Industry 2.0 August 2012 by bhupinder sharma

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A 99 MEDIA PUBLICATION

VOLUME 11

ISSUE 12

Cut Organisational Complexity for

August 2012 PRICE 100

Manufacturing

Excellence

Operations

Seamless field-tofactory vision adds speed to your assets

Supply Chain

Comprehensive visibility can help mitigate problems

Management

Understanding your customersâ&#x20AC;&#x2122; needs can pay rich dividends

editorial Vol. 11 | Issue 12 | August 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, 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

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Wither SME Manufacturing?

espite massive expansion in capacities, and a slew of new companies setting up shop, the Indian manufacturing sector has been unable to reach the 20 per cent share of the GDP. Pessimists will point to an array of factors that are hobbling industrial growth—from inadequate infrastructure and power, to regulatory and licensing matters, taxation snarls, labour problems and environmental restrictions. Many of these problems can be solved relatively quickly through quick and decisive action on the part of the government. But there are some problems that are more intractable. The biggest challenge is to make the SMEs the real engine of the manufacturing economy—much like in China, Taiwan and Germany. In Germany, the so called ‘mittelstand’ companies account for nearly one-half of its substantial manufactured exports. Many of these companies have niche market leadership positions, and have actively adopted modern manufacturing techniques like lean manufacturing and TQM. The companies often collaborate with universities, and cluster themselves around big manufacturers. Another secret to their success is that they are located in rural areas, and benefit greatly from the apprentice system that provides reservoir of skilled workers. Indian SME manufacturers are tiny by world standards. Not only do they have to grapple with poor infrastruc-

industry 2.0

R Giridhar editor@industry20.com

ture and comply with onerous laws, many are also capital constrained. This means that they have low ability to invest in modern equipment or technology tools. Collaboration with educational institutions or investment in innovation is virtually nonexistent. Nor do they have access to a trained workforce. Consequently, many Indian SMEs exist in commoditised manufacturing activities—with resulting low margins. Economic downturns and swings in commodity prices often hit them hard, and business failure rates are high. One way to fix the situation is to identify a few sectors in which there is an opportunity to achieve world-class standards. And then create the enabling ecosystem through a combination of financial incentives and appropriate legislation. Mandate public-funded research and education institutions to effectively transfer knowledge to the SME sector through innovative schemes, and completely revamp the Industrial Training Institutes (ITIs). Look at ways to encourage the software industry to collaborate with the manufacturing industry to transfer knowledge and best practices from around the world, use advanced tools and planning solutions, and help SMEs embed software into products to create innovative offerings. SMEs will also need to learn to cooperate and collaborate, and adopt agile strategies to remain relevant to customers. Else, they are headed for oblivion.

- technology management for decision-makers | august 2012

contents advertiser index National Instruments...................IFC Mitsubishi.......................................03 Panasonic.......................................05 Schneider........................................07 BRY-Air Asia...................................09 Reillo PCI India Pvt Ltd................... 11 Ace Micromatic...............................13 Powerbuild.......................................15 CHEP.............................................16-A Omron.............................................56 Elcon.............................................. IBC GW Precision................................. BC

cover story 18 Unleashing Manufacturing Excellence

departments

Rigid organisational structures and coordination problems can become a major obstacle to achieving manufacturing quality, flexibility, speed and cost-effectiveness. However, they can be overcome by using an optimal design; nurturing a skilled and engaged workforce; and by setting in place the requisite supporting systems and governance models

Editorial........................................... 01 Advertiser Index.............................02 Industry Update.............................04 Techwatch.......................................12

Cover Design: Manav Sachdev

Product Update..............................54

sector update 26 Biscuits

supply chain 36 Eye on the Supply Chain

Cookies Make the Cut Insatiable demand propels robust expansion of the biscuits market and attracts international brands

While the benefits are clear, achieving effective supply chain visibility is hard. However, new developments in communication and collaboration technologies are enabling the key building blocks for establishing and maintaining information flows through the global supply chain

27 Cold Chains Logistics sector expands cold

storage capacity, and upgrades infrastructure and transportation technology to meet evolving customer demand

facilities

& operations

28 Linking the Field to the Factory

Manufacturers are securing a competitive advantage by seamlessly linking ordering systems, production, fulfilment and delivery

management & strategy 42 Collaborating for Success

august 2012 | industry 2.0

Manufacturing companies are increasingly collaborating with customers to build relationships and revenue. And by meeting customer

- technology management for decision-makers

needs better, manufacturers are also improving their own productsâ&#x20AC;&#x201D; and cutting costs

48 Moving to a Digital World Most consumer-facing businesses are now using digital tools to get closer to customers. But few organisations are close to completing the challenging journey to a holistic, integrated business model, with shared assets and platforms. A look at how leading companies are tackling this problem

opinion 47 Thriving in Adversity To be a successful leader you need to employ positive thinking. Set realistic goals to reduce stress, and maintain an optimistic outlook

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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.

Central control room

Electro-deposition booth transport PLC

Air conditioning control PLC

All booth integrative PLC Air conditioning control PLC

Temperature control PLC

Electro-deposition tool temperature control PLC Mixing control PLC

Modular PLC

VFD

Micro PLC

AC servo

HMI

CNC

Automation Mumbai Date: Sept 7 - Sept 10, 2012, Venue: Bombay Exhibition Center (BEC), Mumbai Visit Hall No.5, Stall No.L13-14, L35-32

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 Samsung has Asia-Pac’s Best Supply Chain

esearch firm Gartner has identified the top supply chain organisations in Asia based on factors like revenue growth, return on assets (ROA), inventory and peer opinion. Of the top 15 supply chain organisations, five are headquartered in Japan (Canon, Honda, Komatsu, Seven & I Holdings, Toyota), four in Korea (Hyundai, Hyundai Heavy Industries, LG, Samsung), two in China (Huawei and Lenovo), one in Australia (Woolworths), one in India (Tata Motors), one in Singapore (Flextronics) and one in Taiwan (ASUSTeK). Samsung leads in Asia Pacific which is dominated by high tech, consumer electronics, automotive, retail and industrial products companies. Four companies entered the list for the first time in 2012. “Our regional rankings help to capture issues and best practices that are unique to each region,” says Debra Hofman, Managing Vice President at Gartner. She said there were a number of notable trends in Asia Pacific affecting supply chain leaders that included a focus on growth and low-cost innovation; growing but unpredictable demand with associated demand management challenges; shifting supply bases that require supply chain redesign; growth in intraregion trade; rapid inflation, rising and volatile costs and tightening labour market that combine to pose increased risks. Supply chain leaders like Taiwan Semiconductor Manufacturing Company, Wilmar International and Wesfarmers did not make it to the list because they did not get enough votes. According to Gartner Research Director Debashis Tarafdar, the Asia Pacific supply chain leaders have maintained momentum in the difficult economic environment by re-configuring their supply chains while staying focussed on a demand-driven strategy. “Companies leading the top supply chains in Asia Pacific have demon-

august 2012 | industry 2.0

APAC Rank World Rank Company

Samsung Electronics

Hyundai Motor

Tata Motors

L Group

Huawei Technologies

6 57 Woolworths

Toyota Motor

ASUSTeK Computer

Hyundai Heavy Industries

Seven & I Holdings

104

Honda Motor

12 111 Canon

116

LG Electronics

14 118 Komatsu

121

Flextronics International

strated capabilities in demand management, operational excellence and innovation,” he pointed out. “They are using best practices including demand sensing and shaping, segmentation and collaboration, to help manage demand volatility and deliver predictable results. To measure supply chain performance, they select the right metrics that are aligned to the company’s overall business objectives. They also build resiliency into supply network design, and implement risk management strategies.”

Logistics Majors Seek Patents

layers in the highly competitive logistics sector are looking to protect innovations through the use of patents. German major, DHL, has registered more than 1,843 patents since 2002, including its GoGreen service. DHL’s patent management team is part of its solutions and innovations group that studies short-term market requirements and builds a base for new developments. “The innovations…in most cases are driven by new technologies,” remarks Petra Kiwitt, Executive Vice President for Solutions and Innovation at DHL. Transport Corporation of India (TCI), the Rs 2,000-crore Indian firm, has started off with two patents. “As the business dynamics of the logistics sector become more competitive, patents represent a new challenge for technology management in the logistics industry. A few logistics companies have started to understand the value of patents and are actively in the process of patenting their business practices and technology,” explains Vineet Agarwal, Joint Managing Director of TCI.

Ashok Leyland Mulls Hybrid Buses

shok Leyland is evaluating the possibility of launching a hybrid version of its Optare buses in India. The company holds a 75 per cent stake in UKbus maker Optare. “But considering the fact that electric buses are expensive, it is not viable for the Indian market. We could introduce a hybrid alternative,” says Dheeraj Hinduja, Chairman, Ashok Leyland. “We have been working on alternative fuels with our CNG buses. We are doing a lot of work on hybrid vehicles,” adds R Seshasayee, Executive Vice-Chairman.

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industry update Concor Plans Logistics Parks

ontainer Corporation of India (Concor), a public sector unit under the Ministry of Railways, has planned to set up three logistics parks in West Bengal at an estimated investment of Rs 150 crore. The company plans to set up 15 such hubs across the country. Sanjay Swarup, Group General Manager of Concor, says that the company has identified land at Durgapur, Dankuni and Siliguri for developing these multimodal facilities. Each park will require nearly 100 acres of land, and will have facilities like warehouses, container yards and cold chains. “The land acquisition process is on for these parks. While the Railways will provide the land at Durgapur and Dankuni, we are in talks with the West Bengal Government for land in Siliguri,” Swarup explains. In addition to the three parks in West Bengal, Concor has identified three locations in Andhra Pradesh; four in Odisha; one each in Maharashtra, Gujarat and Rajasthan; and two in Uttarakhand, for setting up such facilities.

BHEL Commissions Solar Power Plant

harat Heavy Electricals (BHEL) has commissioned a 5 MW grid-connected solar power plant at Shivasamudram. Set up at a cost of Rs 62 crore, this is the single largest solar photovoltaic (PV) power plant in Karnataka. It is owned by the state-owned power producer, Karnataka Power Corporation (KPCL). For the Shivasamudram project, BHEL’s scope of work included design, manufacture, supply, erection and commissioning of the solar power plant. In addition, BHEL will also operate and maintain the solar power plant for three years. The solar power plant has been synchronised with the main grid, and the DC power generated by the solar panels is converted into AC by inverters and fed into a 66 kV grid through transformers. Crystalline silicon photovoltaic technology has been used and the SPV modules are manufactured at the facility in Bangalore. The company also has a R&D unit in Gurgaon to support its operations in semi-conductors and solar photovoltaics.

Alstom Gets Gas Turbine Renovation Contract

lstom’s thermal services business has bagged a contract worth nearly Rs 344.5 crore (€53 million) to renovate NTPC’s gas turbines at its 657-MW Jhanor-Gandhar Gas Power Station Stage-1 project in Bharuch, Gujarat. The contract has been awarded to Alstom (Switzerland) and Alstom (India). Alstom India’s share

from the contract would be about Rs 22.6 crore (€3.50 million). Alstom was the original supplier of turbines to the project. The refurbishment contract involves the supply, installation and commissioning of turbine parts. While the components will be produced at Alstom’s global manufacturing facilities,

the services in India will be provided by Alstom India. The project is scheduled to be completed over a period of three years. The gas turbines at the Jhanor Gandhar power plant have been in operation for over 15 years, and will operate for another 15 years with the same output after the parts are replaced, according to Alstom.

FARO Develops New Laser Tracker

ARO Technologies has announced the Vantage, a laser tracker that combines new features and a portable design. The Vantage is 25 per cent smaller and 28 per cent lighter than its predecessor. Faro has included a new in-line optic system to improve long-range measurement by 45 per cent, and has added WiFi to the device to eliminate tethering to laptops. Along with standard shipping cases, the Vantage is packaged with an allnew backpack and roller board that can be stowed in a standard airline overhead compartment. Two of the new features found only in the Vantage— SmartFind and MultiView—increase productivity by reducing measurement time. The SmartFind system responds to simple gestures from the operator and allows the Vantage to

august 2012 | industry 2.0

- technology management for decision-makers

quickly find the desired target whenever its beam is lost or broken. The MultiView system utilises two integrated cameras that let users point automatically to any specific and difficult-to-reach targets. The Vantage’s TruADM technology provides the accuracy needed for every day, real-world applications where the differences between absolute distance measurement (ADM) and interferometer (IFM)-based measurements are, for the most part, insignificant. Unlike technologies that require an IFM system to assist their ADM system, FARO’s TruADM simplifies the process. Enhanced, predictive algorithms in this patented, fifth-generation technology allow quicker capture of dynamic measurements by simply scanning with the target.

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industry update Online Solution Optimises Material Cutting

eometric is now offering a pay-per-use nesting solution for material optimisation. NestLibOnline.com is useful for occasional users who need a solution for nesting and optimisation of cutting of flat materials. It can be used by cabinet and furniture makers, carpenters and wood working consultants, small factories with sheet metal and wood-cutting machinery, foam product manufacturers, textile and leather product manufacturers, and packaging product manufacturers. The software offers true shape automatic nesting to optimise material utilisation, and fits two-dimensional shapes on larger 2D sheets. Nested layouts are instantly generated once the 2D DXF parts are uploaded, and the desired sheet sizes for nesting are selected. The results are displayed in PDF or DXF formats. Nesting jobs can be queued without waiting for the nesting process, and the nesting report is automatically sent to the user’s email ID. A 30-day free evaluation version is available on the website http://www.nestlibonline.com.

Small Vehicles to Propel Indian CV Market

he small commercial vehicle (SCV) and light commercial vehicle (LCV) segments are entering a rapid growth phase, and the trend is expected to continue for the next 5 to 10 years according to Frost & Sullivan. The combined sales of SCVs and LCVs reached 353,620 units during 2010-11, and the sales volume is anticipated to hit 827,920 units by 201516. SCV goods carriers are

expected to account for around 70 per cent of this volume. The Indian CV market is polarising towards the SCV and LCV segments, and the market share of medium CVs (MCVs) is declining. This trend is intensified by many factors. For instance, the restriction on medium and heavy CVs’ entrance into metro cities has made it necessary for logistics companies to procure SCVs and LCVs for within-city delivery of goods. The availability of low cost LCVs with high power and gross vehicle weight (GVW) capacities has also eaten into the market share of MCVs.

Rockwell Secures Order from Lauren-Jyoti

auren-Jyoti, a joint venture between Lauren Engineers & Constructors of the USA and Jyoti Power Structures, has awarded a $1.9 million order to Rockwell Automation. Rockwell will provide PlantPAx-based power plant distributed control system (DCS) solution with solar field local controller panels for Godawari Green Energy in Rajasthan. “This win is significant because it provides us the opportunity to set industry standards for concentrated solar power plants,” remarks Terry Gebert, Vice President and General Manager, Rockwell Automation Global Solutions. Lauren-Jyoti is constructing a green field 50 MW concentrated solar power plant for Godawari Green Energy. The plant will be one of the first utility-scale solar thermal power plants commissioned in India. “This solution, support and collaboration will enable us to integrate widespread solar field control with main plant control to achieve better uptime and reliability,” says Siddharth Agrawal, Director, Godawari Green Energy.

august 2012 | industry 2.0

- technology management for decision-makers

Integrated Valve Control Simplifies Installation

lfa Laval has developed a new valve control unit called Unique Control, consisting of an integrated automation unit and actuator. Quick and easy to install, it eliminates the need for separate automation units for flow control. Unique Control is designed to handle all applications, and is available as an option for Alfa Laval butterfly valves. An intuitive and fully-automatic setup greatly shortens installation time, and users can set it themselves to be normally open or normally closed.

