Industry 2.0 June 2012 by bhupinder sharma

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A 99 MEDIA PUBLICATION

VOLUME 11

Squeezing out value How manufacturers are transforming their value chains to optimise resource productivity

ISSUE 10

JUNE 2012

PRICE 100

Supply Chain

Demand-driven supply chains require good collaboration

Strategy

VA Tech Wabag is making big moves in the water treatment industry

Technology Sound tactics are essential for winning the war for talented staff

editorial Vol. 11 | Issue 10 | June 2012

Managing Director: Dr Pramath Raj Sinha Printer & Publisher: Kanak Ghosh Editorial Group Editor: R Giridhar Copy Desk Managing Editor: Sangita Thakur Varma Sub Editor: Radhika Haswani Design Sr. Creative Director: Jayan K Narayanan Art Director: Anil VK Associate Art Director: Atul Deshmukh Sr. Visualiser: Manav Sachdev Visualisers: Prasanth TR, Anil T & Shokeen Saifi Sr. Designers: Sristi Maurya & N V Baiju Designers: Suneesh K, Shigil N, Charu Dwivedi Raj Verma, Prince Antony, Peterson Prameesh Purushothaman C & Midhun Mohan Chief Photographer: Subhojit Paul Sr. Photographer: Jiten Gandhi Sales & Marketing VP - Sales & Marketing: Krishna Kumar KG (09810206034) National Manager - Events & Special Projects: Mahantesh Godi (09880436623) Assistant Brand Manager: Maulshree Tewari GM (South & West): Vinodh Kaliappan (09740714817) South: Farooq Faniband (09886600175) North: Madhusudan Sinha (09310582516) East: Jayanta Bhattacharya (09331829284) Production & Logistics Sr. GM - Operations: Shivshankar M Hiremath Manager - Operations: Rakesh Upadhyay Assistant Production Manager: Vilas Mhatre Ad Coordination: Kishan Singh Assistant Manager - Logistics: Vijay Menon Executive - Logistics: MP Singh, Mohamed Ansari & Nilesh Shiravadekar

office address Nine Dot Nine Interactive Pvt Ltd Kakson House, A & B Wing, 2nd Floor 80 Sion Trombay Road, Opposite R K Studio Chembur, Mumbai 400071. Board line: 91 22 67899666 Fax: 91 22 67899667 For any information, write to info@industry20.com For subscription details, write to subscribe@industry20.com For sales and advertising enquiries, write to advertise@industry20.com For any customer queries and assistance, contact help@9dot9.in Printed and published by Kanak Ghosh for Nine Dot Nine Interactive Pvt Ltd Plot No. 725 GES, Shirvane, Nerul, Navi Mumbai 400706. Board line: 91 22 67899666 Fax: 91 22 67899667 Editor: Anuradha Das Mathur Plot No. 725 GES, Shirvane, Nerul, Navi Mumbai 400706. Printed at Tara Art Printers Pvt ltd. A-46-47, Sector-5, NOIDA (U.P.) 201301

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Looking at Procurement Strategically

or many manufacturing companies, materials account for 25 to 60 per cent of the total costs. However, rising commodity prices, greater volatility in availability, constraint on sources, currency fluctuations and complex geopolitical factors have all combined to make the task of sourcing increasingly difficult. Are there better ways to negotiate prices, or become more efficient at using material? How do you get organisational alignment towards lowering procurement costs? While techniques like lean and value engineering can help optimise the quantity and quality of material that is being used in the manufacture of a product, there are other ways to save money in procurement by systematically tackling the problems. For instance, in many organisations the procurement teams are able to negotiate prices with vendors—but have little control over the mix or use. This means that teams are dealing with a plethora of suppliers, or are unable to negotiate better deals because they cannot consolidate orders. Better coordination between engineering, manufacturing and marketing can help capture additional savings through procurement rationalisation—without increasing the risk. How often does a supplier come to you for a price increase when commodity prices go up? These days, it could

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R Giridhar editor@industry20.com

be quite often—and you probably agree to the increase (after negotiation, of course). However, if commodity prices drop, do you get a lower price? Studies show that few companies actively track input prices and renegotiate supplier rates. So, it may be worthwhile to regularly monitor the cost structures and input prices for your suppliers and look for savings when opportunities arise. Another important factor in strategic procurement is having the right people involved in the process. Any effort dominated solely by procurement staff will fail to sustain savings. A better idea is to set organisation-wide goals, and coordinate a team of leaders across procurement, finance and the business to drive them. Have experts from business units actively partner with procurement to correctly identify savings opportunities. You will also need to build organisational capabilities for continuous procurement improvement. Make sure that you communicate procurement policy changes across the organisation—and be ready to modify the policies if they are not working well. Ensure that all stakeholders have visibility into the procurement metrics, and focus on exception reports so that you can take quick action. Solving the procurement problem is not easy, but a good strategy can mean the difference between a struggling and a successful organisation. Write in and let us know if you are winning the procurement game.

- technology management for decision-makers | june 2012

contents advertiser index HP â&#x20AC;&#x201C; PSG .......................... IFC Mitsubishi.......................... 03 Hitachi .............................. 06, 07 Schneider.......................... 09,IBC Reillo PCI India ............... 11 Ace Micromataic............. 13 GW Precision................... BC

cover story 22 Making Manufacturing More Productive By focussing on production, product design, value recovery, and supplycircle management, manufacturers can generate new value, minimise costs and improve operational efficiency. A comprehensive approach to resource productivity helps strengthen value propositions to customers, and benefits the entire society

departments Editorial................................ 01 Advertiser Index.................. 02

29 Agile Operations for Volatile Times

Industry Update................... 04

By improving how risk is measuredâ&#x20AC;&#x201D;and managedâ&#x20AC;&#x201D;in global operations, companies can adapt to changing conditions faster than competitors. A look at how companies around the world are using volatility to gain advantage over rivals

Techwatch............................ 16 Bookshelf............................. 60 Product Update................... 62

Cover design: Peterson

opinion 33 A View to Die for

Cognitive biases can often lead to costly errors. Managers would do well to learn from such experiences, and avoid making adverse decisions

information technology 34 Winning the Battle for Talent

The right technology talent can be hard to find. But managers can learn how leading IT organisations develop, retain and recruit good people

and coordination between supply chain partners. But, to reap the full benefits of a supply chain that is truly driven by demand, organisations will need to make profound operational and structural changes

International pump and systems manufacturer, Grundfos, has put a lot of thought into ensuring that its new factory has a low impact on the environment.

New techniques and technologies are enabling better collaboration

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facilities & operations 48 Grundfoss Goes Green

supply chain 40 A Demand-driven Supply Chains

management & strategy 50 Retaining Key Employees

- technology management for decision-makers

During times of change and reorganisation, many companies shower financial incentives on senior executives and star performers in bid to ensure continuity and enhanced loyalty. Are there better ways to keep the key people you need?

56 The Water Masters

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The IQ platform is the first to combine all key types of automation in one controller for optimal multi-discipline data control. Mitsubishi Electric’s iQ Platform's centralized control improves both efficiency and quality on automobile assembly lines. Through unified control of PLCs, HMIs, inverters, servos, numerically controllers, robots and other systems, the iQ Platform fully integrates data sharing for a completely seamless production line.

Mitsubishi Electric – Optimizing production flow in the global auto industry.

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www.MitsubishiElectric.in MITSUBISHI ELECTRIC INDIA PVT. LTD. Emerald House, EL-3, J Block, M.I.D.C., Bhosari, Pune, 411-026, Maharastra State, India Tel: 91-20-2710-2000 Fax: 91-20-2710-2100

industry update Henkel Adhesives Gets New Chief

eremy Hunter has taken over the reins as President at Henkel Adhesive Technologies India. Hunter joined Henkel in 2002, when it acquired Sellotape, New Zealand where he was the General Manager. He has experience working across regions including United Kingdom, Portugal and Turkey. Prior to his current position in India, Hunter was the Country Manager of Australia and New Zealand for Henkel Adhesives business. Commenting on his new role Hunter says, “Within India, we are in the midst of consolidating our core efficiencies and businesses to make a constructive difference to the market. With our fresh insights and contributions we look forward to growing rapidly and creating a value-based relationship with our Indian customers.”

ACMA, Messe Frankfurt Collaborate for Expo

utomotive Component Manufacturers Association of India, (ACMA) is partnering with trade show organiser Messe Frankfurt to organise the ACMA Automechanika New Delhi expo. The automotive aftermarket products trade fair will be held in Delhi from February 7 to 10, 2013. Raj Manek, MD of Messe Frankfurt India (MFI) says, “ACMA and Automechanika will leverage each other to evolve ACMA Automechanika New Delhi into a leading international show. Both parties will be responsible for promotion, organisation and management of the fair. ACMA will recruit its members, as well as canvass for trade visitors in India, while MFI will be re-

sponsible for international exhibitor and visitor recruitment.” The two bodies will be promoting the participation of the Indian automotive component producers at other Automechanika fairs, including the Frankfurt fair. Arvind Kapur, President of ACMA, said, “We will work closely with Messe Frankfurt to ensure significant presence of ACMA members at our pavilion at the various Automechanika shows. To begin with, this year the ACMA pavilion at the Automechanika Frankfurt will have a 650 sq m prime location to showcase 30 leading Indian auto component manufacturers. ACMA will also mobilise business delegations to Automechanika’s 12 worldwide fairs.”

SAIL, BSCL to Make Railway Components

AIL is collaborating with Burn Standard (BSCL), a subsidiary of Indian Railways, to set up 50:50 joint venture for making wagon components in West Bengal. The estimated investment in the project is about Rs 200 crore. The project will come up on 50 acre site within the existing 128 acre campus of Burn Standard at Jellingham. Commercial production at the new facility, which will have the capacity to produce 10,000 bogies and 10,000 couplers per annum, is expected to commence in 2014.

june 2012 | industry 2.0

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Jakson Opens New Plants

akson, a power solutions provider, has recently started production at two manufacturing facilities in Kathua, Jammu. The first is facility is for meeting the needs of domestic customers, while the other plant is a 100 per cent export-oriented unit to serve specific customers. Both plants will manufacture diesel and gas generating sets, and special application generating sets. When fully operational, the plants will employ around 60 persons. Sameer Gupta, Managing Director, Jakson Group, comments, “With these two new plants commissioned, we now have enough capacity in place to keep pace with our aspirational growth rate of 20 per cent for next five years. The plants are modern and have world-class facilities.”

Dow Formulates Water Resistant Lubricant

ow Corning, a provider of silicone and silicon-based technology, has developed Molykote G-1502FM Synthetic Bearing and Gear Grease, for lubricating equipment operating in waterrich environments. The grease is formulated to resist spray-off, reduce wear and corrosion, and help users lower equipment maintenance costs. The product is also able to reduce rust by as much as 95 per cent. Phil Grellier, Global Market Manager for Dow Corning Industrial Assembly and Maintenance Solutions, says, “Our customers drove the development of this product. They identified the performance shortcomings of traditional greases offered for waterrich environments in applications like food and beverage machinery, pulp and paper processing equipment, water management, and others. Molykote lubrication experts developed an exact solution to address these issues.”

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GE Commences Plant Construction Triumph Plans

E India is building a new plant, the first for the company, at the MIDC Industrial Park in Chakan, Pune. Spread over a total area of 68 acres, this multimodal, large scale facility will involve a cumulative investment of $200 million. The plant will develop localised products and solutions for the energy sector in its first phase of operation commencing in 2013. GE’s focus on manufacturing is in line with the need for localised products and solutions suited to Indian customers across GE’s various businesses present in the country. The Pune plant, to begin with, will focus on power generation, transmission and distribution, as well as measurement and control. In addition, GE also plans to package its environment friendly technologies like hybrid batteries for energy storage and biogas power generation technologies at the facility. According to a company spokesperson, the site will enable assembly and production support for any GE business that needs local manufacturing capability in India. GE already has a wind turbine assembly unit in Pune, operating out of a leased facility. The recently acquired Dresser business by GE builds and tests industrial process valves for both the Indian market and exports. The industrial solutions plant at Bangalore manufactures switchgear, control and relay panels. GE’s Intelligent Platforms manufacturing and design centre provides integration solutions like panel engineering, designing, testing of automation controllers and optimisation software. Also, GE Healthcare has three manufacturing facilities in Bangalore for production of ultrasound and patient monitoring systems; CT and X-ray tubes, and components. GE also runs the India Technology Centre in Bangalore to support its worldwide research and development activities.

Assembly Unit

ritish motorcycle manufacturer Triumph has decided to set up a Rs 215-crore manufacturing and assembly unit near Bangalore. This will be the company’s third manufacturing location, after UK and Thailand. The company has reportedly identified about 40 acres of land on the Bangalore-Chennai highway for the plant. At the 11th Auto Expo in Delhi, Triumph showcased its range of motorcycles for the Indian market which included the parallel-twin, Bonneville; the naked roadsters Speed Triple and Street Triple; the off-roader Tiger 800XC, super sport bike Daytona 675; and cruisers Storm and Rocket III. The company has plans to build affordable premium sports motorcycles with displacements of about 350 cc for the India market, and for exports.

Honeywell Revamps Software Portfolio, Services

oneywell Process Solutions (HPS) has recently has refreshed its Asset Manager and Field Advisor technologies, and has announced a collaboration with consulting firm GPAllied to help plants more effectively implement reliability-centered and predictive maintenance programmes. Ron Stallworth, Asset Management Business Leader at HPS explains,“These newest software releases allow Honeywell to offer wall-to-wall consulting and technology for a wholly-integrated solution that makes asset management part of our customers’ organisational cultures for sustainable results.” Asset Manager is a real-time condition-based monitoring (CBM) technology that integrates with IBM’s Maximo and SAP enterprise asset management and computerised maintenance management (CMM) systems. This integration allows maintenance and reliability planners to review the status and priority of equipment health and the

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severity of any failures, assign resources as well as raise and track work orders directly from Asset Manager. Additionally, Honeywell’s newest version of its Field Advisor tool has been refreshed to provide efficient automation for inspections. HPS has also launched its next-generation Experion Process Knowledge System (PKS). Experion PKS Orion introduces two major innovations: it is the first industrial process system to use Universal Channel Technology to remotely configure process and safety systems without the need for additional hardware; and it comes equipped with a complete virtualisation solution that includes the most advanced and complete package of hardware, software, training and support from Honeywell. According to HPS, Universal Channel Technology completely liberates safety and process I/O, from channel type dependency. This obviates the need for custom hardware alignment with different I/O configurations. Jason Urso, VP of Technology at HPS says, “Universal Channel

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Technology simplifies engineering and configuration during the design stage of a project, which can save up to 33 per cent of the installation costs.” Honeywell announced that the Experion platform is the first distributed control system (DCS) to achieve ISA99 certification. Honeywell has also formed an industrial IT Solutions group to help manufacturers and process industry facilities protect against cyber threats. The group specialises in the design and protection of networks used in the process industry, including wireless instrument and SCADA platforms. “Automation network security and performance has become a critical component of plant safety in the process industries,” says Jon Lippin, VP and GM, Honeywell Lifecycle Solutions and Services. “As control networks continue to expand and integrate to business systems, the risks and complexity of cyber vulnerabilities must be addressed with the same vigilance as process safety risks assessments.”

- technology management for decision-makers | june 2012

PowerWatch

industry update

CAMWorks Improves Part Nesting

eometric Software has introduced CAMWorks Nesting, a solution that can nest layouts of SolidWorks parts or assemblies to optimise material utilisation. The software which is integrated with SolidWorks, allows users to seamlessly transition 3D SolidWorks models as well as sheet metal parts or assemblies to CAM nested SolidWorks 3D assembly files, from within the SolidWorks interface. CAMWorks Nesting automatically nests parts based on the thickness and the material within an assembly. This eliminates the manual effort needed to segregate individual parts with the same thickness and material during a nesting operation. The nested results can be further utilised for tool path and NC code generation. The software supports nesting of wood for the wood-working industry, as well as composites nesting for industries like aerospace manufacturing.

Gartner Forecasts Changes in Logistics Operations

esearch firm Gartner has published four predictions that are expected to affect global logistics organisations by 2016. While these forecasts will affect most logistics organisations, the impact will depend on how prepared they are to adapt to these events, Gartner analysts said. “While logistics operations might be out of sight, out of mind, logistics is under significant pressure to deliver near-perfect performance, while business conditions continue to become more complex, risky and difficult,” said C Dwight Klappich, Research VP at Gartner. The top predictions include: 1. By 2016, more than 50 per cent of Global 1000 logistics organisations will be required to systematically report verified emissions and environmental data. The shift from aspirations and feel-good platitudes about sustainable logistics to verified requests for accurate environmental and greenhouse gas (GHG) emissions information and actual performance is being catalysed by industry groups, market expectations and regulations. “Governments are set to continue to enact environmental legislation that

june 2012 | industry 2.0

has a profound impact on logistics operations,” says Klappich. “In AsiaPacific, Australia will soon introduce a carbon tax; China is moving to pilot an emissions trading scheme; and New Zealand and India have schemes in place. Over time, regulations will become increasingly tighter.” 2. By 2016, less than 10 per cent of logistics organisations will have a chief compliance and risk management officer. As supply chain complexity and risk grow, only 14 per cent of companies are positioned to effectively manage risk, and few, if any, have yet seen fit to elevate compliance and risk management to an executive-level position in the supply chain management (SCM) organisation. While compliance, risk management and security are all issues SCM organisations deal with today, few have formalised even one of these. While government mandates have an increasing impact on SCM organisations, responsibility for understanding and managing these is scattered across their business. 3. By 2016, 20 per cent of SCM organisations will adopt a supply chain execution convergence application

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strategy. Thirty-five per cent of businesses recently surveyed by Gartner identified the inability to synchronise end-to-end business processes as an issue, which will increase demand for SCM application convergence. Most SCM organisations struggle with functional and application silos that make orchestrating and synchronising business processes across their organisations nearly impossible. Application portfolio fragmentation is caused by many factors, such as buying standalone applications over time, as well as how companies have been structured, mergers and acquisitions, and outsourcing. This is where supply chain execution convergence will help SCM organisations adopt a platform that allows them to model and synchronise end-to-end logistics processes. 4. By 2016, slower global trade growth will force shippers to adjust from proliferation to optimisation of international flows. Global trade as a percentage of global GDP will continue trending downward. As cross-border trade growth slows, supply chain organisations will be forced to adjust from proliferation to optimisation of international flows. Shippers will evaluate global sourcing options more carefully and more comprehensively manage the risks involved. Gartner estimates that 60 per cent of current multinational manufacturers will organise to manage logistics globally in order to gain economies of scale, manage risks associated with volatility in currency exchange rates, taxes and margins. By managing logistics globally, companies can gain economies of scale through centrally negotiated and managed contracts for sea and airfreight, switching transport mode and using postponement strategies and near-shoring. To improve efficiency and lower costs, companies will focus attention on the execution elements of the supply chain, including network and inventory optimisation, warehouse and inventory management systems, and transport management systems (TMSs).

