By Sunil Mathur
The ‘Make in India’ initiative aims to boost the contribution of the manufacturing sector from 15% to 25% of the GDP, by 2022. When this growth happens, there will be two factors driving it. First, the local demand and then the capex driven by FDI. Roughly an additional trillion dollars of capex can potentially be added to the country’s economy soon. To support this massive growth, India will need an ecosystem comprising of Tier 1, Tier 2, as well as the Tier 3 suppliers, with an elevated level of automation flexibility, and quality focus.
The Make in India programme of the Prime Minister is visionary and one which turned its focus on manufacturing and India growth story. However, if the local ecosystem is not ready to support these companies, they will be forced to move their own sub-companies into India. This can take away opportunities from the local manufacturers. It is only through digitalization that Indian SMEs can build the competitive edge, be on the high value chain, and take on their foreign counterparts.
In an industrial experiment it was observed that where only close to 80 variants of a product could be built in three separate production lines, but with digitalization, 180 variants of the same product can be built in a single production line. This widens the scope of viability of medium and small enterprises, while amplifying the importance of digitization in cost competitiveness and improved productivity.
The next decade of manufacturing will focus on cognitive solutions that infuse intelligence into all processes – from a factory’s floor to the finished product. This will bring into existence, factories that will coordinate on their own to meet deadlines, optimise throughput, utilise capacity, and enhance product quality.
The factories of future or ‘smart factories’ will move from automation to autonomy, leading to greater inter-connectivity between machines, physical systems and humans in real time via Internet of Things (IoT). The biggest strengths of a smart factory will be its shop floor connectivity, advanced robotics, flexible automation, virtual and augmented reality systems, and efficient energy management.
Globally, the standards for the general manufacturing sector are driven by the automotive industry. In India as well, the automotive ecosystem has developed tremendously over the last couple of decades. Many manufacturers and suppliers in the country employ a large degree of digitalization. However, the problem lies in the disconnect of their value chain.
Manufacturers employ digitalization in design and then move to automation while assembling, but the steps in between are not always connected. The same problem persists at different maturity levels when we move to other industries.
Presently there are discrete steps of the value chain that have been digitalised. However, the entire value chain is not linked. A smart factory calls for data entering the value chain from one point and then moving along it wherever required. For example, if a product manufactured by a factory has a defect; to determine where the defect lies and its nature, the product specification will enter the value chain at a point. Now, instead of taking the product manually to different entry points in the value chain, a smart factory will be able to automatically determine the fault.
Demand-supply graphs indicate that without a high degree of automation or digitalization it might not be possible to satisfy the needs of the end customers. This will be true across sectors like automotive, defence, marine, high-end manufacturing, and others, requiring precision, speed, and flexibility.
This is a great opportunity that Indian SMEs must be geared up for.
However, in order to wholeheartedly embrace digitalization, SMEs need a significant amount of capital infusion. Currently, availability of finance is one of the major challenges that the Indian SMEs are facing. The need of the hour is innovative and low-cost finance through leasing companies offering project finance, equipment and leasing solutions, structured finance, capital loans, and advisory services. Lastly, it is not just the money, but also the mentorship that our SMEs desperately need.
The other challenge is equally serious. While several SMEs are advanced in their processes and have made decent headway with respect to digitalization, they lack a skilled workforce. For SMEs to sustain and grow, both labour and productivity must come together. A few private sector companies are investing in training and skill development centres that allow SMEs to try complex concepts in industrial processes and get access to their resources and technical application centres. However, the current skill-gap is huge, and expanding.
A real breakthrough in smart manufacturing will come when the SMEs in India start partnering with IoT platforms that enable higher efficiency. That is why the next decade will require SMEs to partner, even piggyback, on companies that offer robust, proven, and cutting-edge digitalization solutions.
The manufacturing industry is crucial for the upward mobility of the nation’s economy. A lasting impact is waiting to be made through the collaboration of SMEs with companies striving to connect the real world of production to the Internet of Things. A revolutionary change can be brought about with industrial integration and advanced software solutions for optimized productivity and resource efficiency. Pioneer companies such as Siemens are ploughing through the colossal challenges of digitalization aiming to bring about seamless data integration and process automation, enhancing quality and productivity.
The future of the manufacturing industry can be visualized as individual manufacturing units being able to independently make decisions and communicate with one another thus embodying a self-organizing facility of production. The need of the hour is digitalization across value chains, strategic partnerships, innovative funding, and turn-key solutions that can make Indian factories smarter, ensure more productivity and high efficiency.
The writer is Managing Director and Chief Executive Officer, Siemens Ltd.