IT Spend in Indian Manufacturing to Grow

ven though costs are increasing, manufacturers are updating and automating their business processes. IDC Manufacturing Insight predicts that the manufacturing IT spend will grow to $8,781.8 million by 2016. The sector expected to spend the highest on IT in 2012 automotive, followed by chemicals and consumer products. “With increasing costs and uncertainty in the world economy, manufacturers across the region are increasingly focussing their efforts on productivity and efficiency,” says Dr Christopher Holmes, Head, International, IDC Manufacturing Insights. Holmes continues, “From a technology perspective, we will see companies move to clearly establish the link between technology and efficiency to driving out cost and becoming more productive. There is greater interest in looking beyond ERP, as companies seek to leverage technology to deliver value to the enterprise, with increased focus on more specific applications to support manufacturing operations, supply chain management and product lifecycle management. We are also seeing more interest in newer technologies like business intelligence and mobile as companies seek to leverage these for enhanced productivity.”

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Siemens Secures Multiple Steel Plant Orders

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MM Ispat has ordered core systems for an electrical steel plant, from Siemens VAI Metals Technologies. The steelmaking plant is part of a new integrated production complex at Hospet, Karnataka, and is scheduled to go into operation at the end of 2013. BMM Ispat is expanding production capacity at the Hospet site by two million tonnes per year, and is setting up a flexible bar mill with an annual capacity of 850,000 tonnes. The crude steel for these products will be produced in the new electrical steel works. BMM Ispat is ordering an electric arc furnace specially designed for combined charging of hot metal and directreduced iron (DRI). Siemens will be delivering the mechanical and electrical equipment for the electric arc furnace with a tapping weight of 110 tonnes, a 110-tonne ladle furnace, a vacuum degassing plant and the alloying and additive systems. The electric arc furnace, the ladle furnace, the material charging systems and other auxiliaries are being equipped with a de-dusting system. The scope of the order also includes entire Level 1 automation and process automation (Level 2) systems, furnace transformers and a dynamic compensation system. In a separate deal, a Siemens VAI Metals Technologies consortium has secured an order from the National Mineral Development Corporation (NMDC) for the supply of a complete LD (BOF) steelmaking plant. The order size is approximately €290 million. The steel works will be built at Nagarnar, Chhattisgarh as part of an integrated production complex with an annual capacity of approximately three million tonnes of steel. The project is scheduled for completion by mid-2015. NMDC has already ordered a sintering plant from Siemens for the Nagarnar project site. For the integrated steelmaking plant, Siemens will be in charge of the design and the turnkey supply of two LD (BOF) converters, two 175-tonne desulfurisation plants (HMDS), two ladle furnaces (LF), and a RH degassing plant. The project scope of supply also includes the material handling systems, the primary and secondary de-dusting systems, a gas recovery plant and a water treatment plant. The project will be executed in collaboration with SEW Infrastructure and Mukand Engineers, who will be responsible for the civil works, the manufacturing and the erection of the steel structures, as well as for general erection of equipment. Siemens will supply the complete basic (Level 1) and process automation (Level 2), and the completed plant will comply with environmental standards in India as well as Europe. NMDC is India’s largest manufacturer and exporter of iron ore. It mines approx 30 million tonnes of ore each year.

industry update PTC Acquires Servigistics

TC has signed a definitive agreement to acquire Servigistics, a developer of service lifecycle management (SLM) software solutions, for approximately $220 million in cash. Transaction is expected to be completed in September. The acquisition will enhance PTC’s existing portfolio of SLM solutions that includes capabilities in the areas of warranty and contract management, service parts definition, and technical information. Servigistics is recognised as a technology leader in complementary areas such as service parts planning, management and pricing, field service management,

returns and repair management, and service knowledge management. “Over the past few years, Servigistics has earned a reputation for helping companies maximise their global service businesses through increased profitability, cash flow, and customer loyalty,” explains PTC’s President and Chief Executive Officer Jim Heppelmann. “Their customers are at the leading edge of a global trend to take service from a cost centre to a profit centre, and SLM technology has been a critical driver.” For manufacturers, getting their service strategy right presents a multibillion dollar, high-margin revenue

Siemens Develops Low Power Drive

opportunity to differentiate themselves in the market from their traditional product-oriented competitors. As an enabling technology, SLM helps manufacturers and their service network partners optimise the customer experience by ensuring service is systemically planned, delivered, and analysed to continually improve performance and maximise customer value. Yet, few manufacturers have either a coordinated strategy or the integrated technology suite needed to capture this new market opportunity—with many manufacturers realising as little as 25 per cent of the total service value in their products’ service lifecycle. By adding Servigistics to its portfolio, PTC aims to deliver a complete system for the service lifecycle.

Intergraph’s India Centre Reaches a Milestone

iemens has unfurled Sinamics V20, an inverter designed to perform simple drive tasks. This variable frequency drive is available in four sizes, and covers the power range from 0.12 to 15 kW. The compact inverters can be connected directly in line, or alternatively mounted as a push-through installation in addition to the conventional wall-mounting method. With an in- built interface display (Basic Operator Panel), this user friendly inverter enables easy on-site commissioning and operations. Further, it has simple menu driven steps from power up till motor run. The inverter is equipped with an energy-optimised control mode (ECO Mode) for increased energy efficiency, which automatically adapts the magnetic flux in the motor to the prevailing operating point. Pre-built connection and application macros facilitate application-specific settings for quick commissioning and maximum performance. Features such as wide voltage range, better cooling design and a coated PCB increase the robustness of the inverter and ensure reliability even in harsh industrial environments. Speaking on the occasion of the launch, Ralf Michael Franke, Chief Executive Officer, Drive Technologies, Siemens AG said “With its unique features, the SINAMICS V20 is targeted at industries that need robust, fast, cost-effective installation and hassle free operation. With superior energy efficiency, reliability and high availability, this drive contributes directly to the profitability of an enterprise.”

august 2012 | industry 2.0

- technology management for decision-makers

yderbad-based Intergraph Consulting (ICC), an engineering and geospatial software development facility for Intergraph, has completed 25 years of innovation. According to the company, the 850 people strong ICC has contributed significantly to the organisation’s growth and development, and has been a key asset for Intergraph. Intergraph develops plant design, information management and geospatial engineering solutions in Hyderabad using the latest tools and technologies. For Intergraph’s Process, Power & Marine (PP&M) division, ICC has made significant contributions the 3D plant and marine design software used by process, power, ship, and offshore companies globally. ICC also plays a key part in the research and development of geospatial and public safety solutions for Intergraph’s Security, Government & Infrastructure (SG&I) division.

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Conductive, Elastic Conductors with Silver Nanowires

esearchers from North Carolina State University have developed highly conductive and elastic conductors made from silver nanoscale wires. These conductors can be used to develop stretchable electronic devices. Stretchable circuitry would be able to do many things that its rigid counterpart cannot. For eg, an electronic ‘skin’ could help robots pick up delicate objects without breaking them, and

The silver nanowires can be printed to fabricate patterned stretchable conductors

stretchable displays and antennas could make cell phones and other electronic devices stretch and compress without affecting their performance.

Clay Coating Could Replace Conventional Flame Retardants

Credit: NIST

n their search for better flame retardants for polyurethane foam used in home furnishings, researchers at the National Institute of Standards and Technology (NIST) have literally hit a clay wall. The team has developed a thick, fast-forming coating containing flame-inhibiting clay particles. It adheres strongly to the Swiss cheese-like surface of polyurethane foam, which is used in furniture cushions, carpet padding, children’s car seats, and other items. “We can build the equivalent of a flame-retarding clay wall on the foam in a way that has no adverse impact on the foam manufacturing process,” explains NIST fire researcher Rick Davis. “Our clay-based coatings perform at least as well as commercial retardant approaches, and there’s room for improvement. We hope this new approach provides industry with practical alternative flame retardants.” To date, researchers have built up coatings by stacking thin layers in pairs that are held together by basic electrical attraction. With no clay present a thick coating is formed rapidly, but it isn’t a fire retardant. With clay in every other layer, either the coating is too thin or the clay content is too low to be an effective fire retardant. The NIST team tried something you would expect not to work: trilayers consisting of a positively charged bottom topped by two negatively charged layers. Under most circumstances, the two negative layers would repulse each other, but it turns out that hydrogen bonds formed between the two negative layers and overcame this repulsive force. The resulting trilayer yields a thick, fastforming, and high concentration clay coating on polyurethane foam. This nanocomposite coating is Above, untreated polyure10 times thicker, contains 6 times more clay, and thane foam catches fire from a nearby heat source. Below, achieves this using at least 5 times fewer total layfoam treated with a novel clayers than the traditional bilayer coatings. filled coating did not ignite when exposed to the same “The eight trilayer system thoroughly coated heat source. Instead, a fastall internal and external surfaces of the porous growing protective layer, called char, forms on the surface polyurethane foam,” the team reports.

august 2012 | industry 2.0

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However, the first step is to produce conductors that are elastic, and are able to effectively transmit electric signals when deformed. Dr Yong Zhu, an assistant professor of mechanical and aerospace engineering at NC State, and Feng Xu, a PhD student in Zhu’s lab have developed such conductors using silver nanowires. The new technique developed embeds highly conductive silver nanowires in a polymer that can withstand significant stretching without affecting the material’s conductivity. “This development is very exciting because it could be immediately applied to a broad range of applications,” Zhu says. “In addition, our work focusses on high and stable conductivity under a large degree of deformation, complementary to most other work using silver nanowires that are more concerned with flexibility and transparency.” “The fabrication approach is very simple,” explains Xu. Silver nanowires are placed on a silicon plate. A liquid polymer is poured over the silicon substrate. The polymer is then exposed to high heat, which turns the polymer from a liquid into an elastic solid. Since the polymer flows around the silver nanowires when it is in liquid form, the nanowires are trapped in the polymer when it becomes solid. The polymer can then be peeled off the silicon plate. When the nanowire-embedded polymer is stretched and relaxed, the surface of the polymer containing nanowires buckles. The end result is that the composite is flat on the side that contains no nanowires, but wavy on the side that contains silver nanowires. After the nanowire-embedded surface has buckled, the material can be stretched up to 50 per cent of its elongation without affecting the conductivity of the nanowires. The buckled shape of the material allows the nanowires to stay in a fixed position relative to each other. “In addition to having high conductivity and a large stable strain range, the new stretchable conductors show excellent robustness under repeated mechanical loading,” Zhu says.

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Credit: North Carolina State University

techwatch

techwatch R

esearchers at Rice University have developed a lithium-ion battery that can be painted on virtually any surface. The rechargeable battery created in the lab of Pulickel Ajayan, Materials Scientist at Rice, consists of spraypainted layers, each representing the components in a traditional battery. “This flexible approach allows all kinds of new design and integration possibilities for storage devices,” said Professor Ajayan. “There has been lot of interest in recent times in creating power sources with an improved form factor, and this is a big step forward in that direction.” Neelam Singh, a Rice University graduate student, and her team spent painstaking hours formulating, mixing and testing paints for each of the five layered components—two current collectors, a cathode, an anode and a polymer separator in the middle. The materials were airbrushed onto ceramic bathroom tiles, flexible polymers, glass, stainless steel and even a beer stein to see how well they would bond with each substrate. The researchers reported that the hand-painted batteries were remarka-

bly consistent in their capacities, within plus or minus 10 per cent of the target. They were also put through 60 chargedischarge cycles with only a very small drop in capacity, Singh said. Each layer is an optimised stew. The first, the positive current collector, is a mixture of purified single-wall carbon nanotubes with carbon black particles dispersed in N-methylpyrrolidone. The second is the cathode, which contains lithium cobalt oxide, carbon and ultrafine graphite (UFG) powder in a binder solution. The third is the polymer separator paint of Kynar Flex resin, PMMA and silicon dioxide dispersed in a solvent mixture. The fourth, the anode, is a mixture of lithium titanium oxide and UFG in a binder, and the final layer is the negative current collector, a commercially available conductive copper paint, diluted with ethanol. “The hardest part was achieving mechanical stability, and the separator played a critical role,” says Singh. “We found that the nanotube and the cathode layers were sticking very well, but if the separator was not mechanically stable, they would peel off the

Photo: Jeff Fitlow

Making Every Surface a Battery

Ceramic tiles coated with battery paints, and then heat-sealed, power a series of LEDs spelling out ‘RICE’ in an experiment. The lithium-ion batteries can be painted on virtually any surface

substrate. Adding PMMA gave the right adhesion to the separator.” Once painted, the tiles and other items were infused with the electrolyte and then heat-sealed and charged. Singh said the batteries were easily charged with a small solar cell. She foresees the possibility of integrating paintable batteries with recently reported paintable solar cells to create an energy-harvesting combination. As good as the hand-painted batteries are, she said, scaling up with modern methods will improve them by leaps and bounds. “Spray painting is already an industrial process, so it would be very easy to incorporate this into industry,” Singh said.

New Way to Control Structure of Titanium Dioxide

is better suited for use in other applications, orth Carolina State University such as photovoltaic cells, smart sensors researchers have developed a new and optical communication technologies. technique for controlling the crystalline “Traditionally, it has been a challenge structure of titanium dioxide at room to stabilise titanium dioxide in the desired temperature. The development should phase,” says Dr Jay Narayan. We have now make titanium dioxide more efficient A new technique allows researchers to developed a technique that precisely in a range of applications, including control the phase of the titanium dioxide by modifying the structure of the titanium photovoltaic cells, hydrogen production, controls the phase, or crystalline structure, trioxide and sapphire substrate antimicrobial coatings, smart sensors of titanium dioxide at room temperature— and optical communication technologies. and stabilises that phase, so it won’t change when the temperaTitanium dioxide most commonly comes in one of two major ture fluctuates.” ‘phases’, meaning that its atoms arrange themselves in one of The process begins by using a widely available sapphire subtwo crystalline structures. These phases are ‘anatase’ or ‘rutile’. strate that has the desired crystalline structure. Researchers The arrangement of atoms dictates the material’s optical, then grow a template layer of titanium trioxide on the substrate. chemical and electronic properties. As a result, each phase has The structure of the titanium trioxide mimics the structure of different characteristics. The anatase phase has characteristics the sapphire substrate. The titanium dioxide is then grown on that make it better suited for use as an antibacterial agent, and top of the titanium trioxide template layer. The technique works for applications such as hydrogen production. The rutile phase because of a process called domain matching epitaxy (DME).