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industry update

New Gas Membrane Manufacturing Centre U OP, a Honeywell company, has started a manufacturing and operations centre in Penang, Malaysia, to produce natural gas membrane elements. The company’s Separex membrane systems are employed for removing impurities from natural gas streams. The Separex membrane systems are delivered as modular, skidmounted units, and can be deployed in off-shore applications such as Floating, Processing, Storage and Offloading

(FPSO) vessels, and remote locations. “The new manufacturing and operations centre in Malaysia will strengthen UOP’s position to meet demand as natural gas becomes a larger part of the world’s energy equation,” says Rajeev Gautam, President and Chief Executive Officer of Honeywell’s UOP. “This facility will expand our membrane manufacturing capabilities and increase our presence in the region.”

Solidace Upgrades BuiltWorks

AD tool company Solidace has released a new version of BuiltWorks, a structural steel design and engineering add-in application for the SolidWorks CAD environment. The solution enables real-time steel design by providing tools for 3D solid parametric modelling, analysis and design, connection detailing and automatic generation of both drawings and reports. Dr Vladimir Popov, CEO of Solidace says, “BuiltWorks is flexible to enable external best-of-breed vertical market products from AEC and plant industries to be linked to SolidWorks. It establishes a communication chain within and between companies involved in the design, analysis, fabrication and construction of industrial facilities, buildings and structures. The solution can read and save data in popular industrial formats–SDNF, and CIS/2 (CIM steel Integration Standards). This ensures seamless and integrated round-trip data exchange and information flow between SolidWorks and industrial design systems including those for structural steel detailing and fabrication”. BuiltWorks 2012 version 3.1 can interoperate with AVEVA PDMS, Intergraph PDS and SmartPlant 3D, Bentley AutoPlant, and other plant design systems.

Ashok Leyland Coordinates, Automates Supply Chain

shok Leyland (ALL) has deployed an integrated SAPbased solution to manage planning and supply chain processes across core functions covering all seven manufacturing plants and its dealership locations in India. The company expects that the rollout of this solution will enable an improvement in forecasting capabilities, and create a transformational foundation for analytics. Speaking about the development,

june 2012 | industry 2.0

Vinod K Dasari, MD, Ashok Leyland said, “While our earlier homegrown IT platform was sophisticated and robust, our decision to migrate to the state-ofthe-art SAP applications was dictated by the need to accommodate our global complexity. This marks a significant move up to improve operational efficiency and enhance customer experience. This is an important step towards achieving our vision of being among the top 10 truck and top five bus manufacturers.”

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Tata Motors Opens Dharwad Plant

ata Motors has commenced operations at its Dharwad, Karnataka plant for small commercial vehicles, and has begun to manufacture the Tata Ace Zip and the Tata Magic IRIS vehicles. The plant, which was established with an investment exceeding Rs 900 crore, is spread across 405 acres. The total planned capacity of the plant is 90,000 units per year. The plant has been equipped with state-of-the-art equipment, and will implement lean manufacturing principles. It has built-in flexibility to assemble large numbers of vehicles, and different variants in mixed mode production. The major capital outlay has been sourced from Europe, the US, South Korea, Japan and best-inclass suppliers from India. The plant has been constructed in line with the norms specified by Indian Green Building Council, and has applied for the ISO 14001 Environment Management System Standard compliance certification.

Carborundum Adds New Collaborators

urugappa group company Carborundum Universal has signed techno-commercial agreements with Sheffield Refractories and Anderman Ceramics of UK. Sheffield Refractories is a producer of specialised refractories for integrated steel plants, boilers used in power projects and cement plants. Anderman Ceramics is a distributor of technical ceramic parts and components with operations in the UK, the US, and France. The agreement is for manufacture, supply and installation of a range of high-end refractory solutions for the steel and glass industries and aerospace component manufacturing. These products will be manufactured at Carborundum’s plant in Ranipet, near Chennai, and also at a new location.

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industry update Havells Mulls More Acquisitions

lectrical equipment and goods manufacturer, Havells India, is scouting for mid-size acquisitions in China and Africa that may entail an investment of up to $200 million (about Rs 1,100 crore). “We are open for any strategic acquisition in locations such as China and Africa, where we are not present now,” Havells India Joint Managing Director Anil Gupta says. The

company has also planned to expand its presence in Turkey, Russia, Indonesia and Malaysia. In 2011-12, Havells posted a total turnover of Rs 6,500 crore, with exports accounting for Rs 3,000 crore. The company has 10 manufacturing facilities in India, and seven overseas manufacturing plants. It owns brands like Crabtree, Sylvania, Concord, Luminance, Linolite and SLI Lighting.

Last year, the company formed a manufacturing joint venture (JV) with a Chinese firm, Shanghai Yaming Lighting Co, to produce various lighting products for overseas markets. The JV, Jiangsu Havells Sylvania Lighting Co Ltd, plans to invest up to $100 million (more than Rs 500 crore) over the next three years. Havells’ business is divided into four verticals—cables and wires, lighting and fixtures, electrical consumer durables (fans) and switchgears.

Grunfos Mobile App for Pump Selection

Badve to Supply Honda, Tata Motors

rundfos Pumps India has announced the availability of GO CAPS, the mobile version of its well-known CAPS (Computer Aided Product Selection). Available in 11 languages, GO CAPS can run on Apple mobile platforms like the iPhone, iPod touch and iPad, both by customers and Grundfos staff. The mobile app enables users to search for products and replacements, compare pumps, perform pump sizing, view pump specifications and rating curves, review documentation and the complete catalogue. Commenting on the solution, NK Ranganathan, Managing Director of Grundfos Pumps India says, “We are always trying to simplify the way we communicate with our stakeholders. The objective has been to put the power of choice and selection in the hands of customers and enable them to take informed decisions with all the required data. We feel confident that GO CAPS will go down well with customers— existing and future.”

uto parts maker Badve Engineering will be setting up two plants in Karnataka to supply components to Honda and Tata Motors. In Kolar, the company is close to completing a plant that will manufacture parts like mufflers for Honda Motors. In Dharwad, the company will set up a plant to manufacture chassis for Tata Motors’ four wheelers. The plant in Kolar has the capacity to manufacture parts for 300,000 to 500,000 vehicles every month. Badve also will manufacture exhaust systems for motorcycle and four wheeler goods carriers, chassis and frame assembly for auto rickshaws, four wheeler goods carrier and motorcycles. RP Bhalerao, General Manager for Materials at Badve Engineering explains that the company will leverage its expertise from its existing plants in Pantnagar and Chakan to get the two new facilities quickly functional.

Maruti to Merge with Suzuki Powertrain

he board of Maruti Suzuki is proposing to merge Suzuki Powertrain India (SPIL), the diesel engine and transmission firm with itself, by entering into a stock swap transaction with its Japanese parent Suzuki Motor. The merger will not result in any cash outflow. The merger will enable Maruti Suzuki to align the expansion of the diesel engine-maker with its own expansion plans, as demand for diesel engine cars outpace petrol fuelled cars in India.

june 2012 | industry 2.0

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Invensys Appoints Chan as Asia-Pacific Head

nvensys Operations Management, a provider of technology systems, software solutions and consulting services to the process and manufacturing industries, has appointed Terence Chan as General Manager for Asia-Pacific business operations. Chan joined Invensys in 2009 as Vice President and Managing Director of the company’s ASEAN, Japan and Taiwan operations. Prior to Invensys, Terence was the President of the Asia-Pacific region for Mircrostrategy, a provider of business intelligence technology. Earlier, he has held key leadership positions in SAP and Siebel Systems.

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industry update

New Materials Make 3D Printed Models Realistic

This model shows how 3D printers can output parts and assemblies made of several materials with different properties

srael-based 3D printer manufacturer, Objet, has announced the availability of 39 new ‘digital materials’ for rapid prototyping and additive manufacturing. According to the company, this development enables users to select from a range of 107 materials

for their projects—ranging in texture from rigid to rubber-like substances, standard to ABS-grade engineering plastic in terms of toughness, and from transparent to opaque, in terms of clarity and shades. Object clarifies that 90 of the 107 materials are derived though composite mixing of primary Objet materials. Using an Objet Connex multi-material 3D printer, users can combine up to 14 materials, at the same time in a single model. According to CEO David Reis, “Objet has become the first 3D printing company to break the 100 materials barrier. These new materials can be used by design and manufacturing companies

Geometric to Service in Japan

eometric Software has tied-up with Japan-based Dipro (Digital Process), a supplier of engineering solution services to set up a Centre of Excellence (CoE), and support Dipro’s Japanese automotive customers. Under the terms of the agreement, the two companies will jointly offer engineering services. Manu Parpia, MD and CEO of Geometric explains, “We have been working with Dipro for over a decade, and the establishment of this CoE is the culmination of years of partnership.” Announcing the CoE, Hideki Yuasa, MD and GM of Dipro says, “Japanese manufacturers need a PLM backbone that can support the rapid availability of accurate product data across locations; they are increasingly looking at alternate countries like India for know-how and reducing cost of operations. Geometric’s deep engineering expertise and delivery footprint in India and China makes it an ideal partner to help us increase the gamut of solutions we currently offer our customers, while giving our customers the offshore advantage that they seek.”

Siemen’s Solid Edge Advances Design Capabilities

iemens PLM Software has unfurled the Solid Edge ST5 with advanced design capabilities to help users develop better products faster. According to

june 2012 | industry 2.0

the company, the latest release of the software contains more than 1,300 new customer-driven productivity enhancements. Siemens PLM has also announced Solid Edge Mobile

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in every stage of their product prototyping process—from form modelling to fit testing and functional verification. Objet’s 3D printers create models by jetting materials in ultra-thin layers onto a build tray, layer by layer, in preset combinations. Each material is funneled through a dedicated liquid system connected to a set of printing heads. The printer manages dispersal of the jetted material, thereby enabling control of the structure and mechanical properties of the resulting output. This enables each composite material to provide specific values for tensile strength, elongation to break, HDT and even Shore A values. Each layer is cured by UV light after it is jetted. The gel-like support material designed to support complicated geometries, is easily removed by hand and water jetting.

Viewer, a new free 3D viewer mobile device application (app) for the iPad to broaden access to design data, and help companies enhance collaboration. “The new features in Solid Edge ST5 are driven by our strong focus on our customers’ requirements. By responding directly to their needs, we ensure each functional enhancement delivers real business value,” says Dan Staples, Director of Solid Edge product development at Siemens PLM Software. “Customers are seeing real benefits from our industry-leading synchronous technology and we’ve strongly extended our lead in this area.” Solid Edge continues to leverage synchronous technology—a historyfree, feature-based design technology for product development—to provide enhanced support for multibody modelling, and let users import parts and assemblies from virtually any CAD system. The resulting imported geometry can be combined into a single part or multiple parts depending on manufacturing requirements.

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2012 If you think you are ready to play the role of a Chief Information Officer, prove it to your peers and superiors. ITNEXT will help you echo your aspiration. NEXT100 is an awards program from IT NEXT magazine that identifies senior IT Managers who have the skills, talent and spirit to make to the top slot - the CIO. The process starts with a call for self nomination. The nominees then participate in a series of exercises that test their techno-commercial and management skills. The evaluation and selection of award recipients is made by a prestigious committee of technology and business leaders who judge nominees on career accomplishments, professional expertise, skills and potential to be a CIO. The culmination of NEXT100 is in an awards night that celebrates the NEXT100 CIOs. The ceremony will be held in December 2012

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techwatch

Credit: Image courtesy of Fraunhofer-Gesellschaft

Functional Coatings from a Plasma Nozzle Dr Jörg Ihde and Dr Uwe Lommatzsch (from left to right) have developed a new coating process using a plasma nozzle that works at atmospheric pressure

oatings offer protection against rust, scratches and moisture and improve adhesion. They are now available through a new plasma process which enables them to be applied more easily and cost-efficiently on an industrial scale. In industry today, wet chemical processes or vacuum plasma processes are primarily used for coating applications. Both have drawbacks. Vacuum units are expensive, limited to smaller components and applying a coating takes a relatively long time. Wet chemical processes often involve high resource and energy consumption with the corresponding environmental damage and can also cause difficulties in the handling of material combinations for lightweight construction such as plastics/metals or aluminum/steel. Dr Jörg Ihde and Dr Uwe Lommatzsch from the Fraunhofer Institute for Manufacturing Technology and Advanced Materials IFAM in Bremen have developed a new kind of plasma coating process that works at ambient pressure. “And that poses a major challenge,” explains Jörg Ihde. “Because the pressure is 10,000 times higher, we had to stop unwanted particles from forming and embedding in the coating. That was the key to developing robust and efficient industrial processes using the new plasma system.”

june 2012 | industry 2.0

The central element is a plasma nozzle. The nozzle is no bigger than a typical spray can. Yet it contains a highly complex coating system. “In the nozzle, an electrical discharge generates small flashes and a plasma is expelled in the form of a jet. We systematically feed into the nozzle outlet those materials that are excited and fragmented in the plasma, and then deposited out of the plasma jet as a functional nano-layer onto the surface,” explains Uwe Lommatzsch. “We achieve extremely high deposition rates, enabling fast and cost-effective production processes to be realised.” The use of a nozzle allows the coating to be applied very precisely and only where it is needed, thus conserving resources. “We can control the processes so that the same nozzle can be used to apply coatings with various functionalities, for corrosion protection or for increasing or reducing adhesion, for instance,” adds Jörg Ihde. Only very small amounts of coating material are required and practically all materials and material combinations can be coated. The process offers, in addition to the coating qualities and functionalities, even more benefits: it can be easily integrated into an inline production process, requires little space and is easy to automate. The positive characteristics benefit industrial production: depositing an adhesionpromoting coating on a car window edge before gluing it in, to replace environmentally damaging chemicals or as a substitute for thick protective paint on printed circuit boards, which improves heat dissipation and hence prolongs service life.

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Durable Plastic May Replace Metals

Tel Aviv University researcher is giving the quest for environment friendly plastics an entirely new dimension. Prof Moshe Kol of TAU’s School of Chemistry is developing a super-strength polypropylene, one of the world’s most commonly used plastics, that has the potential to replace steel and other materials used in everyday products. Durable plastics consume less energy during production, explains Prof Kol. If polypropylene car parts replaced traditional steel, cars would be lighter overall and consume less fuel. And because the material is cheap, plastic could provide a much more affordable manufacturing alternative. However, biodegradable plastics have not yet been able to mimic the durability and resilience of common plastics like polypropylene. Prof Kol believes that the answer could lie in the catalysts that enable their production. Plastics consist of very long chains called polymers, made of simple building blocks assembled in a repeating pattern. Polymerisation catalysts are responsible for connecting these building blocks and create a polymer chain. The better the catalyst, the more orderly and well-defined the chain—leading to a plastic with a higher melting point and greater strength and durability. This is why the catalyst is a crucial part of the plastic production process. Prof Kol and his team of researchers have succeeded in developing a new catalyst for the polypropylene production process, ultimately producing the strongest version of the plastic that has been created till date. Cheaper and more efficient to produce in terms of energy consumption, as well as non-toxic, Prof Kol’s polypropylene is good news for green manufacturing and could revolutionise the industry.

