Manufacturing Global - June 2018

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June 2018

Delivering success and growth at Mercedes-Benz Group Services Philippines

Smurfit Kappa

The packaging champion The dangers of labour overspending is it possible to save without cutting staff?

Top 10

electronics manufacturers in the world

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WELCOME TO THE June edition of Manufacturing Global magazine.

This month, we start the conversation with Edwin Goffard, COO of Corrugated Europe for Smurfit Kappa.

As a global giant in the manufacturing industry, Goffard describes how Smurfit Kappa’s innovative thinking is impacting the packaging industry and supporting its customers.

Next, as the sector tries to meet the demands of Manufacturing 4.0, computer numerical control (CNC) has emerged as a promising market, forecast to reach $100bn by 2025.

Manufacturing Global’s Nell Walker finds out how motorsport is nurturing this manufacturing trend.

Next, as research from Deloitte showing that labour overspending has reached concerning levels, we speak to Jennie Brogrand, Manufacturing Sector Lead for LaborWise, Deloitte to find out more.

Overprocessing is one of the well-documented seven wastes of lean manufacturing.

With this in mind, Manufacturing Global talked to Tim Murray, Associative Director of Newton, to find out how processes can become more efficient in the manufacturing sector.

Next, we turn the spotlight to the top ten electronics manufacturers in the world. In 2016 alone, these organisations generated combined profits of $27.7trn but which manufacturers topped the list?

Finally, we take a look at the most highly-anticipated events that the sector has to offer.

Enjoy the issue!

www.manufacturingglobal.com www.bizclikmedia.com

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Smurfit Kappa: The packaging champion

20 PE O PLE & S K I L L S

THE DANGERS OF LABOUR OVERSPENDING is it possible to save without cutting staff?

MANUFAC TURING 4. 0

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TOP 10

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OVERPROCESSING IS OFTEN HIDDEN IN MANUFACTURING

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_Top 10 electronics manufacturers in the world_

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L E A D E R S H I P & S T R AT E G Y

Smurfit Kapp The packaging champion EDWIN GOFFARD, COO OF CORRUGATED EUROPE FOR SMURFIT KAPPA, DESCRIBES THE INNOVATIVE IMPACT OF THE BUSINESS ON THE PACKAGING INDUSTRY AND HOW IT HELPS TO SUPPORT CUSTOMERS Written by NELL WALKER

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L E A D E R S H I P & S T R AT E G Y

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N IMMEDIATELY RECOGNISED name in the manufacturing industry, Smurfit Kappa has grown from a Dublin-based box-making business in 1934 to a global FTSE 100 organisation, and Edwin Goffard, COO of Corrugated Europe, has a working history peppered with Smurfit Kappa’s influence.

Born and raised in Belgium, Goffard went on to study in Brussels and New York, after which he was headhunted by a variety of businesses across multiple roles.

His first experience of Smurfit Kappa was with Smurfit Stone in Chicago, which was created from a merger between assets that the business had in the US and Stone Corporation. Goffard was put in charge of the integration programme.

A year into the role, he moved to Germany to become CEO of Smurfit Stone’s German subsidiary, which eventually morphed into Smurfit Kappa in 2005. After 11 years, Goffard “got the itch” (in his own words) and left the business, but rejoined in 2016 to run the Mexican operations before moving once more to Amsterdam for his current role. It’s been a fascinating working life for Goffard, who is always keen to enjoy new experiences.

“No matter what role or situation you’re in, you can always find new things to do and learn for yourself,” he says.

“Even if you stay in a role for a long time, I think that’s possible. I do like to experience new challenges every now and then and, within Smurfit Kappa, I certainly have been able to do that. The role is very exciting.”

A large part of what makes Smurfit Kappa such an attractive employer is its dedication to innovation. Back 10

June 2018

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L E A D E R S H I P & S T R AT E G Y

in October, Manufacturing Global reported on the announcement of Smurfit Kappa’s e-retail offering – eSmart – along with the news that the business was then working with 70% of all leading European e-retail brands. Smurfit Kappa knows that packaging plays a vital role in customer experience, and advising businesses on that fact is something Goffard is passionate about.

“For the majority of our customers, 12

June 2018

e-commerce is just another sales channel which drives complexity in operations and supply chains,” he explains. “It’s changing all the time and, though the growth it represents overall is comparatively small, it’s rapid growth in that sales channel. Doing packaging right in the fast-moving goods sector is very important but, due to the speed of change, I think there are many unknowns for companies in terms of approach.”

“ Around two thirds of businesses do believe they can enhance the customer experience with better packaging, but that does also increase complexity” — Edwin Goffard, COO Corrugated Europe, Smurfit Kappa

Smurfit Kappa’s own approach is a structured one which looks at how it can support e-retailers with the challenges of e-commerce. According to Goffard, at least 80% of companies say that packaging should represent the retail brand, but it’s not always that simple. Many companies aren’t occupying their own brand space when it comes to e-commerce operations; as an example, when a large company recently visited Smurfit Kappa’s Experience Centre in Amsterdam, it was discovered that this can be a serious problem for the brand perception of the consumers.

“We ordered a number of their products and showed them how they arrived with us,” says Goffard.

“It was very surprising to them because they spent so much money on cultivating their brand over years and years, but their products actually came shipped in a reused box which had previously been used for something else and might even have another company’s branding on. That completely loses the brand image. Around two thirds of businesses do believe they can enhance the customer experience with better 13

L E A D E R S H I P & S T R AT E G Y packaging, but that does also increase complexity.”

This is where Smurfit Kappa steps in with a fit-for-purpose solution.

