industry 4.0, supply chain 4 - automotive...

Industry 4.0, Supply Chain 4.0

“Evolution of India 4.0 - Make In India, Smart Factory of

the World”

10th December 2015

Rajiv Bajaj

VP & Partner

Nomura Research Institute (NRI) India Pvt Ltd

Nomura Research Institute (NRI) India

Copyright（C） Nomura Research Institute, Ltd. All rights reserved. 1

Introduction

We are living in VUCA times. The fast pace of change and turbulent times are

placing increasing demands on corporates and their management teams

Volatile Global currency flows, Exchange rates

Global commodity & asset prices

Global liquidity, FII flows

Equity, debt markets, interest rates

Global geo political environment, Govt changes

Difficulty in forecasting, different scenarios

New business models, startup disruptions

Industry 4.0, Big data, Smart mfg etc

Customer/ Supplier expectations

External environment, War on terror

Competitor strategies, Disruptions

Political changes, Policy uncertainty

Technological changes, IT, Digitization, IOT

Internal human resources engagement

M&A, JVs, Alliances

Global geo political environment

UncertainAmbiguous

Complex


Introduction

We at Nomura Research Institute (NRI) believe companies and their leaders

can convert the VUCA challenge into a positive opportunity

V Volatility

U Uncertainty

C Complexity

A Ambiguity

Vision

Understanding

Clarity

Action


Next Frontier in Manufacturing Collaboration

Companies in Germany have collaborated and launched Industry 4.0 as next

generation manufacturing system

Four Industry Revolutions

18th Century Early of 20th Cen. 1970~ Presenttime

complexity

Industry 4.0

1969Emergence of PLC

1870First Production Line

1784First Mechanical Loom

Follows introduction of

water- and steam-powered

mechanical manufacturing

facilities

Follows introduction of

electrically-powered mass

production based on the

division of labour

Uses electronics and IT to

achieve further automation

of manufacturing

Based on Cyber-Physical

Systems

Source: NRI analysis based on interviews and various materials.



Next gen smart manufacturing/ industry 4.0 is driven by evolution of internet

of things/ M2M communication, data analytics and smart devices

Transformation of IT-connected

manufacturing to optimized and

sustainable plant and supply networks

an interconnected world … data,

voice, video, etc.

Supply Chain Distribution

Center

Customer

Business Systems, ERP

Smart Grid

Smart Factory

Machine Builders

Supply Chain Distribution

Center

Customer

Business Systems, ERP

Smart Grid

Smart Factory

Machine Builders

Copyright © 2010 Rockwell Automation, Inc. All rights reserved.

Shop Floor to Top Floor

Source: Bosch, Siemens, NRI analysis based on interviews and various materials.



Siemens Industry 4.0 architecture demonstrates collaboration and smart

integration of hardware & software systems

Siemens Industry 4.0 HW, SW Lineups at different levels

Source: Siemens



In order to pursue cyber physical systems (CPS) development, leading

players are changing their closed/ legacy systems to more open

• To cater to 5.0 billion Market

• Business Sustainability

• Resource Capability

Industry 4.0 Concept

Digital Engineering

Platform[Cyber Physical System]

DevelopmentHR

Technologies

Production

Purchasing

LogisticsCustomer

Global engineering Network of

Global factories

Global HR

Education program

“Learn-strument”

Global sourcing of

Parts, materials

Globally integrated

supply logistics

Catering to advanced

customers

Consortium among

German mid / small

firms

Mobilization

Adaptation

Source: NRI analysis based on interviews and various materials.



Leading companies like Bosch are creating new business model through

convergence between product development, manufacturing & logistics

Smart Factory Concept of Industry 4.0 [Bosch]

Source: Bosch Software Innovation

Fine & agile production & logistics

Flexible trading element technologySelf managed factory networking

Flexible & Agile

Customer involved

Customer integrated

engineering

Technology

Marketplace

Predictive

Maintenance

Networked

Production

Resilient Factory

Adaptive

Logistics

Up-cycling

Local Communication

Communication Services

Development Process

Detection & Integration[Physical Environment]

1

2

3 4

5


Introduction

Make in India - Vision

A Major New National Program. Designed To Facilitate Investment. Foster Innovation. Enhance Skill

Development. Protect Intellectual Property. And Build Best-In-Class Manufacturing Infrastructure

• An increase in manufacturing sector growth to 12-14% per annum over the medium term.

• An increase in the share of manufacturing in the country’s Gross Domestic Product from 16% to

25% by 2022.

• To create 100 million additional jobs by 2022 in manufacturing sector.

• Creation of appropriate skill sets among rural migrants and the urban poor for inclusive growth.

• An increase in domestic value addition and technological depth in manufacturing.

