establish cross-enterprise
Data-driven
Smart After Sales Connected
Operational

Process &
Services Integration Supply Chain
Excellence

Infrastructure
(connects Cyber-Physical Systems)

Technology Enabler (Selection)

Mobile Cloud Analytics M2M Social Robotics

integration platforms (e.g. Organization

3D-printing grid)
IT &
Technology
People &
 Leverage and develop more
cloud-based solutions to
Culture  Establish agile team culture
increase flexibility  Enable agile and decentralized
 Establish Industry 4.0 decision making
processes in own factories  Prevent ‘not-invented-here’
culture

Copyright © 2014 Capgemini Consulting. All rights reserved.

20
 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  Review of the product
maturity and market and service portfolio for
potential adaptation requirements
 Identify and develop  Re-engineering of product
business opportunities portfolio to CPS
 Design the business  Service innovation and
model implementation
 Develop the roadmap  Apply customer value
towards Industry 4.0 analtics to improve
revenue and profit
 Design, implementation  People and culture
and operation of digital transformation
platforms (e.g. the service
 Leadership skills
cloud) and infrastructure
transformation
 Integration platforms  Transform towards end-
(vertical and horizontal to-end engineering
integraztion) integration
 Referenzarchitekturen
 Design and implemen-
tation of digital business
processes

Definition & establishment of security and communications standards (e.g. security solution
on device level and corporate M2M-communication standards)

Copyright © 2014 Capgemini Consulting. All rights reserved.

21
Thank you for our attention!

Copyright © 2014 Capgemini Consulting. All rights reserved.

22