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techwatch Nanostructures Enable Better Self-cleaning Surfaces 10 pm 1 pm

The surface of a lotus leaf has bumps in size of about ten micrometres and spikes of below one micrometre that help it shed water

Credit: © A*STAR

any plants and animals have textured surfaces on their body for manipulating water. Some textured surfaces are designed, for example, to improve adhesion, while others may enable the collection of water from fog in arid regions. The lotus leaf, in particular, is the most widely known for having a textured surface with selfcleaning properties. The surface of the lotus leaf has a hierarchical structure—combining micrometre and sub-micrometre features—that makes it difficult for water droplets to spread. As a result, water droplets form tight spheres that easily roll off the leaf, picking up dirt particles en route. Such functionality can be useful if applied to textiles or windows. Linda Yongling Wu at the A*STAR Singapore Institute of Manufacturing Technology and her co-workers have developed a fast and cost-efficient way to fabricate large-scale superhydrophopic surfaces on silica—and mimic the lotus leaf. The researchers used a laser to carve out a microstructured template that was then used to pattern a sol-gel coating. Nanoparticles were subsequently bound to the surface of the cured sol-gel surface to create a second level of hierarchy. The fabrication methodology can be adjusted to achieve different degrees of micro and nanostructures. In addition to the new fabrication methodology, Wu and co-workers considered various ways to optimise the water repellency of the textured surface. They found that increasing the surface roughness increases the true

august 2012 | industry 2.0

area of contact between the liquid and the solid, enhancing its intrinsic wetting properties. However, if the surface features are small enough, water can bridge protrusions leading to the formation of air pockets; the wettability of such a nanostructured material is then calculated as a weighted average of the wettability of the pure material and that of air. These two effects are known respectively as the Wenzel and Cassie-Baxter states. The researchers derived an equation for calculating the surface contact angle between a water droplet and a silica surface with a certain degree of roughness. They found that there was a transition between the Wenzel

to the Cassie-Baxter state, as surface structuring enters the nano dimension. The researchers found that for an optimum super-hydrophobic effect, the Cassie-Baxter state must dominate the surface structure to allow a massive 83 per cent of the surface state to be involved in air trapping with only 17 per cent of the liquid drop surface actually in contact with the silica itself. The researchers hope that their findings will generate new ideas for making innovative self-cleaning materials. “We are now developing the technology for real applications, such as easy-clean coating for solar films and structured surfaces for personal care products,” says Wu.

Snakeskin Inspires Abrasionresistant Materials

he bodies of snakes are exposed to constant friction forces, but has to last until moulting takes place. “The skin of snakes therefore has to be optimised against abrasion wear,” explains Dr Marie-Christin Klein of Kiel University. With Stanislav Gorb she examined the skin of four snake species: sand boa (Gongylophis colubrinus), the king snake (Lampropeltis getula californiae), the rainbow boa (Epicrates cenchria cenchria) and the green tree python (Morelia viridis), which inhabit different environments to find the secrets to abrasion resistance. “We found out that the skin architecture differs depending on habitat. However, all show a gradient in material properties. This means that the skin of all species has a stiff and hard outside and becomes more flexible and soft towards the inside, even though the skin differs in thickness and structure depending on species,” explains Klein. The four snake species achieve this mechanical effect by developing different cell types. A material that has a transition from a stiff outside to a flexible inside can distribute an impacting force over a larger area, therefore, decreasing the force on one single point. Materials like this are like a flexible amour. Possible application areas can be found in the medical engineering sector, in which friction could for instance be optimised for artificial implants. Furthermore, the propulsion and conveyer technique market could profit from the abrasion minimisation findings, since lubrication would be needed less often.

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cover story

Unleashing Manufacturing

Excellence

Organisational issues can become a major obstacle to achieving manufacturing quality, flexibility, speed, cost-effectiveness, and a competitive advantage. However they can be overcome By Frank Lesmeister, Daniel Spindelndreier, and Michael Zinser Imaging by Manav Sachdev

august 2012 | industry 2.0

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Most manufacturers have come to accept that change is a constant. Increasingly global operations, evolving production networks, mergers and acquisitionsâ&#x20AC;&#x201D;all contribute to a growing complexity that can extract a high cost if it is not actively managed. But improvement efforts tend to focus on the operational aspects of manufacturing, such as production processes, the shop floor, and logistics. Often overlooked is the high cost of organisational complexity: the matrix structures with multiple interfaces, the proliferating roles and responsibilities, the many management layers that have built up over the years, and an organisation structure that is no longer aligned with a companyâ&#x20AC;&#x2122;s manufacturing strategy. These issues are often at the root of performance problems. Ignoring them can be a major obstacle to quality, flexibility, speed, cost-effectiveness, and competitive advantage. www.industry20.com

industry 2.0

- technology management for decision-makers | august 2012

cover story No single solution will fit all manufacturing organisations. A companyâ&#x20AC;&#x2122;s industry, markets, customers, products, internal capabilities, competitive position, and overall strategy will inform any decisionsâ&#x20AC;&#x201D;and there will always be trade-offs. But an effective manufacturing organisation requires three things: an optimal organisation structure; a skilled, engaged workforce; and supporting systems and governance.

The Optimal Organisation Most companies wrestle with how best to organise their manufacturing operations at both the corporate and the plant levels. Typical questions at the corporate level include: Should we centralise manufacturing responsibility and decision-making, or give regional and local plants greater autonomy? Should decisions that affect product divisions be made globally or locally? How can we make sure that process and

technology standards are implemented across business units and globally? To what extent should engineering, maintenance, quality, asset management, and other functions be integrated into the manufacturing organisation? How do we minimise overhead among similar plants with similar products? At the plant level, critical questions include: What responsibilities should be given to plant managers? Which plant activities should be centrally coordinated? How should plants be organised below the plant manager level? To answer these questions, The Boston Consulting Group analysed organisation structures in a wide range of industries. Our goal was to determine which factors drive manufacturing performance and to identify overall best practices in organisation design. Our analysis revealed the optimal setup for specific industries based on strategic business drivers,

Exhibit 1 Strategic Drivers Affect Organisational Choices

Organisational Choices Strategic drivers

Organisation design

Degree of functional integration

Plant roles and responsibilities

High economies Global setup Standardised production system Lead plants or centres of scale with integrated industrial of excellence; if one engineering product per plant, independent plants

High economies Standardised production system with Lead plants or of scope integrated industrial engineering centres of excellence

Economics

High significance Global setup Integrated planning and scheduling Lead plants or centres of asset utilisation to balance demand volatility and of excellence control global volumes Standardised production system with integrated industrial engineering and management of assets and maintenance

High impact of personnel costs

High level of standardisation with Lead plants integrated industrial engineering

High importance of Regional or local setup Independent plants proximity to customer close to customer High number of region Regional or local setup Independent plants -specific products High number of customer-specific products

Customer-oriented setup Lead plants or centres on global or regional/ of excellence local level

Centres of excellence Highly skilled engineering and production workforce required

Global setup Standardised production system Lead plants or centres High importance of production know-how with integrated industrial engineering of excellence

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Source: BCG analysis

Technologies and skills

Markets and customers

High degree Global setup Standardised production system Lead plants of complexity with integrated industrial engineering and standardised assets with asset management

Exhibit 2 Industry Characteristics Drive Manufacturing Decisions

Start with Strategy A company’s manufacturing strategy must be aligned with and support the overall corporate strategy. These strategic considerations will drive decisions about how best to set up manufacturing operations. (See Exhibit 1) To this end, we believe the manufacturing strategy must consider the following three factors: economics, markets and customers, and technologies and skills.  Economics. How critical are scale, scope, efficiency, utilisation rates, complexity, labour, and other cost drivers that affect overall manufacturing economics? The importance of these factors will vary by industry and company. For instance, scale is typically integral to companies in the automotive, chemical, metal, and fast-moving consumer-goods industries. The chemical and metal industries also tend to seek economies of scope, so that multiple products can share common pre-manufacturing steps. Standardised processes are critical to companies seeking scale and scope. For companies in asset-intensive industries such as the automotive, pharmaceutical, and building materials industries, asset utilisation is a key consideration. When high asset utilisation and economies of scale are required, manufacturing is best set up as a centralised corporate function.  Markets and Customers. How important is it to be close to end-user markets and to have products that are customised for specific regions or customers? For instance, automotive suppliers, as well as companies making engineered products or specialised chemicals and metals, all offer a large number of customised products. For companies in the building materials industry, proximity to customers is critical. A regional or local manufacturing organisation tends to be more effective than a global one for these types of companies.  Technologies and Skills. How important are specialised engineering skills, technologies, or production capabilities? Companies that make customised products, such as those companies noted above, require specialised processes and technologies that are often specific to individual plants. As a result, centralised control and sharing of best practices is less important to their manufacturing operations.

Choose the Right Structure

Consumer goods Organisation design Functional integration Plant Roles Durables

Centralised Low Standalone

Decentralised High Network

fmcg

Automotive Organisation design Functional integration Plant Roles OEM

Centralised Low Standalone

Decentralised High Network

Supplier

Building materials Organisation design Functional integration Plant Roles

Centralised Low Standalone

Decentralised High Network

Chemicals/pharmaceuticals Organisation design Functional integration Plant Roles pharmaceuticals

Centralised Low Standalone

Decentralised High Network

Chemicals

Engineering products Organisation design Functional integration Plant Roles

Centralised Low Standalone

Decentralised High Network

Metal and mining Organisation design Functional integration Plant Roles Metals

Centralised Low Standalone

Decentralised

Source: BCG analysis

and we created organisational guidelines to point companies in the right direction.

High Network

Mining

To help determine the best setup for your

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industry 2.0

- technology management for decision-makers | august 2012

cover story company, look at how different industries typically organise their manufacturing operations. As shown in Exhibit 2, certain factors are more important in some industries than in others and lead to different organisation setups. The key strategic drivers that we discussed above—economics, markets and customers, and technologies and skills—affect structural choices in three critical areas: organisation design, degree of functional integration, and plant roles and responsibilities. Let’s look at each of these areas more closely.  Organisation Design. Companies must decide whether manufacturing decisions—such as product allocations or capital outlays—should be made on a global, regional, or local level, and whether manufacturing should be set up as a centralised corporate function or as a part of each business unit. (For illustrations of decisions that should be made at the corporate level and at the plant level, see Exhibits 3 and 4) As a general rule of thumb, a global organisation makes sense if scale or standardisation are major cost drivers, specialised production capabilities are needed, or the manufacturing strategy has a major impact on the overall business strategy. Our research shows a trend across industries toward creating a global manufacturing organisation with centralised decision-making for products, technologies, and processes. Beyond

the potential scale effects, this approach makes it easier to share best practices and speeds up performance improvements—critical benefits in today’s fast-changing, fiercely competitive global economy. But this solution isn’t always the right choice. For instance, companies that must create different products for different markets will usually find that a regional or local organisation allows them to better focus on—and respond more quickly to—the needs and requirements of local customers.  Degree of Functional Integration. Decisions about whether to integrate related functions—such as production control, planning and scheduling, IT, quality, maintenance, engineering, and asset management—within the manufacturing organisation can have a major impact on operations. Integration can lead to fewer interfaces, better communication, faster decision-making, and greater synergy. Companies in asset-intensive industries, for instance, can achieve higher levels of utilisation by integrating maintenance, asset management, planning, and scheduling. As a result, manufacturing operations have less downtime, greater asset productivity, more balanced utilisation across the plant network, and fewer bottlenecks along the supply chain. Similarly, an integrated engineering unit can identify new performance levers, promote production standards, and encourage the sharing

Exhibit 3 Three Types of Organisational Decisions Should Be Made at the Corporate Level Hybrid

Functional Mfg

BUA

Source:BCG analysis Note: Mfg= manufacturing; BU= business unit

Planning and Scheduling

Degree of functional integration

Production Controlling

BUB

Mfg

BUC

Maintenance Management

august 2012 | industry 2.0

Board

BUA

BUB

BUC

BUA

BUB

BUC

Mfg

Procurement

Independent Plants

Plant roles and responsibilities

Divisional

Board

Organisation DESIGN

Industrial Engineering

Logistics (in and outbound)

Asset Management

Quality

Plant Network Products

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Processes

Lead plants

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of best practices. Integrating quality functions is usually more effective at the plant level, where total quality management (TQM) can engage workers in continuous improvement efforts. Lean initiatives—with their total-productive-maintenance (TPM) approach—also show the power of integrating maintenance activities at the plant level.  Plant Roles and Responsibilities. Decisions about how to set up plants and allocate production are also critical to overall manufacturing performance. When cross-plant material flows are absent—such as when the product portfolio is varied or highly customised to specific regions—there will be limited cross-plant synergies. In these cases, plants can be run independently, steered by centrally defined performance metrics. But when materials flow across plants and knowledge and standards are shared, a plant network with dedicated roles for each plant is the optimal setup. For instance, if specific production skills are critical, make certain plants lead plants or centres of excellence for particular processes or capabilities in order to concentrate this knowledge, set standards, and share best practices. Manufacturers can also get more from their production networks by matching asset characteristics with the needs of specific products and customers. For instance, some plants are designed to produce a small number of products at high volume for greater economies of scale. Others are designed for flexibility, with short changeover and ramp-up times that are best suited for products with volatile or unpredictable demand. By defining plant roles, consolidating products with

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The Importance of People and Governance Achieving a high level of manufacturing performance requires a skilled, engaged workforce and governance systems that drive and sustain excellence

anagement leadership and visibility help create a culture of trust, cooperation, learning, and continuous improvement. Having the right people in the right roles at the right time is also critical. Given the global shortages of skilled labour, this requires strategic workforce planning—a type of planning that involves defining needed jobs and skills, estimating likely hiring and attrition rates, and addressing any gaps that must be filled. Often, manufacturing organisations have too many of the wrong types of skills or people. But when it comes to trimming the organisation, most companies focus more on reducing their workforce than on streamlining their management ranks. ‘De-layering’ these organisations can help flatten the reporting pyramid and increase spans of control, which lowers costs and improves efficiency and effectiveness. De-layering is more than just a restructuring or costCompanies Should Define Individual and cutting exercise. Shared Responsibilities It also leads to Example: site manager and line manager improved management performance Line manager Site manager and accountability, more efficient de Organisational Direct or dotted-line Manufacturing team reporting; plant ownership structures; task allocation Parameters cision-making, and greater job satis Leadership ‘Go Gemba!’ ‘Go Gemba!’ Behaviour Kaizen initiatives; Kaizen initiatives; faction. Knowledge, collaboration among cross-line collaboration; manufacturing related guidance and development cultural changes, functions and headquarters; of foremen and and corporate best-practice sharing across teams on shop floor plants and business units values also spread throughout the Accountabilities Individual: improve overall Individual: line perfomance; financials by lowering sustainable implementation organisation more costs and reducing working of standards; cross-training capital; improve quality, and competence development quickly and easily service levels, staff of staff; engagement and because there are engagement and capabilities, satisfaction of line staff health and safety fewer layers of management. Shared: secure, reliable Shared: timely product delivery product delivery for Finally, the right customers and component supply incentives are important to encour Metrics and First-pass yield; on-time Overall equipment effectiveness; delivery; cycle/throughput time; changeover times; quality; Targets age the right be accident levels; COG1 ; direct/indirect costs haviour. In addition working capital/inventory; direct/indirect costs; CAPEX to cost or quality performance, plant Decision Rights Owns: execution of Owns: optimisation of managers could be manufacturing strategy operating processes; at plant; personnel decisions; enforcement of standards; rewarded for such improvement initiatives; lean-manufacturing tools; factors as service high-level planning line stoppages; personnel (eg, Kanban, segmentation); decisions on shop floor levels, the health inventory levels and safety of their Can veto: investments Can veto: line personnel decisions people, sharing Influences: manufacturing Influences: investments; of best practices, strategy; supplier selection inventory levels and compliance with production Sources: BCG approach; BCG project experience standards. 1COG refers to manufacturing costs only (costs of marketing and sales are not included)

industry 2.0

- technology management for decision-makers | august 2012

cover story similar characteristics, and exploring ways to reallocate products across the network, companies can achieve greater cost savings, flexibility, and efficiency.