Difficulties in packaging branding can come about when businesses use both direct and indirect channels to sell their products. Different sales channels typically require different pack sizes and packaging, but manufacturing filling lines are often not flexible enough to deal with this complexity. Smurfit Kappa’s mix of creativity, data, analytics, science and experience is applied to unlock value for customers, focusing on product protection, supply chain efficiency and sustainability to create a streamlined customer experience. The business recently put on an e-commerce event for customers in Amsterdam to showcase concepts, innovations and services, whereupon many of the 150 visitors were keen to ask questions and get involved in discussions about supply chain and branding complexity.

Smurfit Kappa is well-positioned to gather data collected not only from distributors and manufacturers, but from the consumers who, arguably, matter the most when it comes to 14

June 2018

packaging decisions. “We have a lot of consumer data that we use to work with our customers and show them what the impact is of changing secondary packaging on the shelf, for example,” says Goffard. “Sometimes customers will say exactly what they want but we’ll show them what consumers actually think of that, and guide them towards a better solution.

So we’re not limiting ourselves to just listening to the wishes of our customers

“ It’s very satisfying when we see [customers] make a change – it’s an exciting part of my job” — Edwin Goffard, COO Corrugated Europe, Smurfit Kappa

– the conversation is broader than that.

“10 years ago it would have been hard to imagine having marketing, sales, and business unit managers around the same table as procurement and supply chain teams, but now they fly in from far and wide to discuss market strategies in packaging. We know, with all our experience, what works and doesn’t work with regard to the consumer experience, and we give our customers the tools to make the right

decisions. It’s very satisfying when we see them make a change – it’s an exciting part of my job.”

In terms of the trends affecting packaging choices, sustainability is the main one – particularly in the UK and Europe, where there is a major drive towards going green. Plastic packaging has a worse reputation than ever, making Smurfit Kappa – a paper specialist – an even more appealing option for its customers. While Goffard is realistic that there will always be some packaging wastage that doesn’t get recycled no matter how good the recycling system is, at least with paper the impact is much less severe as it naturally breaks down in a short amount of time. With plastic, “you might consume something in the space of minutes, and it seems completely out of proportion that the packaging of that lies around for 100 years or more, impacting nature,” says Goffard. “We need to be much smarter in that regard.”

With all its expertise as an innovator Smurfit Kappa is, above all else, a business partner. It has the benefit of seeing the industry from the perspective of multiple cultures, countries and supply chains, and it has been around 15

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“ You might consume something in the space of minutes, and it seems completely out of proportion that the packaging of that lies around for 100 years of more, impacting nature” — E dwin Goffard, COO Corrugated Europe, Smurfit Kappa

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long enough to share its experience within the business and across the sector. Smurfit Kappa has over 1,000 designers and technical specialists across the world using its tools every day to find new solutions for customers, utilising data drawn from the analysis of over 60,000 supply chains. As Goffard asks: “Who else has a database that size?”

Looking to the future, Goffard expects to see further collaboration

between his business and people other than those working in procurement. E-commerce and sustainability will continue to develop and put some pressure on the packaging industry in terms of shorter lead times and greater customisation, and digital print is likely to increase in strength of presence.

For Smurfit Kappa, the future will see the business continue its high levels of innovation which it achieves

through stellar inter-team connectivity.

“If a good idea comes up within the team, it becomes immediately available to everyone else,” explains Goffard. “Smurfit Kappa is not a centralised company, and we have over 20 Experience Centres throughout the world from which we’re always collecting feedback and insights.

I think that’s the power of the innovation that Smurfit Kappa brings – we go from strength to strength.”

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POWERING DATA-DRIVEN DIGITAL TRANSFORMATION IN MANUFACTURING Hewlett Packard Enterprise’s (HPE) Hybrid IT technology is enabling original equipment manufacturers (OEMs) such as GE Digital enter a world powered by Internet of Things (IoT) connectivity and data analytics – where nothing ever breaks. These benefits are being passed on to customers, allowing them to adopt new business models, streamline operational processes and create more innovative products and services.

Hewlett Packard Enterprise’s (HPE) Hybrid IT technology is enabling original equipment manufacturers (OEMs) such as GE Digital enter a world powered by Internet of Things (IoT) connectivity and data analytics – where nothing ever breaks. These benefits are being passed on to customers, allowing them to adopt new business models, streamline operational processes and create more innovative products and services.

CHALLENGE For OEMs, the current idea economy is all about turning ideas into value faster than the competition. With the vast amounts of data gathered from a growing number of IoT endpoints, manufacturers can drive operational efficiencies, deliver better user experiences, and develop new capabilities. However, while leveraging technology to improve performance is critical to remaining successful, it’s not as easy as it sounds. This is due to a variety of factors, including: • Bespoke systems: Many existing industrial systems are purpose-built, with distinct protocols and limited capabilities. However, right now, what companies need are cross-platform visibility and insights.

• Implementation difficulties: The lack of mature skills and resources for IoT implementation means that the integration of information technology (IT) and operational technology (OT) has become essential in driving productivity and business results.

• Alignment between IT and operations: The financial risk and uncertainty resulting from IoT adoption has driven companies to use a mix of SaaS, Hybrid and Cloud-first strategies, which must now be connected to each other.

SOLUTION To combat these challenges, HPE OEM has built hybrid IT solutions that include pioneering edge computing and analytic data techniques, to help manufacturers turn vast quantities data into real-time, actionable insights.

These solutions have been designed to adapt to a variety of business challenges. For example, GE Digital harnessed them to create Predix – the operating system for the Industrial Internet – to drive its own business transformation, as well as that of other manufacturers.

