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A 99 MEDIA PUBLICATION
VOLUME 12
ISSUE 04
DECEMBER 2012
PRICE 100
OPINION
MSMEs have significant scope of improvement
INNOVATION
Application of wireless system eases PG test
STRATEGY
Skilled buyers break cartel without legal aids
rategy t S s s Busine d n u o for S A Tool
editorial Vol. 12 | Issue 04 | December 2012
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Create Visibility
G
lobal economic recession has definitely influenced many manufacturing leaders to shift their paradigm. Thus, majority of them are leaning towards more service oriented business models. It is quite evident that as far as manufacturing competitiveness is concerned, Europe is slowly losing to the developing world. Deloitte’s Global Manufacturing Competitiveness Index 2013 categorically points out the same – stating, “Five years from now, emerging economy nations surge to occupy the top three spots, with China retaining the top spot, and India and Brazil moving up to claim the second and third rankings, respectively.” Thus, despite all odds, Indian manufacturing industry is entering 2013 with a big potential. Now, it is the time to march forward with all round preparedness. The most important question at this juncture is – how much are we prepared to go up? Because, just low labour cost cannot be a weapon to win over other the well-geared emerging competitors. Gearing up at par with the global trend is very important. Contextually, the question comes up – what are the focused areas right now globally? Many experts from different parts of the world have already declared their views on it. And the most common point
industry 2.0
P. K. Chatterjee editor@industry20.com
on which they have emphasised is – enhancing visibility of operations – that is possible through complete integration of the processes. Why are they in concord on visibility enhancement at every quarter of manufacturing? Today’s global economic situation leaves no alternatives but real-time decision making. In this competitive situation, no manufacturing organisation can grow without aligning the goal of the manufacturing department with the complete business goal of the organisation. Complete visibility helps in different ways. Whether it is raw material searching or sourcing, production planning, manpower planning, warehouse management or distribution – an integrated system brings harmony among all these different activities associated with manufacturing. The result is right materials are purchased, processed, stored and dispatched at right time with the help of right manpower. So, the bottleneck situations are avoided, advantages of the best costs for raw materials are obtained, sales department can look for the best price for the manufactured goods and so on. Most of the Indian manufacturing organisations are still following some thumb rules as far as their business decision making processes are concerned – that is a journey in isolation. The trend needs to change immediately.
- technology management for decision-makers | december 2012
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contents
advertisers’ index NBC................................................IFC Riello PCI India Pvt. Ltd................... 3 Bry Air Asia....................................... 5 CHEP.............................................16-A Ace Micromatic............................ IBC GW Precision................................. BC
cover story 19 Battle-test Your Innovation Strategy Unfortunately, in the heat of competition it is extraordinarily difficult for players to identify threats, because the tendency to overlook rivals is deeply ingrained in human behaviour.
Job generation plummeted by over twenty one per cent between January to December 15, 2012.
design & optimisation 28 Improving Energy Efficiency Payback period is basically a risk management tool, and says hardly anything about ROI.
Industry Update.............................04
Global industrial growth remained sluggish in the third quarter of 2012 due to the ongoing economic uncertainty.
& processes
24 Growing Demand for Steel
In the fiscal 2012-2013, growth in domestic steel demand is expected to be around five and a half per cent.
Honeywell offered a solution that effectively addressed the challenges that BHEL faced during a power plant commissioning.
A machine for defibering dumped husks is helping in making valueadded products in Kerala.
There is significant scope of improvement in the current way of working of the Indian MSMEs.
industry & economy 14 Decelerating Growth of Global Manufacturing Output
of Technology
green manufacturing 40 Developing an Eco-friendly Machine
opinion 12 Potential for MSMEs in Manufacturing
december 2012 | industry 2.0
Advertisers’ Index..........................02
Product Gallery..............................46
market scenario 10 Little Sign of Recovery in Job Market
2
Editorial........................................... 01
Techwatch......................................08
Cover Design: Raj Verma
materials
departments
supply chain
41 Expected Global Trends in 2013
challenges & solutions 33 Managing Your Pressure Washer A pressure gauge can help maintain the longevity of the pressure washer.
quality & innovation 36 Strategic Application
- technology management for decision-makers
Real time visibility will be possible through absorption of the latest technologies.
management
& strategy
43 Breaking Cartel through Online Negotiation
Manufacturers always look at the ways to break cartel to ensure smooth supply of raw materials.
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industry update New policy to boost exports
T
he Union Minister for Commerce, Industry and Textiles, Anand Sharma has announced additional incentives to boost exports. These incentives came in the backdrop of the Annual Supplement of the Foreign Trade Policy announced on June 5, 2012. According to Sharma, the two per cent Interest Subvention Scheme on rupee export credit, which is available to certain specific sectors including handicrafts, carpets, handloom, readymade garments, processed agriculture products, sports goods and toys, has been given an extension up to March 31, 2014. At present, the Scheme is scheduled to end on 31st March 2013. Along with this, Small and Medium Enterprises (SMEs) for all sectors will now be able to avail the benefits of the Scheme. The minister has also announced the introduction
of a ‘pilot scheme’ of two per cent Interest Subvention for Project Exports through EXIM Bank for countries of SAARC region, Africa and Myanmar. Speaking about the project, he said, “The scheme will be operational immediately for a combined worth of US$ 500 million to begin with. The interest subvention would be linked to the Buyer’s Credit Scheme, which was introduced in the last financial year (2011 -- 2012) being implemented through EXIM Bank, ECGC and the National Export Insurance Account.” He further added that the “objective of the scheme is to boost India’s exports in these countries by providing long term concessional credit through EXIM Bank, as co-financing in infrastructure sectors such as drinking water, housing, irrigation, road projects, renewable energy, etc.”
LME team visits India
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team of experts from the London Metal Exchange (LME) recently visited Mumbai and New Delhi as part of an educational tour to India. The sell-out tour, which consisted of day-long seminars for Indian delegates, has received enormous support from the Indian industry. The LME’s Robert Fig, Senior Business Development Executive, provided an introduction to the LME, and the function and benefits of hedging to protect against price volatility. Multi Commodity Exchange of India (MCX) was the exchange partner for the events, and Gold Matrix Resources and INTL FCStone sponsored those. “We are very pleased that the Indian metals industry has been so supportive of the tour. The seminars aimed to familiarise delegates in India with metals price risk management tools,” said Catherine Markey, Head of Marketing and Education at the LME. A number of companies exhibited, sponsored and spoke at the events including Mitsui Bussan Commodities, ADM Financial Services, Marex Spectron, Simportex and Sizer Metals. The London Metal Exchange is the world’s premier base metals market. It aims to set the global standard for price risk management in metals and provides tools including futures and options contracts for aluminium, copper, tin, nickel, zinc, lead, aluminium alloy and NASAAC, steel billet and the minor metals like cobalt and molybdenum.
Essar commissions new dry bulk terminal
E R. Agarwal MD, Essar Ports
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december 2012 | industry 2.0
ssar Ports has commissioned its 16 million metric tons per annum (MMTPA) dry bulk terminal at Paradip, taking the aggregate handling capacity of Essar Ports Limited to 104 MMTPA. The project involved the upgradation and mechanisation of the existing 230m long CQ3 berth at Paradip with installation of a fully mechanised ship loading system with a capacity of 5,000 tons per hour. It is an all weather terminal with a capability to
- technology management for decision-makers
handle large size ships. The terminal is connected to the stockyard by a nine km long conveyor system having a capacity of 5,000 tons per hour. The stock yard has been equipped with two reclaimers with a capacity of 2500 tons per hour each. Commenting on the achievement, Rajiv Agarwal, Managing Director, Essar Ports said, “This is our first project on the east coast of India and is a modern facility with best in class capabilities. The terminal will help achieve better handling rates, improve efficiencies with faster turn-around time for ships and would benefit the Paradip Port and its customers.”
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AVEVA opens training centre
Remove Moisture and see the difference in quality and productivity
A
VEVA has opened a new training facility in Mumbai. This will help buyers from their recently opened sales and support office. The developments will support the company’s expansion plans in the Indian region. Based in the Powai suburb of Mumbai, the new centre will significantly expand the current training capacity with a dedicated team of qualified staff. The training provided at the Mumbai facility will cover the entire range of AVEVA’s software products and solutions. “As in other emerging economies, Indian businesses require a strong support network for training employees in important engineering disciplines, enabling projects to start quickly and efficiently. AVEVA software offers this benefit, and great interest has been shown in both the public and private sectors for AVEVA-trained and certified users. We will support our customers and their staff to gain the skill sets required for major plant and marine projects by offering advanced courses across our product portfolios. Participants are welcomed from a wide variety of engineering industries and organisations. On successful completion of the training, each participant will be certified by AVEVA,” said Navtej Garewal, SVP - Head of India, AVEVA. E. Fedotov, Sr VP, Russia, India & ME, AVEVA said, “This recent expansion, following that in Mumbai and Hyderabad, demonstrates AVEVA’s commitment to the Indian market.
D
assault Systèmes, the 3DEXPERIENCE Company, has launched a product for finance managers. Based on Dassault Systèmes’ 3DEXPERIENCE platform, ‘Product Innovation Factory’ will allow product managers from investment, wealth management, insurance and banking organisations to capitalise on market opportunities, as well as to respond quickly to market and regulatory challenges in order to accelerate the lifecycle of financial products from ideas to sales. This will leverage the same technologies used by the world’s leading aerospace, consumer products, retail and life sciences companies
to drive innovation, mitigate operational risk and maintain transparency regardless of product complexity. “Financial services firms must constantly innovate in order to profitably meet customers’ needs while maintaining their bottom line performance. With the rigour of an explicit, repeatable and fully traceable product creation process, ‘Product Innovation Factory’ will establish the foundation needed to provide speed and agility to deliver new financial products and drive market profitability,” said Monica Menghini, Executive Vice President, Industry and Marketing, Dassault Systèmes, India.
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industry update Blue Dart wins ‘Green Leadership Award’
A
A. Khanna, MD, Blue Dart Express
nil Khanna, Managing Director of Blue Dart Express, has been honoured with the ‘Outstanding Entrepreneurship Award’ at the Asia Pacific Entrepreneurship Awards (APEA). The award was conferred on him in a ceremony held at the Taj Palace Hotel, New Delhi recently. Blue Dart too was conferred with the ‘Green Leadership Award’ for its GOGREEN Carbon Neutral Service at the Asia Responsible Entrepreneurship Awards (AREA) - South Asia. The awards organised by Enterprise Asia and supported by Indian Chamber
Lanxess builds waste water plant
L
anxess has opened a new Waste Water Post Treatment Plant at its Nagda site in Madhya Pradesh. This plant, built with an investment of nearly INR 35 crore, will treat the discharge from the existing Effluent Treatment Plant (ETP) in a manner that virtually no liquid effluent is discharged from the site. The water recovered from the waste water post treatment plant can be used for the production processes, which will bridge the gap in availability of water during the summer months. Explaining the significance of this plant, Dr. Hubert Fink, Head of Business Unit Advanced Industrial Intermediates (AII), Lanxess AG said on the occasion, “The Lanxess operation in Nagda is an important pillar for the Business Line Benzyl Products and Inorganic Acids of the business unit AII. This site not only caters to the domestic market but also serves customers in different markets worldwide. It is therefore significant that we are not only producing world class products at this plant in Nagda but are also reaching new levels of sustainable development.” Lanxess’ Nagda site has a full fledged Effluent Treatment Plant (ETP) and a state-of-the-art sewage treatment plant that treats sewage water from the colonies around and renders it fit for use in the production processes. After a reverse osmosis step, this water is then used as boiler feed water.
Indian IT security level is ok
P
wC India has unveiled an assessment of the state of information security in organisations in India. The study – “The State of Information Security Survey -India, 2013’’ –is a shot in the arm for businesses seeking to replicate global best practices in information security in India. It states: 80 per cent of respondents felt confidence in the security behaviours instilled in their organisations. A significant 45 per cent believe that their oraganisations exhibit
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december 2012 | industry 2.0
attributes of information security leader and a whopping 75 per cent respondents from India as compared to 45 per cent of global peers expect an increase in spending on information security. Almost 85 per cent of respondents claimed a strong alignment of their security strategy with their business objectives. On the flip side, there is a lag reported in the security strategy around new technologies including mobile devices, cloud and social media.