• Enhancing the global competitiveness of the Indian manufacturing sector.

• Ensuring sustainability of growth, particularly with regard to environment

Sectors: Auto, Auto Components, Aviation, Bio Technology, Chemicals, Construction, Defence Mfg,

Electrical Mch, Elec Systems, Food Processing, IT & BPM, Leather, Media & Ent, Mining, Oil & Gas,

Pharama, Ports, Railways, Renewable Energy, Roads Highways, Space, Textiles Garments, Thermal

Power, Tourism Hospitality, Wellness


Made in India Vision

India manufacturing companies should create the right mix of cost,

performance & innovation as the “made in India – smart factory of the world”

value proposition

India Value Proposition

High Performance

High Technology

Industry 4.0

High Precision

High Quality

Flexible Smart Mfg

High Innovation

High IT Integration

Scale, Robust

Frugal Engineering/ R&D

Cost Performance Innovation

Local Market + Export Hub

Cost

Scale

Limited Reliability


Manufacturing in India

India “frugal engineering & solution mindset” can help in development of

lower cost models for emerging markets

Local Needs

• “No More, No Less”

product development

“Frugal Engineering Example – Product Development”

High Speed Light Asset

• Digital development

enabling less prototypes

• Using ESOs to reduce

capital investments


Implications for MNCs in India

Leveraging India not just as market but as R&D hub/ Export hub, MNCs can

stabilize the Indian business even in volatile FX and market conditions

Make in India Value Proposition for MNCs New three challenges towards the 3rd biz model

“Utilizing Frugal Engineering”- Towards the global R&D hub for emerging markets

(design, development)

- Proactive utilization of ESO (Engineering Services

Outsourcers)

“Exporting from India to ROW”- Market needs are similar to that of India

- Possibility to leverage Indian human network

- Government support for exports to Africa

“Capturing New Indian Middle Class”- The middle class is expanding from Tier1 to Tier 2

- Mid priced products matching local needs

- Acquiring low cost production and sales channels through

M&A

1

2

3

Service Export

Product Export

Domestic Sales

Growing

domestic market

with 1.2 B people

Global

R&D base

Export base for

Other Emerging

Countries


Made in India Value Proposition - Example

Indian machine tool players – can leverage their understanding of Indian

customer requirements an lead via “Smart Frugal Indian Machines”

India Value Proposition

Smart Frugal Indian Machine

Pricing

Economies of scale

Performance

Simplicity

Robustness

Automation

Design & Footprint

Low price Medium price High price/premium

High volume Medium volume Low volume

Simple Complex

Robust/maintenance-friendly Fragile/laborious to maintain

Low-Mid Mid HighVery low

Low Cost Automation AutomationFull Integrated

Automation

Lean TPM Friendly MediumLarge Size, Loaded

with Features

Source RBSC ACMA IMTMA Study

Machine Attributes and Indian Companies Value Proposition


Platform

Upper

Body

Diesel

Engine

System

Manufacturing MNCs in India – Success Examples

Taking BRIO and diesel engine platform developed in EU as basis,

AMAZE was developed with limited efforts, reducing its cost for development

Maximizing the utilization of existing platforms

‒ Downgrade the emission

performance

‒ Increase displacement to match

with tax exemption program

‒ Existing platform used as it is

‒ Upper-body development based

on Indian consumers’ needs

Engine Developed

in European Market

Engine Developed

for Indian Market

BRIO AMAZEBRIO

Source: Honda


Indian automotive industry vision 2026 – 5X growth – Collaboration is key to

success

19

8318

71

10

40

8

74

6

32

FY14 FY26

• Government (Central, State, City)

• Institutions, Trade Agencies,

Financial Institutions

• Roads

• Railways

• Ports

• Aviation

• OEMs

• Suppliers

• Logistics Service Providers

• Consultants, Advisors, Project

Managers

Units: USD Billion 300

61

Component -

Aftermarket

Component -

Export

OE - Exports

Component -

Domestic

OE - Domestic

Automotive Industry Vision 2026 [Revenue Size]

Made in India Vision


Make in India Vision

Clearly we will see OEMs, Suppliers, LSPs upgrade their activities &/or pursue

new activities

Industry 4.0 Supply Chain 4.0

Automotive

Industry

Return

Time

Upgraded activity

Current activity

Return

Time

New activity

Current activity

Doing same things better

Doing newer things

1

2


We look forward to working closely with our clients to move from–ive VUCA to

+ive VUCA

V Volatility

U Uncertainty

C Complexity

A Ambiguity

Vision

Understanding

Clarity

Action

NRI India Vision & Promise

Rajiv [email protected]

VP & PartnerNomura Research Institute, IndiaMobile +91 99100 34445

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