As the world’s first and only industrial cloud platform, GE Predix is turning data into actionable insights from the edge to the cloud, and employing the latest innovations to optimize assets and operations – all supported by a robust ecosystem that accelerates app development. With the HPE-powered Predix, manufacturers can leverage big data and analytics in conjunction with industrial expertise to achieve real gains in productivity,

BENEFITS The partnership between HPE OEM and GE Digital is helping national electric utility company Saudi Electricity achieve an ambitious modernization of Saudi Arabia’s electricity infrastructure.

Working with the HPE OEM and GE Digital Alliance, Saudi Electricity implemented an industry-leading Industrial IoT platform that supports machine learning and predictive maintenance technologies. This allows them to improve the company’s quality of service while minimizing energy costs.

By 2020, Saudi Electricity expects to this continuing partnership to yield a $19B reduction in operational and capital costs, 3x increase in power generation capacity and improved reliability, and 100% control of critical electrical assets.

Ultimately, companies seeking to thrive in the idea economy must implement data-driven digital transformation Ul practices. By identifying problems before they occur, manufacturers will derive improved quality, reduced production time and machine downtime, and lower production costs – and then pass these benefits on to the customer. The collaboration between HPE OEM and GE Digital is a powerful example of how hybrid IT platforms are giving manufacturers real-time visibility across heterogeneous systems, putting them in a safe and secure environment that enables decisions to be made quickly, accurately, and intelligently.

PEOPLE & SKILLS

THE DANGERS OF LABOUR OVERSPENDING ­— is it possible to save without cutting staff?

Recent research by Deloitte shows that labour overspending in manufacturing has reached concerning levels. Jenine Bogrand, Manufacturing Sector Lead for LaborWise, Deloitte, talks us through the findings Writ ten by STUART HODGE

PEOPLE & SKILLS

M

ANUFACTUR ING SEEMS LIKE it’s always in

a state of flux as new technologies develop and the world changes accordingly. People still need products to be made and companies still need to profit from making them but the way that manufacturing sits within the greater economic landscape has changed immeasurably in the recent past.

Recently, the industry has enjoyed somewhat of a renaissance, particularly in the United States where the Institute of Supply Management Manufacturing Index recently rose to a 13-year high of 60.8%. The report which revealed the rise also relayed that employment saw the biggest bump, jumping 5.5 points.

According to Deloitte though, these “ What I’m passionate about numbers are not necessarily indicative is making sure that the of positivity. The consultancy’s own manufacturing world is findings show the average employer being creative and assessing overspends on payroll by up to $800 per hourly employee each year, what can they do to really resulting in a considerable negative bring out their efficiencies” impact on manufacturers’ bottom line.

— Chobani CEO and leading Jenine Bogrand, Manufacturing Sector Lead for LaborWise, Deloitte entrepreneur Hamdi Ulukaya once

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Deloitte’s Lisa Disselkamp speaks to how LaborWise provides clear metrics for labour spending

remarked: “Unlike the objective of far too many companies, manufacturing is not about a quick ‘exit’. It is centered on long-term value creation.”

If this is the case, why does Deloitte’s research indicate that labour overspend in the US is reaching such concerning proportions? To try and find out, Manufacturing Global spoke to Jenine Bogrand, Manufacturing Sector Lead for LaborWise, Deloitte’s workforce analytics tool. She claims that often, when consulting with businesses in the manufacturing sector, savings of between 0.5% and 2% on total hourly spend are uncovered. When talking about companies which are often turning over tens and hundreds of millions of dollars, that is a lot of money.

“I do think there’s a drive for more consumer goods out there, and that’s driving the manufacturing,” she says.

“What I’m passionate about is really making sure that the manufacturing world is being creative and assessing what can they do to really bring out their efficiencies.

“I know efficiency and worker productivity is always top of mind, but there are times that they need to step 23

PEOPLE & SKILLS

back and be a little bit more creative in how they’re looking at it.”

The power of manufacturing as a base which helps bring together communities is inarguable, and probably more prominent than in most other industries.

Bogrand recognises that and reckons the drive to ‘bring manufacturing jobs back’ to more developed countries like the US, so that they can have more control over quality, is one of the driving forces behind the 13-year high seen in the manufacturing index.

“Many of the manufacturing plants are in small towns,” says Bogrand.

“They’re not in the large towns. They’re out in the middle of very rural areas, and they are the bread and butter, and the heart of those areas. When plants close, it affects that community.

Obviously the bottom line is always important, but there’s also a drive to continue to be part of a community.”

Bogrand recalls a client which considered moving offshore. “When they really did the research about the effects it was going to have on the community and their workers, they worked with the small town to make sure that they weren’t taking those 24

June 2018

“ When plants close, it affects the community.

Obviously the bottom line is always important, but there’s also a drive to continue to be part of a community” — Jenine Bogrand, Manufacturing Sector Lead for LaborWise, Deloitte

jobs away. The client didn’t want to go, but there was also the cost of labour that had to be considered. In the end, they kept the plant open in the small town, because, had they left, the town would have had nothing and people would have moved away. It kept the town alive, and it kept their people with jobs, which was really a key piece.

“How do you balance profitability and shareholders’ needs with your community presence and jobs that have been there for years and years and years? It’s absolutely a challenge for so many companies today,” she concludes.

Whether or not a company chooses to remain in its traditional surroundings

or to move on to a new location is at the discretion of the individuals in charge of the organisation, but an issue for each and every one of these manufacturing companies, regardless of geography, is whether they can be more efficient with regards to labour costs, and how this can be achieved.

“That’s the conversation that I think needs to happen within every organisation, because it is the number one cost in making anything,” asserts Bogrand. “That way, as long as you’re using it efficiently, and you’re looking at all the metrics, and you’re being able to cost-effectively produce that product, then maybe that conversation turns a little bit. Instead of looking to, say, get a client to go cheaper, before you do that we need to look and make sure that what we’re doing with your current workforce is efficient – that you’re not wasting money with inefficiencies, whether it’s scheduling, staffing or whatever – and seeing if we can tighten it up first, before we start looking to go to a different staffing model.”