- technology management for decision-makers
of Commerce (ICC) were presented by Rajeev Shukla, Minister of State for Parliamentary Affairs, Government of India and Dr. Balram Jakhar, Former Union Minister for Agriculture. Commenting on the awards, Khanna said, “Blue Dart has always paved the way for the logistics industry be it in terms of cutting edge technology or introduction of green logistics. I am overwhelmed at this recognition and remain committed to raising the bar in setting new benchmarks in delivery excellence and corporate citizenship for the industry.”
Carrier’s Bawal plant starts operations
C
arrier Midea India, a joint venture between Carrier and Midea, has announced commencement of operations at its new manufacturing facility situated at Bawal, Haryana. As per the company, spanning approximately 150,000 sq. ft., the plant is one of India’s largest manufacturing facilities for air conditioners with an initial annual flat volume production capacity of 7,00,000. Its capacity will further be expanded to 1,000,000 units. With an investment of Rs. 500 crore over the next five to six years period, the company will further strengthen its position in the residential air conditioning and white goods market in India. It will use a dual brand strategy for distribution of Carrier and Midea brand products in India. Aiming rapid growth in India, the company will manufacture, distribute and service Carrier brand residential air conditioners, Midea residential air conditioners and home appliances, which will include large and living appliances. Both brands will be available through a strong nationwide channel network. The Carrier Midea factory is an environmentally responsible facility.
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Little Sign of Recovery in
Job Market According to a recent survey report, in India, job generation plummeted by over 21 per cent between January to December 15, 2012.
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he current year 2012 saw a decline to the extent of over 21 per cent in the new job generation in various sectors of the Indian economy. “A total of over 5.3 lakh jobs were generated during the aforesaid period across India i.e., over 2.8 lakh jobs in first half of the year and over 2.4 lakh jobs during July-December 15,” according to a sector specific analysis titled ‘Job Trends Across India in 2012’ released by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). The ASSOCHAM Research Bureau (ARB) sourced their inputs primarily from data tracked on a daily basis for vacancies posted by about 4,000 companies via job portals like timesjobs.com, naukari. com, monster.com, shine.com and job related advertisements published in national and regional newspapers for about 56 cities and 32 sectors offering job opportunities.
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- technology management for decision-makers
“Delhi and National Capital Region (NCR) topped as over 1.1 lakh jobs have been generated between January 1-December 15, 2012 followed by Mumbai (over 77,000 jobs), Bangalore (over 75,000 jobs), Chennai (over 44,000 jobs) and least number of jobs were generated in Kolkata (over 25,000 jobs) amid the top five metro centres,” said D. S. Rawat, Secretary General of ASSOCHAM while releasing the findings of the chamber’s analysis. Information technology (IT) ranked on top with over 2.1 lakh jobs generated in the sector between January-December 15, 2012 across the country. Academics and education ranked second with over 34,500 jobs generated in the sector followed by insurance (over 27,100 jobs), banking (24,500), automobile (22,890), financial services (22,500), manufacturing (20,400), engineering (18,650), hospitality (16,100) and IT hardware (15,600) are other leading job generating sectors in India. Interestingly, only academics and education sector registered an upward spiraling job generation growth of over 16 per cent in the first six months of the current year. While the job generation growth dipped by over 10 to 50 per cent in the remaining sectors during this period. According to the ASSOCHAM analysis, aviation sector registered a job generation growth rate of over 78 per cent in the later half till December 15, 2012 followed by sports (41 per cent) and retail (six per cent). While rest of the sectors registered a dip in job generation ranging over one to 46 per cent during this period. In Delhi, telecom sector generated maximum employment
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market scenario
opportunities with over 53,000 jobs followed by IT (over 11,000 jobs), hospitality, manufacturing, architecture, infrastructure, textile, banking, real estate and gems and jewellery.
381 per cent. Mumbai (259 per cent), Hyderabad (114 per cent), Ahmedabad (93 per cent), Chennai (81 per cent), Jaipur (33 per cent), Lucknow (12 per cent) and Coimbatore (6 per cent)
Job market in 2012 at a glance • Delhi-NCR tops with maximum job generation throughout 2012. • IT ranked on top with over 2.1 lakh jobs generated in the sector. •O nly academics and education sector registered an upward spiraling job generation growth. •T he aviation sector registered a job generation growth rate of over 78 per cent in the second half. • J ob market has slightly recovered during the course of last six months. The job generation growth in the first half of the current year was maximum in Bangalore – as the city generated about 41,500 jobs between JanuaryJune 2012 as against 8,600 jobs that were generated in the last six months of 2011 –thereby registering a growth of over
were other cities that registered growth in job generation during the first half of the year. While, the job generation declined in most of the cities in the later half of the on-going year, Kochi registered highest job generation growth of over 30 per cent as the number of
jobs increased from over 1,500 in January-June this year to over 2,000 between July-December 15. Agra (14 per cent), Ajmer (12 per cent), Udaipur (10 per cent), Kota (seven per cent), Kanpur (five per cent), Vellore (five per cent) and Jalandhar (four per cent) were other cities that registered upward spiraling growth of job generation during this period. “The ASSOCHAM analysis shows that job market has slightly recovered during the course of last six months as the employment generation growth rate declined by about 15 per cent between July to December 15 while the job generation growth in India declined by over 25 per cent during the first six months of the year. This change is presumably due to slew of positive steps taken by the government during this period,” said Rawat.
techwatch New prototype of solar cells is under development the nanowires, as the structures are called, and thereby develop multiple variants, such as p-n diodes. A further advantage of the technology is avoiding the cost of expensive semiconductor wafers.“In addiLars Samuelson, Professor of Semiconductor Physics at Lund University, tion, the process is Sweden, and Head of the University’s Nanometre Structure Consortium not only extremely quick, it is also continuous. Traditional completely new method of manumanufacture of substrates is batchfacturing the smallest structures based and is therefore much more timein electronics may make their manufacconsuming,” he reveals. ture thousands of times quicker, allowAt the moment, the researchers are ing for cheaper semiconductors. working to develop a good method to Instead of starting from a silicon capture the nanowires and make them wafer or other substrate, as is usual self-assemble in an ordered manner on today, researchers have made it posa specific surface. This could be glass, sible for the structures to grow from steel or another material suitable for freely suspended nanoparticles of gold the purpose. in a flowing gas.
A
Behind the discovery is Lars Samuelson, Professor of Semiconductor Physics at Lund University, Sweden, and Head of the University’s Nanometre Structure Consortium. He believes the technology will be ready for commercialisation within two to four years. A prototype for solar cells is expected to be completed in two years. “When I first suggested the idea of getting rid of the substrate, people around me said ‘you’re out of your mind, Lars; that would never work’. When we tested the principle in one of our converted ovens at 400°C, the results were better than we could have dreamt of,” says Samuelson. He adds, “The basic idea was to let nanoparticles of gold serve as a substrate from which the semiconductors grow. This means that the accepted concepts really were turned upside down!” Recently, they have also built a prototype machine with a specially built oven. Using a series of ovens, the researchers expect to be able to ‘bake’
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The reason why no one has tested this method before, in the view of Professor Samuelson, is that today’s method is so basic and obvious. Such things tend to be difficult to question. However, the Lund researchers have a head start thanks to their parallel research based on an innovative method in the manufacture of nanowires on semiconductor wafers, known as epitaxy – consequently, the researchers have chosen to call the new method aerotaxy. Instead of sculpting structures out of silicon or another semiconductor material, the structures are instead allowed to develop, atomic layer by atomic layer, through controlled self-organisation. The structures are referred to as nanowires or nanorods. The breakthrough for these semiconductor structures came in 2002, and research works on them are primarily being carried out at Lund, Berkeley and Harvard universities.
New device to save energy in industrial boilers
U
K-based Fluid Dynamics’ Fueltron has just finished a three-month test at Otsopa soft drinks factory in Thailand. Fitted to a steam boiler there, the Fueltron has achieved a remarkable seven per cent reduction in the natural gas needed to raise the same amount of steam. According to Fluid Dynamics, in Unilever too in South America, the Fueltron has achieved a considerable fuel saving. Fueltron is expected to save millions of rupees The Fueltron works by improving for the companies using boilers worldwide. the combustibility of fossil fuels so that they burn with a higher temperature, and thus more efficiently. The patent applied for Fueltron states – it is simple to fit, has no moving parts, and needs no electrical connections. Robert Spencer, Chairman, Fluid Dynamics, says, “This ground breaking technology will save literally millions in fuel for companies running industrial steam boilers all over the world. With the product already proven by Unilever and Otsopa, we are expecting significant worldwide sales in 2013.”
- technology management for decision-makers
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Effects of manufacturing nanomaterials
Credit: Laurie C. Van De Werfhorst, UCSB & Rod Rolle
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unscreens, lotions, and cerium oxide, on Soybean plants are growing in a UCSB greenhouse. and cosmetics soybeans grown in contain tiny metal soil in greenhouses. nanoparticles that Zinc oxide is used in wash down the drain cosmetics, lotions, at the end of the day, and sunscreens. or are discharged Cerium oxide is used after manufacturing. as an ingredient in Those nanoparticles catalytic converters eventually end up to minimise carbon in agricultural soil, monoxide production, which is a cause for and in fuel to increase concern, according fuel combustion. to a group of environCerium can enter mental scientists that soil through the recently carried out atmosphere when fuel the first major study additives are released of soybeans grown with diesel fuel in soil contaminated combustion. by two manufactured The zinc oxide nanomaterials (abbr. nanoparticles may MNMs). dissolve, or they The team was led may remain as a Patricia Holden with John H. by scientists at UC particle, or re-form Priester from the research team Santa Barbara’s Bren as a particle, as they School of Environmental Science & are processed through wastewater Management. The team is also affilitreatment. At the final stage of ated with the UC Center for Environwastewater treatment there is a mental Implications of Nanotechnology solid material, called biosolid, which (CEIN), a $24 million collaboration is applied to soils in many parts of based at UCLA, with researchers the U.S. This solid material fertilizes from UCSB, UC Davis, UC Riverside, the soil, returning nitrogen and University of Texas at El Paso, Columphosphorus that are captured during bia University, and other national and wastewater treatment. This is also a international partners. point at which zinc oxide and cerium Patricia Holden, a Professor with oxide can enter the soil. the Bren School explained that the The scientists noted that the EPA research is helping to discover potential requires pretreatment programmes to environmental implications of a new limit direct industrial metal discharge industry that includes nanomaterials. into publicly owned wastewater treatThe ultimate goal is to help find more ment plants. However, the research environmentally compatible substitutes. team conveyed that “MNMs –– while Soybean was chosen for the study measurable in the wastewater treatdue to its importance as a food crop ment plant systems –– are neither –– it is the fifth largest crop in global monitored nor regulated, have a high agricultural production and second in affinity for activated sludge bacteria, the U.S. –– and because it is vulnerable and thus concentrate in biosolids.” to MNMs. The findings showed that The authors pointed out that soycrop yield and quality are affected by bean crops are farmed with equipthe addition of MNMs to the soil. ment powered by fossil fuels, and thus The scientists studied the effects of MNMs can also be deposited into the two common nanoparticles, zinc oxide soil through exhaust.
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The study showed that soybean plants grown in soil that contained zinc oxide bioaccumulated zinc; they absorbed it into the stems, leaves, and beans. Food quality was affected, although it may not be harmful to humans to eat the soybeans if the zinc is in the form of ions or salts, in the plants, according to Holden.
Henkel’s technlogy helps Ford to Innovate
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he powerful new Ford engine is small and more highly stressed than old designs. This is a common trend, and one to which Henkel gasketing products have responded. To meet the need for a flexible product to accommodate the increased vibration, Henkel recommended its Loctite 5900 silicone for sealing oil pan and front cover joints on the Fox engine, a thixotropic black paste that when cured has excellent performance in engine oils. “The Ford design rules dictate that the walls of an engine block should have a certain thickness. But progress comes out of challenging traditional ideas, and our designers had proved in studies that thinner walls were do-able. But literally that meant the RTV process had to seal the engine with reduced wall thickness and that -- presented Henkel with a challenge,” explained Tsunou Chang, Ford’s Liquid Sealing Specialist.
- technology management for decision-makers | december 2012
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opinion
Potential for
MSMEs in Manufacturing A closer look at Indian MSMEs reveals that there is significant scope of improvement in their current way of working. By Nitin Kalothia
Current status and major challenges These companies are more individual-driven and micro-managed by their owners or proprietors to cope with day-to-day operational
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requirements. The focus is on ensuring that customer requirements are met at any cost and the customer is kept happy. However, not much effort is displayed by MSMEs toward building efficiencies in systems. Most of these organisations are driven by quality control, instead of quality assurance systems. Reasons for the same include non-availability of skilled manpower at affordable prices, investment constraints, and notso-advanced infrastructure. High attrition rate among casual workers, along with lack of process knowledge and required skills add to the problems faced by these companies. The challenge is – most of these companies need to continuously meet customer requirements at affordable prices, while not compromising on quality. Organisations that have understood customers’ requirements clearly and aligned
- technology management for decision-makers
their manufacturing and supply chain to that have excelled faster than competitors.
