Much has been written about industry 4.0 which is expected to integrate the internet, sensors and various connected technologies into mainstream manufacturing. In practice we do see it, for instance in the branding of a car such as MG Hector in India, which proudly says on the rear panel, “Internet Inside”. General Electric did implement Industry 4.0 in its finest form when it rolled out Predix – which was spoken about and executed as the Industrial Internet. GE was able to remotely diagnose and predict possible problems that could arise in its turbines, jet engines and medical equipment. These machines were deployed at various locations across the globe. For GE, it translated into revenue of about $1 billion ten years back. However, within a span of three to four years, the project lost steam and now this digital division of GE is up for sale, going by business press reports this year. Reasons have to do mainly with the fact that GE’s digital business was operated more as a product and not as a service; it was not open to easy access by developers. The platform was not conducive for enterprise customers to operate as a service. They lost out to the might and muscle of cloud providers such as Amazon, Microsoft and Google.
Consider this scenario: at a Dutch firm, ASML Holdings based out of Veldhoven, under development are some of the largest and most advanced lithography machines such as the EUV lithography systems (https://www.asml.com/en/products?icmp=navigation-homepage-link-products) that are capable of making the finest lines on microchips; customers are Samsung, Taiwan Semiconductor Manufacturing Company and others. The machine is one of its kind and sells for as much as $340 million, more expensive than Boeing’s Dreamliner. What lies inside? A complex set of technologies comprising hydraulics, pneumatics and various cooling systems that could challenge the understanding of some of the best brains in the business. Applications are not merely confined to smartphones and laptops but could also be relevant to advanced defense systems. This machine has caused intense political lobbying that aims to ensure that the technological expertise is not transferred to the Chinese. American and European governments are in the fray, anxiously pushing their agenda through diplomatic channels. Quite a peculiar scenario, considering that one machine and the technological expertise that it portrays could cause superpowers sleepless nights, just to prevent it from falling into the wrong hands.
Gently move your cognitive frame to the academic environment in engineering institutes. Most mechanical engineers are aware of complex theories which have their applications – one example is Coriolis acceleration which has to do with a component of acceleration when sliders move within another component which has a rotary movement. Or elaborate equations in fluid mechanics which are derived by professors on the whiteboards in engineering classrooms. Working with valves, hydraulics and pneumatics are the intended learning outcomes. When we relate such teaching to real-world applications as seen in the case of technologies developed by ASML, there are no doubts that core engineering and manufacturing practice are closely intertwined. Add on layers from electronics and communication technologies and we have clarity on how modern manufacturing can be visualized. It is not driven purely by Henry Ford’s successes in assembly line manufacturing; we can now visualize the layer from information communication technologies that sit atop the recent passenger cars – the heart being the silicon chip which is where contributions from firms such as ASML have played a major role.
It is not just about large organizations alone. Consider a firm such as Rational which is the world leader in cooking technology for industrial kitchens. Gunther Blaschke, the CEO of this firm relies more on continuous innovations and being at the forefront of technology for sustained dominance – this firm has a global market share of 52%. Another firm Omicron which is the world market leader in tunnel grid microscopes relies on innovation and development. Evidence can be observed thus: it has 40% of the workforce engaged directly or indirectly in research and development. A firm such as Festo, which is the global leader in pneumatics makes actuators, motors, servo drives and industrial robots. The firm uses collaborative robots, also known as ‘cobots’ in its precision manufacturing. To stay ahead of rivals, this firm identifies a pipeline of products and usually has about 100 products ready for patenting. The firms mentioned – Rational, Omicron and Festo were featured in “The hidden champions of the twenty first century”, an edited book. The core message is that manufacturing expertise has deep foundations that have helped build the core, whilst leveraging technology as well as focusing on innovation.
‘Core’ remains a keyword, especially in light of C K Prahalad and Gary Hamel’s seminal article, ‘The Core Competence of the Corporation’ featured in Harvard Business Review, 1990. A powerful message delivered by the authors was the identification of core competencies – for instance, they argued that Canon had developed competence in three areas, viz. fine optics, microelectronics and precision mechanics. Leveraging these, the company was able to make components or products that straddled a wide range of applications. Think of lenses, cameras, and photocopiers; we can visualize the wide range of consumer and industrial applications. Similarly, 3M with its core competence in substrates, coatings and adhesives has managed to retain its dominance in a wide range of consumer and industrial products. Prahalad and Hamel also reiterate that the added thrust of innovation and relentless pursuit of market share was instrumental in the success of these two firms.
Therefore, some compelling takeaways can be noted. These could be applicable to young managers who envisage careers in supply chain and operations. Firstly, digital technologies would continue to be powerful enablers and have their applicability across industries. Manufacturing is one area where their presence would be felt; such technologies would be present, cause greater functionality, yet remain as complements. Secondly, manufacturing would continue to leverage fundamentals and build on them with greater emphasis on continuous innovations. Process innovations are more likely, while product innovations may be lesser. Thirdly, the rise of robotics, robots and ‘cobots’ merely point out that the dependence of manufacturing on automation would remain partial and not full. For aspiring managers, the message is that they would need to develop a broad spectrum of competencies while retaining their interest and passion in an identified niche within manufacturing.
Prof. John Ben Prince
Associate Professor – Operations