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Engineered Materials Yield Custom Magnets

he properties of a substance are field,” says Luk’yanchuk. However, they An array of metamolecules largely dependent on its constarted to interact when moved closer comprising silicon stituent atoms and the way that together, and the researchers observed spheres and copper these atoms interact with each other. that the magnetisation of the split-ring split-rings can be used to control mag- decreases and even becomes negaThe finite number of atom types, hownetisation waves ever, imposes a limit on the range of tive for separations smaller than 0.5 Credit: © 2012 American Chemical Society properties that a conventional material micrometres. can have. In contrast, a new class of engineered materials This situation is somewhat analogous to the magnetic called metamaterials, have no such limitation. Metamateriordering in ‘natural’ materials. When all the atoms contribals are typically composed of an array of nanostructures that ute in a positive way to a material’s magnetic properties, the can interact with electromagnetic waves in much the same material becomes a ferromagnet. However, when alternatway as atoms. In addition, the optical properties of these ing regions of the material have opposite magnetisation, the metamaterials can be tuned by altering the size and shape of material is said to be antiferromagnetic. nanostructures. Although the analogy between metamaterials An international team of researchers led by Boris and magnetic materials is not a perfect one, most Luk’yanchuk at Singapore’s A*STAR Data Storage metamaterials are said to be ferromagnet-like. The Institute has extended the properties and potential uses design proposed by Luk’yanchuk and the team closely of metamaterials by using not one but two very different mimics antiferromagnetic ordering, and this opens an classes of nanostructures, or metamolecules. Luk’yanchuk opportunity for researchers to study antiferromagnetic and the team mathematically modelled a two-dimensional phenomena in metamaterials. One notable example is giant array of metamolecules comprising a silicon sphere next to a magnetoresistance, a phenomenon that is at the heart of partially incomplete copper ring. They studied the influence modern electronic memories. of both the sphere and the split ring on the magnetic Luk’yanchuk affirms that a metamaterial analogue would component of an incident electromagnetic wave—a property offer exciting research prospects. “We believe that our work known as magnetisation. has the potential to make a strong impact towards the devel“When the two structures were more than one micromeopment of on-chip integrated solutions for reconfigurable tre apart, they both acted to increase the local magnetic and optically-controlled metamaterials.”

Making Ultra Slippery Surfaces

team of researchers from Harvard University have invented a way to keep any metal surface free of ice and frost. The treated surfaces quickly shed even tiny, incipient condensation droplets or frost simply through gravity. The discovery has direct implications for a wide variety of metal surfaces used in refrigeration systems, wind turbines, aircraft, marine vessels, and the construction industry. The group, led by Dr Joanna Aizenberg at the Harvard School of Engineering and Applied Sciences (SEAS), previously introduced the idea that it was possible to create a surface that completely prevented ice with ice-repellent coatings, inspired by the water repellent lotus leaf. Yet, this technique can fail under high humidity

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as the surface textures become coated with condensation and frost. “The lack of any practical way to eliminate the intrinsic defects and inhomogeneities that contribute to liquid condensation, pinning, freezing, and strong adhesion, have raised the question of whether any solid surface can ever be truly ice-preventive, especially at high-humidity, frost-forming conditions,” Aizenberg said. To combat this problem, the researchers recently invented a radically different technology that is suited for both high humidity and extreme pressure, called SLIPS (Slippery Liquid Infused Porous Surfaces). SLIPS are designed to expose a defect-free, molecularly flat liquid interface, immobilised by a hidden nanostructured solid. On these ultra smooth slippery surfaces fluids and solids alike—including

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water drops, condensation, frost, and even solid ice—can slide off easily. The challenge was to apply this technology to metal surfaces, especially as these materials are ubiquitous in our modern world, from airplane wings to railings. Aizenberg and her team developed a way to coat the metal with a rough material that the lubricant can adhere to. The coating can be finely sculpted to lock in the lubricant and can be applied over a large scale. In addition, the coating is non-toxic and anti-corrosive. In addition to allowing for the efficient removal of ice, the technology lowers the energy costs associated by several orders of magnitude. Thus, the readily scalable approach to slippery metallic surfaces holds great promise for broad application in the refrigeration and aviation industry.

- technology management for decision-makers | june 2012

techwatch Better Lubrication Without Oil

Photo: © Dirk Mahler/Fraunhofer

“In two projects we have successfully replaced oil with water. One surprising thing we found was that water is no worse a lubricant than oil, the key to it all being the additives.” Adding natural polymers to water can dramatically improve its lubricating properties. The Freising, Germanybased researchers set about testing renewable raw materials such as celluloses, starches or bacterial polysaccharides as lubricant additives. Their aim: to make water more viscous by adding biopolymers, so it lubricates better. In addition to the significantly lower impact on the environment and the high raw material efficiency, the new lubricant also offers technological benefits. It reduces wear and prolongs tool life, for example. The processed components are also easier to clean. This cuts costs and improves the cost-efficiency of the entire production process. Converting to the new lubricant is very easy for companies to carry out, explains Eisner. “In principle, once thoroughly cleaned, the same machine tool circulation systems can be used.” In addition, the use of the aqueous lubricant improves occupational health and safety and hygiene: no formation of oil mists, and addition of fewer biocides, and is gentler on the skin. The newly developed lubricant is already being distributed by Carl Bechem GmbH under the product name of BERUFLUID.

Peter Eisner, Michael Menner and Andreas Malberg have developed a cooling lubricant using water and aqueous biopolymers

rilling, milling, turning and grinding operations—all use lubricants to prevent work pieces and tools from overheating and from excess wear. The standard lubricants used today are all based on mineral oil. This has drawbacks: fossil mineral oils come from finite resources, transport relatively little heat away from the work piece, are harmful to health and are flammable. So there‘s a need for alternative lubricants. A team comprising Andreas Malberg, Dr Peter Eisner and Dr. Michael Menner from the Fraunhofer Institute for Process Engineering and Packaging have a surprising idea: lubricate with water, not oil. “We have been looking at the issue of cooling lubricants for a considerable time,” explains Menner.

Detecting Defects in Ship Propellers

june 2012 | industry 2.0

Suction feet are used to attach the mobile scanner to the propeller, and researchers can record the ultrasound test data on-site

Photo: © Dirk Mahler/Fraunhofer

hip propellers are often as large as a single-family home–and manufacturing them is quite a challenge. During the casting process, pores and miniscule cracks can form, that in the worst case may cause a blade to break. Now these massive components can be inspected for defects in a non-invasive manner, using a new kind of ultrasound process.

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Until now, propellers have been inspected manually for inner defects when necessary. To make them visible, the inspector guides an ultrasound test probe over the component by hand— an error-prone procedure that fails to capture the entire volume of the component. This method cannot detect cracks inside the propeller in certain circumstances. To identify defects in a timely manner, researchers at the Fraunhofer Institute for Industrial Mathematics ITWM have developed a mechanised ultrasound process that can be used for the non-destructive testing of complex components. “With our mobile ultrasound test system, we can inspect copper-nickelaluminum bronzes up to 450 millimetres thick and detect fissures down to a few millimetres in length. Because we emit the ultrasound at defined angles, we also find defects positioned at an angle to the surface,” says Dr Martin Spies of ITWM. The system is capable of recording large volumes of digitised ultrasound test data, taking into account the many and variously intense curvatures of the propeller surface. The device currently scans test grids of 700 by 400 millimetres, achieving a rate of up to 100 millimetres per second. The mobile scanner can be positioned anywhere on the propeller, and, thanks to its suction feet, it can be attached in a horizontal as well as vertical test position. “We obtained the 3D data about the inside of the component by an imaging procedure known as SAFT. It provides a detailed display of inclusions and welding-seam defects. It basically works like computer tomography in medicine,” explains Spies. With the aid of special computational processes and algorithms, the experts have succeeded in reducing interference signals and intensifying error signals—a complicated task, since the various areas of the blade do not have a homogenously coarse grain. This can weaken the echo substantially. The specialists also use simulations to calculate in advance which ultrasound test probe they have to deploy.

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Photo: © Fraunhofer IWM, Felicitas Gemetz

Shooting at Ceramics Shot is fired from a blasting gun at a ceramic leaf spring to correct its shape, or cause specific warping as desired

n corrosive, high-temperature environments, metals quickly lose their elasticity. Beyond certain temperatures the material fails and its properties are compromised; metallic springs stop working if heated above 500 degrees Celsius, for example. But what to do if these are exactly the conditions a production process requires? One way of avoiding the problem has been to make components out of ceramic, a material that is lightweight, rigid, corrosion-resistant and able to withstand high temperatures. Yet this only offers a partial solution, as producing thin ceramics for parts such as leaf springs, lightweight mirrors for optical and extraterrestrial use, or membranes for sensors and fuel cells is both time-consuming and expensive. This is because ceramics can only be machined using costly diamond tools, and the process itself creates tensions within the surface of the material which cause the finished part to distort as soon as it is removed from the machine. Reshaping the components after manufacture has never been a viable option before as the material is too brittle, and so the large amounts of waste that are generated push the costs up. Researchers at the Fraunhofer Institutes for Mechanics of Materials have now found a way to straighten distorted ceramics using shot peening, a process by which small pellets, known as shot, are fired at the surface of a component with a blasting gun. The shot strikes the surface and alters the shape of the thin, outermost layer of material. By moving the gun over the ceramic part along a precisely calculat-

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ed path, scientists are able to counteract any undesired warping, or create lightly curved mirrors out of thin, even ceramic plates. “Shot peening is common practice for working metals,” says Dr Wulf Pfeiffer, who manages this business unit at the IWM, “but the technique has never been used on ceramics because they are so brittle— they could shatter, like a china plate being hit with a hammer. This meant that we had to adapt the method to the material with great precision.” The researchers began by analysing which size of shot would be suitable for use on ceramics, as the surface could be destroyed by pellets that were too big. Pellet speed is another critical factor: hitting the material too fast causes

damage; too slow and the shape of the surface is not altered enough. They also discovered that it is important not to bombard the same spot too often with too much shot. Before producing a new component, the scientists first conduct experimental analysis to determine what can be expected of the particular ceramic involved. They fire a beam of shot at it and then measure the resultant stresses to see what sort of deformation is possible and how the beam should be directed. The experts have already produced various prototypes, including a ceramic leaf spring and a concave mirror. For manufacturing simple components, the technique is now advanced enough to be used in series production. The IWM scientists have recently gone one step further and are developing a computer simulation that will allow components to be worked in multiple axes. Meanwhile their colleagues at the IPK are working on automating the process using a robot.

New Compound Improves Energy Efficiency

new type of durable, environmentally-benign blue pigment discovered at Oregon State University has also been found to have unusual characteristics in reflecting heat. The compound, which has now received patent approval, was discovered about three years ago almost by chance, as OSU scientists were studying some materials for their electrical properties. Credit: Oregon State University Its potential use to help reduce heat absorption on the roofs and walls of buildings—which is an evolving field of considerable interest in warm regions where cooling is a major expense—adds another role for the material, which is now being considered for various commercial applications. “This pigment has infrared heat reflectivity of about 40 per cent, which is significantly higher than most blue pigments now being used,” said Mas Subramanian, an OSU professor of chemistry who discovered the compound. ‘Cool roofing’, in which paints are used to reflect significant portions of the sun’s heat and thereby reduce cooling costs, is an important new trend in ‘green’ construction, experts say. Such reflective coatings also are more aesthetically pleasing, have less thermal degradation, reduce the ‘heat island’ effect in cities and reduce air pollution due to lower energy use and power plant emissions. In general, any darker colour tends to absorb more heat. But some compounds, like the one discovered at OSU, have dark tones but also the ability to reflect heat in the infrared spectrum, which is responsible for most of the heat energy absorbed from sunlight.

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- technology management for decision-makers | june 2012

cover story

Making Manufacturing More

Producti By focussing on production, product design, value recovery, and supply-circle management, manufacturers can generate new value, minimise costs, and increase operational stability

By Stephan Mohr, Ken Somers, Steven Swartz, and Helga Vanthournout

june 2012 | industry 2.0

- technology management for decision-makers

Imaging: Peterson

apid growth in emerging markets is causing a dramatic increase in demand for resources, and supplies of many raw materials have become more difficult to secure. Commodity prices are likely to continue to rise and will remain volatile. Manufacturers are already feeling the effects in their operations and bottom lines, and these challenges will persist, if not intensify. Consequently, manufacturersâ&#x20AC;&#x2122; variable costs have increased. Between 2000 and 2010, for instance, the variable costs of one western steel company rose from 50 to 70 per cent of its total production expenses, mainly due to jumps in commodity prices. For one Chinese steel company, 90 per cent of production costs are now variable. And for a manufacturer of LCD televisions, energy represents 45 per cent of the total cost of production. But, companies that take steps to increase resource productivity could unlock significant value, minimise costs while establishing greater operational stability. Our experience suggests that manufacturers could reduce the amount of energy they use in production by 20 to 30 per cent. They could also design their products to reduce material use by 30 per cent while increasing their potential for recycling and reuse. Indeed, companies could cut their product costs in half by reusing materials and components. Some companies have even begun to pioneer new business models that enable them to retain ownership of the materials used in the products they sell. This can involve establishing mechanisms that prompt customers to return a product to its manufacturer at the end of its consumer utility, enabling the manufacturer to extract additional value from it.

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ve www.industry20.com

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cover story A number of manufacturers have launched resource-productivity initiatives that are already paying dividends. But most efforts focus on operational slivers within the four walls of their business, and classic improvement approaches— such as lean manufacturing and material-andinformation-flow analysis—typically fail to fully address energy or resource costs and constraints. Because they lack a systematic approach that focusses attention on resources throughout the value chain, manufacturers have tended to think narrowly about what is actually a broad landscape of opportunity.

and supply-circle management. By taking a comprehensive approach to resource productivity, companies can improve their economics while strengthening their value propositions to customers and benefitting society as a whole.

Prioritise Areas of High Impact

Companies should first focus on activities within their operations, where they can exercise the most control; they can turn their attention later to activities that require the cooperation of other organisations, customers, or other stakeholders. Specifically, companies should prioritise the activities that offer the greatest potential for impact given their position on the production circle. • Rethink resource ownership 1. Upstream manufacturers: • Develop sources of supply via Companies that are focussed Upstream production primarily on transforming materials into inputs used by other companies Optimise production should start by optimising Optimise supply circle by production for resource productivity. analysing how Such companies have the most • Help downstream collectors • Raw materials are extracted to gain by reducing the amount and sorters to optimise return • Components are produced of material or energy they use in of materials/components • Products are designed production. Indeed, the operations of • Help upstream suppliers • Return markets are organised mining companies are often as much optimise production as 10 times more energy intensive Downstream production than the operations of companies that use their products. As a second Optimise product step, manufacturers should prioritise waste recovery, which can enable them to secure access to materials Optimise market through activities such as recycling Collecting & sorting and reuse. 2. Downstream manufacturers: • Explore new recovery techniques Companies focussed primarily on • Develop markets for recovered materials making components or final products should start by optimising their How to do it? products in order to use materials Exercise influence in the supply circle where there is no direct more efficiently. These companies control—both upstream and downstream will gain most by designing products to reduce material requirements, Consider new business models—for example, lease rather than sell to retain ownership of materials embedded in products minimise energy consumed while using them, and ensure they are This article offers a practical set of tools to optimised to be recycled or reused at the end of help manufacturers and waste-management their lifecycle. Downstream companies can also companies capture the resource-productivity prize. benefit from reducing the energy required to Manufacturers are likely to achieve the quickest manufacture their products, but this may be a impact if they start by focussing on their areas second priority, since the operations of downstream of core competency. But to secure the full value players are not as energy intensive as those of of their efforts, companies must optimize their upstream players. operations for resource productivity in four broad 3. Waste-management companies: areas that cut across their business and industry: Companies that handle waste materials—including production, product design, value recovery, those that collect, process, and manage waste—

june 2012 | industry 2.0

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should start by optimising processes and developing new markets for material reuse. They should develop the sorting and collection technologies and capabilities necessary to mine the highest-value materials from the general waste stream at the lowest possible cost. They should also develop business models to help other companies with their material-sourcing and reuse strategies.