Opportunities for improvements As companies navigate along their growth path, there is a need to shift from the current way of operating to a more systematic way of functioning. Companies should stay focused on customers and continuously align their manufacturing focus to customers’ buying priorities. This will be important to stay competitive in the market and win customers’ trust. Having built faith with customers over a period of time with business growth, proprietors or owners should work toward developing a second-line command, and train them to handle day-to-day operations. Systems should be defined to ensure processes are
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I
n India, Micro, Small, and Medium Enterprises (MSMEs) contribute to over 40 per cent of industrial output. MSMEs contributed 17 per cent to India’s GDP in 2011, this is expected to increase to 22 per cent in 2012-13. They employ about 60 million people. These numbers themselves highlight the significant role they play in the economic development, and also their future potential. MSMEs are expected to play a crucial role in improving the contribution of manufacturing processes in GDP from the present rate of 16 per cent, to about 25 per cent by 2012-13.
standardised. To begin with, critical processes and operations should be standardised; control documents should be prepared and deployed. This will also reduce dependence on individuals in the organisation. If day-to-day activities are taken care of by the second-in-line, the leadership team will get adequate time to focus on critical business processes and facilitate efficient implementation of shortterm and long-term strategies of the company. While embarking on the journey toward manufacturing excellence, it is important to understand â&#x20AC;&#x201C; which elements of excellence will give organisations the maximum benefit for their efforts. For example, if customers visit the facility often and expect to see a wellorganised shop floor, then implementation of 5S practices
In the journey toward excellence, it is important to understand â&#x20AC;&#x201C; which elements will give organisations the maximum benefit. should be a priority. Similarly, if the facility makes multiple models, has many changeovers, and loses significant part of capacity during model changes, then the organisation should take up changeover time reduction through quick changeover tools on priority. While there would be many things to be done from a manufacturing excellence perspective in these organisations, ones that would have maximum impact on the business should be primarily focused upon. MSMEs with support and guidance from large companies, consultants and industry associations can
be much more efficient, productive and contribute significantly to improve supply chains. Large organisations have already optimised their internal processes. While considering all practical concerns, although opportunities for improvements are restricted, harnessing untapped opportunities in tier -2 and tier -3 companies will help them optimise their cost and supply chain lead time in the coming years. The author is the Associate Director, Manufacturing and Process Consulting Practice, Frost & Sullivan. Contact: caroline.lewis@frost.com
industry & economy
Decelerating Growth of
Global Manufacturing Output The considerable drop in global manufacturing output in the third quarter of 2012 indicates weakening of the economic recovery.
G
lobal industrial growth remained sluggish in the third quarter of 2012 due to the ongoing economic recession in Europe and its growing impact on emerging industrial and developing economies. According to the latest UNIDO estimates, world manufacturing output grew by a mere 2.2 per cent in the third quarter of 2012 compared to the
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same period last year. This is the lowest growth rate since the last quarter of 2009. On a quarter to quarter basis, manufacturing output has dropped by 1.3 per cent compared to the previous quarter, indicating the weakening of the economic recovery. While developing countries have sustained relatively higher growth rates (Figure 1), global manufacturing output growth has decelerated and fell in industrialised countries. The major slowdown of global industrial production has been attributed to the prolonged financial instability in the Eurozone countries. The economic recession in Europe further intensified throughout 2012, causing
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adverse effects on the business environment and consumer confidence. Although several policy measures have been taken in recent months, the financial instability continues to deepen in Eurozone countries. The decline in production previously observed in only a few member states of the European Union has further spread across the continent, affecting major economies such as France, Germany and the United Kingdom. Industrial production also fell in East Asia due to the continuous decline of manufactured exports from Japan, especially to some Asian countries after the recent incident over a territorial dispute. In North America,
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Europe. However, third quarter production data reveal the strong hold of recession in Europe, weakened recovery in North America and production decline in East Asia (Figure 2). As a result, industrialised countries’ total manufacturing output has dropped by 0.3 per cent compared to the same period of the previous year. This is the first time since the last quarter of 2009 that the average growth of all industrialised countries has been negative. The current trends show the deepening and broadening of recession in all industrialised regions, although the reasons behind these trends may differ from case to case. In Europe, the policy interventions to stabilise the Euro curthe overall growth of manufacturing output was significant as compared with the third quarter of the previous year, however, the pace slowed down during Q3 2012 due to the weaker rise in employment and consumption. The recession has adversely affected the growth prospects of developing economies, which are highly dependent on the export of their products to industrialised countries. The decrease in external demand for consumer goods and lower capital inflow have affected industrialising and developing economies’ recovery from recession.
Illustration: Raj Verma
By country groups Industrialised countries: Trends for the first half of 2012 showed a mixture of dynamic growth in North America and East Asia and sustained uncertainty in
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rency have thus far not yet produced the expected results. At the onset, the crisis only affected a few countries, while the Eurozone’s major economies and the transitional economies in Eastern Europe enjoyed relatively high growth. Contrary to the expectation that the major economies would swiftly close the gap, the crisis has spread across all Eurozone countries and beyond. Spillovers from Eurozone have affected the rest of Europe. Manufacturing output has been declining in all of Europe since the beginning of 2012 (Figure 3). In the third quarter, manufacturing output in Europe fell by 2.3 per cent. During the same period, the Eurozone’s manufacturing output dropped at an even higher rate of 2.7 per cent.
Figure 1 : World manufacturing output by year Growth rates in % compared to same quarter of previous year World Industrialized countries Developing countries
12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 Q2
Q3
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Source: UNIDO Statistics
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industry & economy During 2012, all of Europeâ&#x20AC;&#x2122;s major economies contracted. Industrial production began declining in France, Italy and the United Kingdom in the first quarter, and in Germany in the second quarter. In the third quarter, manufacturing output dropped by 1.9 per cent in France, 1.7 per cent in Germany,
manufacturing output in the Russian Federation achieved a moderate growth rate of 3.6 per cent compared to the second quarter, which is attributable to increased internal demand induced by the low growth of consumer prices. The East Asian countries, which demonstrated a strong recovery from the 2009 crisis,
Figure 2 : Growth rates of manufacturing output of industrialized countries, in % to the same period of previous year 6.0
4.0
2.0
0.0 North America -2.0
East Asia Europe
-4.0 QIII
QIV
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2011
2012
6.2 per cent in Italy and 0.9 per cent in the United Kingdom. The crisis remained strong in Greece, Portugal and Spain, where manufacturing output fell by 7.6 per cent, 2.8 per cent and 5.6 per cent respectively. Among the few countries in the Eurozone with a positive growth rate, manufacturing output grew by 1.3 per cent in Austria and by 3.2 per cent in Denmark. Outside the Eurozone, industrial production remained sluggish in the majority of Eastern European countries. In the third quarter, manufacturing output fell in Bulgaria, Croatia, Czech Republic and Hungary. Some positive signs in manufacturing were observed in the Russian Federation. After two quarters of consecutive decline,
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QIII
plunged into another downturn in the third quarter of 2012, with declining production and a soaring trade deficit. In the third quarter, Japanâ&#x20AC;&#x2122;s manufacturing output dropped by 4.6 per cent, primarily due to the significant loss in external demand for its manufactured products. Japanâ&#x20AC;&#x2122;s exports, especially to neighbouring Asian countries, were also affected by the incidents related to territorial disputes. Manufacturing output also dropped in the Republic of Korea by 0.3 per cent and in Singapore by 0.9 per cent. Amid the contraction in industrialised countries across Asia and Europe, North America maintained a positive growth rate in the third quarter. Manufacturing output grew by 4.1 per
- technology management for decision-makers
cent in the United States and by 3.1 per cent in Canada compared to the same period of the previous year. However, on a quarter to quarter basis, manufacturing output dropped in the United States, indicating the deceleration of industrial growth. As uncertainty over fiscal consolidation continues to loom and business as well as consumer confidence remain low, the growth prospects observed previously in 2012 have lost momentum. The recovery prospects from the current recession for industrialised countries look very thin across the globe until the first half of 2013. Developing countries: Relative to industrialised countries, industrial growth in developing countries remained high in the third quarter, however, the impact of global contraction on the industrial growth of developing countries is evident. Since the beginning of the year, manufacturing growth in developing countries, including China, has continuously decelerated. While the recession in industrialised countries has expanded as a result of internal imbalances between the financial sectors and production activities, the current slowdown in developing countries has mainly been caused by external factors. The first recession had little impact on developing countries. However, the loss of demand from industrialised countries due to prolonged financial instability, especially in Europe, and limited inflow of capital to developing economies has steadily slowed their growth (Figure 4). The manufacturing output of developing countries grew by 6.6 per cent in the third quarter compared to the same period of the previous year. However, compared to the previous quarter, it fell by 2.3 per cent, which may
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be indicating the slowdown of manufacturing activity. Several internal reasons for the current slowdown exist as well. At the height of the global recession, developing countries adopted some policy measures to address country-specific problems, such as tightening credit facilities, controlling inflation and speeding up structural reforms. These measures have not always been favourable to short-term growth prospects. As a result of these changes coupled with more influential external factors, manufacturing growth has decelerated in major developing and emerging economies. In the Q3, China’s manufacturing output rose by 9.2 pc compared to the same period of the previous year. However, mfg output in China fell by 3.6 pc compared to the previous quarter. Manufacturing output rose by 2.0 pc in Indonesia, by 3.4 pc in Malaysia and 5.8 pc in Pakistan compared with the same quarter in the previous year. India’s industrial production improved slightly and attained a positive growth rate of 0.2 per cent in the third quarter. However, recovery remains weak and high interest rates are limiting
Figure 4 : Manufacturing output of developing countries Growth rates in % to the same period of previous year China Developing countries Newly industrialized countries Other developing countries
16.0 12.0 8.0 4.0 0.0 QIII
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QI
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Source: UNIDO Statistics
the borrowing possibilities of small and medium enterprises, the backbone of India’s manufacturing sector. The crisis in the Eurozone countries has caused a slowdown in African manufacturing. Many African countries are highly dependent on the export of primary processed commodities to Europe. A severe decline of mfg in Europe has reduced the demand for African goods and forced a slowdown of manufacturing in many countries.
-2.0
According to UNIDO estimates based on limited data, manufacturing output of Africa rose at a moderate rate of 1.2 pc. In North Africa, manufacturing output dropped by 5.9 per cent in Egypt, but increased in Tunisia by 1.4 per cent. South Africa maintained a positive growth rate throughout 2012. The country’s manufacturing output grew by 2.9 per cent in the Q3. In Latin America, Brazil’s manufacturing output dropped for the third consecutive quarter in 2012. Despite the measures adopted by the government to control the price rise, the production of machinery and equipment and motor vehicles declined sharply in the third quarter. Manufacturing output also fell in Argentina and Columbia. However, Chile, Mexico and Peru had a relatively higher growth rate of manufacturing output by little more than 4.0 per cent.
-4.0
By industry groups
Figure 3 : Growth rates of manufacturing output in % to the same period of the previous year 6.0 4.0
Euro zone All Europe
2.0 0.0
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QIV 2011
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QI
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The growth estimates are presented by manufacturing sectors for both industrialised and developing countries.