Bogrand gives an example of doing exactly this for one of Deloitte’s clients, which shows just how stark the 25

PEOPLE & SKILLS overspend situation can become if not dealt with early on.

“We saw this really high percentage of overtime, and I started drilling in,” she explains. “We found the major culprit was one plant. The more senior workers were the only ones that had the skillset needed for the overtime. So, the more expensive workers were the only ones that were able to take advantage of overtime and more junior workers, which would have been cheaper, weren’t having that opportunity.

“Just by cross-training the workers, there was not only a bigger pool to choose from, but it reduced overtime costs, as long as it wasn’t against a union contract. That was hard savings.

The firm was able to retrain a group of employees that were lower in pay, and started seeing their overtime costs go down. It also benefitted from a better-skilled workforce that knew multiple skills, instead of how to work just one machine.”

Bogrand is also of the belief that the 5.5-point employment bump that manufacturing has seen in the US, as per the index, was not actually needed and perhaps a result of similar examples to the one cited. She points out that 26

June 2018

employing people inefficiently now could lead to cuts being made to jobs which are needed in future. “Your labour costs have to be optimised, or you’re going to start cutting,” she warns. “That overspend is going to affect your overall financial performance.

We always like to see employment increase, but was that due to what we call a labour overspend, or could we have not had that increase and been okay?

“Frankly, the leadership, the shareholders, they want their money to be being well spent. They have to produce a quality product, no matter who they are, but they also need a productive, efficient workforce. You have to have efficient processes out in the plant, or the quality is going to start going down, or labour costs going up. This will result in an increased cost of product, so it’s just a boomerang effect. It goes out and comes right back at you, in different ways.”

It all comes back to cost efficiency, as Bogrand concludes: “Making sure that they’re efficient is going to provide a better bottom line and financial impact, and will allow them to be a little bit more flexible in their cost-to-build.”

“ The shareholders want their money to be being well spent. They have to produce a quality product, no matter who they are, but they also need a productive, efficient workforce” — Jenine Bogrand, Manufacturing Sector Lead for LaborWise, Deloitte

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M A N U FA C T U R I N G 4 . 0

CNC MACHINING IS ENJOYING ITS FASTEST EVER RISE IN USE AND POPULARITY IN ORDER TO MEET MODERN MANUFACTURING NEEDS. MANUFACTURING GLOBAL FINDS OUT HOW THE WORLD OF MOTORSPORT IS CONTRIBUTING TO THIS TREND Written by NELL WALKER

M A N U FA C T U R I N G 4 . 0 ITH THE INTERNET of things leading the indomitable march of Industry 4.0, it’s no surprise that CNC (computer numerical control) machining is dominating the lathing, milling and grinding sectors of metalwork.

According to a new report by Grand View Research, Inc., the global CNC machines market is expected to reach $100.9bn by 2025, rising at a CAGR of 6.8% over the forecast period.

The increase has been dictated by a growing need for reduced operating costs, increased efficiency and a dramatically slimmer likelihood of component errors.

More advanced lathing, milling, grinding, welding and laser machines are being implemented in metalworking facilities all over the world as technology continues to demand it. The integration of CNC machinery with CAM (computer-aided manufacturing) helps reduce manufacturing time as well as ensuring the production of flawless components, leading

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commercial businesses and large manufacturers alike to need more and more advanced versions of CNC hardware and software. Industrial CNC machines alone are anticipated to dominate the market until 2025 and reach a value of $25.17bn.

The popularity of CNC is, in fact, nothing new – it was introduced in the 1980s and has been drastically increasing productivity while lowering machining times ever since. The difficulties inherent in hand-milling or lathing a component and attempting to repeat the same piece over and over again swiftly – and thankfully – became a thing of the past when

“CNC MEANS CARS AND COMPONENTS THAT WOULD HAVE BEEN IMPOSSIBLE TO DESIGN AND ENGINEER 40 YEARS AGO CAN NOW BE CREATED” — Charlie Martin, racing driver

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M A N U FA C T U R I N G 4 . 0 one could simply send a design to a machine across a computer network.

One sector CNC machining has had an incredible impact on is the automotive industry, with its need for hundreds of small, perfectly-formed parts, and the motorsport segment in particular has benefited from modern processes which can be utilised to build stronger, lighter structures.

“As with all areas of engineering – nuclear, medical, tool-making, aerospace, etc. – CNC machining has had a positive impact on motorsport,” says racing driver Charlie Martin. “In Formula 1, teams have entire machine

“EVERYTHING IN MOTORSPORT COMES DOWN TO POWER RATIOS IN THE CARS, SO ANYTHING YOU CAN MAKE OUT OF ALUMINIUM OR TITANIUM ON A CNC MACHINE WILL BE PREFERABLE TO A HEAVIER METAL” — Jamie Dodd, owner of DND Racing

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shops dedicated to their own production, meaning they can now design and produce parts in very short timescales.

At the lower end, a team might use a local jobbing shop to repair or manufacture parts made on CNC or non-CNC machinery.

“It’s probably had its greatest impact in the manufacturing methods and materials that can now be employed due to CNC machinery being used – it means cars and components that would have been impossible to design and engineer 40 years ago can now be created.”

Jamie Dodd, owner of DRD Racing,

agrees that CNC has revolutionised motorsport and has literally made design dreams come true. The main benefit is the ability to customise even the smallest parts to create a lighter, more efficient vehicle which is ultimately better to race with.

“Everything in motorsport comes down to power ratios in the cars, so anything you can make out of aluminium or titanium on a CNC machine will be preferable to a heavier metal,” Dodd says. “My customers will bring me parts off their cars and say ‘I need to make this part lighter – what do you suggest?’