Supply Chains to Supply Circles Manufacturers can create value, cut costs, and reduce exposure to volatile commodity prices by improving their resource productivity—using fewer resources for each unit of output. Collaboration with suppliers and customers can keep used products, components, and materials in circulation. New business models that rethink ownership can shift value along the supply circle Economic growth in emerging markets is fuelling dramatic increases in demand for resources... Projected growth, 2010-301

Optimise for Resource Productivity

Depending on where they are located on the production circle, companies should prioritise four broad areas for resource productivity: production, product design, value recovery, and supplycircle management. A. Production: Most manufacturers have already made tremendous gains by implementing programmes to improve labour and capital productivity (for example, through lean manufacturing). Such efforts can improve resource productivity if they are adapted to include criteria for reducing the consumption of energy and raw materials. Here we focus on energy—a particular concern for upstream manufacturers, since energy costs can account for as much as 20 per cent of their overall production costs. Manufacturers can take four steps to increase energy productivity. First, companies can adapt the methodology for lean-value-add identification to map energy consumption at every step of their operating processes. This will enable them to calculate the thermodynamically minimum energy required and evaluate actual consumption relative to this theoretical limit (an approach known as ‘pinch analysis’). The analysis reveals where energy is wasted and how losses can be avoided. One US surfactant-maker that conducted a heat-value-add

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800

Water

Energy

33 %

600

400

654

+ 492

2010

41%

2030

+ 4.5

2010

QBTUs1 (primary)

Steel

6.4

2030

Thousand cubic kilometres

8 0%

2.3

+ 1.3

2010

2030

Billion metric tonnes

...which contribute to higher and more volatile commodity prices With supplies of many raw materials becoming harder to secure, commodity price volatility may not be a temporary phenomenon

260 220 180 140

MGI commodity price

100 60

1900

1920

index 1960

1940

1980

2011

2000

Index years 1999-2001= 1002

This means higher variable costs—for example, in a resourceintensive upstream industry, such as steel

2000

2010

50%

75%

100%= $300 per tonne

100%=$600 per tonne

Change in share of variable cost for steel production Western steel company example Variable

Fixed

It also means pressure on profits for some industries After-tax return on capital employed In a resource-constrained world, value creation moves toward the owners of resources

5% Steel 25%-30%

Mines

(2009 data)

industry 2.0

- technology management for decision-makers | june 2012

cover story analysis found that only 10 per cent of its steamheat inputs were thermodynamically required to make its products; 90 per cent were wasted. The manufacturer implemented about 20 measures and captured steam savings worth 30 per cent of its baseline energy costs, enabling it to recoup what it invested to launch the effort within three years. One measure, which involved implementing a new software algorithm to control the company’s heating and cooling control loop, enabled it to reduce its need for steam by 5 per cent. Another company, a car manufacturer, reduced the amount of energy it used in assembly by 15 per cent by optimising ventilation processes. Second, moving beyond pinch analysis, companies can extend their lean programmes to improve energy efficiency by optimising energy integration in heating and cooling operations. For instance, one chemical company changed its process to release heat more quickly during polymerisation, allowing evaporation to start sooner, thus reducing the energy it used in the subsequent drying stage by 10 per cent. Third, companies can use lean approaches to identify process-design and equipment changes that can deliver greater energy efficiency. One Chinese steel mill saved 8 million renminbi (about

Companies can respond by improving resource productivity—using fewer resources for each unit of output. Leaders in the field are exploring circular operating models

Value is created by looping products, components, and materials back into the value chain after they fulfil their utility over the life of a product

Raw materials

Materials transformation Parts manufacturer Product manufacturer Retailer or service provider

$380

End user

Recycle

efurbish and R remanufacture euse R parts euse R products

epair and R maintenance

billion

Potential annual net material cost-saving opportunity in the EU from adoption of ‘circular’ business practices3

june 2012 | industry 2.0

- technology management for decision-makers

$1.2 million) annually by lowering the leveling bar in a coke furnace an extra few centimetres, which reduced the mill’s total energy cost by 0.4 per cent. The mill achieved an additional 5 million renminbi ($730,000) in annual savings by adding an insulation layer to ladles used in steelmaking. Fourth, lean-energy approaches can eliminate waste and capture savings by optimising the interface between producers—for example, steamboiler operators, cooling-water-unit operators, and power suppliers—and consumers. One chemical plant managed to avoid a $2 million investment to increase its boiler capacity by improving consumption planning—specifically, ensuring that demand would not pass the threshold that triggered pressure drops during demand spikes. B. Product Design: By incorporating energy and materials parameters into their product-design approaches, companies could reduce the use of materials that are hazardous, non-renewable, difficult to source, or expensive. Changes to product design could increase opportunities for recycling and reusing components and materials at the end of a product’s lifecycle. And designers could prioritise the incorporation of sustainable features into their products to reduce the impact products have on the environment. These principles constitute a philosophy known as ‘circular design’, which extends beyond products to systems and business models. Companies that take these steps could reduce costs and facilitate compliance with regulations while bolstering their reputation and building relationships with consumers and other stakeholders. Additionally, they can often expand existing ‘design to cost’ methodologies to quantify the financial or brand impact of incorporating sustainable features in their products. Several approaches touch on product design: for example, companies can conduct product teardowns, disassembling and analysing competitors’ products to identify opportunities to increase resource productivity; they can use linear performance pricing, which enables comparisons among product attributes that provide different levels of performance for users; or they can pursue ‘design for manufacturing’, which involves optimising product design to minimise the resources needed during manufacturing and assembly. One manufacturer, for example, redesigned its shampoo bottles so that they were thinner—but still met strength specifications—and reduced material consumption by 30 per cent. The bottle’s new shape enabled higher packing density during ship-

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Supplier scorecards and environmental P&L statements can be used to put a monetary value on environmental impact ping, and with a flat ‘hat’, it could be stored upside down, allowing customers to more easily extract all of its contents before disposal. The cap was redesigned to use the same material as the rest of the bottle, thus eliminating the need to separate materials before they could be recycled. The manufacturer also optimised the bottle’s production process to reduce cycle time by 10 per cent. In another example, a vehicle manufacturer redesigned its forklifts to reduce fuel consumption and total cost of ownership for customers. Analysis showed that it could either redesign the power train or reduce the weight of the forklift to achieve its goal, but the power-train option was costly and complex. To reduce the weight of the forklift, the company increased the leverage of the cast-iron counterweight used to provide stability during lifting. This removed 200 kgs (almost 450 pounds) of cast iron with no sacrifice in stability, which in turn allowed the manufacturer to reduce fuel requirements by 4 per cent and cut material costs by $200 per vehicle. And a home-appliance manufacturer analysed its competitors’ coffee makers and discovered an opportunity to improve heating efficiency by adjusting the insulation of hot pipes and optimising the flow of water. It also changed the mounting of the heating system, using springs rather than screws, to make it easier to separate materials during recycling. Combined, these adaptations resulted in a product with an improved footprint at a lower production cost; such ‘win-win’ opportunities are not uncommon when focussing on resource productivity. C. Value Recovery: Companies may find they can satisfy their resource needs by recycling and reusing materials historically discarded as waste. Those involved in waste management have an opportunity to pave the way by developing services that allow manufacturers to capture value from materials left over after production or after a product has reached the end of its lifecycle. Great technological advances have been achieved in recycling, organics processing, and waste-to-energy conversion, and these have revealed opportunities in material and component

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recovery. Modern facilities recover much more material than was possible using manual systems, and they produce recyclates of a quality well above that is required by most recycling protocols. These facilities can sort large volumes of varied waste, separating the valuable materials from those of less worth. They can also adjust sorting criteria to optimise selection based on scrap values in the spot market. Waste-collection operators and recyclers should focus on building new business models by working with manufacturers to identify and develop opportunities for value recovery. This could involve helping manufacturers design products and production processes to facilitate material reuse; it could also involve helping develop logistical solutions that allow manufacturers to incorporate recovered material in their production cycle. Companies such as Veolia Environment and Suez Envionment have already begun to transform themselves from waste operators into rawmaterials and energy suppliers, in part by advising other companies on how to design products that can more readily be recycled and reused.

Supply-Circle Management

Many of the activities that affect resource productivity and sustainability—such as acquiring and transporting raw materials, assembling parts used in the manufacturing process, and using and disposing of final products—take place outside the walls of manufacturers’ facilities. Although companies do not have exclusive control over these activities, they can exercise their influence to increase the productivity of their supply chains. To that end, companies could transform their supply chains into supply circles. Whereas the phrase ‘supply chain’ may evoke an image in which materials are collected in one place and ultimately disposed of in another, the phrase ‘supply circles’ emphasises that materials can be looped back into the production process after they have fulfilled their utility over the life of a product. Companies looking to make this shift should first develop a complete understanding of their supply footprint. This involves considering not only

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- technology management for decision-makers | june 2012

cover story which materials are used and in what volumes, but also how much energy is required to use them and what impact they have on the environment. The analysis enables companies to identify areas for improvement in internal, as well as supplier, operations. Companies can use the analysis to manage suppliers, reduce costs, and mitigate the risks posed by potential regulatory changes, supply scarcity, and volatile commodity prices—and to help initiate conversations with suppliers that could result in strategic relationships that enhance the capabilities of each party. In most cases, a footprint analysis will reveal ‘hot spots’ for manufacturers to prioritise to achieve environmental and economic impact. For example, one beverage producer realised that more than 35 per cent of the carbon dioxide emissions generated to produce a half-gallon container of juice came from producing and applying fertiliser to groves where the fruit was grown. It became

clear that working with farmers to reduce fertiliser use was one of the most important steps to take to minimise the company’s carbon footprint. Companies will benefit from adopting tools to monitor and manage their supply circles. Supplier scorecards and environmental profit and loss (EP&L) statements can be used to place a monetary value on environmental impact. Puma, for instance, developed an EP&L statement and pledged that by 2015, half its international product lines would be manufactured according to its sustainability standard. One objective is to ensure that its suppliers use more sustainable materials, such as recycled polyester. Desso, a European carpet manufacturer, substantially increased its market share and profits after it received Cradle to Cradle Certification for its entire product line.

end of its lifecycle. This could enable companies to reduce supply risks while creating high-margin profit centres. Chemical-catalyst manufacturers have done this for decades, essentially selling the functionality of catalysts to customers without transferring ownership of the materials themselves. One lead-acid-battery manufacturer built a competitive cost advantage by controlling not only battery production but also post-use collection, disassembly, and reprocessing of batteries; control of the lead cycle gives the company access to a lowcost source of raw materials. To take an example from another industry, European manufacturers of household appliances and furniture are shifting their business models from customer ownership to lease agreements. Upstream extraction and processing companies could play the same game. Steel mills could retain ownership of the steel they sell and thereby reduce their exposure to prices for iron ore and coal. And waste-management companies may have opportunities to form joint ventures with manufacturers to retain ownership of the materials they sell back into the supply circle. Over the past decade, supplies of various natural resources have become scarcer, and thus more expensive and subject to price volatility, increasing manufacturers’ costs and risks. Nevertheless, the changing resource landscape also creates opportunities. To capture them, companies must embark on a journey to transform their operations and dramatically increase resource productivity. They will have to dedicate as much effort to optimising resources in the future as they did to lean and other improvement initiatives in the past, while at the same time rethinking their business models to capture the value residing in resource ownership. If they get it right, the effort will enable them to increase the stability of supply and manage their costs while developing new products— and even lines of business—that generate sustainable bottom-line value.

Creating More Value

Stephan Mohr is an associate principal in McKinsey’s Munich office,

Companies should first focus on activities within their operations, where they can exercise the most control

In a resource-constrained world, value creation moves toward the owners of the resources. Companies should, therefore, consider developing new business models that enable them to retain ownership of the materials used in their products so that they can recycle or reuse the product at the

june 2012 | industry 2.0

- technology management for decision-makers

Ken Somers is a consultant in the Antwerp office, Steven Swartz is a principal in the Chicago office, and Helga Vanthournout is a consultant in the Geneva office. This article was originally published in McKinsey Quarterly, www. mckinseyquarterly.com. Copyright (c) 2012 McKinsey & Company. All rights reserved. Reprinted by permission.

www.industry20.com

By improving how risk is measured—and managed— in global operations, companies can adapt to changing conditions faster than competitors By Mike Doheny, Venu Nagali, and Florian Weig

he spectre of a catastrophic failure in one or more links of a company’s global supply chain haunts senior executives in many industries: for example, the overnight flood or fire that disrupts a key supplier and quickly grinds production to a halt half a world away. Well founded as such worries are, given the increasingly globalised and interconnected operations of large organisations, they are hardly the only risks facing supply chains. No less significant are subtler, and more persistent, sources of disruption, such as fluctuating demand, labour rates, or commodity prices that together chip away at profits, increase costs, and force organisations to miss market opportunities. All of these issues have become more acute in recent years as rising volatility, uncertainty, and business complexity have made reacting to—and planning for—changing market conditions more difficult than ever. The addition of some three billion consumers to the global middle-class over the coming two decades, and the strains they will place on global resource supplies, all but guarantee that such pressures will continue. Against this backdrop, some companies

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in industries as varied as automotive, building products, chemicals, high-tech, and pharmaceuticals are refocussing global operations to make them more agile. Notably, these companies aren’t just spotting and mitigating supply chain risks. They are also seeking ways to use volatility to gain advantages over rivals. We’ll examine three companies that are seeking advantages from greater operational agility. While each is benefitting in different ways, all are developing similar skills that should position their organisations well for years to come.

Mitigate Downside Risks

A globally diversified pharmaceutical company faced daunting operational challenges: not only were upstream supply shortfalls causing downstream production delays (and headaches for customers) but the company was also about to initiate quality-related product recalls. Together, these problems threatened to damage its profits and reputation seriously. What’s more, as senior leaders began to address the problems, they concluded that the organisation’s existing processes weren’t sufficient to identify—let alone mitigate—potential sources of supply chain risk.

industry 2.0

- technology management for decision-makers | june 2012

cover story In response, a small team of executives investigated a set of high-priority products—those with great potential to influence the company’s financial results and public-health outcomes. The team also catalogued the risks associated with these products at major points along the supply chain, from product development to distribution. This approach allowed the team to visualise more clearly what problems might occur and where: for example, the risk that raw materials from suppliers might be rejected for quality reasons early in the process or that process disruptions could, later on, delay production in plants operated by the pharmaceutical company or a supplier. In parallel, the team assessed the impact of each of these risks on three of the company’s major supply chain objectives: meeting customer demand in a timely way, as well as achieving cost and quality targets. By creating a scoring system that converted the assessments into simple numerical scores, the team could compare risk exposures and discuss the company’s appetite for risk in an ‘apples to apples’ way at the corporate level and across divisional and functional boundaries. The results were eye opening. Products representing more than 20 per cent of the company’s revenues depended, at some point in their lifecycles, entirely on a single manufacturing location. That was a much higher proportion than senior executives had assumed, given

An ‘apples to apples’ analysis of risk was eye opening for executives Sample assessment of corporate-level risks for global pharma company Number of risks

Type of risk

Single manufacturing site Single supplier source Quality and regulatory Capacity constraints Uncertain demand forecast Supply and commodity shortfall Process-equipment failure Production process robustness IT related Moderate level of risk

Commodity costs

june 2012 | industry 2.0

High level of risk

- technology management for decision-makers

the company’s large global network of plants. Similarly, fully three-quarters of the several dozen products that one business division made contained materials or components from single suppliers—a finding that had big implications for public health and the health of the company’s reputation should a supplier have problems. The exercise also highlighted where the company was likely to miss sales because of factors such as poor demand forecasting or capacity constraints. In addition to suggesting some immediate changes (measures to improve product quality, for instance), these findings helped executives create new risk thresholds to serve as operating “guardrails”. For example, the company no longer allows any particular plant to account for more than a certain percentage of corporate revenues. It also embarked on a far-reaching dual-sourcing program to increase its operating flexibility by guaranteeing better access to supply. Thus far, the company reckons it has lowered its risk exposure by more than 50 per cent and almost completely eliminated the most catastrophic risks it faced, at a cost equivalent to less than 1 per cent of annual revenues. Finally, company leaders established a new, full-time team of managers with expertise in supply chains, marketing, finance, and other disciplines to work with the business units to track and report on risk-related issues regularly. The ‘risk dashboards’ the team creates have given the company a common language to use when discussing risk and help prompt the kinds of timely conversations among functional leaders that should help identify potential problems before they occur.

Spot Upside Potential

Of course, the benefits of increased operational agility extend beyond identifying and protecting against downside risks. Indeed, when companies enable their operations to respond more quickly, they often unlock the ability to seize an upside potential that was previously unreachable. Consider, for example, the experience of a global automaker whose leadership team was concerned about the industry’s multi-year development and investment cycles. Recently, they asked a team of supply chain executives to determine the company’s degree of flexibility and ability to react to potential swings in demand, both negative and positive, depending on how the fast-developing global debt crisis played out. The company’s models had long been much better at predicting demand in stable macroeconomic conditions than in more volatile ones. The team, therefore, also took a broader

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look at the primary causes of demand swings facing the industry. Disguised example of a global automaker Ultimately, it worked its way through two dozen or so sources of volatility Gap indicates lack of operational flexibility until it arrived at the four it believed mattered most: growth in two key Average buildable supply Average market demand emerging markets, unpredictable High regulation in those markets, regionalised downturn scenarios in established markets, and volatility associated with new market segments Scenarios with Demand lost revenue for which the company didn’t have scenarios enough historical baseline data to guide planning decisions. As the team discussed how various scenarios Buildable might play out, it realized that the scenarios existing system of linear extrapolation combined with best- and worst-case scenarios was too limited. The ‘A ha moment’ came when the Low team decided to view the future as a Low Number of cars sold distribution of outcomes and not a single, forecasted point. The team members knew they couldn’t build a system to manufacthe upside if demand proved higher than expected. ture all cars required in every possible scenario in By running some of the scenarios at the level of which demand was higher than expected (such a individual production plants, the team spotted system would have required investment levels that bottlenecks it could begin to unclog immediately. could not be economically justified in the majorSome are being tackled through straightforward ity of situations). Yet they did have the analytical operating improvements at the line level; others capacity to model these scenarios, using Monte will require modest tooling changes. Carlo simulation and other traditional techniques. This approach led the group to generate a probAdapt to Changes ability distribution of demand (by geography and Changing competitive dynamics are pressuring by product) that together included some 15,000 companies to introduce more and more product scenarios. To this bell curve, the team mapped the variations to chase new customers in new markets. ability of the company’s production network to In such circumstances, operational agility will meet potential demand profitably in each scenario. increasingly represent a competitive edge. Happily, the executives saw that their planning Consider the case of a global medical-device group’s original estimates were broadly consistmanufacturer that specialises in high-volume ent with what the new approach predicted as the business-to-business products with relatively most likely outcome. Less happily, they could now low margins. Over the years, the company has also assess how much upside potential they had honed its operations to maximise efficiency and foregone in previous years and clearly see how maintain advantages over competitors through a much they might forgo in the coming ones if some combination of high quality and large scale. In fact, of the more positive demand scenarios played out. many of the company’s operational capabilities in In aggregate, they estimated this future upside these respects are world-class. potential represented a significant share of the Those scale-oriented skills, though, were most company’s annual profits. effective in relatively stable markets—and the comCertainly, much of this amount was impossible pany had recently recognised that some of its core to capture and always would be—only one demand businesses were entering a phase of rapid flux. scenario would prove correct, after all, and producNew technology was providing attackers with opention resources are finite. Nonetheless, armed with ings to introduce products that had the potential to this information, the executives could now begin redefine entire categories. Reacting to the changto look for ways to increase the company’s operaes, the company’s leaders realised would require tional flexibility on the margins to capture more of more flexibility not only on the shop floor but also Probability distribution of 15,000 scenarios

Demand–supply simulations uncover a lack of flexibility

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- technology management for decision-makers | june 2012