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industry & economy Previous UNIDO reports cite the competitive advantage of industrialised countries in hightechnology sectors, which dominated those countriesâ&#x20AC;&#x2122; manufacturing growth. However, this advantage has diminished under the effects of the ongoing recession. Decline in industrial production was observed across the manufacturing sectors in industrialised countries. Sectors such as production of chemical goods, machinery and equipment, electronic goods and motor vehicles have also been affected. The production of general machinery and equipment rose by 7.2 per cent in the US and by 9.2 per cent in Canada, but fell in France, Germany, Italy and the United Kingdom. The manufacture of electronic goods and communication equipment dropped
by 17.0 per cent in France, 15.2 per cent in Germany and 14.9 per cent in Japan. The United States maintained its strong growth in the production of motor vehicles, which was attributable to the governmentâ&#x20AC;&#x2122;s stimulus bailout package to support major car producers. The production of motor vehicles also rose in Canada and the UK, however, Japanâ&#x20AC;&#x2122;s car manufacturing experienced a sharp decline in the third quarter compared to the second one due to the decline in exports, especially to China. The production of motor vehicles also dropped in France, Germany and the Russian Federation. Output from the primary processing industry such as textiles, wood products and basic metals decreased significantly in industrialised countries in Figure 5 : Estimated growth by sector in percent, general. Quarter III 2012 Developing countries -10.0 -5.0 0.0 5.0 10.0 15.0 outperformed industrialised Electrical machinery countries in all Chemical products sectors. Their growth was Foods and beverages not limited to Machinery and equipment the primary processing Office and computing machinery industry as has Radio, TV & comm. equipment been the case in the past, but Paper products also covered Rubber and plastics high and medium technology Motor vehicles sectors, such Coke; petroleum products as chemicals, machinery and Wearing apparel, fur equipment and motor vehicles. Basic metals These trends Wood products indicate the growing proLeather products ductive capacTextiles ity of emerging industrial Source UNIDO Statistics Developing Industrialized economies and
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developing countries in all industrial sectors. Among basic consumer goods, the production of food and beverages rose by 7.0 per cent in developing countries, textiles by 5.7 per cent and wearing apparel by 4.1 per cent compared to the previous year. However, due to the impact of recession and decreasing demand from industrialised countries, the production of wearing apparel and leather products dropped in developing countries compared to the previous quarter. The production of garments fell in Brazil, China, Egypt and Malaysia. Developing countries maintained high growth rates in various sectors. The manufacture of chemical products rose by 7.8 per cent in Brazil and 5.8 per cent in India, the production of machinery and equipment grew by 7.6 per cent in China and 9.6 per cent in Malaysia, and the production of motor vehicles rose by 12.2 per cent in Mexico. However, due to the closure or suspension of operation of Japanese car manufacturers, the production of motor vehicles also dropped in China. Despite the relatively high growth in developing countries, a slowdown in manufacturing was observed across all sectors. The production of general consumer goods, particularly those intended for household and office use, are among those that are highly affected by the recession due to the drop in demand from industrialised countries. Compared to the previous quarter, the production of radio, television and communication equipment has decreased by 1.0 per cent in developing countries, printing and publishing by 2.3 per cent, and office, accounting and computing machines by 6.2 per cent.
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cover story
e l t Bat test r u o Y n o i t a v o n In y g e t a r St nies useter a p m o c Leading es to focus bet hile war gamcompetitors, w on their g the way they e iz improvin e and sevate. p a h s , y if ident nities to inno opportu
llen d Ari Ke n a n r o John H apozzi, C . M la r By Ma rma j Ve on by Ra Illustrati
cover story
Y
ou thought you did everything right — gathered market research and consumer insights; brainstormed, prototyped, and tested a promising new idea; developed detailed financial models and a solid marketing plan. Yet your company’s new product or service did not perform as expected. What did you overlook then? If you answered ‘the competition,’ you are far from alone. In our experience, companies making decisions about developing and launching new products commonly fail to anticipate their rivals’ motivations and actions. Moreover, the failure often contributes to innovation-related disappointments, many of which are below the radar and quite insidious: your rival, for example, discounts prices to encourage customers to stock up on its product rather than try yours, ties up distributors so you cannot get shelf space, or duplicates your service to dissuade consumers from switching. Unfortunately, in the heat of competition it is extraordinarily difficult for players to identify such threats, because the tendency to overlook rivals is deeply ingrained in human behaviour. Indeed, neglecting to think about competitors is one of dozens of natural human biases — along with excessive optimism and overconfidence — that subconsciously affect strategic decision making. Addressing the challenge requires tools
the By simulating ns and thoughts, pla petitors, actions of com s are some companie ir improving the even products and services.
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- technology management for decision-makers
and processes that help companies ‘debias’ their strategic decisions. Recognising this problem, some companies are tackling it head on by integrating war games into their innovation activities. By simulating the thoughts, plans, and actions of competitors, these companies are improving their products and services, while gaining a deeper understanding of how their innovation assets compare with those of rivals — insights that help them better identify, shape and seize opportunities. We will hence look at how companies use war games to sharpen their products and services as they wrestle with three interrelated types of innovation decisions: those involving individual products, portfolios of offerings, and market-entry strategies. We will focus on situations involving medium-term innovations — new products or services expected within one to three years. While it is obviously important to keep an eye on rivals at all times, competitive insights gleaned at this stage are particularly actionable, and a company’s ability to adjust its approach relative to competitors, and thereby to change the outcome, is high.
Product-level decisions The development team of a consumer electronics company was debating the mix of components and features to include in the next version of an important product. Advances in the underlying technology meant that the launch, planned for the following year’s holiday season, could well represent a significant upgrade that would influence several generations of the product. To see how the competitive landscape might evolve — and be shaped — the company ran an in-depth war game. Over three days, crossfunctional teams of product designers, marketing and sales experts, and supply-chain managers, assuming the roles of executives in the company and a leading rival, participated in a series of games representing three consecutive (annual) holiday seasons. The choices the opposing team made were revealing, for it identified several new components and technologies the competitor might include in its own update of this kind of product. While there were obviously no guarantees the competitor would act as predicted, the rigorous preparation the company had undertaken to ensure that players on both sides would behave realistically suggested that the competitor’s rationale for making the moves would be strong.
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Moreover, if the competitor was thinking along the lines the simulation predicted, the resulting changes to its product and market positioning would be significant, requiring a speedy and decisive response from the company. Fueled by these insights, the aforesaid company went on to identify a host of moves it could make to seize the initiative — including partnerships, bets on particular technologies, and an attractive, untapped consumer segment — it could target to spur growth. Ultimately, many of the game’s predictions did materialise, and when the competitor moved as expected with its new product, the company was ready. Its own updated product was a hit with consumers, and it went on to sell more units than the competitor did over the following three holiday seasons. An additional insight the war-gaming process sparked was that meeting the needs of the consumers the company was targeting — wouldn’t always require using the very latest technology. In some cases, an older — and cheaper — one was more than adequate. The company used this acquired knowledge to its advantage in making its subsequent sourcing and pricing decisions. To increase the likelihood of gaining such insights, the consumer-electronics company included a range of framing questions when it designed and ran the game. We include a sampling of them here as thought starters for any company looking to plan and run a product-focused war game of its own. • How much of a lead or leap — technological or otherwise — must we make in the next generation of our product or service? • How might our new product or service stand up to the pressures of the existing — and, potentially, the new — competitive landscape? • What price point will our product or service support and sustain?
Portfolio-level decisions War gaming can also help companies develop and deploy their product portfolios more strategically across geographies and customer groups. Consider the experience of the global high-tech company whose leaders wanted to better understand how changing competitive dynamics would affect the company’s B2B business. For years the company had sold a comprehensive range of specialised TV models to hotel chains across the price spectrum. (Compared with the company’s consumer models, the hotel
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War ga mes offer us ways o eful f and re testing fining launc h strate g ensur ies to es of new uccess p or ser roduct vi offeri ce ngs.
TVs were more robust, had additional software features, and in some cases were more energy efficient.) Recently, though, new competitors had begun arriving on the scene in force, and competition had increased broadly. To learn what effect the new conditions might have on the company’s portfolio of products and how they were positioned, it created four rival teams, each representing a new or established competitor, and ran a series of war games against them. The results suggested the threat was bigger than the company had suspected. Notably, several of the games quickly degenerated into valuedestroying price wars. That outcome helped the company leaders understand how quickly its highend TVs would migrate down to the buyers from lower-cost hotels as rivals discounted prices on their own higher-end units to gain market share. If the company were to maintain its pricing policy, the executives recognised, the resulting profit squeeze would be enormous. In response, company leaders essentially decided to ignore certain market segments, where price competition would be fiercest — areas it had strongly contested before. Instead, the company would place its biggest innovation and marketing bets on serving mid-scale hotels. In this growing
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- technology management for decision-makers | december 2012
21
cover story segment, it had a better chance of differentiating some of its existing products and services, and of creating more value for customers (by helping hotels capture additional revenue streams, for example). The company went on to identify several possible partnerships with players in the industry value chain. It had then successfully leveraged these partnerships to begin implementing the newly framed strategy. Useful questions the high-tech company considered when planning and running the game included the following: • Which product classes will face the most competition, and will supply-side dynamics or customer demand drive it? • Can we adapt any of our existing products to differentiate them further for the geographies or segments that will face the most pressure? • Which customer segments will our competitors focus on, and how do these segments overlap with the ones our new offering targets?
Go-to-market decisions Finally, war games are a useful way of testing and refining launch strategies to help ensure that new product and service offerings get the most traction in the market. That’s what happened when a financial services firm wanted to determine which of a handful of promising new services had the greatest potential to reach global scale quickly and thus should be fast tracked. Company executives were particularly keen to test one technology-driven service that they felt had the potential to catch rivals off guard and to capture additional revenues
lps e h ming evelop a g War nies d oduct a r comp eploy p re d mo s oss and o i r l c o a f y port egicall nd t a stra aphies ps. u r o g r geo rg e m o cust
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from much coveted business customers. The company ran a series of simulated launches pitting itself against three rival teams whose members began the games unaware of the new service. Executives were surprised to learn how quickly and convincingly the opposing teams reacted to the offering and developed a version of their own. Worse, in some cases an opponent team’s offering appeared superior to the company’s, or at least close enough that company executives felt it would be tough for business consumers to differentiate between the two. “If we go to market with this offer,” said one team member, “we will get creamed.” This exercise had a sobering effect on the executives, who began to recognize that overconfidence and excessive optimism had clouded their thinking. The company has since gone back to the drawing board and is using many of the observations gathered from the war game to help strategically improve the new service and its market positioning. Notably, the company’s team of developers has also begun identifying ways to use the service’s underlying technology to create entry barriers that could help delay a competitive response by up to a year. Given the tendency of players in the industry to copy good ideas quickly, the ability to create such barriers — and to include this skill in regular development activities — should serve it well in years to come. Questions that it considered in the design and execution of its game included: •W hat ideas could put our product or service out of business in the next one to three years? •C an we create value and continued appeal with our service given the possible responses of attackers and other competitors, our responses to them, and their responses to our responses, over a defined period of time? •W hat next versions and extensions are required to keep our idea in play, sustainable and scalable, and how do we start building them now? War games are a tried-and-true strategic tool, yet relatively few companies use them to innovate. Those that do so effectively can not only avoid the problem of overlooking what the competition might do but also determine how likely their new products and services are to survive in the crucible of the marketplace. Marla Capozzi is a Senior Expert in McKinsey’s Boston offce; John Horn is a Senior Expert in the Washington, DC, office and Ari Kellen is a Director in the New Jersey office. This article was originally published in McKinsey Quarterly, www.mckinseyquarterly.com. Copyright (c) 2012 McKinsey & Company. All rights reserved. Reprinted by permission.
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materials & processes
Growing S Demand for
Steel World Steel Association (worldsteel) predicts that in 2013, world steel demand will grow by 3.2 per cent and reach a record high of 1,455 Mt. By P. K. Chatterjee
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teel is one of the key products for many industries, including automotive, construction, transport, power and machine goods. The industry directly employs about more than two million people worldwide, with a further two million contractors and four million people in the supporting industries. India, Brazil, South Korea and Turkey have all entered the top 10 steel producers list in the last 40 years. World Steel Association (worldsteel) Economics Committee Chairman Hans Jürgen Kerkhoff says, “Earlier this year we were seeing some signs of recovery from the slowdown of the last quarter of 2011 and we expected a better second half performance in 2012. However, the economic situation deteriorated during the second quarter of this year due to continued uncertainty arising from the debt crisis in Euro zone and a sharper than expected slowdown in China. These factors have weighed heavily on business confidence and manufacturing activities around the world. As a result momentum in both the developed and emerging part of the world weakened considerably.” “However, we expect the situation to gradually improve in 2013 on the basis that the Euro zone crisis can be contained, the US successfully deals with the fiscal tightening due in 2013, and the economic stimuli measures secure a soft landing in China. Since the 2008 economic crisis, uncertainty and volatility has become the norm for the steel
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Credit: www.Photos.com
industry – but it is worth noting that world steel demand has maintained positive growth despite all the headwinds and lingering difficulties,” Kerkhoff concludes hopefully. In 2013, China government’s stimulus measures are likely to moderately improve the economic situation. This follows sluggish exports resulting from the global economic slowdown. Thus, China’s apparent steel use is expected to rise by 3.1 per cent and will reach 659.2 Mt in 2013. Similarly, due to both unfavourable domestic and external economic conditions, India’s steel demand growth is projected to slow down to 5.0 per cent in 2013. Apparent steel use will reach 77.3 Mt in 2013. Apparently in NAFTA in 2013, steel demand growth will slow to 3.6 per cent, and its use will reach 135.1 Mt in 2013. Most countries in Central and South America are also facing headwinds from the poor external economic environment as well as domestic tightening. In 2013, apparent steel use in the region is projected to grow by 6.3 per cent and reach 50.4 Mt. In 2013, the debt crisis in the Euro zone is expected to improve and steel demand in EU 27 will recover by 2.4 per cent. Steel demand in Europe, however, will remain at a depressed level and eco-
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Indian Scenario: Expert’s View
T
he overall performance of the steel sector is optimistic. In the fiscal 2012-2013, growth in domestic steel demand is expected to be around five and a half per cent. Total demand is expected to be around 75 million tonnes, up from 71 million tonnes in 2011-2012. In 2013-14, demand is expected to be higher at around seven per cent. Reforms announced by the government will provide a fillip to growth in the economy. In Europe, we expect a modest two and a half per cent growth against the backdrop of a negative growth this year. The formation of the cabinet committee on infrastructure for single window clearance for mega projects will generate activity in the power and roadways sectors, among others. The expected lowering of interest rates by RBI in January will provide impetus to the manufacturing and consumer durables sectors, among others. The full impact of all these will be felt in 2013-14. Moreover, with the ongoing Greenfield and Brownfield expansions, India is expected to become the world’s second largest producer of crude steel in the next two years.