Managing the Trade-offs Each design choice involves trade-offs that can affect cost, product quality, cycle times, and service levels. Companies with a decentralised or divisional manufacturing organisation, for instance, typically have a harder time sharing best practices and can lose synergies. A centralised coordinating function can offset these drawbacks by sharing best practices across the company and creating consistent standards and metrics. In this

problems quickly, and it can rapidly implement improvements. Its plant network is also extremely flexible—production can be shifted as needs, volume, or economic conditions change, and any bottlenecks are shortlived. Another example of an out-of-the-box approach to managing a trade-off: An automobile manufacturer with a global production network wanted to avoid the excessive overhead and backlogs that can result from having headquarters steer the plants and implement global standards inflexibly. The company decided to establish regional ‘mother plants’ that support local projects, train staff, set up employee exchange programmes, and manage five-year performance road maps. Headquarters can now focus

Exhibit 4 Two Types of Organisational Decisions Should be Made at the Plant Level

Organisation DESIGN

Workshops-activity bundling Mfg

Mfg

WS 1

WS 2

WS 3

WS 4

VS 1 VS 2

Production Controlling

Degree of functional integration

Planning and Scheduling

Maintenance

way, a divisional setup with concentrated knowledge of certain products or regions can coexist with unified standards and a high degree of sharing best practices across the company. A divisional manufacturing setup can also greatly complicate interactions with a centralised R&D unit and hamper design-to-cost efforts. Companies can offset these drawbacks—and sharply reduce production costs over time—by defining manufacturing requirements early in the manufacturing process through better communication. Some companies take more of an out-of-thebox approach to managing trade-offs. A microchip manufacturer with enormous cost pressures, for instance, had stringent requirements for quality and process reliability. Moreover, because its business was asset intensive, asset productivity and scale were critical. To meet these challenges, the company made all its manufacturing plants identical, down to the smallest detail, so that each one makes the same products in the same way—a rather extreme approach to central governance. As a result, the company can diagnose and fix

august 2012 | industry 2.0

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Quality

Source: BCG analysis Note: Mfg= manufacturing; VS= value stream; WS= workshop

Value stream-process bundling

on the bigger picture—developing major change programmes that the mother plants can implement. Each company must decide which tradeoffs to make based on its individual situation, markets, competitive environment, and industry benchmarks. Moreover, a company’s organisational choices require the right people and skills to be truly powerful. In today’s fast-moving, increasingly complex global environment, companies must rethink not just their manufacturing operations but also their manufacturing organisations. The high-performance organisation is lean, flexible, and strategically aligned. The right organisation design, an engaged workforce, and effective governance systems result in sustained manufacturing excellence—and a powerful source of competitive advantage. Michael Zinser is Partner & Managing Director in BCG Chicago office. Frank Lesmeister is Principal and Daniel Spindelndreier is Partner & Managing Director at BCG’s Düsseldorf office. Reprinted with permission. Copyright © 2012 The Boston Consulting Group, Inc.

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sector update

Cookies Make the Cut

Insatiable demand propels robust expansion of the biscuits market and attracts international brands By Sangeeta Shaukand

ndia has an ardent engagement with biscuits. All day long people reach for these tasty, filling snacks, sometimes to satisfy hunger pangs and often just to savour these flavourful treats. In 2011, market research firm Euromonitor International stated that the biscuit industry was the largest and fastest growing of all sectors in the fast moving consumer goods (FMCG) category. A 2011 report of the Development Commissioner of Micro, Small and Medium Enterprises pegged India as the world’s second largest producer of biscuits, after USA. Bread and biscuits together account for

august 2012 | industry 2.0

80 per cent of all baked foods in India. Although bread and biscuits are produced in almost equal quantities, the value of biscuits is 112 times more than that of bread, according to the report. The biscuit industry has recorded double-digit value growth between 2008 and 2011. Valued at more than Rs 11,000 crore, the industry is being propelled by higher per capita consumption of biscuits. Britannia, Parle and ITC’s Sunfeast together own close to 80 per cent market share of the branded biscuit segment. Britannia leads the pack with 35 per cent, followed closely by Parle at 33 per

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cent. In fact, Parle’s glucose biscuit, Parle-G was the world’s largest selling biscuit brand in 2011, according market research firm Nielsen. However, in terms of value, Britannia is ahead of the pack. ITC’s Sunfeast has a significantly lower market share of 11 per cent. Other important companies in the industry include Surya Foods and Agro (Priyagold); Cadbury India (Bytes); and GlaxoSmithKline Consumer Healthcare (GSKCH), owners of the Horlicks brand of biscuits. Other small but important players in the biscuit industry include Bakeman, Kwality, Champion and Dukes. Britannia has, in recent years, shifted focus to healthy, low-fat cookies. The company decided to remove 8,500 tonnes of transfats from its biscuits, even though the company was under no regulatory compulsion to do so. In fact, it is the only biscuit manufacturer in India to have taken such a step. Over the last few years, Britannia has also fortified many of its products with vitamins and micronutrients. Currently, half of its products are fortified. Though the biscuits business has so far been dominated by Parle Products, Britannia and ITC, multinationals such as Kraft, PepsiCo, Britain’s United Biscuits and GSKCH are rapidly moving in. Oreo, the 100-year old brand of Kraft Foods has entered the Indian market, while United Biscuits is quickly expanding its McVitie’s brand. GSKCH has extended its established health drink Horlicks into biscuits for toddlers. Meanwhile, Britannia has expanded its NutriChoice range from plain vanilla digestive biscuits to spiced-up variants, as well as diabetic options. ITC, too, has launched variants like Marie Light and Marie Light Orange.

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sector update

Cold is Comforting

Refrigerated storage sector expands capacity, upgrades infrastructure and technology to meet customer demands By Ruchira Mittal

eeping perishable products—food, fruits, vegetables, milk, ice cream and medicines— fresh and wholesome is the goal of the cold chain industry. According to the Ministry of Agriculture’s Directorate of Marketing and Inspection, India has a nearly 5,400 cold storages with an aggregate capacity of 26 million tonnes. Of these, 4,875 are in the private sector, 400 in the cooperative sector and 125 in the public sector. The country has a wide variety of cold storages, including bulk cold stores that house single goods like potato, apples and raisins. Most are basic in terms of facilities, though some have facilities for sorting, grading, packing and pre-cooling for horticultural produce like grapes, mangoes, pomegranates and papaya. A few specialised facilities exist for processing and freezing commodities like fruits and vegetables, ice cream, butter and poultry products. In the last decade, a number of large distribution centres with cold chain facilities have come up close to places like Mumbai. The Planning Commission forecasts that India’s Rs 15,000-crore cold chain industry will reach Rs 40,000 crore through increased investments, modernisation of existing facilities, and establishment of new ventures through public-private partnerships (PPP). Growth of the food industry from $100 to $300 billion is expected to drive the expansion of cold chains. The reefer transportation business in India is about Rs 1,100 crore, with estimated 25,000 refrigerated vehicles operated by 250 transport operators. These vehicles transport perishable products nationwide, with the bulk of the business coming from the milk industry. The pharmaceutical industry, especially the Rs 1,000 crore vaccine segment, also gives good business to the cold chain sector. Vaccines require unbroken refrigeration from the time that they are made to the time that they are used. Large companies like Bharti Walmart, Reliance Retail and Aditya Birla are investing heavily in their supply chain logistics and infrastructure. According to the Global Cold Chain Alliance’s Indi-

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an Cold Chain Expo, the Indian cold chain industry needs to transport 336 million tonnes of perishable goods each year. It said an important development is the movement of refrigerated wagons through the railway network under the PPP model. The Ministry of Agriculture has collaborated with Fresh and Healthy Enterprises (FHEL), a fullyowned subsidiary of government-owned Container Corporation of India, to form an ambitious special purpose vehicle (SPV) for the cold chain sector. The government is also setting up a National Centre for Cold Chain Development (NCCD) to provide impetus to the industry. More recently, the government has put on fast track a plan to create an additional 15 million tonnes of storage capacity through PPP mode. The National Horticulture Mission has sanctioned 24 cold storage projects with a capacity of 140,000 metric tonnes. An additional 107 cold storage projects with a combined capacity of over 500,000 tonnes have been approved by the National Horticulture Board. The 2011-2012 Union Budget has also granted infrastructure status to the cold chain sector making it eligible for viability gap funding or PPPs. The budget also exempted air-conditioning equipment used in cold chain infrastructure from excise duty. A study by CRISIL estimates that India needs to invest Rs 65,000 crore on cold storage facilities and refrigerated trucks.

industry 2.0

- technology management for decision-makers | august 2012

facilities & operations

Linking the Field to the

Factory Manufacturers can gain an advantage by seamlessly linking ordering systems, production, fulfilment and delivery

august 2012 | industry 2.0

- technology management for decision-makers

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peed is a competitive asset, and having visibility from when a quote is first produced to when the final product is shipped is what matters most. Harvesting demand starts with this clear view through your company’s value chain. To ignore it by leaving out a critical step is to leave money on the table. AMR Research, a consulting firm that specialises in analysing the effects of increasing the visibility of demand signals through global manufacturing enterprises, has found a strong correlation between the extent of integra-

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tion and resulting transparency between the field and its many interactions with customers on the one hand, and the ability to excel at production, fulfilment, and service on the other. Adopting a field-to-factory vision and then aggressively going after strategies to fulfil its objectives is actually beyond best practices as it has been defined in many research circles. It’s beyond searching for the best of what others have done. It’s defining your own best practices as they relate to becoming a global competitor; where speed, not spending, and timing, not tentativeness, mark your strate-

gies for growth. Becoming a world-class competitor includes making the decision to move away from being myopically inward focussed and striving to see the outside world such as what’s happening in the field with your channels, customers, partners, and own sales force. This includes: Intensifying your focus on each customer interaction. In every interaction with the customer, his/her trust must be earned. You must intensify your focus on the fact that every critical moment has to underscore the fact that your company in particular values and aligns internal systems

industry 2.0

- technology management for decision-makers | august 2012

facilities & operations to deliver exceptional service. Bringing solutions—not just technology to your clients. Create systems that allow your prospects to progress at their own pace. This strategy is true for product evaluations, trials, and purchases. Also, during the trial period, build clear visibility throughout the entire value chain of your company. Giving clients visibility into order history as well as each specific order’s progress. Creating systems that benefit all clients by delivering the status of a customised order as it travels through manufacturing and fulfilment and also has the ability to quickly summarise order history by product or business unit is what happens when a field-to-factory vision gets turned into reality. Integrating all customer-facing systems in the field to ensure accuracy, reliability, and transparency. The need for providing transparency across quoting, pricing, manufacturing, and fulfilment systems—with a focus on how to best surpass customers’ expectations at every interaction—is critical. This is at the

heart of field-to-factory strategies and where several manufacturers are finding a sustainable competitive advantage.

Curing the Myopia Thomas Friedman, in his bestselling book, The World is Flat: a Brief History of the 21st Century, speaks of the need for every service and manufacturing company to view themselves as global competitors. According to Friedman, the first step is to cure inward or myopic views of sales and service performance by embracing the fact that every company is a global competitor, and each has to harness speed, accuracy, and agility as competitive weapons to survive in an increasingly competitive world. The best companies are pursuing pre-emptive and aggressive growth using field-to-factory strategies and initiatives as their competitive weapons. Let’s take a look at the implications of Thomas Friedman’s book on field-tofactory strategies, and how his insights can be applied: Focus on serving the custom-

Sharing information in real time leads to field-to-factory best practices Customer Sharing

Supplier Sharing Logistics Provider Sharing

Sales and Operations Planning Usage Leaders

Laggers

Figure 1 Sources: AMR Research; Cincom CMBS Research

august 2012 | industry 2.0

- technology management for decision-makers

er instead of price. Friedman stresses this point and shows several examples of how companies that focussed on price-based strategies failed and those that focussed on field-based strategies succeeded. Focus on ‘the voice of the customers’ over products. Friedman shows how companies that became myopically focussed only on products and how to produce them at a cheaper price were doomed to fail. However, those that embraced the voice of the customers and redefined their entire manufacturing approach succeeded. Rather than focussing on rival companies, intensely compete against yourself. This promotes a broader product outlook and sets the pace in any manufacturing company to create solutions. Field-to-factory execution is the path to competitive advantage. Through several examples, Friedman shows that for a manufacturing company to grow, it needs to add value for its customers, channels, partners, suppliers, buyers, and service partners. The secret to lasting competitive advantage is to continually improve field-to-factory performance. Friedman’s research shows that when a company loses its connection with the field-to-factory process within its companies, the company loses the ability to stay competitive. Cost advantages are a mirage; customer advantages are real. Friedman underscores this point again and again in his analysis of industries. Focus on turning information into competitive strength. Making the most of a field-to-factory strategy includes transforming the relationships you have with customers, suppliers, logistics providers, and sales and operations planning partners. Building a field-to-factory strategy has to

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start with looking at how to make communication between each of these constituents as efficient and in real time as the business model dictates. Figure 1 shows the results of surveys completed by AMR Research regarding their work on the leaders in Demand Drive Supply Networks (DDSN). This is a core concept of the broader field-to-factory strategies of many of the world’s bestmanaged fulfilment companies.

Why is it Critical? The ability to compete and win business, then fulfil orders accurately, reliably, and profitably, distinguishes manufacturers that grow from those that shrink or go out of business altogether. The bottom line is that fieldto-factory strategies—the ability to have a clear view of what’s happening in your channels and align manufacturing to support its fulfilment—will make or

break thousands of manufacturers, according to AMR Research. To be pre-emptive and aggressive about your growth as a company is to embrace and excel at a field-to-factory vision. When you consider these facts, you’ll see that this concept is all about creating competitive strength. Table 1 includes several statistics that underscore the need for companies to adopt field-to-factory strategies. The points below describe the specifics of how companies are relying on these strategies to compete globally. Between 70 and 80 per cent of orders from manufacturers need further work when compared to the 20 per cent average across all industries. The complexities of capturing orders in manufacturing environments makes fieldto-factory strategies a ‘musthave’ capability. Only one in three orders can be filled the first time. For one

Trane Makes It Work

rane, a subsidiary of Ingersoll Rand, is a leading provider of applied air-conditioning systems used in large buildings. Each of these systems is uniquely designed based on the characteristics and location of the building. The Trane system needs to meet the customers’ environmental and air-quality requirements while operating efficiently. This set of complex variables led Trane to pioneer the use of intelligent, rule-based product-selection and productdefinition systems. The result is a product model that is built through the field-to-factory process. This model is comprised of ‘attributes and values’ that define every aspect of the configuration, including performance specifications. Today, this data model is the information backbone of customers’ product requirements. Trane’s strategy was to develop a common information model that would evolve through the sales and manufacturing

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Why Have Field-to-Factory Strategies 20%

The order error rate across US industries

30%

Perecentage of orders consumer products companies don’t fulfil

Percentage of call centre cross-sell opportunities that result in a sale

42%

Percentage of companies that have one or more mergers or acquisitions in a typical year, and 70 per cent plan to make all product and service offerings visible to all sales channels

51%

Percentage of companies that have more than one order-capture application

40%

Percentage of companies that have multiple orderfulfilment applications. (US average is 5.3.)