99% of what we do is CNC racing parts

and it’s geared around weight-saving and improving strength and safety.”

An additional benefit is that parts made using a CNC machine are not only cheaper in the long-term, but highly customisable. Dodd has found that once a customer has used a component of his team’s creation, they will often then return asking for adjustments to create something even more efficient. “Without CNC and CAD/CAM, you wouldn’t be able to do that,” he says. “It wasn’t done 20 years ago, that’s for sure.”

Martin, whose family runs Percy Martin – a business which sells

Click to take a look at the Williams F1 Machine Shop that manufactures over 100,000 pieces per year

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M A N U FA C T U R I N G 4 . 0

“ONE ADVERSE EFFECT FROM THE GROWTH OF CNC IS THAT A LOT OF HARD-LEARNED SKILLS AND KNOWLEDGE ARE SADLY BEING LOST” — Charlie Martin, racing driver

pre-owned machine tools – has watched as machining has changed and adapted to modern needs. Newer processes like additive machining and 3D printing are becoming increasingly prevalent as we become more reliant upon computer processes, but there is a downside to this.

“One adverse effect from the growth of CNC is that a lot of hard-learned skills and knowledge are sadly being lost,” Martin admits. “Younger generations are taught more computer-based skills sets and more hands-on skills are being

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June 2018

lost as older generations retire.”

This may be true, but it’s unavoidable for one technical skill to be overtaken by another. CNC evolves so quickly that, according to Dodd, even machines bought as recently as five years ago may be unable to keep up with today’s client demands. The latest machines need to be more complicated with increased movement, travel and articulation, and that, of course, leads to improved efficiency. “If someone rings me up with a problem that I can solve, I draw up the plans and within an hour or so, it’s ready and available to test,” says Dodd.

Martin’s family business has been particularly busy with CNC machine sales lately as the rest of Europe takes advantage of the weak sterling, and she is certain the sector will only grow from here. Second-hand machines are increasingly affordable to potential users who had previously seen CNC as too expensive a process for them, and businesses which were relatively unknown are enjoying the prestige that comes with working in motorsport.

For example, Grand View Research Inc.’s survey showed that one of

the key players in the developing CNC industry is Haas Automation – a company which Martin confirms was relatively unknown outside of engineering until it became a major F1 component manufacturer.

“DMG Mori, which sponsors the Porsche works teams, has also grown massively,” says Martin. “These types of ventures and partnerships will become more popular and appealing for big name teams to promote their technical status. Formula E is obviously the new growth area for manufacturers to flex their technological muscles, so I think you could see more associations being made with hightech CNC machining here as much as anywhere else.”

As a popular passion for fans of all ages, motorsport has really boosted the visibility of CNC machining as the leading edge in flexible, adaptable component creation. This, alongside businesses like Percy Martin making second-hand machines accessible, will likely be at the forefront of helping the market fulfil its predicted boost, as well as adding an element of cool to parts manufacturing.

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O P E R AT I O N A L E X C E L L E N C E

O

VERPROCESSING IS ONE of the seven wastes of lean manufacturing and arguably the most nuanced to spot when making a finished product. It is a question of adding value only when it is strictly needed, instead of completing a process out of habit. For this reason, it can be difficult for the organisation tasked with manufacturing a raw material to identify any possible actions that could be eliminated.

Some prevalent examples of overprocessing include painting a car part which will never be seen by the customer or be susceptible to rust, or unnecessary plastic packaging on fresh fruit and vegetables. Being able to step back and view the entire manufacturing process objectively may require external assistance from the likes of Newton, a business management consultancy from Oxfordshire, England. Significant time is spent with a range of organisations who hope to unlock savings through becoming more efficient.

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June 2018

“ WE’VE SEEN INSTANCES WHERE IMPROVEMENT TEAMS PURSUE THE HIGHLY MATHEMATICAL ‘SIX SIGMA’ ROUTE TO TRY AND UNDERSTAND A PROBLEM FROM BEHIND A LAPTOP. SPENDING TIME ON THE SHOP FLOOR OBSERVING EXACTLY WHAT HAPPENS WHEN THE PROBLEM OCCURS WOULD BE MUCH MORE EFFECTIVE” ­— Tim Murray, Associate Director, Newton

Tim Murray, Associate Director of Newton, said: “When we first meet many of our clients we find they are frustrated that they’ve spent months or years implementing lean manufacturing, but they haven’t seen the step change in their profit and loss they were expecting. This isn’t because lean is ineffective. In fact, it has many positive aspects and we’ve seen numerous examples where the implementation of lean manufacturing has really engaged the workforce and helped improve the culture of the business.

“So why doesn’t lean deliver the big cost savings? Firstly, many of the commonly used lean prioritisation processes are built more on opinion than facts and data. Consequently, improvement effort is often focused on the wrong areas as the monetary value of the problems being tackled is not understood.

“Secondly, even when we encounter businesses that are working on the right areas, we find that complicated problems don’t get solved. Often this is because the lean principles are applied to inappropriate settings. For example, we’ve seen instances where 43

O P E R AT I O N A L E X C E L L E N C E improvement teams pursue the highly mathematical ‘six sigma’ route to try and understand a problem from behind a laptop. Spending time on the shop floor observing exactly what happens when the problem occurs would be much more effective.”

Manufacturers should be also mindful not to implement a ‘copy and paste’ approach to problem-solving. Even if situations appear quite similar on the surface, the monetary value and its impact on operations can be quite different. But the lean toolkit doesn’t naturally allow for this, and this is why it’s crucial to examine each process on an individual, case-by-case basis.

However, it is equally important to remember that while the very visible examples such as unnecessary packaging get challenged, the biggest opportunities to eliminate overprocessing are often hidden.