H. M. Nerurkar Managing Director Tata Steel
industry 2.0
Hans Juergen Kerkhoff President, German Steel Federation and Chairman World Steel Association Economics Committee
nomic growth between countries will continue to be uneven. In 2013, however, steel demand in Japan will decline by -2.9 per cent to 63.6 Mt. In the CIS, apparent steel use is forecast to rise by 3.9 per cent in 2013, much slower than the 13.8 per cent achieved in 2011. Steel demand will be 57.4 Mt in 2013. The recovery of steel demand in the MENA region has been slower than expected due to continuing political instability, but apparent steel use in the region will still increase. In 2013, the growth rate is expected to accelerate to 6.7 per cent, and steel demand will reach 66.9 Mt. The developing and emerging world overall will see their steel demand growing by 3.7 per cent in 2013, whereas in the developed world steel demand will grow by 1.9 per cent in 2013.
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IT MAY BE TIME TO TAKE OFF THOSE BLINKERS.
photo credit: getty images
2012 - INDIA IS STILL HOME TO 41% OF THE WORLD'S POOREST. For India to truly change, we need to address this issue. PRADAN is powered by the belief that the best minds in the country need to work at the grassroots to change the face of poverty in India. Their teams have been working with endemically poor communities for 30 years with some amazing results. Their focus is to work with women and tribal communities across the poorest districts of India. They have introduced models, which have helped entire communities find livelihoods and emerge from poverty. They have touched over 1 million people, changing their lives in a range of ways â&#x20AC;&#x201C; from ensuring food and livelihood, to creating choice and dignity. They pictured the change. And changed the picture. It may be time to take off those blinkers. Donate now to help change the picture. For any further information on how you can help, please visit 30.pradan.net or send an email to campaign@pradan.net. You could choose to either make a personal donation or join hands with PRADAN as part of your CSR initiatives.
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design & optimisation
Energy Efficiency W
e have now gotten used to hearing that many things have ‘intelligence.’ We have intelligent pumps and controls and even smart materials. The meaning of the term ‘energy intelligence’ is far more coherent, and it takes a considerable amount of human intelligence to achieve it. How do we identify opportunities to save energy? One approach for achieving quick results is to scrutinise and optimise individual components (pumps, valves, heat transfer media and compressors) or specific subsystems (compressed air supply, chilled water supply). A study conducted by the Fraunhofer Institute for Systems and Innovation Research shows that this is undoubtedly an important first step for many users. Fluid flow machinery such as pumps, fans and air compressors are particularly ‘energy hungry.’ It is considerably more difficult to take a holistic approach and perform optimisation at the system level. This approach however results in the largest energy savings. Users also benefit from enhanced process stability and improved product quality.
Energy intelligence on pumps Realistic estimates indicate that pumps consume 20 to 25 per cent of the electricity, which is produced worldwide, and the process industry
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- technology management for decision-makers
Global focus is shifting towards designing energy efficient fluid flow machinery as they consume very large amount of energy among the process industry equipment.
accounts for a quarter of that total. The majority of all pump systems currently in operation are equipped with centrifugal pumps. The figure worldwide is estimated to be around 73 per cent, and can be as high as 85 to 90 per cent in specific industries (e.g., the chemical industry). Very well engineered pumps and optimal configuration of the hydraulic system appear to offer the best route to maximum energy efficiency. Ongoing maintenance can also reduce energy consumption, because wear and aging reduce the efficiency of all types of equipment. Corrosion and deposits increase flow resistance in pipe networks. Leakage in valves and fittings causes pressure losses in the system. A study conducted by the FfE Research Center for Energy Economics indicates that the energy efficiency of poorly maintained pumps can decrease by as much as 15 per cent. In practical application, diaphragm pumps are often twice as efficient as centrifugal pumps. However, the efficiency levels that are theoretically possible with displacement pumps are not always achievable, with friction losses being a particular type of problem. Friction losses can be broken down as follows: gear unit (5 to 40 per cent), plunger packing (1 to 20 per cent), bearings (up to 3 per cent depending on the oil level), churning losses (up to 3 per cent)
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Improving
and the hydraulics (2 to X per cent). Possible solutions are: ∙H igher efficiency gear units (toothed gearing, belt transmissions) ∙ I mproved bearing efficiency (no gaskets, lean lubrication, optimal viscosity) ∙L ean lubrication with the lowest possible viscosity to minimise churning losses ∙S election of the shortest possible seals with small seal faces Effective pulsation management on displacement pumps reduces losses by more than one per cent. Under normal conditions, pulsating flow increases pressure losses. Continuous flow saves energy and reduces stress on all system components.
ErP guideline sets minimum efficiency standards The European Ecological Design Directive (ErP) requires manufacturers to improve the energy efficiency of their equipment over the entire lifecycle, and reduce the environmental impact. Pumps are of course no exception. The motor regulation (EC640/2009) applies to nearly all motors rated between 0.75 and 375 kW as follows: ∙S tage 1: All motors must be IE2-compliant. ∙S tage 2: From January 1st 2015 all electric motors rated between 7.5 and 375 kW must either be IE3-compliant or IE2-compliant with a frequency converter. ∙S tage 3: from 2017 all electric motors rated between 0.75 and 375 kW must either be IE3compliant or IE2-compliant with a frequency converter.
Minimum efficiency standards have been in effect in the US for years. The proportion of high-efficiency motors (IE2) is significantly higher there than in Germany and Europe. The ErP Directive is based on the simple realisation that not using energy is the best solution from both the ecological and economic point of view. A study carried out by the German DENEFF energy-efficient business initiative indicates that – energy savings by businesses and households could eliminate the need for electricity generation by ten nuclear power stations. The standard principles of good pump design (working point close to the optimal pump operating point, hydraulically correct pipe dimensioning) and the technologies – which are currently available to reduce energy consumption (efficient motors, frequency converters for speed control, hydraulics designed for optimum efficiency, reduction of losses in the coils and bearings) must be exploited to the fullest extent possible. FfE Research Center for Energy Economics has provided some figures from 2009. The investment costs are consisted of the cost of the frequency converter (€100 to €200/kW pump rated power) and installation
It is more difficult to take a holistic approach and perform optimisation at the system level. www.industry20.com
industry 2.0
Leak-proof joints in fluid lines are very important for energy saving.
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design & optimisation costs of around €2000 per pump unit (these are guideline figures only). Impeller modification is another method, which can be used to adapt centrifugal pumps to the specific application and reduce pump energy consumption. Reduction of pump and motor power ratings can cut energy consumption by between 10 and 40 per cent. Modification can cost up to €1000 depending on impeller size.
Interactivity-enabled e-pumps Variable speed drives not only save energy and money, they also provide interactive capability. Pumps with sensors and microelectronics become actuators, which can ‘intervene’ and affect the process flow. Communication-enabled pumps with parameterisation features can ensure that a desired pressure level and volume flow are available in the reactor at a certain point in time or that exactly the right mixture of two substances is added at precisely the right moment. Compared to mechanical control with butterfly valves etc., flow rates can be controlled far more accurately and reaction times are shorter when variable speed drives are used. E-pumps adjust the flow rate to match actual demand much faster and with greater precision in response to demand fluctuations. Variable speed pumps are more energy efficient, and they also help stabilise the process.
fail. In such situations, the new system must be available quickly and cost as little as possible. No thought is given to lifecycle costs. ∙F ailure to allocate costs: many companies only know what their overall energy consumption is. No consumption data is available for individual equipment. In many cases, personnel costs for maintaining old equipment is not allocated to the specific items. Without information on energy consumption and labour costs for the existing equipment, there is no way to identify inefficient equipment, and a financial evaluation of equipment optimisation is not possible.
Energy efficiency on compressors Industry uses compressed air similar to the way it uses electricity from a power socket. Compressed air is a very important source of energy in many production applications. Because compressed air is safe, reliable and easy to use, cost is a secondary consideration for many users. In some cases, a lot of money literally leaks off into thin air. Loss rates of 15 per cent are the rule rather than the exception, and losses can be as high as 70 per cent. All major manufacturers now offer a compressed
Overcoming obstacles
Very well engineered pumps offer energy efficiency.
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If that is the case, why then have users not taken advantage of all optimisation options? There are a number of possible explanations: ∙ Decisions are based on payback time: at many companies, the maximum payback period is two to three years. The payback period however is basically a risk management tool, but says nothing about ROI. NPV is the method to use for that purpose. ∙ Lack of a basic technical understanding: the people responsible for energy management cannot present the information in a way that managers without engineering expertise can understand. ∙ Spending constraints: approval is not given for any investment that is not absolutely necessary. ∙ Lack of human resources: opportunities to save energy are understood, but no one has time to take the appropriate action. ∙ Investment only when faults occur: reinvestment is often only considered when systems actually
december 2012 | industry 2.0
- technology management for decision-makers
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air audit service to identify leaks, poorly dimensioned compressed air lines and mismatches between supply and demand. Maximising the energy efficiency of every single compressed air component is necessary, but even more is needed to optimise the overall system. With the exception of continuous flow production in the process industry, analysis reveals fluctuations in the demand profile. If that is the case, it can make sense to invest in variable speed compressors. A higher-level controller is recommended on larger systems, so that multiple compressors at a station can be operated in a coordinated fashion. For example, splitting the load between different sizes of compressors can increase load response efficiency. A central compressed air station has advantages, but extremely long compressed air lines can make distributed supply the better option. Service and maintenance are easier if the compressors are consolidated in one place. Compression generates heat, and a heat recovery system can further reduce energy costs. As much as 96 per cent of the energy, which is supplied to a compressor can be reused as waste heat (e.g., for heating purposes).
Energy savings can eliminate the need for electricity generation by 10 nuclear power stations.
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Compressed air contracting on the increase More and more companies are choosing the contracting option, which allows them to install a new, energy-efficient compressed air system without tying up capital. A compressed air profile (maximum, average and minimum consumption) should be created before the compressed air contracting model is agreed with the customer. It is important to understand the consumption dynamics, in other words the magnitude of the fluctuations in volume flow and pressure which occur in a minute/hour/ day. What are the compressed air quality requirements? Does the customer operate one shift or multiple shifts? In essence, customers who decide to purchase compressed air have better cost transparency. High-precision metering ensures that customers are only charged for the amount of compressed air that they actually use. Besides cost transparency, ongoing optimisation of compressed air costs is the main advantage of the contracting system.
Identifying leakage Users know that compressed air is an expensive energy source and leakage should be prevented. Compressed air that is ‘lost’ has to be regenerated using energy-intensive compressors. Nevertheless, sufficient attention is not always paid to this aspect in practical application. There are many reasons why leakage can occur in very long compressed air lines that have many branches. High-sensitivity thermal flow sensors (turn down ratios as high as 1:1.000) can be used to detect leaks. Using this approach, electricity consumption by a battery manufacturer was reduced by 563 MWh/yr, a 21 per cent savings (roughly 327 MT of CO2) according to ZVEI (German Association for the Electrical and Electronics Industry).