37%

Adequately integrated throughout their sales channels

Table 1 Sources: AMR Research; Cincom CMBS Research

heavy-truck manufacturer, only one order out of seven is filled correctly the first time. Think of the competitive advantage this manufacturer could attain from just a slight improvement? Field-to-factory strategies can deliver greater synchronisation and results. According to AMR Research,

cycles and be relevant years after the product left the factory. By constructing this model around a product’s attributes and values, they created a common denominator that can be viewed across a product’s life. This same product model provides the basis for pricing, bills of material, manufacturing processes, service, and forecasting a future product-option mix.

Results Achieved A common product definition model drives all business processes. This provides a common language from the sales engineer and the demand planner to the production technician. S uppliers using the attributes and values of the product definition produce customer-specific components. This eliminates the need to create unique part-level engineering drawings and purchase part numbers. M anpower planning is based on product configurations. In a mass-customised world made up of ever-changing mixes of size options, labour forces can be overwhelmed by part numbers and engineering changes. By building the labour profile around the key values of the product definition, the product configuration can be used to optimise factory manpower.  Monitoring incoming order configurations enables marketing teams to spot market shifts and adjust near-term demand shaping strategies.

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- technology management for decision-makers | august 2012

facilities & operations 51 per cent of companies have more than one order capture system, and in manufacturing companies, the average number of fulfilment systems is 5.3. Synchronising these order capture systems and creating a competitively strong and synchronised field-to-factory link is critical. Only one in three companies that rely on indirect channels has systems that are integrated with each other. Integrating pricing, order capture, and fulfilment systems differentiates those companies that are capable of responding quickly to un-forecasted product orders. Think of field-to-factory strategies as the glue that unifies your company’s demand, supply, and product processes and organisations. Typically, field-to-factory strategies progress through the steps of demand sensing, demand shaping, and defining profitable demand response or fulfilment. Figure 2 shows these steps in the context of the intersection of demand, supply, and product areas of your company.

Sensing Demand The new paradigm of selling is

to attract prospects, clients, and existing customers by enriching them through knowledge. You get what you give, not what you demand. The field-to-factory strategies in this phase look to enrich prospects with excellent information first, and earn trust during sales cycles. To do this: Enable everyone in your channels and direct sales force to always deliver value, and respond to prospects with ‘what’s in it for them’. Earn the title of trusted advisor. You do this by delivering exceptionally accurate, clear, and solid information. This is only possible with thorough integration of systems from the front office or field to the back office including ERP, pricing, fulfilment, and service. Quotes, pricing, proposals, and responses to requests for information must be trustworthy. The performance of all systems needs to show evidence of being highly integrated. They must also deliver responses in real time from the field, and as a result, further strengthen the trust between your prospects and field or channels. Selectively use analytics to

How Field-to-Factory Works

Demand

Market-driven not marketingdriven

Demand sensing

Channel-drivenfulfilment

Demand-driven replenishment

Demand shaping

Building products that drive demand Product Figure 2 Sources: AMR Research; Cincom CMBS Research

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Supply

Building agile supply networks for customer centric replenishment

Profitable demand response

deliver insights to prospect opportunities. Manufacturers are taking an all-or-nothing approach to analytics today with some going to the extremes of measuring everything. Many are also focussing on capturing data manually and posting Excel charts throughout their companies. With field-to-factory, the focus first needs to be on measuring what matters to your prospects, customers, and installed base.

Shaping Demand The essential aspect of field-tofactory strategies is that they deliver accurate and insightful information at the time in the sales cycles when it’s needed the most—right at the time when prospects are deciding whether or not to purchase products. The focus on serving the prospect with clear and trustworthy information about how your company will perform later in the relationship is a very powerful competitive weapon. To shape demand, you need to: Give prospects a glimpse into the extent of your company’s value chain. Being synchronised earns trust and sales and solidifies long-term relationships. For field-to-factory strategies to work, there must be a clear and strong link between the ‘field’ and production systems throughout your company. Enable your channel partners, resellers, distributors, and sales force to provide identical information to prospects. The Achilles’ heel of so many manufacturing companies that rely on indirect channels is the often conflicting and incomplete information that is given to prospects. By taking a field-tofactory approach to the systems that serve the channels and sales forces of your company, you can alleviate the bottlenecks caused by inaccurate, conflicting and

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incomplete information. Write orders only for those products and services that can be delivered. With systems reporting back what’s available in both finished goods and what’s possible to produce given production capacity, companies are only taking orders that they can fulfil profitably. There’s no longer the uncertainty of knowing whether an order is buildable or not, and if it is, when it will be produced. Build reliable sales pipelines by starting with accurate information from production. Equipping the sales force with access to the critical pieces of information from your supply chain results in solid pipelines. Trane and Greenheck have especially demonstrated this. The complexities of products these companies sell underscore the critical nature of setting accurate expectations with customers early in sales cycles.

Profitable Demand Response At some companies, field-tofactory is revolutionising selling strategies by enabling the entire process from sales orders to production in a single keystroke. When an order is input, it travels directly to production scheduling. The field-to-factory platform translates order lines and date question and answer data into order lines and characteristics for the bill of material. This enables lean manufacturing even for highly customised products. The companies that are accomplishing best practices in field-to-factory strategies are finding the following benefits, especially in production workflows for configurable, high-end products: Accomplishing the essence of lean manufacturing by automatically routing orders to production. This makes manufacturing processes as lean as possible

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Factors Influencing Field-to-Factory Performance

Demand forecast Perfect order

Inventory total

Supplier Supplier quality on-time

Cost detail

Production schedule variance

SCM cost

Plant utilisa-

tion

RM inv

Purchase costs

WIP + FQ inventory

Dir mtl costs

Order cycle

time

Perfect order

detail

Figure 3 Sources: Sources: AMR Research; Cincom CMBS Research

starts by trimming all unnecessary steps in the order-capture, order management, and production-scheduling systems. This is the essence of the field-to-factory vision: the ability to place orders and have them scheduled and ultimately fulfilled electronically. Capturing engineering knowledge so that it can be electronically applied to quotes, orders, and RFPs. In companies that have taken this step, product introductions were on time 50 per cent more often, and the complex production engineering tasks were completed on time. To make lean manufacturing truly lean, tools that are easily used by business managers need to be provided. In the case of Greenheck Manufacturing the ability of business managers to create product rules and constraints has given them a competitive advantage in launching new products and maintaining existing ones. Another major benefit of implementing a field-to-factory strategy is that your company won’t have to constantly change bills of material (BOM) in

response to the order’s changing requirements. By using a field-to-factory solution strategy, manufacturers are able to generate a BOM only once and use it throughout the production process. The solution includes support for both production-level and engineering-level BOMs, synchronising workflows in the process. Consolidating order-fulfilment systems significantly improves order accuracy and fulfilment. AMR Research states that, on average, the typical manufacturer has 5.3 fulfilment systems. Consolidating these down to a single system that has an architecture that can support multiple channels and synchronise orders is a strategy that is paying off across all industries. At the heart of this consolidation of orderfulfilment systems, is the goal of creating and perfecting a lean front-office globally. Each manufacturer has a slightly different path to lean manufacturing, yet the benchmarks along the path are shared. In our experiences, we’ve seen manufacturers vary in their approaches to accomplishing

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- technology management for decision-makers | august 2012

facilities & operations The Road to Best Practice

reenheck Fan Corp is a leading manufacturer of air-movement and control equipment. Its flagship ventilation products are typically found behind walls, in ductwork or on the roofs of hospitals, office buildings, hotels, restaurants, schools, industrial plants and commercial buildings. Their function, basically, is to move air in, out and around a building. Greenheck has consistently invested in expansion and new facilities to better serve its customers. In recent years, the company has increased its manufacturing space, both in the US and overseas. Greenheck was challenged with how to achieve lean manufacturing while making its quoting and ordering process more synchronised with production. Challenges it faced were: Supporting the launch of new products with solid product-configuration data. Modifying product data over the shorter life of many products due to the competitive nature of business. Providing full sales-cycle support, including improving the user experience of their existing configurator, and creating additional cross-selling and up-selling opportunities. Streamlining proposal generation to support integration with CAD applications so that CAD files can be output for configured models as part of the production process. Providing support for mobile sales and configuration in both connected and un-tethered environments as their sales force spends time in the field working with customers. Greenheck focussed on synchronising demand from the field directly with production and attaining the first steps of their fieldto-factory strategy by integrating sales, engineering, and manufacturing systems. Figure 4 shows Greenheck’s approach to accomplishing their lean-manufacturing objectives using field-to-factory strategies. Greenheck was able to take data once ‘locked’ in legacy systems and use it more effectively.

Results Achieved Greenheck was able to accomplish the following results by pursuing a field-to-

august 2012 | industry 2.0

factory strategy: Integration between legacy systems to create more data independence, and as a result, higher sales. This resulted in greater accuracy of quotes and orders. The ability to execute from a quote to the completed product in a single step to create high levels of customer trust. Being able to fulfil orders accurately the first time and with little, if any, delay. Significant increase in order-fulfilment efficiency. Greenheck was able to eliminate an entire series of order-fulfilment manual processes, and therefore experienced a significant increase in order-fulfilment speed and accuracy. Increased ability to meet customer needs, when they are ready to buy, by providing quoting, configuration, and pricing systems in both connected and disconnected modes. This was a critical requirement to support sales strategies, and meant that quoting systems would need to be able to replicate data easily between their laptops and order capture, management, and product-information databases that are available only online. Creation of a common set of rules that allowed business managers to modify product rules and options without having to rely on IT. This provided Greenheck with the speed necessary to keep up with the many new product introductions they had planned throughout the year. It also gave business managers the opportunity to create entirely new configurations based on logic already defined. With the coordination of engineering content and rules as shown in Figure 4, Greenheck was able to significantly trim down the number of exception orders handled. This in turn helped to maintain higher margins on custom orders, reduced the time required for exception handling on the production floor and by operations, and ultimately opened up new product lines for growth. Greenheck’s efforts to attain field-tofactory strategies allowed it to maintain its market share leadership in the United States while adding more new products than ever before.

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lean-manufacturing goals. However, the shared value across all of them is a focus on measuring their performance on the perfect order, supply-chain measures of performance, and multiple measures of value and supply-chain performance. Figure 3 provides a framework of factors influencing field-to-factory success. The approach of assessing, diagnosing, and correcting field-to-factory performance by demand sensing, demand shaping, and demand response needs to be part of any performance measurement.

Implementing the Strategies Cultivating channel partners, distributors, and resellers is where the most profitable returns are being generated from field-to-factory initiatives and strategies. Go after these strategies for quicker returns on channel investments so that your company will be able to harvest demand more efficiently and with greater accuracy than competitors. Look at the intersection of manufacturing, sales, and production to make field-to-factory strategies work. Just as Greenheck Manufacturing looked to unify their sales and manufacturing responses to customers electronically and accurately using engineering’s expertise, many manufacturers can find the same benefits. Look at the intersection of these departments, the databases and systems used, and examine ways to streamline or even replace manual processes. Spend heavily on channel education and product knowledge versus short-term incentives. Companies that are winning against competitors are using field-to-factory strategies to bring superior knowledge into their channels. Knowledge puts lasting pressure on competitors while incentives become addic-

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tive for channel partners, and they often become conditioned to only sell only what has an incentive attached to it. Aggressively manage leads and their escalation through your channels. Donâ&#x20AC;&#x2122;t settle for just sending leads out and then waiting to see if sales happen. Work to re-engineer processes around leads to track them efficiently. Then find what best practices work for your organisation. Pursue best practices in quoting and order capture. This translates into making the most of integration between your quoting and order-capture systems with pricing, supply chain, ERP, and services systems. Making your company as competitive as possible starts with a strong focus on unifying the channelfacing systems with internal systems. Winning business against your competitors starts with

the ability to Factors Influencing Field-to-Factory Performance capture quotes without errors, and the skill to define a realisOrder lines, Order date question, Header Data tic expectation and answer sets back to a client regarding when SAP their build-toorder product Field-to-factory VC solution set will be shipped. Order lines Characteristics The longestOrder BOM lasting benefits from field-toFigure 4 Sources: Greenheck Manufacturing Company factory go to those companies that start with the goal of providing a clear through fulfilment. To workflow from the order to the predominantly focus on internal production floor, alleviating all measures of performance first unnecessary manual steps. is to be myopically focussed. To be competitive, You will be the revolution that manufacturers must become your customers want, and transparent from the field where opportunities to serve them and orders and quotes are created, grow your business. through to the factories where products are manufactured This paper is courtesy Cincom Systems, Inc.

supply chain

Keeping an Eye on the Supply Chain

Illustration by Raj Verma

Supply chain visibility is hard to achieve. But by putting in five key building blocks, companies can effectively monitor global supply chains

he benefits of supply chain visibility have been recognised for over a decade, but solutions to date have fallen far short. Although warehouse management systems (WMS) have provided good inventory visibility within facilities and enterprises, the real need is for visibility beyond the four walls. However, due to cultural and technological reasons, true supply chain visibility has eluded most companies. Meanwhile, globalisation of supply networks and the rise of the consumer-driven value chain have greatly increased complexity and the need for supply chain-wide visibility. In fact, a recent survey by Aberdeen Group found that the top pressure to improve supply chain visibility came from the growth of global operations and supply chains. â&#x20AC;&#x153;The increased complexity of global supply chains has led to longer lead times, more pipeline inventory, and the need to control downstream and upstream logistics. This, in turn, has contributed to increased supply chain management costs,â&#x20AC;? says Aberdeen. The need for supply chain visibility is especially great for discrete manufacturing companies because of their higher propensity than other industries to outsource production and distribution, and because the value of the inventory is high, thus tracking it is more critical. Moreover, without detailed visibility, they cannot understand and control supply chain costs, inventory levels and lead times, nor react effectively to ever increasing variability and disruptions.

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Never a Greater Need Supply chain professionals have long had to balance service levels against cost to arrive at the optimal supply chain formula for their company and customers. But both sides of this equation are under intense pressure, making the balance much more challenging to achieve. On one hand, the emergence of the always-on, instant gratification culture (internet, mobile, social networks) has put huge pressure on companies to deliver products faster, with more personalisation, and at constantly lower costs. At the same time, consumers are more fickle, with less brand loyalty, ready to snap up the latest new gadget over an ever-widening array of shopping options. Servicing this highly volatile, everchanging demand requires discrete manufacturers to be much more agile than in the past. On the other hand, in order to increase financial and product agility, discrete product companies are moving fixed costs to variable costs by outsourcing much of their production and distribution to contract manufacturers and logistics service providers. These contract manufacturers are often in many distant, low-cost countries. Add in the rising demand from emerging markets and suddenly supply chains are much longer and more complex. The killer is that distance and complexity are the arch-enemies of agility. So discrete product companies are caught in a Catch-22â&#x20AC;&#x201D;they have leveraged outsourcing to aid financial and product agility, but that outsourcing has also hurt supply chain agility. The only way to

industry 2.0

- technology management for decision-makers | july 2012

supply chain tackle this paradox and restore balance is through global supply chain visibility.