Murray offers up a client example involving over-cooked chickens. “It is essential the product is properly cooked, but the safety margin built in to the cook duration and temperature can result in a dry product and lower yield. In one recent example, our team were able to take 10 minutes out of the cooking time 44

June 2018

“ PERFORMANCE SHOULD BE MEASURED AGAINST THE BEST POSSIBLE OUTCOME, RATHER THAN AGAINST A STANDARD, SO THAT THE TOTAL LOSS IS KNOWN” ­— Tim Murray, Associate Director, Newton

resulting in a 5% better yield and an improved taste quality of product, whilst still comfortably achieving all the food safety requirements.

“Manufacturers should challenge themselves: ‘if it’s not adding value, then why are we doing it?’ To help this, performance should be measured against the best possible outcome, rather than against a standard, so that the total loss is known. Manufacturers can then identify where the problem lies, and how big the issue is, before coming up with a workable solution.”

When it comes to optimising performance in relation to overprocessing, it can be especially difficult as many organisations are looking at ways to reduce the practice. But these firms believe they are doing the correct procedures already, so are not focused on making the necessary changes. An offshoot problem from overprocessing is not just the use of extra ingredients, materials or parts and the extra employee hours spent, but it is also the increased wear and tear on the factory equipment. Each section of this particular overprocessing moment incrementally adds up to be a significant potential cost saving without reducing 45

O P E R AT I O N A L E X C E L L E N C E

the true value of a product.

The reason why Newton insists on a more hands-on approach rather than problem solving in the boardroom is because decisions relating to overprocessing are usually made at factory floor level, so c-level executives are usually unaware this is even happening.

Murray notes: “We often see how difficult it is to achieve standardisation across shifts. People usually focus 46

June 2018

“ RATHER THAN FORCING STANDARDISATION, THE BEST WAY TO IMPLEMENT CHANGE IS TO ENGAGE THE WORKFORCE. SHOW THEM THE ROOT CAUSE OF THE ISSUE, AGREE A NEW PROCESS AND DEMONSTRATE A BETTER WAY TO MAKE THEIR JOB EASIER” ­— Tim Murray, Associate Director, Newton

on their way of doing things, meaning standard operating procedures are ignored. However, rather than forcing standardisation, the best way to implement change is to engage the workforce. Show them the root cause of the issue, agree a new process and demonstrate a better way to make their job easier. This won’t always be fixed at the first try but, by learning what is going wrong and approaching

this as an opportunity to improve, employees gain a stronger understanding of the manufacturing issue and how to fix it.”

Ensuring that workers buy into any of these changes and understand how it benefits them is one of the key ingredients manufacturers need in order to combat efficiency issues.

However, it is important manufacturing businesses realise optimising processes is difficult. Murray concludes: “It takes a combination of excellent technical skills to identify the right places to focus and design the solutions, unwavering determination that means that improvement work doesn’t stop as soon as the first blocker rears its head and the ability to engage the workforce to want to change. Applying rigour through analysing your data is also key, meaning you are aware of your biggest inefficiency. Lastly, have measures in place so when things go off track again you can gain visibility again quickly.”

As illustrated, seemingly small problems can add up to millions of pounds lost within the myriad of manufacturing thanks to the habit of overprocessing.

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T O P 10

_Top 10 electronics manufacturers in the world_ Every year, the Fortune Global 500 reveals the planet’s 500 largest companies. In 2016 alone, these organisations generated combined profits of $27.7trn. But which electronics manufacturers placed highest on the hallowed list?

Written by SAM ROWE

T O P 10

09

Mitsubishi Electric $39.12bn

10

China Electronics Corporation (CEC) $30.01bn www.cec.com.cn Majority owned by the Chinese government, CEC is among the largest providers of telecoms equipment in China and employs close to 145,000 people, boasting a revenue of $30.01bn and an overall ranking of 362 in the Fortune 500. In 2007 it acquired the mobile division of Philips, which it had been researching, developing and producing phones for since the turn of the century.

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June 2018

www.mitsubishielectric.com/en A Fortune stalwart since 1995 (the year firms started being ranked by revenue), the Tokyo-based multinational manufactures a host of electronic and architectural equipment, as well as photovoltaic panels. This year, Mitsubishi makes 262 on the list thanks to its $39.12bn in revenue. From its founding way back in the 1920s, Mitsubishi Electric has been at the cutting edge of Japanese technical innovation for nearly a century: it will celebrate its 100th birthday in 2021.

Click to see how Mitsubishi’s SeaAerial is changing the way we communicate

07

LG Electronics $47.71bn

08

Honeywell International $39.3bn www.honeywell.com Another 23-year veteran, Honeywell is based out of New Jersey and produces a range of products across its consumer, commercial and aerospace divisions. The company takes an overall spot of 260 on the Fortune 500, with a revenue of $39.3bn.

Previously named Honeywell Inc, a 1999 merger with AlliedSignal led to a rebrand and HQ move. Best known for its thermostats, dehumidifiers and alarm systems, in addition to various retail products made by partners that license the Honeywell name.

www.lg.com Part of the LG Group, LG Electronics comprises four units: Home Entertainment, Mobile Communications, Home Appliance & Air Solution, and Vehicle Components. The firm is headquartered in Seoul, South Korea, and after Samsung (see number one) is the second-largest TV manufacturer on the planet. It makes 201 on the overall list, boasting a revenue of $47.71bn from this as well as its other major product lines including mobile phones, smart watches, tablets and home appliances.