Energy efficiency on valves and fittings Following the explosion on the oil platform in the Gulf of Mexico, there has been enormous pressure to come up with innovative solutions in the oil & gas sector. A number of manufacturers have unveiled LDAR (Leak Detection and Repair) systems. Pilot-Operated Safety Valves (POSV) have a long, proven track record in the US and the Middle East. These valves have only been approved in Europe since the introduction of harmonised standard DIN EN ISO 4126-4. These valves have
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design & optimisation the advantage that the sealing pressure increases up to the set pressure, and as a result the user can operate the valve near the set pressure. Also, the backpressure can be higher with POSVs compared to spring-loaded safety valves. Rather than spring force, the system pressure holds POSVs closed. These valves are used in the chemical, refinery and offshore industries.
Automation reduces operating costs It is important to distinguish between two different requirements profiles for valve automation. One is open/close control only, where the valve merely needs to be moved to the end stop. The other scenario is control mode, where a valve is adjusted to control the flow based on a set value. Valve automation costs depend not only on the actual valves that you select, but also on the mode of activation
ing console or plant asset management system. The production team can keep valves and positioners under constant surveillance. The goal of suppliers is to provide predictive, preventive diagnostics rather than drawing attention to symptoms. The emphasis is on the condition of the valve and not on alarm messages. The root cause of the problem is identified and recommendations are issued concerning what action to take to extend the functionality of the valve and the entire production process. Can automated valves contribute to improved energy efficiency? ZVEI has determined that this is indeed the case. Valves with electro-pneumatic positioners can be used to optimise flow control. Control systems can react much more quickly in high-speed process applications in the chemical and petrochemical industries. Less primary energy is needed to produce larger volumes of product. Product yields increased three per cent simply by installing an intelligent electro-pneumatic positioner and a suitable pneumatic circuit in an OLEX process to separate butane and butene. Acoustic sensors can be used to detect leaking valves and prevent creeping product loss. If wear on a flare valve with a DN 150 nominal diameter and an upstream pressure of 20 bar results in three per cent leakage (which equates to a leakage loss of 800 kg/h), product losses can be as high as €10,000/day. Compared to conventional equipment, state-of-the-art positioners consume only a tenth as much instrument air, significantly reducing consumption of auxiliary energy. Conventional positioners consume around €200 to 250 of instrument air per year and device. At a medium-size plant with say 100 positioners, the savings can be as high as €20,000. Compressed air consumption in the system can be managed more efficiently.
Pumps and compressors consume a large share of energy in process industry equipment. (manual, electrical, pneumatic or hydraulic). Different combinations result in different capital investment, operating and energy costs. There is also another aspect to consider. Lower activation force is needed for 90°-valves (flap, stopcock) compared to linear valves (butterfly, gate). The drives are smaller and less expensive. A number of partners offer the standardised Opos Interface that supports reliable, efficient solutions that combine intelligent positioners with pneumatic thrust or swivel drives. The attractive features of this interface include low-cost installation, lower spare part inventory costs, increased reliability and stability and safe positioner replacement during ongoing operation due to built-in shutoff. The advantages are particularly evident in safety-related applications. The non-proprietary interface gives users a wider choice of products. Inadequate maintenance on control valves can have a very negative impact on process reliability. Complex analysis and the manufacturer’s expertise are required to assess the actual condition of a control valve in the production process. FDT/DTM can be used to provide connectivity to a monitor-
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Final statement Manufacturers of pumps, compressors and valves often have to compete on price rather than on the operating cost of their equipment. Everyone involved should reach a consensus that NPV provides a better basis for decision-making than the payback period only. Courtesy: DECHEMA
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challenges & solutions Hydra-Clean 4500 psi Pressure Washer
Managing Your Pressure Washer A pressure gauge can help maintain the longevity of the pressure washer. Also, its innovative design reduces the operator’s fatigue.
P
ressure washers are known for their many cleaning uses in the industry, some of those include trucks, exhaust systems, degreasing motors and so on. Although those devices can be used at one’s discretion, knowledge of some specific aspects helps in increasing the life of the equipment, as well as reduces the operator’s fatigue.
Source: Graco Inc & Invent Help
Handling the device “Maintaining an even level of pressure is the key for gaining consistent performance from your pressure washer. As soon as the pressure drops, the performance is impacted, which causes the operator wasted time, money and more water usage than necessary,” says Terry Bosma, President, Pressure Services Inc. One of the easiest ways to monitor the correct pressure while using your power washer is by installing a pressure gauge. While some models are sold with this feature, most are not. “When installing a pressure gauge on your power washer, we recommend installing it at or
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near the head of the pump. This allows for the most accurate reading of pressure. Once installed, the most important thing to remember is to keep an eye on the pressure to ensure the power washer is operating correctly,” he adds. If your pressure gauge is installed and the power washer seems to be operating abnormally, there are a few checks that can be done to diagnose the problem. Bosma suggests – checking the nozzle to ensure it is not worn out, making sure there are no leaks in the pressure hose or quick couplers, and to also make sure there is plenty of water going into the pump – so that it is not starving for water. If you continue to see a decrease in pressure after these steps have been taken, it is recommended to contact your supplier for further diagnostic help.
Attachment to the device One of the clients of Invent Help (an American inventor service company), has designed a pressure washer attachment that makes the operation less fatiguing. This patented attachment, called the “Pressure Washer Caddy,” can produce a more uniform cleaning when using a pressure washer. The
industry 2.0
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challenges & solutions device can eliminate fatigue and back pain associated with conventional pressure washing. The unit can be conveniently rolled over the expanse of the work area. The mechanism is designed for easy, one-handed operation. The invention includes a splash guard to prevent the userâ&#x20AC;&#x2122;s feet from getting wet. No tools are needed to adjust the unit. It is very compact for easy storage. The Pressure Washer Caddy consists of a wand receptacle, which is mounted on top of a twowheeled column, which provides rolling support for the wand. The unit has a height of nine inches and it is six inches wide between clamps, with three inch wheels and an eight inch splash guard. The wand is attached with a thumbscrew that may be loosened to adjust the distance from the spray nozzle to the surface being cleaned. The bottom of the wand receptacle is inserted into an elongated slot on top of the The Pressure column, which enables the wand to Washer be oriented at a functional angle. A Caddy split block extends from the top and bottom of this slot. The blocks feature V-shaped notches and can be clamped to the wand. The operator can adjust the nozzle to the desired height. Cleaning operation may be done with only
Washer Wand Inserts From Top CARRIAGE BOLT
Wood Blocks
Notch For Wand Passes Through Entire Device
Thumb Screw Secures Wand
Wheels Splash Guard
one hand as the device supports the spray wand. The blocks are adjustable to fit over wands of varying diameters. A flat panel is extended from the front of the column and function as a splash guard. The guard can be snapped on or off. The Pressure Washer Caddy can be produced from moulded plastic with a metal rod to service as an axle.
quality & innovation
Strategic Application of Technology
During handling a power plant commissioning project, BHEL faced a big challenge to scale down the cost of execution of equipment testing, Honeywell effectively addressed the issues.
W
hen Tata Power commissioned its 250 MW coal-fired Unit 8 at the Trombay thermal power station in Mumbai, (BHEL), the power generation equipment OEM for the Trombay station supplied, erected and commissioned critical main plant and balance-ofplant equipment under an EPC contract. As part of the final contract handover, BHEL had to establish and guarantee a performance baseline for the plant equipment and perform periodic verification. Some of the key parameters, for which performance measurements were conducted under various load conditions, were – Steam inlet to turbine, Fuel input, Combustion air, Extraction steam to process backpressure steam to process, Condensing steam, Condensate from turbines, Turbine bypass steam, Flue gas and Cooling water to condenser. BHEL was required to provide all of the instrumentation and measurement devices for conducting Performance Guarantee (PG) and Performance Evaluation tests. The entire instrument setup needed to be freshly calibrated prior to the testing – and carry a certificate of calibration from an accredited lab.
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Typically, the setup consisted of hundreds of pressure, temperature and flow instruments, as well as flue gas analysers, power supplies, MUX boxes, cable harnesses, cables, junction boxes, miscellaneous accessories and data logger or analysis software. This equipment is packed, unpacked, repacked again and hauled from one site to another to support performance tests. The capital investment in the instrument setup was very high. BHEL faced a number of specific challenges involved in conducting the necessary PG tests. These included: employing high-accuracy digital communications for instrumentation, shortening setup and dismantling time, reducing hardware required for tests, making the instrument setup as portable as possible and avoiding temporary cabling work and the costs associated with material waste.
Customer value BHEL’s PG test instrumentation and measurement setup was required to be independent of plant control and instrumentation systems as per regulatory standards. Honeywell’s OneWireless solution helped achieve such independence and provided
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cycle time and greater test efficiency. Cycle time for the PG procedure, involving planning, preparation, logistics, calibration and actual testing over 12 weeks or more, could be cut to six-eight weeks. In addition, the standards-compliant OneWireless solution could provide the ability to source instrumentation from multiple suppliers, ensuring vendor plurality and interoperability.
Honeywell’s solutions As part of the wireless system configuration, Honeywell XYR 6000 wireless temperature, pressure and flow transmitters were installed at various process points to measure key process parameters. Multinodes were installed at vantage points within the power generation unit, and all monitored process measurement data were made available for real-time visualisation, trending/historisation reports and data export to Microsoft Excel. The Experion platform was used for data logging, analysis and reporting to support the PG test procedure. The entire OneWireless infrastructure was installed and commissioned in just two days. BHEL evaluated the performance of the system in order to benchmark it against a conventional wired data acquisition system running in parallel.
Buying criteria
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BHEL’s PG test instrumentation and measurement setup had to be independent of plant control and instrumentation systems…
additional flexibility and efficiencies to BHEL’s overall PG test process. Approximately $1M worth of CAPEX was locked into the PG test setup, and BHEL had to maintain more than 20 per cent of spares inventory due to the probability of equipment failure. Obsolescence, failure replacement, and wear and tear caused by frequent installation or dismantling and calibration eroded the capital value of the test equipment. With an expected service life of five years for the instrument setup, which would be used to perform 120 PG tests, wireless technology would help save a total of $4.7M. There were also indirect costs incurred by the end-customer, which could be reduced by as much as 50pc as a result of improved
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BHEL wanted to ensure the following: ● obtain high-accuracy measurements from instruments with a digital communications capability (i.e., no A-D and D-A conversion accuracy loss) ● improve setup/cycle time ● reduce CAPEX and OPEX for PG tests ● match the number of PG tests performed to the number of tests required annually, and as such, improve business performance ● raise measurement coverage during PG tests, thus, enhancing test accuracy and integrity ● reduce electricity tariff-related disputes through proven performance baseline as per central and state regulatory norms ● reliable and stable wireless communications capability ● standards-based solution with vendor plurality and interoperability
Performance evaluation BHEL evaluated the results from the pilot program and compared them to those achieved from their conventional set up, and as a result of their positive experience with Honeywell’s OneWireless solution, they are actively considering a wireless system as part of their PG testing process.
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'The Innovation Steeplechase' In his or her mind, each of us wants to be 'innova- tive'. Innovation is the new mantra for success for corporations and individuals within them. It is the answer to problems of growth, profitability, produc- tivity, and organisational logjams. It is also the ready response expected from 'leaders' - functional or otherwise. But like leadership, innovation remains elusive and daunting. How does innovation come about and how can you bring it about - across the organisation or within your department? Most CXOs feel constrained due to 'too much to do in too little time'... and therefore none left over to innovate or fight deeply entrenched systems that come in the way of change. Equally inertia could result from the feeling that what you do is too mundane to innovate. Misconceptions around innovation only make 'getting started' tougher! Given how critical innovation is for raising the bar - every time, every day - the 9.9 Leadership Institute is launching a series of 'Innovation Workshops' to help with 'winning the innovation steeplechase' irrespective of where you are in the race - before the start line, in the uncertain middle, or closer to the finish line...
Depending on which of these questions dominates your thoughts around innovation, the 9.9 Innovation Team will design a workshop or programme for you and your team.
What the '9.9 Innovation Team' can do for you... Companies and senior executives are grappling with answers to one or all of the questions below in the innovation context.
The Why
The What
Why should I innovate? Can I be innovative? This question is answered through awareness around innovation, including: - Addressing myths and misconceptions - And why each one of us can be 'innovative' If you spend all your time making tiny process improvements and watching competitors steal your customers with innovative new products and services, then "The Why" applies to you.