High

cover story upstream, during product development. Indeed, the two needs were interrelated. Only by increasing the proportion of shared components and designs in some products (and product families) could the company economically produce its own new offerings on the same machines and production lines. Implicit in these changes was a belief that demand for several of the new products would grow. That wasn’t a foregone conclusion, though, and if the company moved too quickly toward more flexible production approaches, it might wind up with too much capacity and could even put at risk the economics of some of its traditional products. To mitigate this risk, the company carefully phased in the evolution of its manufacturing approach to ensure that the different stages of the work preserved the maximum option value of stopping early should the expected demand not materialise. Today, as the company continues to expand the new approaches across its production platform, its leaders estimate that these moves have already lowered capital costs for the targeted products by 40 per cent as compared with the traditional approach, while reducing the ramp-up time for new

product variations by 75 per cent. In parallel, the company is revisiting the skills it requires in product developers and operations staff to ensure that new hires have both the ‘hard’ technical skills and the ‘softer’ ones necessary to identify and prioritise uncertainties. In our experience, such forward-looking organisational moves are wise. Companies that can make the ability to preempt, detect, and respond to risk a part of the institutional mindset will hold a big edge in an increasingly volatile world. Across many industries, a rising tide of volatility, uncertainty, and business complexity is roiling markets and changing the nature of competition. Companies that can sense, assess, and respond to these pressures faster than rivals will be better at capturing the opportunities and mitigating the downside risks. Mike Doheny is a principal in McKinsey’s Atlanta office, Venu Nagali is a consultant in the New York office, and Florian Weig is a principal in the Munich office. This article was originally published in McKinsey Quarterly, www. mckinseyquarterly.com. Copyright (c) 2012 McKinsey & Company. All rights reserved. Reprinted by permission.

opinion

View to Die for

Cognitive biases often lead to costly errors for mountaineers. Managers would do well to learn from such experiences By David Lim

rnst Hemingway once said that there are only three true sports—motor racing, bullfighting and mountaineering— the rest are merely games. And when it comes to mountaineering, conquering the Everest is the holy grail. So, each year, Everest has hundreds of climbers swarm its flanks. Almost all of them attempt to scale it from the south in Nepal or the north from Tibet. In it’s purest form, the sport of mountaineering is about freedom of expression. It’s about selfdetermination, route finding, working as a team, and challenging yourself in a pristine, harsh and remote arena. And yet, climbing Everest has lost most of the elements that make mountaineering what it is. For Everest at least, the aim of the game is summiting, and sometimes at all costs. Ask those this season who were asked to turn around, but did

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not; and then died on their descent, largely from exhaustion and mistakes made in a hypoxic state. Veteran mountain guide, Dave Hahn, told me more than a decade ago on my second Everest expedition, “There is the sport of mountaineering, and then there is this thing called Everesting”. Dave Hahn should know. He’s climbed Everest an amazing 14 times. In ‘Everesting’ it seems, more and more people want to get to the top, at the expense of investing in a long, often rewarding apprenticeship of, and love of mountaineering. Even as recently as 1998, when I led the first Singapore Mount Everest Expedition, our aim was to climb the mountain with more than the minimal experience, clocking up significant time in the mountains prior to tackling the peak. That year, from the standard route from Nepal, 45 people summitted. This spring season on Everest, nearly 400 people have done so. None, in Nepal, died in that spring season in 1998. Ten died during this spring season. Leaving aside the classic and more recent mountaineering risks like overcrowding, a key factor is cognitive biases at work. These are tendencies to make mental shortcuts in a decision-making process where normally, you will get it right, most of the times. The most common ones are: ‘Sunk cost’. Another, which can affect anyone, is ‘confirmation bias’. Another cognitive bias at work was the ‘anchoring effect’. One of the principal teams involved in the tragedy was led by a very successful expedition leader who had previously summitted with his clients three times in previous years on May 10th. His belief that May 10th would still work out that year may have been influenced by the anchoring effect the date had with him—even if the weather reports clearly stated that weather would start to deteriorate. By compartmenting weather (which does not behave this way), he assumed the 10th was a workable summit day, and he could get his team down before the 11th. In reality, the first part of the storm arrived by the afternoon of the 10th, creating havoc. In the business world, what are cognitive biases are at work—and how can we spot them? Look at some of your own beliefs, and constructs and check if you are being affected by any of these cognitive biases that colour your decision-making adversely. For those on Everest, these mistakes truly make the peak one with a view to die for. David Lim is a leadership and negotiation coach, and a leader of two Mt Everest expeditions. Reach him at David@everestmotivation. com.

industry 2.0

- technology management for decision-makers | june 2012

Information Technology

Wi the B

june 2012 | industry 2.0

- technology management for decision-makers

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Illustration: Charu Dwivedi

ecently, a conversation with the CIO of a thriving, innovative company turned to the biggest hurdles he was facing. Talent acquisition was at the top of his list. He said, “I need a few senior architects. Note that I didn’t say good senior architects. I gave up finding good ones months ago. I’d settle for a few mediocre ones—do you know any?” Even with unemployment hovering close to 10 per cent in many countries, a remarkable number of CIOs and CTOs we know are having a hard time finding and retaining the talent necessary not only to extract value from investments in such areas as big data and enterprise mobility, but also to undertake everyday IT operations with the required quality, security, and efficiency. These executives are

also struggling to get the most out of their existing talent. While they have staff with specific IT skills, they often lack stars who can solve thorny problems that span multiple technology domains and engage business managers on topics such as technology innovation. Interestingly, companies that heavily outsource technology wrestle with these talent challenges just as much as those that do not; outsourcing changes technology talent requirements but does not diminish them. This issue is critical for senior technology leaders. Fortunately, our experiences of working with leading IT organisations show that these leaders do have a number of high-impact levers that can be used to develop, retain and recruit talent.

Developing Talent

Integrating new talent in a technology organisation (or any other

organisation) costs money and, more important, is time-consuming and risky, particularly at the management level. Screening candidates, conducting interviews, negotiating employment terms, and getting a new hire up to speed in his/her role can take six months or more, even for a mid-level manager. Therefore, the first imperative in winning the war for technology talent is to develop and retain the team you have. In addition to all the traditional people-management levers (competitive compensation, rewards for success, effective coaching, and so on), we found that leading organisations employ a range of other approaches to develop and retain technology talent. Rotate high performers: In many technology organisations, the career path is a traditional one. A new hire starts out in a particular domain (web development, databases, data-centre

nning attle for Talent The right technology talent can be hard to find. But executives can learn from the ways in which leading IT organisations develop, retain and recruit good people By James Kaplan, Naufal Khan, and Roger Roberts

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- technology management for decision-makers | june 2012

Information Technology operations) and advances to assume roles of greater responsibility in that domain by demonstrating a combination of technological expertise and operational or project competence. Although this path has its advantages, it also encourages relatively narrow specialisation and, over time, can lead to a feeling of career ‘staleness’. Some technology organisations are proactively rotating high performers across technology domains and into business or operational functions as well. The purpose is to groom managers who can engage with business leaders as peers and can more readily solve multifaceted technology problems that span many parts of a traditional IT organisation. Make training less technical: Many technology organisations provide high-quality training on technical topics such

as requirements management, database design, and programming in a range of languages. As critical as these skills are, some institutions are also experimenting with new types of training. Providing training that helps technology personnel understand the business—in some cases, all the way to the front line—makes technology’s value more tangible and provides invaluable context for interacting with nontechnology managers. Such training can address the company’s customers, products, strategies, and market position, as well as its operations. Ensure senior exposure: Many technology organisations have found that the opportunity to interact directly with the institution’s most senior leaders is an irreplaceable motivator for highperforming technology staff. As the chief administrative officer of

Risk Management

Succession Planning

Talent Acquisition and Development

People Leadership and Management

Vendor/Supplier Management

Cross-discipline Technical Skills (ie, breadth of expertise) Programme and Project Management Assetmanagement Unit (IT) Financial Management (eg, financial planning, cost management) Operational Management (eg, definition and tracking of key performance indicators)

Technical Skills (eg, application development, network, testing)

Business/Stakeholder

Talent area

Business Knowledge

Major gap No gap Some gap

Capabilities needed

A heat map of priorities can highlight capability gaps

Senior Leadership Strategic Programmes Programme Office Consumer Banking Unit (IT) Wholesale Banking Unit (IT) Asset-management Unit (IT) Infrastructure

Augmenting Talent Externally

Security Architecture Vendor Management/ Procurement Governance and Compliance • Overall technical skills are strong, with the exception of the architecture group; more skilled architects are needed to help drive architecture-simplification and modernisation efforts • Programme and project management is a key gap given the anticipated increase in demand from offshoring and a managed-services model

a top 10 financial institution told us, “I don’t present to the board on information security. I make sure that the chief informationsecurity officer (CISO) gets a regular opportunity to interact with the board and the executive committee directly. He could go anywhere, but I think that’s a key reason he stays here.” Support technology passions. The best people in technology shops have a passion for technology. They are excited by the opportunity to use innovative technologies to solve problems. With all the focus on top-down management of IT project portfolios, individual innovation and experimentation are easily discouraged or lost. One web-services company we know of helps its engineers recharge after a long, gruelling project by allowing them to work on an idea they are passionate about for a couple of weeks. Facilitate outside exposure: Technology is a community that extends far beyond any individual company or institution. By making time for high performers to participate in industry or functional groups (for example, standards-setting boards), leading technology shops expand their high performers’ horizons and help them feel connected to a broader technology community.

june 2012 | industry 2.0

- technology management for decision-makers

Developing and retaining existing talent is important, but it is never enough. Skills and capabilities required to play key roles may not exist internally, and opportunities to upgrade talent always exist; new blood brings fresh ideas

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and perspectives into a technology organisation. As such, sourcing talent externally is also critical. Naturally, great recruiting capabilities are a must, but there are also specific actions that IT organisations have found particularly useful. Buy whole teams where feasible: Some companies use M&A to gain access to talent much more quickly than they would have by building internal capabilities. For example, Allstateâ&#x20AC;&#x2122;s acquisition of Esurance provided Allstate with capabilities in developing online customer channels and systems. Rethink location strategies when necessary: IT organizations created tremendous value over the past decade by relocating functions to less expensive locations. Some IT organisations are now refining their location strategies to enhance their ability to attract critical talent. In many cases, this means operating a portfolio of locations that includes lower-cost sites to perform transactional activities and locations in city centres or near universities to attract technologists with cutting-edge skills. Draft the best athlete: Large, complex technology requires dozens or hundreds of specialised skills, and needs can change rapidly: this year customer analytics and enterprise mobility may be pressing requirements, but other issues may be more critical in a few years. However, talented technologists can learn new skills quickly, so some IT organisations have focussed recruiting on finding great problem solvers and communicators, with the expectation that they

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Trends in the market should also be considered Example Technology area

Demand trend

Java

Comments Popular development platforms will continue to grow, but the supply of practitioners will likely keep pace

Legacy (eg, CICS1)

Demand for legacy platforms will continue to decline, though companies may occasionally encounter scarcity of skill sets

Enterprise Mobility

Demand and the need for expertise will rise given an increasingly mobile workforce and customer base

Enterprise Security

Increased mobility, the digital marketplace, and the cloud (online channel, social media) will push demand even higher

Hadoop2

Cloud computing and big data are expected to increase demand for skill sets and knowledge related to distributed computing

TOGAF3

Architecture simplification is a critical topic for IT organisations, and demand for related skill sets is expected to grow significantly

Enterprise Information Management

Enterprise information management will be hot, with a focus on data architecture and support for big data/analytics

Customer Information Control System. Apache Hadoop is a software framework that supports data-intensive distributed applications. TOGAF is a framework for enterprise architecture developed and trademarked by The Open Group.

can pick up the skills required for a particular role. Leverage the network: Talent attracts talent, especially in technology functions. Investing in high-profile hires, potentially from non-traditional sources (for example, recruiting high-tech talent for enterprise IT roles), can help build buzz on the recruiting market. One company hired an experienced CTO and a senior software-product-management executive from a successful Internet player. Once these people came on board, the recruiters worked with them closely, leveraging their professional networks to identify additional candidates and using their reputations as a selling point.

Making Changes Happen

Which of these levers to apply, how to apply them, and in what

sequence depend heavily on a companyâ&#x20AC;&#x2122;s needs, existing capabilities, and organisational constraints. Hereâ&#x20AC;&#x2122;s how to integrate these levers to help win the war for technology talent. 1. Get an unvarnished picture of future needs and current capabilities: A technology talent strategy has to start with an insight into needs: will there be large investments in multichannel customer care? Which is a bigger priority: business innovation or quality and efficiency of IT delivery? Will cyber security risk management have to improve? At the same time, IT organisations must develop an unvarnished view of their current skills and capabilities, which people are leaving and why?; how current staff feels about their career experiences?; how staff is perceived outside the company?;

industry 2.0

- technology management for decision-makers | june 2012

Information Technology and how current recruiting and career-development processes work—or don’t work? 2. Develop a heat map of priorities: To focus efforts, leading organisations develop a heat map that shows the gaps between business needs and current skills, as well as risks related to those gaps. For example, a company might recognise that most of its developers grew up programming back-office applications, but that the business will need more sophisticated data analytics over the next two years, or that given a planned consolidation programme, the company can’t afford to lose any high-performing infrastructure engineers. Moreover, the heat map should be informed by the trends in the market and their impact on the availability of talent in the near future. For instance, the need for enterprise mobility is expected to continue rising, thereby increasing the demand and competition for talent in this area.

3. Map levers to needs, taking constraints into account: Not every lever is appropriate to every situation. Board exposure will motivate senior leaders but will not increase retention in a frontline data-centre operations team. In many cases, opening a new location or making an acquisition may not be feasible. Getting the right strategy in place requires systematically determining which potential levers will address each talent gap and risk. 4. Ruthlessly track and reinforce progress: To make sure the required, everyday behaviour changes occur, progress must be tracked against a set of metrics (for eg, retention of high performers, the number of external hires who succeed in their roles, and the percentage of staff receiving business-oriented training) and syndicated with senior leaders who can resolve issues and accelerate progress. Most technology organisations

face a daunting agenda: to build new capabilities, to do more with less, to keep systems running ‘all day, every day’, and to protect critical information assets. These initiatives cannot be addressed without exceptional technology talent. Traditional approaches for managing technology careers tend toward narrow technical specialisation. By adopting a wide range of talent-management levers, many technology organisations can foster the broad-gauged innovators and problem-solvers required to help exploit growing demand in cloud computing, big data, enterprise mobility, and a host of other areas. James Kaplan is a principal in McKinsey’s New York office, Naufal Khan is an associate principal in the Chicago office, and Roger Roberts is a principal in the Silicon Valley office. This article was originally published in McKinsey Quarterly, www.mckinseyquarterly.com. Copyright (c) 2012 McKinsey & Company. All rights reserved. Reprinted by permission.

supply chain

Creating a

Demand-dri Supply Chain

New techniques and technologies that enable better collaboration and coordination are making demand-driven supply chains a reality By John Budd, Claudio Knizek, and Robert Tevelson

june 2012 | industry 2.0

- technology management for decision-makers

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ven

true demanddriven supply chain (DDSC) has always been the Holy Grail of operations managers around the world. Even when forecasts are finely tuned, an unexpected spike or drop in demand can wreak havoc on production schedules, leading to problems such as stockouts and lost sales; inventory pileups, markdowns, and writeoffs; poor capacity utilisation; and declining service levels. Today, these margin-sappers are increasingly avoidable thanks to recent advances in technology that finally can make the DDSC a reality. The advantages are substantial. According to recent research by The Boston Consulting Group, some companies with advanced DDSCs carry 33 per cent less inventory, improve their delivery performance by 20 per cent, and reduce supply chain costs dramatically.

Illustration: AnilT

What is a DDSC?

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We define a DDSC as a system of coordinated technologies and processes that senses and reacts to real-time demand signals across a network of customers, suppliers, and employees. Supply and demand are easily matched if demand is steady over time with no change in volume or mix. As soon as demand changes, however, a company must adjust the supply levels accordingly at each step of the supply chain. But given the lag time before changes in demand are detected at various points along the chain, their effects are often amplified when they hit, leading to inventory shortages or pile-ups. Product promotions further exacerbate the problem by altering demand. Companies then tend to

overcompensate by slowing down or speeding up production lines, which can cause inventory levels to fluctuate wildly. This whipsaw effect is costly and inefficient for all participants. A DDSC offers real-time information on current demand and inventory levels to all supplychain participants so that they can react quickly and effectively—by revising forecasts given to their own suppliers, for instance, or by altering production or distribution plans—when unexpected changes arise. This allows companies to optimise planning, procurement, production, inventory replenishment, and order delivery for better service, higher sales, and lower costs overall.

The Four Pillars

A DDSC stands on four key pillars: Visibility: Demand and inventory levels must be transparent across the supply chain. Infrastructure: A robust infrastructure allows supply chain players to adapt quickly to short-term changes in supply and demand. Coordination: Tight coordination among all players allows companies to execute flawlessly and cost-effectively. Optimisation: By optimising the overall supply-chain performance—and not trying to only reduce costs—companies can deliver the best customer service and still reap major financial benefits. With a true DDSC, companies can become more responsive to changing market conditions, minimise stockouts and lost sales, maintain lower inventory levels, sharply reduce the costs of expediting orders, and make far better use of their operating assets. The goal of a DDSC is to tightly align and coordinate all

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- technology management for decision-makers | june 2012

supply chain players across the supply chain— much like vertical integration but without the investment. Instead of buying individual suppliers or contract manufacturers, for instance, companies aim for ‘virtual’ integration through a DDSC and gain many of the same benefits. This capability provides even small players with the advantages of vertical integration.