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05

Panasonic $67.78bn

06

Amer International Group $49.67bn www.amer.com.cn A Chinese company specialising in cable and copper, Amer is headed up by billionaire Wang Wenyin, who Fortune christened “China’s New Prince of Copper” in 2014, owing to the firm’s meteoric growth – indeed, its most recent recorded revenue came in at $49.67bn and landed it 183rd spot on Fortune’s list. Previously a small private firm that produced copper rods, Amer now boasts a fleet of mines and factories, as well as political sway within the Communist Party. A key player on the global copper stage, it is a small firm no longer.

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June 2018

www.panasonic.com Panasonic – formerly known as Matshushita Electrical Industrial Co. – celebrates its centenary this year, with the Japanese company growing from a small producer of light sockets to become one of the world’s leading electronics producers with a $67.78bn revenue and a secure 110th spot on the Fortune 500. With wide-reaching tentacles, from automotive systems and avionics through to mobile and home renovation services, the business even owns Gamba Osaka soccer team (in Japan’s J. League).

03

Hitachi $84.56bn Sony’s next level gaming — Detroit: Become Human

04

Sony $70.17bn www.sony.com The Tokyo-based monolith has a broad portfolio, covering electronics, gaming, entertainment and financial services, and comes in at 105 on the Fortune 500. It was the first company to produce direct-view portable transistor televisions, transistor video tape recorders and, who can forget, the Walkman. What’s more, as one of the ‘big three’ record companies, Sony has full or partial rights to the musical catalogues of Michael Jackson, Eminem and The Beatles. Its revenue comes in at an impressive $70.17bn, as it maintains a solid place in the electronics world.

www.hitachi.com While it is more than two decades since Hitachi hit its lifetime high of 13 in Fortune’s rundown (it’s now at 71), the Japanese company remains billions of dollars in profit, with an ever-diversifying range of interests.

Among its 11 (yes, 11) segments are information and telecommunication systems, social infrastructure, construction, digital media and consumer products, railway and urban systems and automotive systems, plus a few more. This diverse selection of offerings contributes to a revenue of $84.56bn.

Click to watch: The Arrival of Class 800 Train for the UK’s Intercity Express Programme 55

© Foxconn Electronics Inc

T O P 10

02

Hon Hai Precision Industry (Foxconn) $135.13bn www.foxconn.com Trading as Foxconn Technology Group, Hon Hai is the 27th company on the Fortune 500 and is more commonly known as ‘the company that makes the iPhone’. With an elite stable of customers – including Amazon, Hewlett-Packard, Nintendo, Sony, Toshiba, Intel, Microsoft and Google – it is the largest contract electronics company in the world.

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Click to watch Samsung’s: The camera. Reimagined.

01

Samsung Electronics $173.96bn www.samsung.com It’s been a rough year for the South Korean tech superpower – what with the explosive fallout of its defective Galaxy Note 7 – yet here it clinches the crown on our list, along with a solid overall 15th ranking by Fortune. Recent innovations include Bixby (Samsung’s very own AI assistant to rival Siri and Alexa), the Gear S3 smartwatch and its first set of wireless headphones. Not bad for a company that, when founded 80 years ago in what was then Japanese Korea, was a small trading company. At the moment, revenue stands at $173.96bn and it will be interesting to see how this number changes in a developing smartphone market.

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E V E N T S & A S S O C I AT I O N S

EVENTS MANUFACTURING GLOBAL TAKES A LOOK AT SOME OF THE KEY EVENTS AND CONFERENCES TO ATTEND ACROSS THE GLOBE THIS YEAR Written by STUART HODGE AND ANDREW WOODS

2018 CANADIAN LEAN CONFERENCE

RBC Convention Centre, Winnipeg 04–07 June ‘Embracing Excellence’ is the tagline for this event where 1,000 leaders, managers and LEAN practitioners will come together to explore LEAN thinking, share enterprise excellence and learn LEAN best practices.

Organisers say: “Our vision is to provide conference attendees with a first-rate learning experience that will show them how embracing excellence and engaging people in continuous improvement benefits customers, employees and stakeholders alike.”

This year’s conference will include seven keynotes from highly acclaimed industry leaders, lean gurus and motivational speakers; 15 highly-interactive, in-depth workshops, given by proven LEAN experts; 36 practitioner-to-practitioner presentations, divided into four value streams; and 18 tours where you see hands-on applications of LEAN thinking in action. www.embracingexcellence.ca

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SUBCON UK

NEC Birmingham 5-7 June Now in its 42nd year, Subcon is a massive event for subcontract manufacturing professionals across all industry sectors, looking to source suppliers, benchmark capabilities and secure the right partners to help them remain competitive in a global market. The best of British manufacturing will be on display alongside a wealth of market leading international suppliers all looking to help UK manufacturers optimise their supply chain strategy in 2018 and beyond. Taking place alongside a free to attend, three-day educational programme and brand-new sister event, The Engineer Expo, Subcon 2018 is set to be the biggest event to date. www.subconshow.co.uk

14th ANNUAL MANUFACTURING LEADERSHIP SUMMIT Huntingdon Beach, California 11–13 June

Back to the United States now, for this summer’s Frost & Sullivan 14th Annual Manufacturing Leadership Summit, an event which embraces the constantly-evolving nature of the industry.

Organisers say: “The global manufacturing industry is entering an era of radical change. Driven by new, transformative cyber-physical technologies, manufacturing companies around the world are now envisioning a future state for the manufacturing industry that will change the rules of competition, how work will be performed, how companies will be organised, and how leadership must lead.” ww2.frost.com/event/calendar/manufacturing-leadership-summit 63

E V E N T S & A S S O C I AT I O N S

2018 GLOBAL AUTOMATION & MANUFACTURING SUMMIT

(as part of the International Manufacturing Technology Show 2018, which runs 10–15 September) McCormick Place, Chicago, Illinois 13 September This time, rather than looking at the entire conference output, we’ve highlighted one event which is part of the International Manufacturing Technology Show 2018.