What areas should you innovate for maximum benefit? We outline areas where innovation can deliver serious benefits and identify the most popular application areas across organisations. The most obvious approaches begin with a need for: - Topline growth - Bottomline improvement Your business is going fine, sales and profits are a bit flat perhaps but they will pick up... or will they? If this is your concern, then "The What" applies to you.
The How How do I execute and implement? Here we offer our Creativity & Innovation Toolkit to help you kickstart the process to: - Deliver specific outcomes - Sustain the process - Embed programmes to influence the DNA of the organization If you are unaware of the one right problem to solve that creates "unfair" advantage for your organization in the marketplace, then "The How" applies to you. We offer Initiation Workshops; Toolkits; Projects and Embedding Programmes with durations ranging from 2 hours to 2 days to 2 months and beyond.
FOR MORE INFORMATION CONTACT Email: akanksha.pundir@9dot9.in Phone: +91-9999799614 Email: anuradha.mathur@9dot9.in
green manufacturing
T
he vending points for tender coconuts at Sabarimala generate huge heap of waste materials, which is an environmental hazard by itself. It was felt essential that these materials are removed for fruitful end uses. The ban on the supply of tender coconuts, which is a natural source of energy for the pilgrims while trekking up the hills to the Sabarimala shrine, is no solution. Therefore, it was essential to ensure that there is proper management of the waste, which is generated by the process of vending tender coconuts. A presentation in this regard was made by the Coir Board before the High Court of Kerala in the presence of all the learned counsel appearing for the various stakeholders, including the government, TDB etc. A few products were shown that had come out by utilising the fibers of coconuts. The working of Mobile Fiber Extraction Machine (MFEM) as a disposal mechanism of coconut husks was also explained for instantaneous defibering of coconut husks.
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The High Court of Kerala has given directions to use the husks of coconuts properly under the guidance of Central Coir Research Institute (CCRI) of Coir Board. A project for defibering the husks dumped in Pamba and Sabarimala by making valueadded products has been implemented through cooperation between Coir Board and Forest Department. The husk has been defibered using the Mobile Fiber Extraction Machine (MFEM), also known as ‘Swarna’, developed by the CCRI of Coir Board. The coir fibers coming out of the machine will be used for making handicraft items like coir toys, necklaces, chains etc., and coir pith will be converted into organic manure. It will help develop the coir industry and agricultural industry. Prof. G. Balachandran, Chairman, Coir Board took keen interest in the project and directed his officials to launch the project immediately. Accordingly, the project work has been inaugurated by Dr. U. S. Sarma, Director, CCRI of Coir Board, – by installing MFEM on the site.
- technology management for decision-makers
Mobile fiber extraction The coir industry in India utilises only 25 per cent of the total availability of husk, remaining valuable bio-mass is either used for fuel purposes or for dumping it around the coconut trees for manure purpose. The industry sometimes starves for the husks and it becomes a crisis. Almost every year the state of Kerala is forced to buy the coir fibers from the neighbouring states – namely, Tamil Nadu and Karnataka for making floor covering products making those uneconomical. During the year 2009, the crisis deepened and the CCRI was asked to come to the rescue of the industry by developing a mobile fiber extraction machine, which could be easily transported to the villages – where there is availability of husk but it is difficult to collect at a centralised location for defibering. The CCRI had developed this machine within a period of two months by December, 2009, then it was demonstrated before the coir industry – when the then Minister of MSME, Dinsha Patel gave it the name ‘SWARNA’. The industry is happy on the quality of fiber and pith being obtained in a matter of 10 seconds. The author is the Media & Communication Officer, PIB, Cochin, India.
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Machines made by CCRI to convert husks from tender coconuts into usable coconut fiber may be deployed with eco-friendly tender coconut disposing units. By L. C. Ponnumon
supply chain
Expected
Global Trends in 2013
Visibility enhancement and creating resiliency are on top priority list. By P. K. CHATTERJEE
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A
lthough there is hardly anything quotably new on the continuing global economic uncertainty, Supply Chain (SC) stake holders will continue to put their efforts to create excellence in the sector in all possible ways in 2013. As economic status quo always governs the growth rate of any business sector; and the supply chain sector being no exception will continue to witness cautious inflow of money in the coming year – naturally, the major foci will be centering around maintaining consistency, cost reduction, resiliency and reducing human dependency or
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error. Obviously, those will be initiated by creating better visibility, which will be possible through absorption of the latest technologies. Of course, the old concept – “you do what you do best and let me focus on my core business,” will gain prominence, and the manufacturers will more prominently focus on outsourcing the supply chain activities. In the recent past, several experts from different parts of the globe have made their predictions on the expected trends in this field, in 2013. IDC Manufacturing Insights has released its “Top 10 Predictions for 2013 Supply Chain.”
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supply chain IDC’s Top 10 predictions • Resiliency becomes a priority for end users looking to master ‘massive multidimensionality.’ • On the supply side of the supply chain, recognising the inherent cost of long lead-times, manufacturers will continue to look at global networks through the lens of both regional and country-level sourcing. • On the demand side of the supply chain, recognising the need for better service levels and mass customisation, manufacturers will look again to postponement techniques and data analytics to drive more effective customer insights and ‘smarter’ fulfillment. • End user IT organisations will have to support a more productive supply chain ecosystem. • Service excellence will become a strategic priority. • Supply chains will optimise omnichannel customer service and cost by enabling Trustworthy, Efficient and Effective Supply Chains (TEE). • End users will focus efforts to improve collaboration both upstream with suppliers and downstream with customers to better compete in a faster world. • Supply chains will invest in technologies that enable visibility, visualisation and virtualisation. • The ‘modern’ supply chain will get ‘smarter.’ • The big data ‘era’ dawns for supply chain organisations. Stuart Dunkin, CEO and Founder, Data Profits, says, “We see three important pieces to providing true real-time supply chain visibility in 2013, namely – actionable insights across the supply chain, smart data, which is needed to drive smart decisions and the translation of smart data into new behaviours across the supply chain.” Bob Ferrari, an independent supply chain industry analyst predicts: • 2013, yet another year of global challenges to support revenue and profit growth. • Stabilised and potentially reduced inbound commodity prices, but certain exceptions in 2013. • The renaissance of U.S. based manufacturing will continue in 2013, but further momentum is dependent
on addressing key challenges in legislative and industry barriers and the new transformation of manufacturing. • For manufacturers and retailers, supply chain talent retention, management and development will remain a significant problem across global supply chains, with special emphasis in China and Asia. • Two industry SCs, B2C and the Aerospace Industry, will undergo more significant challenges or higher turmoil. • SC organisations must either embrace and augment resiliency and responsiveness capabilities in 2013, or deal with the consequences of poor business outcomes. • China-based mfg and service firms will markedly raise their presence and influence in global SCs during 2013. • Executive level voice and shared accountability of SC organisations will invariably extend into 3 broader areas. • Similar to what transpired in 2012, higher and more expensive incidents of counterfeit products, theft and other unscrupulous ‘grey’ market activities within and across industry supply chains will finally motivate industry to step-up mitigation efforts. • Cloud computing and managed services options, enabling supply chain business processes, will continue to gain more traction, provided that vendors resolve current lingering customer concerns. Thus, from the expert analysts’ views, we can conclude that in 2013, obviously globally there will be multidimensional efforts to build robust and resilient SCs, where absorption of technology will be manifold. And this coupled with the fierce competition may effect in reduction of manpower in some specific industries. However, demand will increase for well-trained SC professionals. The supply chain sector stands on the tripod of product flow, information flow and finance flow. Although the third one is very much unpredictable at this moment, first two will slowly gain speed and there will be a little faster acceleration too – may be after the first quarter of 2013. The author is the Managing Editor of Industry 2.0.
management & strategy
Cartel Breaking
through Online Negotiation
Cartels are formed by a group of suppliers to ensure growth of their respective business. However, for the buyers it is often a cost raiser practice. Therefore, manufacturers always look at the ways to break cartel to ensure smooth supply of raw materials at justified price. By Tapas Kumar Chakraborty
M
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ore and more buyers are finding it convenient to outsource nonstrategic procurement as they feel it is difficult to control the cartel among suppliers, which leads to hike in procurement price. In a volatile market, where fundamentals such as demand and supply is affecting market regularly, it is difficult for procurement professionals to identify whether price is really affected by a cartel without performing a detailed study on the subject. A ready solution for them has been online negotiation, which is seen to break cartels and control its negative effects to certain extent.
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management & strategy Understanding cartel A cartel is a group of suppliers which together attempts to control production, marketing, and pricing of a product, with an objective to increase their operating margins. Under antitrust laws in many regions of the world, cartels are illegal, because they eliminate fair market competition. However, several international cartels continue to exist despite these laws. Within nations, private cartels may control the market for certain commodities. For the members of a cartel, cooperating together has a distinct advantage. By agreeing to not compete, the members of the cartel mutually benefit. Cartels are often successful in driving up the price of the commodity they control well beyond what could be considered the fair market value. Typically, cartels are formed for commodities for which their suppliers were earlier forced to operate at a bare minimum profit and very low margins. Once these suppliers get together, the buyers are forced to pay higher. Though purchasers are at liberty to take legal recourse to break such cartel, operating in an era where supplier relationship holds the key to competitive advantage, innovative concepts are often used to break a cartel. Creating a preferred pool of suppliers, listening to them closely and awarding them for their good work are some of the very common and recent initiatives that help in breaking a cartel. However, a reactive way to break a cartel is through online
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reverse auctions, which is also used where negotiation is done with a group of suppliers simultaneously instead of negotiating on a one to one basis. In cases, where buyers find it difficult to manage things, and they find it difficult to manage the increasing demand of the suppliers, they resort to the legal mode. Legal procedures are difficult to prove and very much time consuming.
Several international cartels continue to exist despite preventive laws. Within nations, private cartels may control the market for certain important commodities.
Forming strategic alliance and enhancing the market share of the vendor to take the best return, is a one time solution, but thereafter in case the strategic partner is not continuously evaluated on every front â&#x20AC;&#x201C; especially on the price front, the parent company may be losing on competitive advantage. A solution to this is â&#x20AC;&#x201C; continuous vendor development activity, and a continuous process of creating new business opportunity within the function â&#x20AC;&#x201C; so that the strategic partner finds it difficult to settle on firm ground. In this way, the
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motive to form the cartel can be appropriately addressed.
Motive to form cartel A vendor is moved to form a cartel when according to his perception, the market price obtained is not sufficient to justify his value addition. After failing to convince the purchaser on every occasion and working out a remunerative deal, he goes out to convince his competitors that the problem of lower margin is a universal problem and cannot be solved in isolation. The cartel then settles among themselves to only accept a price, which would justify their perceived value addition. Increasing the profit level obviously would call for increasing the selling price, and if the buyer gets no other source to buy the item, he would have to shell out the set price. In case importing is a solution to bypass the domestic vendors, vendors trying to form a domestic cartel would have to convince the government that importing would be injurious to the domestic industry, and an import duty needs to be implemented as a measure of safeguard. However, the item for which a cartel is being formed has to be a critical item to the buyer. Otherwise, the effects of cartelisation would be nullified.
Detecting a cartel A cartel can be detected for all items, which are being bought critically by the buyer on a regular interval. Obviously, the buyer would always try to strategically avoid paying higher to the seller by all possible means. Similar strategic efforts
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would also be made by the seller to ensure that he gets paid for his perceived value addition. In case, the seller is not able to do it alone, he would form a cartel. The seller may also try to buy stakes in competing companies wherever possible, and through this consolidation would try to ensure a justified margin. Items not so critical for a company can be made critical – if the specifications and terms of supply are so designed that only a very few vendor can match the competency level required to pass the eligibility criteria. This also increases the chance of cartel in non-critical items bought by the company.