Evolving Capabilities

The concept of a DDSC is not new, of course. Toyota’s demanddriven kanban system was a key part of its just-in-time (JIT) production system as long ago as the late 1950s and during the 1960s. In the 1970s, the first electronicdata-interchange (EDI) system emerged, allowing multiple companies to connect and share information on a single network. The 1980s saw the first EDI network developed to connect companies in the transportation and financial services industries. By the 1990s, retailers had begun sharing pointof-sale (POS) data on inventory

levels with their suppliers. And during the past decade, Procter & Gamble and other leading consumer-products companies raised the bar again by using DDSC strategies—such as actively using POS data in their planning processes—to overcome market challenges, such as SKU proliferation, low-cost competition, and complex global supply chains. Recent industry and technology changes are driving the DDSC evolution forward. In the past, retailers were reluctant to share real-time POS data with their suppliers. Now, many companies (including Walmart) provide that information, because they recognise that partnering with suppliers can reduce stockouts, improve service levels, and boost overall sales and customer satisfaction. Moreover, dramatic improvements in processing speed and computing power can support the rapid, data-intensive processes underlying a DDSC. External storage capabilities—once una-

Mitigating the Risks

any companies often cite the following three risks as the reasons they are reluctant to fully commit to a DDSC. When inventory is too lean, we have no safety stock to address supply shortages or unexpected spikes in demand. In fact, when all SC players are connected to the same DDSC, better visibility can improve overall SC performance. The network effect allows you to work with multiple suppliers to address any shortages, and the DDSC gives suppliers greater visibility into your real-time needs, so they can react more quickly. And if your suppliers are part of the same DDSC, their own suppliers will also see what inventory is needed, so reaction times improve. We don’t want our proprietary data getting into wrong hands. Although, making sensitive information visible to other nodes on the SC can create potential points of vulnerability, there are ways to increase security. That’s why a trusted source of data storage is critical. To make a DDSC work, companies need very clear product, marketing, and operational strategies to help establish priorities and provide a compass for making decisions. These guidelines help ensure that employees don’t mindlessly fulfil every unexpected customer order. Finally, to truly reap the benefits of a DDSC, the operational processes must be as agile as possible.

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vailable or cost-prohibitive—are now virtually unlimited through external platforms and cloudbased systems. Taken together, these developments are making the DDSC a reality. Although retailers and consumer products companies are leading the way, other industries with complex products and logistical challenges will likely embrace DDSCs. For instance, manufacturers in the aerospace and defence industry need a high number of very specialised parts at the right time. Since ordering parts in advance and keeping high levels of inventory is costly, the companies must work closely with their suppliers to coordinate deliveries. Real-time visibility into demand and supply levels allows for unprecedented supply-chain performance. Inventory can be reduced throughout the system without hurting service levels. In fact, by lowering costs and improving forecasting accuracy, DDSCs benefit all supply-chain participants: suppliers, manufacturers, retailers, and consumers.

Six Success Factors

Despite the advances in technology and the growing willingness among supply chain players to share information, creating a DDSC is far from a plug-andplay exercise. Old processes, structures, and behaviours can hinder true change and sharply limit results. Getting all supplychain participants committed and involved is another challenge. Unfortunately, partial adoption leads to only partial benefits. By evaluating the experiences of leading companies that have implemented true DDSCs—and achieved major benefits—we’ve identified six critical success factors: 1. Set Up the Right Technology Infrastructure

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DDSCs Enable Supply Chain Participants to Share Information More Rapidly and Frequently The flow of information and products across a hypothetical supply chain Retailer’s store

Traditional supply chain

Demand spikes 250%

Retailer’s warehouse

Manufacturer’s warehouse

Manufacturer’s factory

Raw materials

1-2 days

1-2 days Total: 4-8 days

1-2 days Total: 10-18 days

2-3 days

1-2 days

2-3 days

Real-time information—no delay in passing information across the supply chain

Demanddriven supply chain

Demand spikes 250%

Information flow

1-2 days Total: 4-8 days

1-2 days

Product flow

Information is integral to DDSCs. That’s why a fast dataexchange platform that can share inventory data in real time among all participants is the backbone of any implementation. Since sharing real-time data across a supply chain generates a high volume of information, a DDSC requires strong processing capabilities. A trusted source of data storage is the third component. Data must be stored in a common location where it can be analysed and processed. But since this information is strategically critical to companies, all participants must have confidence in its security and reliability. To this end, mechanisms that restrict access to unauthorised parties must be in place. The system’s user interface must allow all participants to easily access and interact with the information. And the system must support operations; close coordination is needed between the IT and supply-chain functions to select and roll out the best tools.

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1-2 days

Sources: BCG analysis and case experience and expert interviews

The automation of key supply-chain processes can also help overcome behavioural roadblocks that impede DDSC improvements. For instance, a supplier with a DDSC correctly saw that a major retail customer was ordering the wrong volume of certain products. But the supplier’s order-fulfilment staff either didn’t believe the recommendations that the DDSC generated or were too risk-averse to push through product volumes that were different from those the retailer had specified. Automating the manual-fulfilment process allowed the system to bypass these human roadblocks and consistently deliver the optimal volume of products. Finally, a DDSC requires a scalable architecture that is flexible and robust enough to dynamically incorporate needed changes as they arise. In a world where supply chains are constantly evolving, this feature is critical to keep a network updated and to optimise the contribution of each

supply-chain participant. 2. Revisit Data Collection and Analysis Most companies trying to implement a DDSC will need to collect and share data on inventory levels more frequently and increase the degree of data granularity they analyse. Effective DDSCs typically require information on levels of finished goods and work-in-process inventory at plants. These systems also require SKU-level detail on items in stores, on warehouse shelves, and in distribution centres. Since the exact volume of on-shelf SKUs are hard to measure in a non-DDSC environment, it may need to be deduced on the basis of shipments to a store minus customer sales. It also may be necessary to remap customer information to make it more usable. A major pain point for many consumer-products companies is that POS data are inconsistent from retailer to retailer. As a result, consumer goods compa-

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supply chain nies may have to create a ‘shadow’ replenishment system that captures and translates retailer data into the required format. 3. Rethink Operations The classic elements of flexible manufacturing—such as short changeover times, access to temporary labour and external capacity, and the ability to produce small batches cost-effectively—make it easier to respond quickly to spikes and dips in demand, a key aspect of DDSC success. Companies should analyse their production capabilities and remove any obstacles that hinder agility. Otherwise, they will find it necessary to maintain excess inventory as a cushion. Flexible logistics are also critical. Companies need to rethink delivery planning and scheduling so that trucks can be rerouted quickly as needed and logistics are optimised overall. To lower its transportation costs, a food company switched from trucks to rail for much of its delivery. The increased visibility and lower

costs of the DDSC allowed the company to consolidate loads and take a longer path to market. Other companies have found that shrinking loads and reducing truck sizes is the right path to follow. The key is to analyse your specific situation and delivery targets and capitalise on the greater visibility you have into inventory levels throughout the supply chain. Procurement must change the way it operates, too, by finding flexible, highly responsive suppliers to work with and by rethinking inventory ‘safety cushions’ and ordering habits. To get supplier discounts, for instance, procurement typically buys raw materials in bulk, and transport costs are bundled in the price. As a result, large shipments and high inventory levels are often the norm. Instead, companies should consider unbundling transport costs and assessing the tradeoff between smaller, more frequent just-in-time shipments (so as to lower the carrying costs

The DDSC Concept has Developed over time Evolution of the DDsc

Milestones

DDSC maturity High

1 Pull-based production systems, such as the one developed by Toyota, start enabling leaner supply chains

Toyota’s kanban system

Adoption of DDSC initiatives by some Extensive EDI network sharing leading connects of POS companies transportation data and financial services companies

First EDI system

4 3

2 1 Low

1950-1969 1980-1989 2000-2009 1970-1979 1990-1999 Year

2 The first EDI system is developed, allowing multiple companies to connect to a single network 3 The first EDI network emerges to connect companies in the transportation and financial services industries 4 Retailers start sharing POS data, at the SKU level, with suppliers on a regular basis 5 Leading consumer-products companies, such as Proctor & Gamble, begin to adopt DDSC strategies to overcome market challenges

Recent industry and technology developments could take DDSCs to the next level Sources: BCG analysis and expert interviews Note: DDSC= demand-driven supply chain; EDI= electronic data interchange; POS= point of sale

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of inventory) and the penalty associated with sacrificing the volume discount. Another food company realised that its distributors kept excessive safety stock. By integrating this stock into its own inventory and then managing it centrally (on the basis of shared information about stock levels), the company reduced overall finished-goods inventory by ten days, freeing up working capital, cutting warehousing costs, and delivering fresher food. 4. Align Metrics The ultimate goal of a DDSC is to ensure the best service at the lowest cost. To this end, the performance targets and incentives of all supply-chain players must be aligned so that everyone is marching in the same direction. If retail customers are pushing suppliers to only reduce costs, then that’s what they will get. But if incentives to improve service levels are also in place— particularly during promotions— then suppliers will pay greater attention to this area. With the proper metrics, a company can constantly benchmark its supplychain performance and identify gaps and inefficiencies that can be addressed in partnership with suppliers. The most common measurements of DDSC success are reductions in inventory levels and working capital, fewer stockouts, faster and more accurate order fulfilment, and higher rates of customer satisfaction. By working to balance all of these objectives in a coordinated manner, all supply-chain parties can reduce their costs, increase sales, and improve profitability. Negative incentives can also be effective. For instance, retailers that want higher order-fulfilment rates can penalise suppliers that fall short by applying fines and charging for lost margin.

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Supplier contracts must be modified to guarantee that decisions made to improve the performance of the supply chain as a whole don’t hurt individual parties. For instance, if the demand for widgets exceeds the supply because of a successful promotion, the retailer will want the product manufacturer to boost production. But for the manufacturer, increasing output may not be profitable if it requires extra costs, such as additional labour or overtime. If analysis shows that the total incremental profit of selling more units is greater than the total loss for ramping up production, then producing more products is the right decision. But the manufacturer must somehow be compensated for operating at a loss, either through short-term payments or longer-term rewards. Only with transparency and common incentives can end-to-end economics be optimised. 5. Manage the Cost and Service Tradeoffs Before getting too lean, companies must be clear on the tradeoffs of maintaining lower inventory levels. Stockouts can lead to lost sales—a risk that may be unacceptable when gaining market share is a key strategic objective, when service is an important differentiator, or when the window of opportunity to earn a price premium is limited. High-tech companies with a firstmover advantage and pharmaceutical companies with a new blockbuster drug are examples of the latter. Segmenting products according to specific characteristics can help companies determine the categories in which the benefits of a DDSC would offset the added costs. These categories typically include high-margin products, high-tech or other products with a high cost of obsolescence, food

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DDSCs Have the Potential to Deliver Benefits to All SupplyChain Participants

Raw-material supplier

Manufacturer

Retailer

Reducing inventory

Decreasing working capital

Improving forecasting accuracy

Reducing transportation costs

Optimising infrastructure

Decreasing order-expediting costs

Reducing other operating costs (such as handling and warehousing)

Reducing head count (such as planners and buyers)

Decreasing sales-planning and operations-planning time

Reducing lost sales

Improving customer sell-through and satisfaction

=strong benefit

Consumer

=partial benefit

Sources: BCG analysis and case experience and expert interviews

or other perishables for which freshness is critical, products with highly variable demand (such as consumer durables), and products with rapid inventory turnover (such as fast-moving consumer goods). Segmenting customer accounts on the basis of purchase volume and profitability can also reveal where higher service levels could pay off. The key is being able to quantify the end-to-end costs and benefits of supply chain decisions. Because companies often lack the ability to perform these complex analytics, many default to pure cost reductions without considering the potentially negative impact on revenue or service. A DDSC promotes greater visibility into the bottom-line impact of higher service levels, greater manufacturing flexibility, and lower inventory levels across the supply chain.

6. Change Organisational Behaviour To work, DDSCs require major organisational and behavioural changes. Most companies are reactive order takers: when a retailer orders five cases of soda, that’s what the supplier sends. With a DDSC, the supplier’s employees can take a more proactive role, suggesting a larger or smaller order if consumption data show the need—or even contacting the retailer before an order has been placed if POS data shows that inventory is getting low. Convincing workers to move from a manual order-anddelivery management process to an automated one is another challenge. As a transition tool, a consumer products company used “deployment adoption reports” to gauge whether employees were following the

industry 2.0

- technology management for decision-makers | june 2012

supply chain guidelines of the new DDSC system that had been put in place. By explicitly measuring adoption rates, the company made it clear that the new system was a priority. A DDSC also requires crossfunctional coordination within a company. For instance, to eliminate ‘hidden’ supplychain costs such as expedited deliveries or excess inventory, various functions such as sales, procurement, manufacturing, and order fulfilment must work together and share responsibility for results. Silo-based decisionmaking rarely considers the end-to-end impact of various actions. Similarly, financial and performance metrics across the company must be realigned to encourage close collaboration across functions. Perhaps the greatest behavioural challenge for all DDSC participants is learning to trust

one another. In the consumer goods industry, for example, retailers must be willing to share their data and trust that suppliers will deliver the right merchandise at the right time. Consumer goods manufacturers must trust that retail buyers will reward their performance—and that closer alignment will lead to greater benefits for all. With their enhanced processes, tight coordination, advanced technology, and end-to-end visibility, DDSCs have the potential to revolutionise a wide variety of industries, including retail, consumer products, automotive, and aerospace and defence. By providing real-time information about demand and inventory levels to all supply-chain participants, a DDSC allows companies to optimise planning, procurement, production, inventory replenishment, and order delivery for better service, higher

sales, and lower costs overall. But only companies that truly understand the profound changes they must make to their organisations will reap the full benefits of a DDSC—and achieve a sustainable advantage in today’s fiercely competitive global economy. As a first step toward realising this advantage, we recommend that companies engage in an open dialogue with their supply-chain partners about the data they’ll need to exchange, the processes they’ll need to optimise, and the potential benefits of true partnership. John Budd is partner and managing director in the Dallas office of the Boston Consulting Group. Claudio Knizek is partner and managing director in the Washington DC office; Robert Tevelson is senior partner and managing director in the Philadelphia office.

facilities & operations

Grundfoss Goes

Green Leading pump manufacturer puts its philosophy into action at new plant

n 2011, when Denmark headquartered pump manufacturer, Grundfos, decided to put in a new plant at Chennai, the goal was to conserve resources and have a minimal impact on the environment. The company wanted to ensure that the new 60,000 sq ft factory would be built, operated and maintained in a sustainable and green fashion. "The overall Grundfos goal is that when this generation delivers planet Earth to the next generation, it should be a cleaner and more energising place than the place when we inherited," says the Group Chairman Niels Due Jensen. The company worked with green consulting firm, En3 Sustainability Solutions, to achieve the IGBC Green Factories Gold certification for its new plant. Today, the factory not only saves energy and water, but

june 2012 | industry 2.0

also provides a superior indoor air quality and healthy environment for its employees. So, how did they do it?

Site Sustainability Measures

• During the construction process, the company ensured the stacking and protection of top soil on-site, and reuse of the excavated soil for landscaping. Care was taken to minimise soil erosion and site disturbance • The building design incorporates several user-friendly features for differently-abled people like preferred parking spaces, ramps in factory area, easy accessibility to the entrances, etc • Provision of non-fossil fuelling facility for 6 per cent of the total parking capacity to promote use of alternative and low-emission vehicles has been made • Covering of factory roof area

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with high solar reflective index (SRI) material to reduce urban heat island effect • Reduction in light pollution through design of external lighting fixtures with no upward lighting, and use of lower lighting power densities

Water Conservation

• Rainwater harvesting captures 97.98 per cent of runoff volumes from the roof and nonroof surfaces, and channels it to storage and recharge pits • Special efforts have been taken to minimise water use by installing water-efficient fixtures. Low flow dual-flush toilets, sensor based urinals and other low flow fixtures have been installed to reduce potable water consumption by more than 49 per cent • Sewage treatment plant treats 100 per cent of onsite wastewa-

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iGbc Scores SS: Sites

WE: Water

EA: Energy

11 MR: Materials

16 16

EQ: Indoors

ID: Innovation

At a Glance Building Type Built-up area Completed Location Green Consultant Rating System Rating Achieved

ter for reuse. All non-process wastewater is treated and reused for landscaping.

Energy Conservation

• A detailed energy analysis and modelling has been done to ascertain various options for energy savings with cost-benefit/payback analysis including high performance glazing, low u-value walls and roof, energyefficient VRV systems for air conditioning and LED-based low energy lighting systems • In line with international standards, the refrigerants used in the air conditioning system are environment friendly and have very low ozone depleting and global warming potential • Separate meters for process and non-process loads have been installed for continuous monitoring of energy and water

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5 5 Total

: Factory : 60,000 sq ft : July 2011 : Chennai : En3 Sustainability Solutions : IGBC Green Factories : Gold

74 Points Possible

consumed within the factory •T he generator sets provided in the factory building meet CPCB norms for emissions and noise compliance.

Resource Management

• The project has ensured up to 96 per cent of total construction waste has been recycled • The project has achieved a combined recyclable content value of 27 per cent of total material by cost, thereby reducing the exploitation of virgin material • About 87 per cent of materials used in construction have been extracted and manufactured locally or regionally, thereby reducing the pollution associated with transportation • The project has used salvaged materials for 17 per cent of the building materials by cost. The salvaged materials, including

100

Points Achieved

salvaged containers and storage bins, have been reused for storing materials • All wood used in the project has been FSC (Forest Stewardship Council) certified.