Hurdles in SC Visibility WMS applications have done a very good job of providing inventory visibility within a facility and across multiple in-house locations. ERP systems grew up as a source for collecting and managing financial and operational data across the enterprise. These systems are internally focussed, however. They aren’t built to handle the multienterprise data necessary for global supply chain visibility. Nor do they have the level of supply chain detail required.

lacked the ability to use the visibility information to analyse alternatives and execute any resulting workflows. To accomplish that they had to be tightly integrated to execution systems such as WMS and transportation management systems, something that was costly and seldom kept up-todate with new releases. Because of these limitations, standalone visibility systems never flourished. Instead, a new class of cloud-based, multi-enterprise applications have emerged that make collaboration much easier and more cost-effective to implement and manage. These systems are built on five basic technology building blocks that together make global supply chain visibility possible today.

The Building Blocks Most high tech, automotive and other discrete manufacturing companies no longer make their own products. Rather, they assemble the many components made by their suppliers into finished goods to distribute to their customers, often through third party channels. Therefore, it is no longer Sony vs Samsung, or Toyota vs GM. It is their respective multi-enterprise supply networks competing. Leading companies realise they need visibility across these vast supply and demand ecosystems if they are going to successfully compete, while maintaining acceptable inventory and cost levels. And that necessitates collaboration and real-time data sharing between supply chain partners. What’s more, it requires companies to quickly analyse and act on shared information. The building blocks described provide the foundation for this global supply chain visibility and execution.

1. Connectivity

To address this issue, standalone supply chain visibility applications appeared a decade ago to collect and display broad swaths of information. But these standalone visibility solutions never caught on for two main reasons. First, collecting relevant information from many supply chain partners is a major challenge due to disparate technologies and protocols that make collecting and normalising information difficult. And many supply chain partners were unwilling to share their data. Second, even if the data was collected, these systems were mainly display mechanisms. They

august 2012 | industry 2.0

- technology management for decision-makers

Connectivity between trading partners across complex, multi-tiered supply networks is a lot more complicated than simply getting one computer to share data with another. Because there are typically vast networks of trading partners with differing systems, technologies and protocols, there is need for a communication network with a ‘universal adaptor’—technology that can accept input from many disparate sources, translate it into a common format, and integrate it into supply chain execution systems for immediate action. Historically, EDI/VAN networks were created to standardise this communication between trading partners. But they were not built to handle the many-to-many interactions of today’s complex global supply networks, and were too expensive to deploy for all but the largest companies. What’s required is ‘trading network’ technol-

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ogy that serves as the hub of the many-to-many information and workflow exchange. This technology gathers and translates incoming transactions into standard formats to pass directly into execution systems, such as warehouse management and transportation management systems. Especially for alerts and events, this ability to immediately take action is critical to minimising the impact of variability and disruptions. With trading network technology, the Internet replaces expensive VANs as the collection vehicle for data coming from all supply chain sources, thus making it economically feasible for smaller sites and partners which were previously blind spots in the supply chain. Another aspect of connectivity that is often overlooked is that many smaller trading partners, or even your own remote storage locations, may not have the necessary underlying technology to provide needed inventory information or advance shipment notices. Cloud deployment of basic WMS and/or shipping capabilities can make these blind spots visible to the rest of the trading network at very low cost. This combination of universal access, integration and enablement technology provides trading partner connectivity that was not available previously, solves one of the major stumbling blocks of past visibility efforts.

2. Data Repository

Once these vast sources of data are collected, there is a need to store this information in a secure repository for easy access, analysis and information sharing. This is more than a database issue. The repository must be accessible by the trading partners both for entering data through a collaborative portal when machine-to-machine interaction is not available, and to provide visibility to all network partners. This latter point is critical for improved efficiency across the network. Too often trading networks are set up primarily for the benefit of the network hostâ&#x20AC;&#x201D;the dominant member of the supply chainâ&#x20AC;&#x201D; but that limits the efficiency of the rest of the network. Everyone benefits when all have access to network information, provided proprietary information is secure from access. For supply chain applications, repositories should reside within supply chain execution systems. These systems are designed to hold and process the serialised LPN (licence plate number) and many other SKU attributes crucial to tracking parts, components, sub-assemblies and finished goods for discrete manufacturing. In addition, they

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not only track this information when inventory is in the DC, but also when it is in-transit anywhere across the network. With todayâ&#x20AC;&#x2122;s supply networks spread across great distances, visibility to inventory in motion is often more critical than knowing what is on hand at each site. ERP and other generalised systems are not designed to manage the complex, often nested data attributes common with high tech, automotive and many other discrete industry products, nor do they adequately track inventory in motion. ERP systems also do not have the ability to act on the data, responding to conditions, alerts and events with execution workflows.

3. Alerts and Event Management

In large trading networks, the sheer volume of data continually flowing through the network makes it impossible to react on a timely basis without systematised help. In addition to normal transaction processing, a separate class of rules-based monitoring and workflow software is needed to continuously sort through the data, or sometimes the lack of data, to discern when out-of-parameter conditions occur. For example, it might detect when a container carrying high tech parts fails to arrive at the designated port or terminal on time; when inspection at a Tier 1 supplier uncovers faulty or damaged components, potentially delaying assembly; or when a natural disaster disrupts production or delivery. For any of these and many other conditions, action must be taken immediately to limit cost impact and disruption to service. The first step is for the system to send out alerts to all affected parties notifying them of the problem. These alerts

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- technology management for decision-makers | august 2012

supply chain may require acknowledgement of receipt, with automatic escalation if acknowledgement is not received within defined time frames. This immedi-

ate visibility to events is a key reason global supply chain visibility is so valuable. Beyond visibility, however, event management systems should be able to react to pre-defined conditions through rules-based workflows without human intervention. Thus, integration with execution systems is required. This greatly speeds resolution to limit impact on supply chain operations. But many times disruptions occur where predefined resolution workflows are not possible. In these cases, visibility must extend beyond just notification to an active search for alternatives. For example, you may receive an alert that critical parts will not be arriving as scheduled. In this case you would want visibility to where these parts are currently available in your network, how many are available, or which alternate suppliers might have them. Thus, immediate event notification and global supply chain visibility go hand-in-hand to minimise the impact of disruptions.

4. Visibility and Analysis

Source: Aberdeen Group

Another important component of supply chain visibility is the ability to display the collected data in meaningful ways on a timely basis. Because the volume of data is so large, the system must sort through the data to provide the information in formats most useful for each user. These role-based displays may include charts and graphs, colourcoded alerts, summarised statistics, and pertinent details. The displays should be easily tailored for each user or role, including users at all trading partners, based on security levels and permissions. Inherent in the ability to display meaningful information is the capability to analyse, segment and manipulate the data. Built-in analytics should sort, group, summarise, and perform calculations and comparisons in order to turn the mountain of data into easily understood and digestible information. In addition, users must be able to search and analyse the data to uncover trends, determine underlying conditions, and find the root cause of problems. This is especially important for discrete manufacturers because so much of their supply chain is managed by third parties. Brand owners must have detailed visibility to what is happening within their trading partnersâ&#x20AC;&#x2122; operations to be able to understand inventory production, storage, shipment and cost considerations, as well as being able to react quickly to disruptions. Therefore, supply chain visibility display capabilities should have three basic componentsâ&#x20AC;&#x201D;configurable analytics; security by partner and user; and user definable, roles-based screen displays. Together,

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these turn network-wide data into actionable information for all trading partners.

5. Sourcing and Execution

What differentiates today’s supply chain visibility systems from standalone or ERP-based visibility capabilities is their integration with supply chain execution systems. It’s not enough to see something is happening in your network, you have to be able to take immediate action to overcome whatever problems or disruptions occur, as well as initiate corrective actions when negative trends are uncovered. Thus, visibility systems must be an integral part of your supply chain execution suite. For example, in the parts shortage after the Japanese tsunami, not only did companies need visibility to alternate sources of supply, but also the ability to act upon that knowledge. This might entail placing orders for replacement parts with alternate suppliers, arranging expedited transportation from those suppliers or within your network, and positioning the distribution centre to receive and process the parts coming from these new sources. Many other examples could be given, but the key point is that while visibility by itself is helpful, the real value comes from integrating visibility with execution capabilities to solve problems.

The Benefits Trying to manage complex global supply networks without supply chain visibility is like steering a ship in dense fog—you can’t see the rocks and shoals until you’re on top of them, and by then it may be too late to save the ship, or your bottom line. Today’s advanced visibility systems clear the fog from your complex global supply network so you can navigate around the rocks and shoals of disruptions, delays, and the myriad of other problems that beset supply chain operations on a daily basis. The benefits of global supply chain visibility can be grouped into three categories—information-sharing, avoidance, and recovery. Information-sharing visibility covers scenarios where being able to see what inventory is in the network, where it is at any given time, and knowing when it will arrive allows you and your trading partners to carry less safety stock typically used to buffer for uncertainties. Lower inventory levels reduce carrying costs and obsolescence while maintaining service levels. This is also true for your customers. Giving them visibility to their orders as they progress through your pipeline allows them to be more efficient, making you a better partner to do business with.

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Avoidance of problems, or the ability to handle small problems before they become big ones, is a major benefit of supply chain visibility. The longer problems such as late or lost shipments, product defects, or damaged goods linger in the supply chain, the more costly they become to correct and the greater the potential they will impact service levels. By being able to see the glitches that regularly occur, along with your options for resolving the problems and the ability to immediately react, you can minimise cost and service impact. For example, if you have visibility to the fact a shipment will be two days late arriving at the port, you may be able to find enough inventory within your network to cover an order from a key customer, thus avoiding expedited shipping costs or disappointing the customer. Similar scenarios could be made for re-routing shipments or pre-positioning inventory to avoid an expected hurricane or winter storm. You probably have many examples from your own operations where visibility to problems and the options you have for resolution could significantly impact your costs and service levels. Helping to recover from major disruptions is another important benefit of supply chain visibility. While these severe problems, like the Japanese tsunami, tornadoes, the Icelandic volcano, strikes, or geopolitical events only happen sporadically, their impact can be huge. Being able to see the consequences to your supply chain and the alternatives for recovery, together with the ability to execute alternative workflows, can be critical to your ability to lessen the impact, especially if it is a matter of getting to alternate sources before your competitors do. Supply chain visibility provides that window to the world to help you recover as quickly as possible. Thus, today’s integrated global supply chain visibility and execution solutions provide benefits on multiple levels. From saving direct costs through lowering inventories, to lessening or avoiding costs when reacting to problems large or small, visibility is a critical tool for managing your complex supply network. It also helps improve service levels and gain competitive advantage—items which are hard to measure, but crucial to success. This white paper is courtesy RedPrairie Corporation.

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management & strategy

Collaborating with Customers for Success

An intimate understanding of customer needs is essential for developing useful services and products. The payoff can be increased market share and better profits 42

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Imaging by Haridas B

ll businesses need to focus on its customers. But how does this work in practice for industrial sectors, where customers aren’t consumers, but businesses? In working with manufacturers, we’ve seen that it can be very difficult to find the right balance between meeting the specific needs of individual customers and being able to produce and sell efficiently, keeping costs down and growing margins. Fortunately, in many cases customers have similar needs. Ingersoll Rand (IR) is one example of a manufacturer that is doing its homework. When IR introduced new R-Series rotary screw air compressors and C-Series centrifugal air compressors in early 2010, the updated versions were the result of extensive research on customer needs. IR surveyed 2,500 customers in the US, UK, Germany and China to understand how customers used the products to solve problems or create value. Emerson Electric (Emerson) is also looking to tailor its development process to customers, but the company is taking a somewhat different approach. Emerson’s focus on customers begins with understanding some of the challenges faced by a particular industry sector, with energy as one example. In an analyst presentation, the company talks about some key issues faced by the petroleum industry. Emerson describes these key customers as facing increasing complexity, as plants become larger, single facilities become integrated

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complexes, and process automation technology accelerates. At the same time 40 per cent of US petroleum workers are nearing retirement, new plants are being located in areas where there is a lack of experience, and years of experience are required to make risk decisions. Emerson’s response is to use what the company calls a “Human Centred

which can produce more solar panels quicker, using less energy than the competition. We believe understanding and responding to what’s happening in your customers’ industry is a vital stepping stone to providing the value they are looking for.

If employees aren’t as skilled, then removing some of the complexities of using technology can help them Design development process”. If employees aren’t as skilled, then removing some of the complexity of using technology can help them do their jobs better. And when experience is lacking, embedding specialised knowledge within the solution can help customers overcome some of their staff challenges. Gardner Denver, a global manufacturer of industrial compressors, blowers, pumps, loading arms, and fuel systems, saw that solar panel manufacturers were having problems with pumps that used lubricant. Loss of the vacuum seal during the lamination process for solar panels sometimes caused air bubbles, a serious quality problem. They also listened to customers who said they needed a pump with greater capacity and reliability. The result was the Solar Screw System 1000, a twostage dry vacuum screw pump,

Price to Long-term Value Business models in the manufacturing sector are changing. In the past most revenues came from the production of components or end products. Now some companies also earn a significant amount from offering services and solutions—and the trend is upwards. As industrial manufacturers look to serve customers better, many are now helping with training, installation, on-going monitoring, maintenance, or refurbishment of the products they sell. In the process they’re shifting the focus from price to long-term value. And some are even looking to support customers more broadly. GE, one of the biggest US industrial companies, announced in its 2010 annual report that the company plans to expand service (and software) offerings above and beyond the company’s installed base. GE says “we

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management & strategy believe there is a $100 billion opportunity in software and services in infrastructure markets we know well.” In the aerospace and defence (A&D) sector, some companies are already far along this road. Engine-maker Rolls-Royce now generates more than half of its revenues—over £5.5 billion— from service activities. That number reflects a 10 per cent compound increase over the past 10 years. How much potential revenue is out there? One UK trade organisation estimates that on average 12 per cent of UK manufacturers’ revenues are generated from services, although the specific percentage varies by sector. While not every sector may be able to reach the 50+ per cent proportion seen at RollsRoyce, that still leaves substantial room for growth. We believe that a strategy which includes enhanced service offerings may be most vital for companies in ‘higher-cost’ manufacturing territories. Our case study of Keenan System is a case in point. Ireland is not a low cost territory for traditional manufacturing. By developing a valuable services model alongside the traditional manufacturing model, Keenan has offset the higher cost of manufacture with a profitable services revenue stream.

Helping Customers One of the most important ways that industrial manufacturers can deliver long-term value to customers is by helping them increase their sustainability. In many cases, new equipment or machinery can make a major difference to reducing the carbon footprint, by enhancing energy efficiency, and/or reducing emissions. Measuring energy efficiency is straightforward, and for many industrial manufactur-

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ers, demonstrating the energy savings that customers can achieve (and resultant emissions benefits and cost savings) may be sufficient. Environmental life cycle analysis (LCA) goes one step further, and demonstrates the embedded carbon, waste or water inherent in the entire production process and supply chain of particular products. Such an analysis allows companies to evaluate competing

There are many ways to cut manufacturing costs...VAVE doesn’t get as much press as some of these approaches solutions—and we believe it can be another way of demonstrating the importance of focusing on long-term value, rather than initial price. For example, if a pump-maker can demonstrate that their pumps are both produced more efficiently and deliver a better outcome (per litre of water shifted) than the competition, they may be able to make a strong case for a price premium. We’ve found that doing a detailed analysis of one or two ‘flagship’ products may be less daunting than trying to track the performance of the entire product portfolio. In some sectors, like chemicals, LCA is becoming increasingly common. There are challenges, though. In order to be reputable, LCA needs to be peer-reviewed. In helping our clients approach the LCA process, we’ve found that performing one requires a thorough understanding of the entire supply chain, from raw materials to waste disposal—including the needs of your customer. It is also impor-

- technology management for decision-makers

tant to understand how customers compete in different markets, what the competition is offering, and where demonstrating a sustainability advantage can make a real difference. In our view, even if LCA isn’t the right solution, the holistic approach it fosters points to the advantages of collaborating with customers (and supply chain partners too). We know from working with a number of industry associations in the manufacturing sector that there is increasing interest, at a sector level, in developing LCAbased product carbon footprints, and sometimes full LCAs, for particular product types. This is because manufacturers collectively recognise that this data is needed to support their products in the market place against the environmental credentials of competing products.