Breaking a cartel The main motive of the cartel can be resolved by properly collaborating effectively with the vendor. If the vendor feels he is part of a family – where buyer is a family member, he would not indulge in any cartel activity. But this may raise serious questions on the creditability of a buyer if the relationship goes beyond a professional relationship – as corruption is not an unknown practice. In a transactional atmosphere, where there is a central figure initiating a cartel activity, one to one negotiation can be done to break a cartel. Alternatively, there are electronic negotiations that are breaking the cartels effectively. In case this option also fails, increasing the scope of supply and accommodating service elements along with an item supply and training selected lot of suppliers to do the same job becomes a viable alternative to break a cartel. In a one to one negotiation done after a cartel is detected, assurances are given to increase market share of the selected vendor – if he discloses all financial
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The main motive of the cartel can be resolved by properly collaborating effectively with the vendor. Electronic negotiations are also breaking cartels effectively.
details pertaining to his company. A vendor who has ploughed back his profit element into various research and development activities is normally preferred over a vendor who uses this profit margin in other ways. From the list of vendors so generated, the most balanced vendor is chosen – who is given the larger pie on a commitment that he would give maximum value to the buying company – and the selected vendor is continuously evaluated on every front. In case such a negotiation fails to deliver, the next best alternative to break a cartel is to go for an online negotiation. Here, the auction engine is so programmed that if a second person wishes to give the same offer, it is automatically rejected by the system. So, all the vendors involved can only get their price registered in the system, if each vendor offers a lower price than the other. Normally, at the end of such reverse auctions, an order is awarded on preset terms to a limited number of vendors out of which one gets the maximum share of business. This helps to break a price cartel. Sometimes it so happens that all the vendors have lower capac-
ity than the share of business offered by the buyer. Vendors here sometimes form a quantity cartel where everyone commits to supply an equal quantity at the same price. In such a scenario, a reverse auction can be so programmed that the quantity and price commitments of each vendor has to be different. In extreme cases where an online negotiation does not give better results, the scope of supply of an item is increased, and it involves an ‘apply’ element also. The supplier here needs to maintain his own workforce at the buyers’ plant to do the job in totality and the buyer ensures training to all the suppliers before awarding the order to a specific supplier based on his performance and quoted price. This is an evolving process that keeps even the strategic partner guessing for the next scope might be too difficult for him to comply. In a nutshell, cartel is there to stay and evolve and a purchaser’s skill is proved if he is able to evolve tools to take best advantage of the situation without resorting to the legal route. The author is the Head of Business Development & Service Delivery in ‘buyjunction,’ which is a business unit of ‘mjunction.’
industry 2.0
- technology management for decision-makers | december 2012
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product gallery Bag Filler
Spectroscopy Camera
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he mobile Bulk Bag Filling System features an integral metal detector/separator and a tilt-down conveyor/feeder for dust-free filling at multiple locations. Integral to it, there is a patented TWIN-CENTERPOST Bulk Bag Filler to maximise strength and improve accessibility to bag hooks while simplifying construction and reducing cost. The system detects metal in the freefall stream of material entering the filler and ejects it through a chute that discharges into a removable drum at the rear of the unit. It has a fill head height adjustment to accommodate all popular bag sizes. Flexicon Corporation Tel.: +1 800 353 9426 Website: www.flexicon.com
yLoN-IR, controllerless, cryogenically-cooled CCD camera finds use in spectroscopy. This is linear InGaAs photodiode array camera, and is designed for quantitative near-infrared and short-wavelength infrared applications that demand the highest possible sensitivity, including photoluminescence and Raman spectroscopy. Its liquid nitrogen cooling greatly reduces dark current that occurs from thermal energy within the CCD. Its indium metal seals enhance vacuum longevity. InGaAs detector offers 16-bit digitisation, and leads the industry with the fastest spectral rate of up to 6600 spectra/sec, and lowest system read noise. Also, by removing the external controller, it has increased experimental flexibility with its improved ultra-low-noise electronics. Model 1024-1.7 is responsive in UV and visible with high sensitivity from 800 nm to 1.7 μm. Princeton Instruments Tel.: +65 6408 6240 Website: www.princetoninstruments.com
Ballast Driver
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ith the Unity AB line of Architectural Ballast Drivers and Non-Dim Relays, projects of any size can benefit from Phase Dimming, 0 -10VDC and non-dim ballast controllers. All three units include individually DMX addressable 20A relays, individual on/off threshold levels and 99 onboard user configurable scene memories that work with the company’s Unity Architectural Remote Stations. All relays are latching, and will remain in their current state until a new command is sent. These AB relays are sold in configurations of 3, 6 and 12 circuits. Lightronics Tel.: +1 800 472 8541 Website: www.lightronics.com
Air Cylinders
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utomation Direct’s NITRA pneumatic product line now includes E-Series dual rod guided air cylinders, which are suitable for applications that require precise alignment or have large side loads. NITRA E-series dual rod guided pneumatic air cylinders are interchangeable with other popular brands of cylinders. The double-acting cylinders are constructed with high quality extruded aluminium housing and switch mounting tracks, dual chrome-plated stainless steel guide rods, and bronze bushings. E-Series cylinders feature a maximum operating pressure of 142 psi and are available in eight bore sizes from 12mm to 63mm; depending on bore size, available stroke lengths range from 10mm to 250mm. Automation Direct Tel.: +1 800 633 0405 Website: www.automationdirect.com
Encoders
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Gate Valves
hese inch-size, light and medium-duty, stainless steel, solid-shaft encoders provide a cost-effective solution for small applications. The TRDA-2E series light-duty encoders have a 0.25-inch diameter stainless steel solid shaft, and they offer resolutions from 100 to 2,500 pulses per revolution. The encoders are fitted with a two-metre cable with tinned ends and are available with 12-24 V DC open-collector or 5V DC line-driver outputs; the series provides up to 200 kHz response frequency.
onval offers Swivldisc Gate Valves in ½” through 4” sizes. The Swivldisc features a superior wedge gate design that employs a flexible disc. This disc permits the seating surface to achieve perfect alignment and establishes a tight seal that is not possible with standard wedge gates. Swivldisc Gate Valves are available in ASME / ANSI Pressure Classes through #4500. Standard materials of construction are Carbon Steel 216 GR WCB, Chromalloy SA-217 GR WC9, SA-217 GR C12A and SA-351 CF3M. Other materials are available upon request.
Automation Direct Tel.: +1 800 633 0405 Website: www.automationdirect.com
Conval Tel.: +1 860 749 0761 Website: www.conval.com
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Wire Stripper
Flow Meters
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rgo-Elite Stripmaster hand-held wire stripping tool has been designed for the aerospace industry. The tool is an improved version of the IDEAL Custom Stripmaster, which is being used in the aerospace industry for the last 30 years. Ergo-Elite is ergonomically engineered to deliver more precise strips with better balance and comfort for the operator. This design reduces risk of repetitive strain injury. It is made from rigid polyurethane reinforced with carbon fiber. It is durable and strong – but weighs a mere 1/3 of a pound. Ideal Industries Tel.: +1 800 947 3614 Website: www.idealindustries.com
Vacuum Pumps
alborg’s Model M Flow Meters are equipped with polycarbonate safety shields for industrial applications. According to the company, these in line and flanged flow meters are distinguished from other OEM models due to their seamless brushed stainless steel bodies. The result is safe, armored construction preferred for industrial applications performed under heavy-duty, harsh conditions. As far as their design specialty goes, they have – solid body and no screws or welding, thick polycarbonate safety shields, fluted or plain tapered tubes, direct reading metric and English system scales. Aalborg Instruments Tel.: +1 800 866 3837 Website: www.aalborg.com
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his range of dry scroll vacuum pumps gives good performance in scientific, laboratory, research and development applications. According to its manufacturer, the novel nXDS pump is more reliable and requires less maintenance than alternative pumps, which results in less downtime and
Sensors
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a low cost of ownership. This also has a lower environmental impact, enabling users to reduce their carbon footprint. It is an oil-free vacuum pump that has no lubricants in the vacuum. The advanced scroll design and tip-seal technology mean the pumps have a longer lifetime.
his series of intrinsically safe LVDT Linear Position Sensors is for use in hostile environments – such as gas/ steam turbine plants, chemical process plants and paper mills. Rated for operation to 100°C, the HLR sensors are now UL/ULC listed for hazardous locations Class I, Division 1, Groups A, B, C, D and Class I, Zone 2 by UL. As per the manufacturer, constructed entirely of SS for environmental robustness, the sensors offer reliable and contactless position measurement for critical applications.
Edwards India Tel.: +91 20 40752222 Website: www.edwardsvacuum.com
Macro Sensors Tel.: +1 856 662 8000 Website: www.macrosensors.com
Ball Valves
Floor Cleaner
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low-Tek, a subsidiary of Bray International, supplies a fully integrated line of multiport ball valves called the Multiport Series. Offering 3-way and 4-way flow control, the Multiport Series valves are available in two different body styles, a compact standard port and a block style full port. Their standard applications include mixing or blending of line medias; diversion of flow to different location; bypass of flow around strainers, meters, and heat exchangers; direct flow out-of or into storage tanks; and shutoff flow from different directions. Valve bodies are available in standard and full port, 1/4"-8", in stainless steel and carbon steel construction. Pressure ratings range from 800 to 1000 psi depending on size.
aivac's AutoVac cleans and maintains floors quickly and effectively, but at a fraction of the cost of any conventional automatic scrubber. Part of Kaivac's award-winning OmniFlex Crossover Cleaning system, the AutoVac is a preconfigured unit that includes a trolley bucket that dispenses only fresh cleaning solution to floors, a wet/dry vacuum, and an AutoVac Add-On Kit. Recent tests at the University of Massachusetts have certified the product's usefulness.
Bray International Tel.: +1 281 894-5454 Website: www.bray.com
Kaivac Cleaning Systems Tel.: +1 800 287 1136 Website: www.kaivac.com
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industry 2.0
- technology management for decision-makers | december 2012
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product gallery Industrial Gears
Machine Shields
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V Engineers supply worldwide all kinds of industrial gears – that include pinion gears, helical gears, ground gears, wheel gears and worm gears, along with gearboxes. As per the company, industrial gears are made not only with the most advanced tools but also with hard work, attention to details and precision. They use all their resources and manufacturing expertise in creating gears that are at par with the world standards. JV Engineers Tel.: +91 9810676032 Website: www.jvengineers.com
vailable for vertical milling machines, electrically interlocked heavy-duty milling machine shields exceed OSHA and ANSI safety requirements, informs the manufacturer. Products consist of thermo-formed, impact-resistant, transparent, polycarbonate front shield in tubularsteel frames. When shield is swung out of position at either of two safety microswitch location, positive contacts open and send stop signal to machine control. Each shield can be positioned for maximum protection during operation. Rockford Systems Tel.: +1 800 922 7533 Website: www.rockfordsystems.com
Roll Separators
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hese Rare Earth Roll (RE) Separators provide peak separation efficiency and ensure exceptional product purity, informs the manufacturer. These powerful separators are useful in many industries, including mining, plastics, abrasives, recycling, glass, foundries, industrial minerals, metals, electronics and many more. RE Rolls are constructed with neodymium-boroniron rare earth permanent magnets. These have extremely powerful magnetic material with at least ten times the attractive force of conventional magnets. Eriez Tel.: +1 814 835 6000 Website: www.eriez.com
Tapping Machine
Bench Grinder
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he heavy duty DEWALT DW758 8-inch bench grinder is useful for all-purpose grinding, including sharpening tools, deburring, rust removal, shaping parts and cleaning objects. The device is powered by a 3/4th HP induction motor, which runs at 3,600 RPM for easy and reliable high speed material removal. The product is complemented by an industrial cast iron base and motor housing for added durability and prolonged life. It has a 12-1/2-inch distance between wheels for longer and larger grinding applications, and precisionmachined adjustable aluminium tool rests allow the user to accurately position work. Rear exhaust ports in the wheel guards provide smooth operation. This grinder measures 16 inches long and weighs 39.5 pounds. The product comes with 36- and 60-grit wheels; eye shields; spark deflectors; tool rests; operating instructions, and can be purchased online from www.amazon.com. Black & Decker India Tel.: +91 22 67973977 Website: www.dewalt.com
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enterline Technologies provides ultra-precision services for grinding, lapping, polishing, diamond sawing and laser machining of metals, ceramic, sapphire and other materials — for the telecommunication, semiconductor, communication, test & measurement, micro-electronic, defense and security industries. A machine had been supplied by this company that could tap 4000 holes per hour. Their high production RapidTap machine taps 18 holes with 3 different pitches simultaneously in an aluminium alloy die-casting.
ethane is produced by the CNG and LNG fueled engines and is a potentially life-threatening and explosive by-product. With the Xintex Methane Gas Detector, the methane level is constantly monitored with both a visual and an audible alarm, which is sounded at 50 per cent L.E.L. Its features include multi-colored LEDs (green, yellow and red) to indicate functionality, operational status and danger, a test function button and a reset button. The product is useful for the commercial trucking industry, particularly heavy duty trucks.
Centerline Technologies Tel.: +1 978 568 1330 Website: www.centerline-us.com
Fireboy-Xintex Tel.: +1 6167359380 Website: www.fireboy-xintex.com
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Gas Detector
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