Indoor Environmental Quality

• Non-air conditioned areas have been naturally ventilated by ensuring a significant ratio of openings to the carpet area. Additionally, all air-conditioned areas are provided with fresh air in line with international ASHRAE standards • The entire building interior is a non-smoking space • Adhesives, sealants, paints and coatings used in the building are low VOC (volatile organic compounds) to minimise organic emissions • The composite wood products used in the factory do not contain urea formaldehyde compounds that would be harmful to occupants.

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management & strategy

Retaining Key Employees

Many companies throw incentives at star performers during times of change. There are less costly solutions to ensure continuity and loyalty By Sabine Cosack, Matthew Guthridge, and Emily Lawson

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oo many companies approach the retention of key employees during disruptive periods of organisational change by throwing financial incentives at senior executives, star performers, or other ‘rainmakers’. The money is rarely well spent. In our experience, many of the recipients would have stayed put anyway; others have concerns that money alone can’t address. Moreover, by focussing exclusively on high fliers, companies often overlook those ‘normal’ performers who are nonetheless critical for the success of any change effort. Our work with companies in many sectors (among them, energy, financial services, health care, pharmaceuticals, and retailing) suggests there is a better and less costly approach to employee retention—and one that will serve companies well as they merge, restructure, and reorganise to seize strategic opportunities as the economy picks up. It starts with identifying all key players, but targeting only those who are most critical and at the risk of leaving. These people are then offered a mix of financial and non-financial incentives tailored to their aspirations and concerns. A European industrial company applied this approach during a recent reorganisation and found that it required only 25 per cent of the budget that had previously been spent on a broad, cash-based scheme. Here are three suggestions for companies with similar hopes of keeping their top talent without breaking the bank:

Credit: www.Photos.com

Finding the Hidden Gems

HR and line managers need to work together during times of major organisational change to identify people whose retention is critical. Yet too often companies simply round up the usual suspects— high-potential employees and senior executives in roles that are critical for business success. Few look in less obvious places for more average performers whose skills or social networks may be critical—both in keeping the lights on during the change effort itself, as well as in delivering against its longer-term business objectives.

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These ‘hidden gems’ might be found anywhere in the company: for example, the productdevelopment manager in an acquired company’s R&D function who is nearing retirement age and no longer on the company’s list of ‘high potentials’—yet who is crucial to ensuring a healthy product pipeline; or the key financial accountant responsible for consolidating the acquired company’s next financial report. Even if the employees’ performance and career potential are unexceptional, their institutional knowledge, direct relationships, or technical expertise can make their retention critical. In one merger we recently observed, certain sales support personnel who filled orders and took inventory turned out to be just as important as the star sales people. Once HR and line managers have generated a thoughtful and more inclusive list of key players (usually 30 to 45% of all employees), they can begin to prioritise groups and individuals for targeted retention measures—in our experience, 5 to 10 per cent of the workforce. The key is to view each employee through two lenses: first, the impact his/ her departure would have on the business, given the focus of the change effort and his/her role in it; and second, the probability that the employee in question might leave. When a European industrial company conducted this exercise, it mapped the outputs on a risk matrix. The results were sobering. The company had been launching a new centralised trading unit—requiring almost all traders and their support staff to relocate, with half of them heading to another country—and was steadily losing people. The risk matrix revealed that another 104 people were likely to leave. Among them were 44 employees who were critical for the success of the trading unit. To be sure, some were traders but most were IT, finance, and administrative staff with unique knowledge of the unit’s systems.

Mindsets Matter

One-size-fits-all retention packages are usually unsuccessful in persuading a diverse group of key employees to stay. Instead, companies should

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management & strategy tailor retention approaches to the mindsets and motivations of specific employees (as well as to the express nature of the changes involved). When executives at the European industrial company looked beyond their standard retention package (bonuses plus compensation for the costs of the move) and focussed instead on the needs of individual employees, they found a more nuanced situation than they had anticipated. Among the key people at risk were two main groups with two different mindsets. One consisted of individuals who were worried about relocating because it would uproot their families. The people in the other, more career-driven group didn’t mind living and working abroad but wondered, as they faced change in any event, whether staying or searching for another

bonus but focussed primarily on the organisational chart of the new, centralised unit, which had been designed from scratch. For people who had held senior roles in their local organisation, it was essential, for example, to learn about their new responsibilities and how many direct reports they would have; for many of the more junior people a key question was who their bosses would be. Also, high on the agenda was a dialogue with each individual about his/her future career and leadership opportunities in the context of the unit’s new strategy. This targeted approach, which cost just onequarter as much as the broad financial incentives plan the company had previously applied, succeeded in stabilising the new unit. One year after its launch, some 80 per cent of the staff who received During a reorganisation effort, one company found that 44 special attention had employees critical to the company’s success were likely to leave started to work in the new Risk heat map for European industrial company, figures indicate number of location—a significantly employees in category (total = 497) higher share than for the Low risk Medium risk High risk group that didn’t receive Unique skills/knowledge; this attention. Since its a pivotal person in the 37 22 9 8 2 founding, the unit has High organisation increased its sales by more Important resource whose than 30 per cent and its specific skills/knowledge 50 39 15 19 69 require careful attention earnings before interest Difficulty in replacing this Important resource, but and taxes (EBIT) by more person person’s competencies are 74 28 21 14 14 than 90 per cent. shared and not at risk General competencies in own area

It is More Than Money

As the European industrial company’s experiHigh No specific competencies; 3 1 2 3 3 ence suggests, financial easy to find in the market incentives play an impor0 25 50 75 100 tant role in retention—but Probability of person leaving organisation, % money alone won’t do the Based on market demand for employee’s skills, latest salary trends, existing competitive offers, family situation, and known preferences and concerns trick. Praise from one’s manager, attention from leaders, frequent promoemployer would best further their careers. tions, opportunities to lead projects, and chances to In one-on-one conversations with the people join fast-track management programmes are often in the family-oriented group, managers explored more effective than cash. Indeed, a McKinsey Quarspecific concerns and discussed how the company terly survey found that executives, managers, and could add to the measures already in place to employees rate these five non-financial incentives increase the likelihood of retaining these individuamong the six most effective motivators when the als. On the menu of incentives: an increase in base main objective of the exercise is retaining people. pay, assistance in finding schools and kindergarOne financial services firm undertaking a recent tens for their children, career counselling for their cost-cutting initiative elected to use only non-finanspouses, language training, and alternative work cial measures—including leadership-development arrangements so employees could work at home or programmes—to retain the pivotal players it had commute instead of relocating. identified as being at risk of departure. One year Meanwhile, in the conversations with the careerlater, none of those players had quit. driven people, managers offered them a cash Leadership opportunities are a powerful

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incentive in any sector. In a pharmaceuticals merger aimed at building the North American acquirer’s presence in Europe, some 50 middle managers from the acquired company accepted invitations to join trans-Atlantic teams with key roles in integrating the two organisations and developing business strategy. The chance to network with the acquirer’s senior people and develop leadership skills during the two-year programme signalled to these high-potential employees—in many cases, people who had been slated for promotion before the merger was announced—that they had a promising future in the new organisation. For the acquirer’s senior executives, one benefit was the opportunity to assess first hand a potential next wave of top management talent. The programme was one part of a carefully designed communication and engagement plan that made it possible to sustain the energy of the 50,000-person strong workforce during the merger. The company ultimately needed to offer only 750 targeted employees a financial incentive.

the remaining two-thirds to be paid out a year later—dependent in part on the recipients meeting defined performance criteria such as the successful transfer of systems from the acquired company. Targeting retention measures at the right people using a tailored mix of financial and non-financial incentives is crucial for managing organisational transitions that achieve long-term business success; it’s also likely to save money. Still, executives mustn’t view employee retention as a one-off exercise where it’s sufficient to get the incentives packages right. Rather, as bestpractice approaches built on continuous attention and timely communication every step of the way to help employees make sense of the uncertainty inherent in organisational change. Ultimately, what many employees want is clarity about their future with the company. Creating that clarity requires significant hands-on effort from managers, including the ongoing work of tracking progress so that companies can quickly intervene when problems arise. Sabine Cosack is a consultant in McKinsey’s Vienna office;

Targeting Works

When financial incentives are required, it is important to design them appropriately and use them in a targeted way. For example, one-third of the retention bonus during a merger might be paid to pivotal staff even before the deal is closed, with

Matt Guthridge is an associate principal in the London office, where Emily Lawson is a principal.

This article was originally published in McKinsey Quarterly,

management & strategy

The Water

Masters India’s largest industrial water treatment company wants to dominate the world stage, and is putting into place a carefully crafted strategy to realise its ambitions By Dhiman Chattopadhyay

t’s a blazing hot day in Chennai. But, despite the stifling heat, a buzz of excitement envelops the global headquarters of VA Tech Wabag— the Chennai-based Indian MNC and India’s largest water treatment technology firm. Employees appear to be in a state of perpetual rush. It is only later that you realise that this is just a reflection of the way the company’s top management thinks

june 2012 | industry 2.0

and acts—fast and furious, with a clear end goal in sight. The excitement is not without reason. The Rs 1,400-crore organisation is on the verge of committing itself to a five-year plan that would not only make it a €1 billion conglomerate by 2017, but also a leading player in the water treatment technology sector across three continents. The company has made a formal commitment to its

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shareholders to grow by nearly 50 per cent in the next financial year, and reach the billion dollar mark by 2017. Spearheading the effort are co-founders Rajiv Mittal, Managing Director and S Varadarajan, CFO. VA Tech Wabag is no stranger to the limelight though, and sceptics who are sharpening their knives, particularly given the current slowdown in the Indian economy as well as across

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Europe where VA Tech has a significant presence, would do well to check the record books. In 2005, VA Tech Wabag India was merely the domestic unit of the Austrian multinational VA Tech AG. The parent company wanted to offload or close down the water treatment technology business, including the entire Indian operations. At this juncture, most CXOs would have simply looked for newer, and hopefully better, prospects elsewhere. Instead Mittal, aided by Varadarajan, created a flutter by sealing an audacious ‘management buyout’. This made the Indian arm of VA Tech Wabag an independent entity, fully owned by the new Indian management. By 2007, VA Tech Wabag India was facing a slew of challenges. Siemens, the new owner of VA Tech Wabag (the holding company) wouldn’t allow Mittal and Varadarajan to use the ‘VA Tech Wabag’ name. They also demanded a 100 per cent bank guarantee if the Indian company wanted to use references of successful projects carried out by the erstwhile owners. The Wabag India management was also acutely missing the expertise and skills provided by the erstwhile European owners. “While we dreamt of becoming an Indian MNC, the buyout deal of 2005 denied us the rights to expand into areas where VA Tech Wabag Europe had interests. We wanted to grow fast, become an MNC, retain our brand name and get

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access to all the references which are crucial for any infrastructure firm. It called for some very bold steps,” recalls S Varadarajan, Co-founder, ED and CFO, as we sip coffee and chat. ‘Bold’ would be an understatement to describe what Mittal and Varadarajan did next. In a €70 million liability deal, the duo acquired the erstwhile parent company from Siemens. Overnight, from being a small Indian company, VA Tech Wabag India now became a leading player in the water treatment engineering sector with 65 projects in 19 countries across Asia, Africa and Europe and the owners of over 100 patents. And the Austrian and German executives who were the bosses till 2005, now started reporting to Mittal and Varadarajan! “Nothing like this had ever been done in Indian corporate history. People were shocked, and there were many experts who opined that we would never be able to succeed with such a huge deal. After all, our former parent company was twice our size. Even ICICI Venture, our principal VC, was not initially convinced about the deal. Clearly, we had to prove our detractors wrong,” says Mittal as he recalls those heady days. Come 2010, and the country was still recovering from the economic slowdown and much of Europe hadn’t yet overcome the global recession of 2009. Yet, in the midst of such uncertain times, VA Tech Wabag led by

Mittal and Varadarajan decided to go for an IPO. Hectic activity began once again, and the entire finance team under Varadarajan stepped up to make this dream come true. The IPO was valued at Rs 475 crore and the Rs 5 face value stock was priced at a steep Rs 1,310. The issue opened on September 22 and closed on September 27. The result? The issue was oversubscribed by 36 times with some segments being oversubscribed by 100 per cent! On the day of the listing, the stock prices took precisely three minutes before registering a 33 per cent rise. The employees-turned entrepreneurs have touched and crossed several key landmarks and milestones. “When we touched Rs 100 crore in 2003 we were the first in India in the water treatment area to reach the mark,” recalls Varadarajan. The fact that they could get bankers and venture capitalists on their side from Day 1, also speaks volumes for the never-say-die spirit that these two gentlemen and their senior colleagues. “Overnight we became entrepreneurs! Our story was very new. No management buyout has happened before. We managed to convince banks with our plans, and they extended a line of credit. We set up Rs 225 crore of credit lines with banks within a month,” recalls Varadarajan. True, there were initial feelings of insecurity and uncertainty amongst employees, some of whom feared that losing the

industry 2.0

- technology management for decision-makers | june 2012

management & strategy MNC tag would hurt business. Others were not sure whether a change of management would mean that Mittal and Vardarajan would no longer be there. “We were apprehensive since it was not clear whether the MD and the CFO would remain or sell out. But once Mittal addressed us and assured us that they would be buying out the Indian arm, it came as a great relief. In fact, we started working twice as hard since then,” recalls CR Pradeep, AGM-Projects who has been with Wabag since 1997. Pradeep now heads one of Wabag’s most prestigious large projects—a sea water desalination plant in Chennai.

“The future of every country will be in desalination, reuse and recycling of water” — Rajiv mittal MD, VA Tech Wabag

june 2012 | industry 2.0

“We wanted to grow fast, become an MNC, retain our brand name and get access to all the references” — S Varadarajan CFO, VA Tech Wabag

Others like TV Gopal the Chief PR manager of the company who has been here for over 14 years, agree that Mittal and Varadarajan’s calming presence has helped all of them. “Earlier in 1998 we were going through a tough time, I remember Mittal’s mail to all of us. The subject line read: ‘Relax’. It left such a deep impression on us.” But challenges remained in several areas. “Our growth opportunities were limited by some strangling clauses in the 2005 buyout agreement. For one, we were not allowed to take our business beyond South Asia. We were already present in 15 Indian states, so further growth within India looked unsure at the time,” recalls Varadarajan. The principal investor (ICICI Venture) had also made it clear that they would look at an exit plan in three years. So, in a 2006 workshop, the co-founders (there were four of them initially) made a commitment to themselves to

- technology management for decision-makers

become a listed company, reach a turnover of Rs 1,000 crore, acquire an European company and get an export order of $50 million—all within five years. “All the four targets have now been achieved. The last of them was reached when we touched Rs 1,000 crore for our Indian operations in FY 2012. Overall we are now close to Rs 1,500 crore,” says Varadarajan. Preparing for the Unknown But clearly the world is not enough from this enterprising duo and their team. So, four years after the landmark acquisition of its erstwhile parents and 18 months after the IPO, VA Tech Wabag is set to take the next step: launch a five-year plan to become a one-billion-euro-Indian MNC with a leadership position in three continents. Ambition, apparently, is not a weak point with Mittal and Varadarajan. The company is sitting on a Rs 400crore cash reserve as it readies to move into its state-of-art

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nine-storied office in suburban Chennai. “We want to use the cash reserve to make a strategic acquisition. We would probably look at a company with a turnover of about Rs 700 crore, and based somewhere in Europe,” Varadarajan says in a matter of fact manner. These are not idle dreams. “Between March 2005 and March 2011 the company grew almost 600 per cent, from Rs 230 crore to Rs 1,230 crore. By 2015, I expect this figure to touch Rs 2,500 crore. I expect to close FY 2012-13 at around Rs 1,700 crore,” says Varadarajan. Recently, VA Tech signed a €100 million order book through its Austrian subsidiary. While a Rs 300-crore project in Libya had to be put on hold after war broke out in the African

nation, VA Tech is hopeful that 2012-13 will be a major year in its journey. “Libya is almost back on track and work for us should resume soon,” says an optimistic Varadarajan. Another significant step the company has taken is to make a concerted effort to train and create a cadre of leaders. SBUs are now run by senior personnel, and not just the founders! Still, if indeed Wabag has to reach that magic billion euro mark in 2017, where is the main growth going to come from, we ask? “Our operation maintenance business has also gone from a mere Rs 15 crore in 2005 to more than Rs 130 crore in 201213. This will be a key driver of our growth,” explains Mittal. The company is also consciously trying to reduce its costs in

Austria—a high-cost centre. It has made a sharp increase in comparatively low cost locations like Turkey, Romania, Tunisia and Algeria. All of them have become profit generating centres in less than two years. “Going forward we want to see our revenues coming equally from our Indian and global operations. Right now its loaded in favour of India at 70:30. We want that to change by becoming a leader in emerging markets of Europe and Africa,” say Varadarajan and Mittal in unison. The final word comes from Mittal when he says, “Clean drinking and pure water will become the world’s greatest need in the years to come. The future lies in desalination, reuse and recycling of water. This is where we will play a lead role.”

bookshelf Leaders Make the Future

Leadership by Example

By Bob Johansen and John R. Ryan Price: $29.95 Hardcover: 264 pages Publisher: Berrett-Koehler Publishers

By Sanjiv Chopra and David Fisher Price: $15.47 Hardcover: 224 pages Publisher: St. Martin’s Press

We are in a time of disruptive leadership change. In a VUCA world—one characterised by volatility, uncertainty, complexity, and ambiguity—traditional leadership skills won’t be enough, noted futurist Bob Johansen argues. This powerful book explores the external forces that are shaking the foundations of leadership and unveils ten critical new skills that will be required in the future. In this second edition, Johansen is joined by the prestigious Centre for Creative Leadership. The book has been updated a new ten-year forecast and new examples, and incorporates the lessons Johansen has leaned about applying the new leadership skills in the three years since the first edition appeared. In addition, Johansen deals with two new forces that are shaping the future. The first is the ‘digital natives’, or young people who have grown up in a completely digital world. The second is cloud-based computing, which will enable new forms of connection, collaboration and commerce and will greatly facilitate reciprocity-based innovation.