Building Green Consider the construction and building products industry. As governments look to decrease greenhouse gas emissions, they

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are increasingly eyeing the built environment. Improving the energy efficiency of homes and commercial properties can have a significant impact on overall emissions levels. But making it happen isn’t always straightforward, especially when human behaviour enters the picture. For residential building, consumers must be willing to pay the initial premium that some kinds of ‘green building’ represent, or put up with the investment and inconvenience that go along with refurbishments. The situation may be simpler in commercial buildings, which face much greater energy costs, and correspondingly bigger potential savings. Industrial manufacturing companies are already developing a whole range of products to help. They’re improving heating, cooling and ventilation (HVAC) systems, and lighting solutions. They’re automating building management to decrease energy usage. They’re developing smart energy solutions to allow the use of renewable power sources. All of these types of solutions show the importance of aligning R&D efforts with the use of the product—and potentially supporting customers during its entire lifetime. While it makes sense to produce such systems as efficiently as possible, looking over the product lifecycle, the biggest potential for emissions savings is clearly during the use phase.

Helping the Customer’s Consumers Looking across the supply chain is vital in other sectors too. While industrial manufacturers are providing solutions to commercial customers, in many cases how consumers use products may also have a big impact. Take the forest, paper and packaging sector, which is currently going through a period of intense

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How Keenan is revolutionising dairy farming?

nnovation isn’t confined solely to big companies with even large R&D budgets. Keenan System, an agricultural equipment manufacturer, is a case in point. The Irish group was established around 30 years ago; its revenues have ranged from €40 to 60m in recent years. Those numbers may skyrocket, though, if the company is able to reach the world dairy market. Keenan started by understanding a customer need. They tracked the milk output per unit of feed (feed conversion efficiency) of their machine customers. They then developed innovative feed wagons that help improve the nutritional efficiency of dairy feed through a patented process. The company has gone one step further. It also offers customers comprehensive support, including nutritional advice, through its patented Performance Acceleration and Control Enhancement (PACE) Information Technology. The PACE system monitors optimum feed rations that consistently deliver perfor-

change. Demand for paper is changing radically as consumers increase their use of digital media. That’s changing the needs of paper manufacturers. While in the past a paper machine producing only one grade of paper may have been perfectly adequate, or even more efficient, shifting consumer demands mean paper-makers need greater flexibility—and that means they need paper machines which are able to switch which grades they produce. And while consumer demand for many types of paper is declining in mature markets, in emerging markets, some segments are growing rapidly—for example, tissue, which is used in hygiene products. Metso Paper is one company

mance to agreed production targets. PACE users can even track their herds’ performance. What’s the bottom line? Potentially a 20 per cent improvement in feed efficiency, which means a dramatic increase in profitability for dairy farmers. It’s also good for the environment. At a national and global level, the potential accumulated economic potential is massive. And it gets better. Keenan’s equipment and feeding methodology achieve great results, but using the best possible mix of feed can make them even better. That’s why the company is collaborating with a feed company to provide the optimal physical rations. Working together, the feed company and Keenan offer the ‘Gain Plan’ to customers on 12 month contracts. By partnering, Keenan is able to access sales territories and farmers it wouldn’t have been able to reach before. They’re also building a customer support network, to help continue the collaboration with customers.

that has responded to this customer need. They’ve designed a new low-cost tissue machine specifically for use in emerging markets. The machine helps paper producers add incremental production where it’s needed— close to the consumers in growing markets.

One-on-one Collaboration We’ve talked about the need to understand customer groups or industries—but what about the needs of individual customers? Working directly with major companies can be an extremely productive way of driving innovation. As just one example, ABB pilots major design changes with key customers as a way of testing and improving them. When the company was looking

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management & strategy to improve its high performance drive systems, for example, it solicited the help of a leading elevator maker in Italy. That helped the company understand which features worked well, and which ones needed improvement —and generate visionary ideas for future innovation too. From a sustainability perspective, we see the ultimate goal as achieving a true step change in efficiency. One-on-one collaboration, where manufacturers and their customers jointly develop a solution that is less resourceintensive, is one route to that goal, although it’s by no means the only one, as our case study of Keenan System suggests.

Cutting Costs, Increasing Efficiency There are many ways to cut manufacturing costs— Six Sigma, Lean, etc. While Value Analysis/ Value Engineering (VAVE) doesn’t get as much press as some of these other approaches, it can be a good choice for companies who want to integrate their customers (and suppliers) into the cost reduction process. VAVE stands for a system of identifying and prioritising product functions, analysing their contribution to overall value and relative cost, and spotting areas for improvement.

We introduced one of our clients, a maker of pipes, valves and control equipment, to VAVE in 2010. The company was looking to update its product portfolio and trim costs. Together with the client, we set up workshops with their supplier network to work through the VAVE process —and we included customers too. That’s because engineers may not always be the best judge of which functions really bring customers the most value. Getting input directly from the people using the equipment helps to validate planned changes. It also underlines the importance the company places on meeting customer needs cost-effectively. The result of our efforts? Significant opportunities to improve on bill of material (BoM) spend —the average savings across the products reviewed was 30 per cent of BoM costs— without jeopardising customer or supplier relationships. Regardless of what methodology is used for cost cutting, these initiatives usually increase efficiency. It stands to reason that removing resource, cost, time and people from a manufacturing process may, in many cases, bring with it improvements in the carbon profile of the good produced, or the service supplied. Customers are increasingly interested in this aspect of performance. We think it makes sense to consider measuring and documenting it.

Environment lifecycle analysis (LCA) goes one step further and demonstrates the embedded carbon, waste or water inherent in the entire production process and supply chain 46

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It’s not always necessary to be physically proximate to collaborate, though. As cloud computing and virtual collaborating technologies improve, the opportunities to work together are expanding exponentially. At PwC, we’re seeing first-hand that enterprises need to adapt their business models and operations to meet the enhanced expectations of the digital consumer and ecosystem. There are also lots of opportunities to make internal changes for companies to collaborate more effectively with customers.

The Way Forward Some manufacturers are already taking steps to increase their levels of collaboration with customers. We believe this type of approach will be fundamental to innovating smarter and developing a sustainable manufacturing business for the future. Companies who fail to collaborate with their customer may face loss of market share, more difficult routes to market, and challenges in maintaining recurring business. Quantifying results will be important too. One good choice may be lifecycle analysis to document the environmental impact of products designed with the customer in mind. And Cradleto-Cradle design actually puts re-usability at the heart of the design process. Companies will also need to understand how to work together with customers around the globe. That could mean establishing or increasing a presence in new markets. For many, rethinking and redesigning their company’s use of digital technologies can also help jump-start collaboration efforts and enhance customer relationships. This white paper is courtesy PricewaterhouseCoopers International Limited.

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opinion

Thriving in

Adversity

Imaging by Charu Dwivedi

Positive thinking and setting realistic goals can reduce stress, and make you a more successful leader By David Lim

ast week my wife caught me “catastrophising”. It was when my laptop’s screen died, and my desktop was also not working. All my key data was still in the hard drive, I had no way to access it. I was reduced to waving my arms and using phrases like ‘my whole life is in that thing’ and ‘I‘ve had it’. I stopped when I realised that I was guilty of the exact thing that I educate people not to do. While preparing for a presentation, I realised that the key reality-forming steps that bring us from where we are to where we prefer to be lies in the language we use. Not just language in the big, important messages we live with, but everyday, little realities that shape the big picture. Here are some ways that will help us thrive. Learn to really, truly enjoy what you have: Joy in life is connected deeply with how we face each day, celebrating what we have, rather than what we don’t. If you drive a serviceable car, don’t let the flashy car that just went by make you feel a little green. Instead count the blessings that you don’t have to rely on public transport. If you’re stuck in a sardine tin of a commuter train, think about how you can enjoy reading a bit of the free sheet, and how this is much better than having to walk to work. Think small to get big goals: In the field of Solutions Focus consulting, a powerful way of getting what we want in small steps, is to imagine the sights, sounds and feelings of what our perfect world might be. Each is unique. By looking at what we need to do, instead of why what we do won’t work, we drive much more positive energy and motivation in getting what we want. But, only if we realise we need to make small, but specific steps based on solutions.

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There is no such thing as reality: But only our own biased, perceptions of what is, as seen through our life experiences, cultural, educational and spiritual beliefs. By choosing to use language that fails to help us improve, we will never achieve our goals. If we get frustrated or concerned, should we be catastrophising? Or should we ask special questions? In one of my programmes on transforming managers into leaders, we use what I term ‘power questions’. These questions will force us to re-look our situation, or re-examine a set of beliefs. The result will be the loosening of previously rigid positions. “You’ll never become a CEO?” Says who? On what grounds? This kind of power question has the ability to turn around naysayers, gives hope, and often transforms a shaken team into a determined one. When I look back on nearly two decades of mountaineering, there was always a defining moment. In each of these, the success of the trip almost always turned on the kind of beliefs we had of our abilities, the weather and challenges ahead. But the most powerful was our internal language we used to shape our future. So, move away from ‘survivors’ as they are sometimes bankrupt of positive belief, and energy, preferring to feel sorry for themselves, and remain consistently negative. Instead, look to those who seem to be miraculously thriving. Even if they have lost half their investments, possibly their jobs, they remain resolute in finding solutions, dreaming and doing things that bring them closer to their perfect world.

By looking at what we need to do, we drive more positive energy and motivation in getting what we want

David Lim, Founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be reached at his blog http://theasiannegotiator. wordpress.com, or david@everestmotivation.com

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management & strategy

Bu to a

ving the

sinessModel Digital World

Most consumer-facing businesses are now using digital tools to get closer to customers. Far fewer are close to completing the challenging but essential journey to a holistic, integrated model, with shared assets and platforms, and an overarching digital approach By John Jackson, Oliver Grange and Kevin Millan

Imaging by Midhun Mohan

n a world of growing digital empowerment, consumer-facing businesses have had to become quick studies. Frontline managers see that digital technologies offer the promise not just of more cost-effective ways of doing things but of more meaningful and valuable relationships with customers. Richer communication channels and a wealth of customer data enable a new connectedness, and there’s a powerful impetus to make the connections before a competitor—perhaps an entirely new one—does so.

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Ironically, perhaps, these initiatives in digital marketing, social media and the like are often the work of pioneering units at organisations still largely anchored in the analogue age. As it happens, these digital efforts are ramping up just as another major trend is peaking. For most of these same companies, the focus over the last decade has been on globalising the business model and its constituent processes and services, from Finance to HR to Supply Chain Management. Migrating from local to regional to global models, they’ve reaped big

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management & strategy benefits in operational efficiency and scale. Now the stage is set for a major convergence, whereby the globalised business model meets a digitised, increasingly customer-connected value chain. Instead of treating new digital efforts as isolated projects, companies have begun working toward a holistic, integrated global digital business model, with shared digital assets and platforms and an overarching digital approach that clearly supports the business strategy. For those most adept

Businesses first need to understand what their current digital portfolio looks like when matched against their strategy and capabilities required to execute it at implementing it, the model will deliver significant competitive advantage in the form of scale, speed to market, agility and closeness to the customer.

Imbalance of Power Two main drivers give this transformation urgency. Call the first a digital arms race. More and more companies are striving to put the large amounts of customer data they now possess to strategic use. Automakers, for example, through the use of GPS devices installed in the cars they sell, have been able to collect and monetise a wealth of data on customer driving habits. Even more significant is the rapid shift of the technological balance of power toward the consumer. At the turn of the millennium, companies spent twice as much on IT hardware per employee as consumers spent. By 2008, the two sides had reached parity. The explosion of social media has underscored this shift. There are now more than one billion social media users worldwide, including 256 million in China alone. And that has serious implications for business. A recent study by market research company AYTM showed that 58 per cent of Facebook users have ‘liked’ a brand, and that 39 per cent of Twitter users have tweeted about one. Given

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the millennial generation’s proven enthusiasm for social and mobile media, all those metrics are likely to rise. Yet whatever the urgency, it is no small task for an established organisation to thoroughly internalise a highly disruptive technology. Large, consumer-facing companies of every kind—in consumer products, retail, financial services, healthcare and beyond—are facing a journey unlike any they’ve experienced in the past. As they embark upon this journey, they’ll need to keep three key success factors, none of them technological, in mind. First and foremost is leadership. Given the scope of this transformation, and the stakes involved, leadership must come from the C-suite. Though this may not be easy for senior executives who are still more at home with highly sequential, large-scale tasks than with the measuretest-learn dynamic of a digital culture, it’s a challenge that must be met. The CEO, CIO or whoever else takes the lead may delegate day-to-day management of the effort, but s/he must be invested in, and accountable for, its success.

Culture Shock Then there is the ability to attract and retain digital talent. Employees at the fast-moving companies that lead in the application of digital technologies tend to want different rewards from their jobs than those at analogue ones. The differences have less to do with money than with culture, and extend from attitudes toward innovation to the quality and flexibility of the work environment to what sorts of devices employees can use to do their work. For traditional managers, opinionated, highenergy digital talent—often part of the same tech-savvy millennial cohort that’s driving change on the consumer side—can be difficult to direct. Many managers need to be retrained to understand digital metrics and the levers that can be pulled to drive a digital business. Finally, leaders must understand the dynamic nature of the digital business model transformation, which is very different from the decade-long, enterprise-wide ERP transformations that are still a point of reference for many. Since digital technology evolves rapidly, so must the model. Organisations need to think big but start small, using the measure-test-learn/proof-of-concept techniques favoured by the likes of Google and Facebook, amplifying the impact of digital evangelists around the company as they accumulate their successes.

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Finding the Path By this time, most consumer-facing businesses have some experience with the basic issues. The talent management challenge in particular transcends sectors. But it’s also the case that each sector has its own dynamics, and that different companies within them are at different stages in the journey to a digital business model. Among the most advanced sectors is consumer products. Here, the long-established multinationals that dominate the industry have been leaders in the move to drive common processes at a global level, particularly in the back office. So, it makes sense for them to look at driving a common approach in the front office as well. Their global footprints and global brands position them to get value out of digital technologies at scale more quickly than companies in many other industries. Consider Procter & Gamble, the consumer

Making the

Digital Journey 1 Ad hoc solutions. Management is still unaware or unconvinced of the benefits digital could bring to the business. The extent to which digital is adopted depends on each department’s needs, and the personal preferences of key opinion leaders. Examples of digitisation are scattered throughout the business, in discrete processes within some departments or business units. Compliance and data management applications tend to be the first to be implemented. www.industry20.com

products giant has made significant investments in digital technology, in the internal and external networks through which its people access it, and in the delivery model through which they deploy it. It’s a commitment that starts at the top, with CEO Bob McDonald’s push to create a fully digitised company and his designation of P&G’s Global Business Services group as the company’s ‘transformation organisation’. The GBS group has moved beyond back-office processes and into the delivery of what P&G calls commercial services, which directly help win customers. A prime example, the virtual reality centres used by P&G teams around the world to create, test and optimise packaging, shelving and store designs. The centres feature life-size, high-resolution screens, and consumer focus groups use them to assess virtual product representations. Sophisticated software creates a real-time record of how

As they shift towards an integrated digital business model, most companies move through four stages

Digital Business Processes. The second stage still shows a fairly disconnected, tactical and unplanned evolution of business processes. By this point, a few pioneer departments have likely realised the benefits that digital can offer and transform part or most of their business processes— for example, virtualisation, social media and Internet applications. However, there is still no overarching strategy coordinating these efforts, so redundant functions, systems and platforms are common.