Likeonomics By Rohit Bhargava Price: $24.95 Hardcover: 224 pages Publisher: Wiley, John & Sons

We live in a world where amazing products fail, qualified candidates don’t get hired, and brilliant ideas languish. Welcome to the world of Likeonomics, where deals are made on golf courses, likeability often trumps competence, and the most important skill anyone can learn is how to build deeper and more trusted personal relationships in business and life. The concept is based on 5 big insights into communications that have fundamentally shifted our understanding of how people choose to believe or reject ideas. Each of these insights is something that has been reported over and over in media, extensively analysed in bestselling business and psychology books or spotlighted in trend reports. Rohit Bhargava offers a new vision of a world beyond the ‘Like’ button, where using likeability to build more powerful personal relationships is the real key to surviving the ‘modern believability crisis’. Written in a storytelling style, the book shares real-world stories of brands and people who have used these principles to be successful.

june 2012 | industry 2.0

- technology management for decision-makers

Very few of us are leaders all the time, in everything we do, but all of us can become a leader in specific situations. Based on the talks Dr Chopra, Professor of Medicine at HMS, has given to more than 60,000 people in at least seven countries, the ‘Leadership’ mnemonic that he explains in the book encompasses: listening, empathy, attitude, dreams, effectiveness, resilience, sense of purpose, humility, integrity and principles. Drawing from his experiences as well as the writings and lives of great leaders throughout history, this easy-to-read, inspiring book will serve as a reminder and guide to aspiring leaders.

Make Difficult People Disappear By Monica Wofford Price: $21.95 Hardcover: 196 pages Publisher: Wiley, John & Sons

We all have to work with people we can’t stand to be around. Our challenge is to find creative ways to handle these difficult people. In the fable Make Difficult People Disappear, the skills and strategic plan needed to change your mindset are told through a clear, concise story. By first understanding the four main personality types in the workplace: commander, organiser, relater, and entertainer; readers can devise effective strategies for diffusing unproductive and damaging behaviour. Complete with a step-by-step action plan, Make Difficult People Disappear serves to replenish confidence and build skills in leading those who until now you didn’t know how to manage.

The Science of Ice Cream By Chris Clarke Price: $42.00 Hardcover: 234 pages Publisher: The Royal Society of Chemistry

Ice cream has been in existence for at least 300 years, though its origins probably go much further back in time. Before the development of refrigeration, ice cream was a luxury reserved for special occasions but its advance

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to commercial manufacture was helped by the first ice cream-making machine patented by Nancy Johnson in Philadelphia in the 1840s. The second edition of The Science of Ice Cream has been fully revised and updated with new material. The book still begins with the history of ice cream, subsequent chapters looking at the link between the microscopic and macroscopic properties and how these relate to the ultimate texture of the product you eat. Information on nutritional aspects and developments in new products and processes for making ice cream have been added and the books is completed with some suggestions for experiments relating to ice cream and how to make it at home or in a school laboratory.

States: proof that America is the land of opportunity, but also a classic example of the corporate pirate who treats foreign nations as the backdrop for his adventures Rich Cohen’s brilliant historical profile unveils Zemurray as a hidden kingmaker and capitalist revolutionary, driven by an indomitable will to succeed. Starting with nothing but a cart of freckled bananas, he built a sprawling empire of banana cowboys, mercenary soldiers, Honduran peasants, CIA agents, and American statesmen. From hustling on the docks of New Orleans to overthrowing Central American governments, from feuding with Huey Long to working with the Dulles brothers, Zemurray emerges as an unforgettable figure, connected to the birth of modern American diplomacy, business and war.

Work Happy: What Great Bosses Know

Leadership Isn’t For Cowards

By Jill Geisler Price: $24.99 Hardcover: 368 pages Publisher: Center Street

By Mike Staver Price: $24.95 Hardcover: 240 pages Publisher: Wiley, John & Sons

Management guru Jill Geisler has coached countless men and women who want to build their leadership skills, help employees do their best work, and make workplaces happy and successful. In Work Happy, she provides a practical, step-by-step guide, based on real-world experience, respected research, and lessons that will transform managers and their teams. It’s a workshop-in-a-book, designed to produce positive, immediate and lasting results. Jill Geisler offers concrete steps for improving each element of management including collaboration, communication, conflict resolution, motivation, coaching, and feedback, so that everyone on the team-whether in the office or working offsite-can do their best.

This book offers straightforward steps to leading courageously, and practical tips for driving performance. Courageous leadership means toughening your approach by being rigorous in the application of your values through the company culture. It means confronting and challenging people, and not letting them get away with being less than you know they can be. The path to courageous leadership has six components: accept your current circumstances, take responsibility, take action, acknowledge progress, commit to lifelong learning, and kindle relationships.

The Transformative CEO By Jeffrey J. Fox Price: $22.00 Hardcover: 256 pages Publisher: McGraw-Hill Companies

The Fish that Ate the Whale By Rich Cohen Price: $27.00 Hardcover: 288 pages Publisher: Farrar, Straus and Giroux

When Samuel Zemurray arrived in America in 1891, he was tall, gangly, and penniless. When he died sixty-nine years later, he was among the richest, most powerful men in the world. In between, he worked as a fruit peddler, a banana hauler, a dockside hustler, and a plantation owner. He battled and conquered the United Fruit Company, becoming a symbol of the best and worst of the United

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While Jeffrey Fox literally wrote the book on How to Become CEO, and radio talk show host Robert Reiss has explored strategy with some of the world’s biggest business legends, in this book they identify the key traits and characteristics that describe this remarkable type of leader. Filled with fascinating insights from superstar CEOs, this book puts you right on the front lines with the people who have transformed businesses with spectacular success. The book provides a new definition of leadership and shows how anyone can become a transformative leader.

industry 2.0

- technology management for decision-makers | june 2012

product update Profile Measurement Machine

eorge Products has developed a profile measurement system that employs edge detection and geometric recognition algorithms for automatic, real-time measurement. The device has 3.40x2.80 inches field-of-view that accommodates parts up to 33/8 inches long x 2 Âž inches diameter. Accuracy is Âą0.0002 inches, and measurements are taken at rate of six times per second in working with a shadow of the part. Every measurement on the part is instantly compared to dimensional tolerances. The system then reports pass, warn, or fail status. George Products Company Tel: +1-302-4490199 Website: www.pobin.com

Wet Abrasion Scrub Tester

QC has launched a new wet scrub washability tester that can be used to test various kinds of materials, including hiding power test charts, scrub panels, metal, plastic, and wood panels. The settings are pre-set in and parameters are fully flexible. The cycle speed (1 to 60 strokes/min), stroke length (2 to 300 mm), pump volume (0 to 3 mL/min), number of cycles, and test duration can be set by the operator. It has two dosing pumps which allow simultaneous testing of two different media. The volumes can be set individually.

DC Motor Controller

umore Motors has developed microprocessorbased DM4400 PWM series single quadrant DC electric motor controllers. The series is available for 12 Vdc and 120 Vac input voltage applications. Integral onboard motor controls eliminate challenges in the remote placement of motor control and associated wiring. Additional features of the product include adjustable IR compensation, current limit, and three speed button settings, and external inhibit input. Custom DC motors and gear motors equipped with the DM4400 DC motor controls are suitable for applications requiring multiple output speeds, such as fans, blowers and conveyers, and applications requiring constant speeds at varying loads like fluid power or pumps. Dumore Corp Tel: +1-888-4678288 Website: www.dumoremotors.com

Bench Rod Oven

incoln Electric has launched a new HydroGuard Bench Rod Oven to protect stick electrodes from damaging moisture pickup, a major contributor to weld cracking and porosity. The oven holds up 159 kg of stick electrodes up to 46 cm in length, enough for multiple operators in almost any fabrication shop or maintenance operation. The oven has flexible interior configuration with removable shelves for pre or post-heating of welded parts, plus a top-mounted shelf that provides surface to take notes and store documentation or tools. Lincoln Electric Co Tel: +1-888-9219353 Website: www.lincolnelectric.com

Pressure Temperature Sensor

TQC BV Tel: +31-180-631344 Website: www.tqc.eu

utomation Systems Interconnect has introduced new line of solar connectors, the ASIPV series, that are compatible and inter-mateable with industry standard 4 mm connectors. The connectors are available with a 1000 Vdc (IEC), 600 Vdc (UL) and 25A rating. Both male and female contacts have a wire range of 12 to 10 AWG. The connectors feature snap lock mating for secure connections.

merican Sensor Technologies has launched a combination pressure/temperature sensor, and a pressure/temperature transmitter. This dual output configuration reduces process penetration points and leaks in critical systems such as hydrogen, oxygen, heavy oil processing, hydraulics, analysers, offshore, pipelines and ammonia systems. Model AST46PT offers pressure ranges up to 20,000 psi, while Model AST20PT ranges up to 45,000 psi. Featuring a one-piece body construction, the microprocessor-controlled devices are available in temperature ranges from -40 to 250Â°F. Both models are suitable for low-power systems as both a pressure and temperature reading are generated with the power consumption of one sensor.

Automation Systems Interconnect Inc Tel: +1-877-650-5160 Website: www.asi-ez.com

American Sensor Technologies Tel: +1-973-4481901 Website: www.astsensors.com

Solar Connectors

june 2012 | industry 2.0

- technology management for decision-makers

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Positioning System

2W is offering a dual-head, two-axis voice coil air bearing positioning stage (VCS15050-AB-LV-2) for precision applications. Each head is driven by a NCC moving coil type linear actuator, and is guided by two porous carbon air bushings floating on two precision parallel shafts. Each voice coil has a 38.1 mm stroke, generates 37.4N of continuous force, and 112N of peak force. The product is supplied with two non-contact analogue output LVDTs. H2W Technologies Inc Tel: +1-661-2512081 Website: www.h2wtech.com

Datamax-O’Neil Tel: +1-407-5788007 Website: www.datamax-oneil.com

Tube Fittings

Wire Stripper

latinum Tools, a provider in solutions for the preparation, installation and hand termination of wire and cable, has introduced its new BR1 Multi-Stripper. Measuring 5x3.25x1 inches and weighing 3.7 oz, the BR1 Multi-Stripper is capable of working with diverse voice, data, and video cable types or sizes. Pre-set coax cassette blades are included along with an adjustable stripper for twisted pair and audio cables. The tool comes with braid comb for folding braid back over cable jacket. Platinum Tools Tel: +1-800-749-5783 Website: www.platinumtools.com

Low Vacuum Chamber

bbess Instruments is offering a digitally controlled low vacuum (LV) chamber for use in a variety of applications, including degassing. Rated for 10 to 4 Torr service, the product comprises cylindrical or cuboid chamber, digital gauge, automated pump and vent valves, and manual vent manifold. The chamber prevents over pumping by allowing operator to limit operational vacuum level. In event of power outage, the system permits a manual vent, and also allows for manual chamber burping while chamber is being pumped down to its set point. Abbess Instruments & Systems Tel: +1-508-8818811 Website: www.abbess.com

Bar Code Label Printer

atamax-O’Neil has introduced a new high-performance industrial printer. With 64 MB flash and 32 MB DRAM, the model features die-cast aluminium frame, metal cabinet, gear-driven design, and abrasionresistant print heads. The modular design of

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the printer facilitates in-field upgrades, with options such as internal rewind, thermal transfer, and WLAN. The printer can automatically adjust to heat, speed, darkness to ensure optimal print quality.

he Heyco-Flex III liquid tight fittings for flexible, non-metallic tubing are available in straight-through and 90° sweep styles with NPT threaded hubs. Designed to accelerate and facilitate installation, they provide a permanent assembly. Nominally rated for NEMA Type 3R applications, they are rated for NEMA 4 and 4X applications when used with Heyco-Flex III Tubing. Heyco Products Tel: +1-800-5264182 Website: www.heyco.com

Data Logging Panel

JE-Rhombus has developed a data logging control panel that can control one or two 120/208/240V, single-phase pump(s) in water and sewage installations. The control panel connects to a laptop computer for system programming, monitoring, and reporting. A Modbus port on inside door connects to Windows-based PC for downloading of system events. The product utilises a floatless C-Level sensor. SJE-Rhombus Tel: +1-888-3425753 Website: www.sjerhombus.com

Thread Milling Cutters

alter has developed a new thread milling cutter with a countersink made of extremely wear-resistant and tough ultra-fine-grain carbide. The cutter has a helix angle of 27o with a shortened flute runout; internal coolant supply from as low as thread size M4; a 90o countersink angle; and a multilayer TiCN coating that permits higher cutting speeds and longer tool life. It can be used for all materials up to a hardness of 48 HRC. Walter USA Inc Tel: +1-800-9455554 Website: www.walter-tools.com

industry 2.0

- technology management for decision-makers | june 2012

product update Solenoid Pump

Servomotor

ee Products is offering the LPL2 inert solenoid pump with a port head design that allows both tubing connections and manifold mounting for optimum design flexibility. Consuming 2.5W in 12V or 24V operation, the unit dispenses 50 ÂľL per shot. Designers can test the fluidic system using 1/16 inch soft tubing, and then manifold mount the pump using standard O-rings once the system design is finalised. The electrical interface of the unit features a contoured end-cap that provides secondary connector retention. Lee Products Ltd Tel: +44-1753-886664 Website: www.leeproducts.co.uk

3D Scanner

ollmorgen is offering IP69K standard sealed hygienic servomotors. The motors feature an all stainless steel round housing design that promotes long life and reliable operation in harsh food, beverage and pharmaceutical applications, and can be subjected to frequent highpressure wash down cleaning. With a robust design that eliminates the need for additional housing, an innovative venting system that eliminates the need for machine builders to supply compressed air to the motor, and a 3 and 6 metre standard flying lead option that eliminates the need for intermediate cables, the W series simplifies machine design and component integration. The units are available in 16 frame/stack combinations, delivering continuous torque to 80 Nm and peak torque to 390 Nm at rated speeds to 7,500 rpm for food, beverage, and pharmaceutical applications. Kollmorgen Corp Tel: +1- 540-6333545 Website: www.kollmorgen.com

Tactile Switch

reaform has unveiled its new line of Metrascan 3D optical CMM scanners for demanding quality control and reverse engineering applications. Featuring Creaformâ&#x20AC;&#x2122;s TRUaccuracy technology, the Metrascan ensures highly-accurate dimensional surface measurements, regardless of the measurement environment (instability, vibrations, thermal variations, etc), or operator skills. The combination of a Metrascan 3D CMM scanner and a Handyprobe arm-free CMM makes for a complete and powerful measurement system for points and surfaces, and enable geometrical and freeform inspection on the same part, with the same system.

-Switch has developed a new series of illuminated tact switches, the TL3240. The surface mount (SMT) switch features LED illumination in blue, red, green and yellow. Cap options are offered, but need to be ordered and shipped separately. The caps cannot withstand reflow soldering processes. Cap color choices include black, red, blue, ivory, green and yellow, and are offered in a square or rectangle shape. The switch is shipped in tape and reel packaging, at 500 pieces per reel. The illuminated tact switch suits applications like AV equipment, computer peripherals, consumer electronics, instrumentation, telecommunications, and medical equipment.

Creaform USA Inc Tel: +1-418-8334446 Website: www.creaform3d.com

E-Switch Inc Tel: +1- 800-8672717 Website: www.e-switch.com

Filling Machine

Connector

osch Packaging Technology has introduced the GKF 702 capsule filling machine. Equipped with a dosator filling station, the modular unit produces small batches. Production parameters can be fully simulated, and the Mini-Bowl filling station handles product batches from 100-300 mL. A slidegate system provides for higher yields as well as option of filling free-flowing granulates, or pellets, via powder station. The machine comes with a 17-inch touchscreen industrial PC.

mnetics has developed latching micro-D connectors with a new squeeze-latch system that offers significant advantages in making quick cable connections to rack and panel equipment. Designed for high-reliability miniaturisation of military, aerospace, and medical equipment, the connectors have 0.05 inch pitch and are tool-free. The push-and-latch design reduces time and effort required to plug connector into circuit. Panelmount connectors offer options for connecting inside instrument, including PCB lead frames and direct wiring. Designs with aluminium alloy 6061 shells and nickel plating offer contact counts from nine to 51 positions.

Bosch Packaging Technology Tel: +1- 715-2432503 Website: www.boschpackaging.com

Omnetics Connector Corp Tel: +1- 763-572-0656 Website: www.omnetics.com

june 2012 | industry 2.0

- technology management for decision-makers

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Machine truxure cuts time to market by up to 50% TM

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Download our ‘On the road to green machines’ White Paper today — it is FREE and available right now. Visit www.SEreply.com Key Code 44711y ©2012 Schneider Electric. All Rights Reserved. All trademarks are owned by Schneider Electric Industries SAS or its affiliated companies. Schneider Electric India Pvt. Ltd., 9th Floor, DLF Building No. 10, Tower C, DLF Cyber City, Phase II, Gurgaon - 122 002, Haryana, India. Tel. 1800-4254-877/272 • 998-2972_IN-GB

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