Digital Business Model. Depending on their particular business model and strategy, some businesses have decided to take one more step toward developing a fully-integrated digital business model. In this case, instead of waiting for digitisation champions to drive change from the bottom up, the business implements a holistic transformation. Every business process is screened and, where it makes sense, moved toward digitisation. In most cases, a delivery organisation is created to drive this change and provide the administration and maintenance that the new systems will require. That organisation reaches out to internal business units to understand their current needs and to the wider business network to understand the needs of the future—and it executes in market at scale with speed.

Cohesive Digital Platform. By the third stage, management has seen the light to some degree and has deployed people and money to drive the change, though the destination is not always clearly defined. Here, companies have developed an overarching platform that supports and coordinates the once-isolated digital processes in the business. Cross-functional processes like new-product development or asset management, for example, can now benefit from cross-enterprise synergies.

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management & strategy participants react to product placement, shapes, colours and designs. The combination of virtual research with physical quantitative research enables P&G teams to understand consumer expectations and design and deliver products accordingly. Equally important, P&G shares the research with its retail partners, so together they can make smarter and faster decisions about what products and quantities are needed on store shelves. The company also uses its virtual-reality centres to build virtual 3D store environments, through which retailers can see how products or displays will actually look in their stores. P&G isn’t just saving money and reducing cycle times for select products. The company is also embracing an approach to innovation that’s more like that of a software company. Google, for example, talks about its ‘fail fast’ mentality and being ‘always in beta’. It isn’t possible to do this if you have to make physical prototypes and test them in real stores—but it is in the virtual environment.

Competitive Pressures Retailers, for their part, face their own sector-specific issues on their digitisation journey. For the big brick-and-mortar merchants, competitive pressures from pure-play online retailers (notably Amazon. com) pose a tough question: How do you move rapidly on the digital front without endangering the seamless, consistent customer experience that helps make the best dual-channel retailers—Apple being the paramount example—so successful? Many retailers have treated digital as a separate channel, with separate leadership, organisation, capabilities and technologies. The approach is not

without some advantages, with @WalmartLabs, the Silicon Valley-based digital unit of the world’s largest retailer, providing perhaps the most dramatic example. After a comparatively slow start in online retailing, WalMart Stores has considerably augmented its digital marketing capabilities and talent pool by acquiring small firms focussed on social media and mobile applications, among other things. In early 2012, for example, it bought Small Society, an Oregon-based mobile agency whose past successes include an iPhone app that enables Zipcar customers to quickly find and reserve a car. The challenge ahead (and not just for WalMart) will be to manage the total customer experience as mobile devices enable shoppers to link the physical and digital channels in real time as they compare prices and read recommendations while standing in the physical store. In general, it is in the marketing and fulfilment functions that retailers have made the most progress in moving to unified digital processes. In areas such as shopper experience, merchandising, demand forecasting and content management, there’s still much work to be done. Global expansion adds additional complexity for retailers. Initially, the favoured model combined central management of the digital channel with local management of the physical one, but this tends to fracture the shopping experience. Several retailers—WalMart, for example—have since moved to a regional model for both channels, giving up some process efficiency to improve the customer experience. Over time, the retailers will likely sort out which digital processes can be centralised and which require a regional touch. Companies in life sciences encounter a different set of sectorspecific complexities when making the transition to a fully-digitised business model. The phenomenon of digitally empowered consumers is much in evidence, with healthcare information sites such as WebMD among the most popular on the Internet. At the same time, pharmaceutical companies are part of a healthcare ecosystem that also includes doctors, providers, medtech companies and government. Digital technologies offer life sciences companies the possibility of deeper relationships with all these key stakeholders as the connections among them strengthen.

Digital technologies offer the promise not just of more cost-effective ways of doing things but of more valuable relationships with customers 52

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The consumer relationship holds particular promise, presenting an opportunity to engage in a dialogue that goes deeper than a discussion of a particular product. So far, this trend is most in evidence in the overthe-counter realm, where regulatory rules permit a freer exchange. A case in point is nutritionpossible.com, a recently launched website sponsored by Pfizer’s Centrum multivitamins unit. The content goes far beyond vitamins, ranging from expert commentary on nutritional issues to relevant material from WebMD and the Mayo Clinic to a nutritional diagnostic test. Consumers can get a wealth of information about personalised nutrition. Pfizer, meanwhile, gets a wealth of information about what its customers want. Though a few life sciences companies have moved from a local, siloed approach for digital projects to a more centralised and coordinated one, many more have yet to do so. As initiatives like nutritionpossible.com prove their worth, however, that is likely to change.

Getting Started While the journey to a digital business model will vary by sector and company, there are important commonalities as well. No matter what business you’re in, managing multiple platforms, negotiating with numerous software vendors and dealing with compatibility issues will consume time, money and energy. Hence, those companies that effectively embed digitisation into their business model, view all processes as being candidates for digitisation and enable the fast deployment of solutions at scale will have a key competitive advantage. Businesses looking to gain this advantage will need to clearly define how they will innovate, implement, manage and monitor the application of digital solutions throughout the organisation—a significant change from working on separate solutions in various parts of the business. Before beginning this journey, businesses first need to take a step back and understand what their current digital portfolio looks like when matched against their strategy and the capabilities required to execute it. Once this fact base has been established, it will be possible to take an objective look at all business processes and decide which of them can benefit from digitisation. This holistic approach should make it possible to find a balance between creating synergies from integration while also staying relevant to digitally empowered consumers around the world. What isn’t possible is to design the perfect end state at the outset. Indeed, planning a company-

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Steps to

Getting

Started 1 2

Identify a senior C-level leader to sponsor and drive the process

Document and define all current digital projects and map them against the key capabilities required to enable the business strategy

Identify projects to act as proof of concepts to kick-start the process

and unify services for end users

Ensure accountability as a service provider to the business (to drive down costs and improve service)

Monitor and measure the performance of service providers and proactively manage the mix

Manage services operated by multiple providers (both internal and external) to the business Maintain strategic ownership and management of digital processes

Provide a consistent management framework across digital services and service providers Drive digitisation for key crossfunctional processes

wide transformation and locking in decisions such as platforms, software and providers too far in advance is a mistake. Learning through iteration will yield better returns than orchestrating a huge and complex transformation that may stay relevant only for a short time. Given the speed of innovation and technology change, the principle to adopt is being fast to failure. Begin by identifying appropriate pilots and applying proof-of-concept techniques to test different options. This concept of continuous beta versions is what helps digital companies learn quickly and remain agile, and it can do the same for analogue organisations that wish to digitise. Continuously harvesting quick wins while keeping an eye on the framework you’re building for the midterm and for the long term is challenging, to be sure. But it will prove important for consumerfacing businesses wishing to stay at the forefront of the digital revolution. John Jackson is a senior executive in Accenture Strategy. He is based in London. Oliver Grange is a London-based senior manager in Accenture Strategy. Kevin Millan is a London-based manager in Accenture Strategy. Reprinted with permission. Copyright © 2012 Accenture.

industry 2.0

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product update Tool Holder

Magnetic Separators

enSwiss has introduced the new Multidec Back-tool holders for turning operations on the sub-spindle and from an ID tool position. Each holder is centre height adjustable to + 0.20 inches, a critical feature for machines without a Y-axis. The fully modular tool holder system features range of shanks, spacers, and insert modules to suit popular machines. The model allows for use of Cut 3000 series inserts to perform grooving, threading or OD turning on the back side of a Swiss machine. The holder can be equipped with adaptor to provide coolant delivery system for insert lubrication and cooling, and a more efficient cutting tool life.

are earth roll separators from Eriez are suitable for many industries, including mining, plastics, abrasives, recycling, glass, foundries, industrial minerals, metals, electronics, etc. Available in single, double, and triple-stage versions with non-magnetic or magnetic-rerun, the separators feature rolls constructed with neodymium-boron-iron rare earth permanent magnets. A high gradient magnetic circuit includes items designed to produce magnetic field in excess of 21,000 gauss. These highly magnetic rolls are capable of recovering weakly magnetic particles, and handle feeds from one-half inch (13 mm) to very fine materials. The separators are available diameters of three, four and six-inches, with roll widths ranging from five to 60 inches. A cantilever design allows quick belt replacement.

Genevieve Swiss Industries, Inc Tel: +1- 413-5624800 Website: www.genswiss.com

Eriez Magnetics Phone: +1-814-8356000 Website: www.eriez.com

Mould Release

Ball Valve

elease Coating 8012, a new heavy duty paste wax from Huron Technologies saves time in moulding operations by clinging to vertical mould surfaces, vents, pins, and wire locators. The solvent-based product can be applied by brushing or wiping, without the need for complicated spray equipment. Available in 10.5 oz cans and 5 gallon containers, the coating is suitable for flexible, integral skin, semi-rigid, and rigid polyurethane foam moulding including high-speed automotive seating operations. The compound maintains a paste-like consistency at ambient plant temperatures up to 110°F. Huron Technologies, Inc Tel: +1- 517-5890300 Website: www.hurontech.com

Corrosion Sensor

ayward Flow Control has released the GF-PP (Glass Filled Polypropylene) TB Series ball valves. Available in sizes from 0.5 to 2 inches, the series features full port design, with true union threaded or flanged end connections, reversible seats, adjustable seat retainer, and double O-Ring stem seals. The valves have a maximum pressure rating of 250 psi (150 psi with threaded or flanged ends), and maximum service temperature of 240°F. The platinum glass filled polypropylene material is suitable for chemical services, abrasive applications, and water distribution. Applications or installations include waste and water treatment, chemical processing, aquatic/animal life support systems, food and beverage, pharmaceutical, pulp and paper, corrosive environments and irrigation. Hayward Industrial Products Inc Tel: +1- 888-4294635 Website: www.haywardindustrial.com

Circular Saw

ohrback Cosasco has developed a new range of sensors that detect corrosion under insulation. Comprising of continuous insulated braid corrosion fuse wire (Type 1), inserted corrosion fuse probe array (Type 2), and CUI Corrosometer probe (Type 3), the corrosion sensors are easy to install. They can also be customised to meet individual requirements and applications.

quipped with 2 HP pneumatic motor operating at 90 psi using 60 cfm air, the circular saw can dry cuts steel plate up to -inches thick, as well as non-ferrous metal, plastic, grating, composite, and corrugated materials. The portable 9-inch saw has overall cutting depth of 3 ¼ inches at 90°, and 2 inches at 45°. Measuring 0.055 inches thick, the laser beam equipped saw blade is tungsten-carbide tipped and shockresistant. The saw is suitable for applications in foundries, petrochemical, nuclear, marine, demolition, and fabrication industries.

Rohrback Cosasco Systems Tel:+1- 800-6356898 Website: www.cosasco.com

CS Unitec Inc Tel: +1-800-7005919 Website: www.csunitec.com

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Barcode Reader Optics

ognex has developed liquid lens optics with variable autofocus for the DataMan 300 series of fixed-mount barcode readers. The device’s intelligent tuning feature automatically selects optimum settings for integrated lighting and autofocus optics for each application, ensuring that the barcode reader will be set up to attain highest read rates possible for 1D, 2D, and direct part marked (DPM) codes. For presentation reading, tote scanning, and small-package sorting, the lens can be configured to sweep through full focal range of optics. Cognex Corp Tel:+1- 800-6772646 Website: www.cognex.com

Magnetic Transporter

ndustrial Magnetics has announced magnetic endof-arm tooling for the appliance, automotive, office furniture and material handling industries, available with a BSPP fitting (British Standard Pipe Parallel thread) on 3-inch diameter models. Engineered with rare earth magnets, the tooling transfers metal blanks, stampings, and parts in automated station-to-station, press-to-press transfer, and robotic pick-and-place applications. The magnets directly replace vacuum cups with minor tooling adjustments, and can be installed to existing air connections on tooling booms or robotic face plates. Industrial Magnetics Inc Tel: +1-231-5823100 Website: www.magnetics.com

Butt Splicer

TC International has unfurled the S-900AB-ACV automatic butt splicer for joining a variety of materials including tag, label, board, film stocks, and other thick or double ply materials. The machine can accommodate various web widths, line speeds, and other process requirements. It allows new roll prep at any time in splice sequence, and the heavy-duty cantilevered unwind design has integral roll lifting. It can hold two full 40inch diameter rolls. Additional features include horizontal web accumulator, and standard vector driven unwind spindles or optional servo drives. Driving the unwind spindles offers several benefits including keeping the machine footprint small, the ability to unwind very delicate materials, and no brakes to replace. The splicer can also be prepped to make a one-sided splice, with the tape always on the same side, without turreting the unwind rolls.

hoenix Contact has developed a range of DC-DC converters that can boost voltage over long wire runs, regulate battery voltage output and isolate ground loops. Featuring selective fuse breaking technology, the Quint SFB DC-DC converters deliver up to six times nominal current for 12 ms. The devices also feature Power Boost technology, providing up to 125 per cent of rated output for demanding loads. The converters are housed in extruded aluminium for optimised cooling.

CTC International Inc Tel: +1-973-2282300 Website: www.ctcint.com

Phoenix Contact Tel: +1-800-8887388 Website: www.phoenixcon.com

DC-DC Converter

Abrasive Wheels

Position Sensor

aint-Gobain Abrasives has introduced Norton Paradigm Diamond and CBN Wheels featuring a new proprietary, patent-pending bond to deliver high grinding performance on carbide and high-speed steel round tool fluting. For maximum productivity, the products are online and offline truable. The wheels are wear and load resistant for superior grinding on six to 12 per cent cobalt, and offer better control over core growth. A high grain retention and uniform structure provides a high G-ratio, up to 2.5x longer wheel life and a 30 per cent higher material removal rate than other superabrasive wheels. It also offers low specific cutting energy, which enables faster grinding with a lower power draw and less burn.

ovotechnik’s TP1 Series of magnetostrictive position sensors provide non-contact, absolute, linear position. The sensor meets all specifications without requiring null and span adjustments, and are available for standard measurement ranges of 50 to 4,500 mm. They feature an update rate of 62 µsec, absolute linearity to within 0.02 per cent of FS, and 16-bit resolution. Output versions include analogue, start/stop, SSI, quadrature, and 48-bit DyMoS that also provides true velocity without need of encoder. Sealed to meet IP68 standard, the sensors operate from -40 to +85°C.

Saint-Gobain Abrasives Inc Tel: +1-800-6351992 Website: www.sgabrasives.com

Novotechnik US Tel: +1-800-6677492 Website: www.novotechnik.com

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- technology management for decision-makers | august 2012

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