It’s the 32nd edition of what is described as ‘the premier manufacturing technology show in North America’ and will host the 2018 Global Automation & Manufacturing Summit, with this year’s themes described as ‘connecting the dots’.

Organisers say: “As implementation of Industrial Internet of Things (IIoT) strategy continues, manufacturers are looking for effective ways to measure and manage plant floor data and make it useful to improve their operations.

“The 2018 Global Automation and Manufacturing Summit will update manufacturing leaders on where the industry is at in the journey to operational IIoT systems and will explore issues such as cybersecurity and operational change management.” www.hannovermesseusa.com/education/gams 64

June 2018

CONNECTED MANUFACTURING FORUM

Four Seasons Hotel, St Louis, Missouri, USA 19-20 June The Connected Manufacturing Forum is a leading cross-industry event that brings together 150+ Operations, Technology, Manufacturing and Advanced Engineering executives. These thought leaders and innovators will come together for a collaborative debate on the latest Industry 4.0 trends, challenges and opportunities. You will rub shoulders with Operations, Technology and Engineering executives from Top 500 manufacturing companies, as well as the world’s most innovative start-ups. https://connectedmanufacturing.wbresearch.com

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E V E N T S & A S S O C I AT I O N S

OPERATIONAL EXCELLENCE AND RISK MANAGEMENT Hilton Canary Wharf, London, UK 2-4 October

The Operational Excellence & Risk Management Summit is Europe’s only event dedicated to operational excellence in hazardous industries.

Taking place in London 2-4 October, this executive level conference will bring together over 100 Heads of Operations, HSE, ORM and Operational Excellence from manufacturing, energy, chemicals, resources, transportation and more – all industries facing high levels of operational risk.

At the event you’ll be able to hear from over 40 world class innovators, all presenting at the event and there to show you how to adopt the culture, systems and processes of the world’s Highest Reliability Organisations. https://opexsummiteurope.iqpc.com

AME 2018 INTERNATIONAL CONFERENCE San Diego, California October 29–November 1

The theme for this event is ‘Create Waves of Excellence’, and organisers says the AME San Diego 2018 International Conference will explore ways for individuals and organisations to accelerate their journey toward excellence.

More than 2,000 attendees are expected at the event which will include speakers such as award-winning innovation expert Jeremy Gutsche, entrepreneur and former NFL quarterback Joe Theismann and Billy Taylor, Director of Manufacturing, Goodyear. www.ame.org/sandiego 66

June 2018

FUTURE MANUFACTURING AND TRADE SUMMIT Dubai, UAE 1-2 October 2018

Formerly known as the GCC Manufacturing Excellence and Technology Summit, this event has now been renamed and is currently the GCC’s largest manufacturing and trade conference.

The Future Manufacturing and Trade Summit 2018 will explore the technological developments, address key issues and showcase innovative manufacturing strategies within all manufacturing disciplines.

Organisers says: “The summit is the only dedicated platform to discuss cutting-edge manufacturing technologies, future trends in manufacturing excellence and strategies to boost this sector’s role in economic development. The manufacturing industry has been identified as one of the key economic drivers for both the country and the region and it plays a pivotal role in promoting economic growth and trade in the country.”

Across two days over 500 delegates from the manufacturing industry will come together for what is described as ‘a truly interactive discussion on the technological developments and innovative manufacturing strategies being implemented within multiple disciplines in the region’.

Speakers and exact dates and locations have yet to be confirmed for next year’s event, but it is expected to be held in November, in Dubai, and promises to be one of the key manufacturing conferences of the year. www.manufacturingtrade.com 67

Inside Schnitzer Steel’s sustainable

supplier programme

Senior Director of Procurement Marcus Folino discusses how procurement plays an increasingly strategic function at Schnitzer Steel Written by Catherine Sturman Produced by Denitra Price

SCHNITZER STEEL

T

hroughout the last five years, supply, including appliances, the mining and metals industry manufacturing scrap and other local has faced a number of sources of construction-related macroeconomic challenges and has recycling, for example. There’s a lot been focused on implementing new of growth coming from many areas.” technologies to provide significant By honing in on industry trends, cost control, cost management Schnitzer Steel has gained essential and enhanced optimisation. foresight in the re-evaluation of its One of the oldest companies operational platforms to deliver in the business, Schnitzer consistent positive outcomes. By Steel Industries, Inc., is investing in its procurement continuing to lead the capabilities, it has way, establishing sought to transform its an impressive procurement function Established in footprint, with from one which is approximately 100 somewhat tactical, Portland, Oregon in locations spanning into one which is the US, Canada more strategic. and Puerto Rico.

With past senior roles “We purchased roughly across manufacturing, 400,000 end-of-life vehicles last logistics and strategic year, from which we harvest parts and sourcing operations, Folino’s role recycle through our platform. There’s as Director of Strategic Sourcing a lot of opportunity that is tied to our at logistics and transportation purchases of automobiles, the overall company Con-way (now part of XPO economy and the replacement rate of Logistics), fully opened his eyes automobiles,” explains Senior Director to the potential that procurement of Procurement Marcus Folino. can bring to organisations.

“We also have a variety of other “At Con-way, I found myself programs and sources of metal rebuilding the strategic sourcing

1906

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USA

function that had already been created. Originally the focus was domestic, North American sourcing and later on, I worked with the international business and took the strategic sourcing function globally. It was a great opportunity and a good challenge, which led me to this role,” he says.

Procurement transformation In order to transform the non-scrap procurement function into one which is increasingly strategic, Schnitzer Steel has placed significant emphasis on three main areas: its tools, its people and its processes to support the company’s ongoing strategy. Folino is nothing but complimentary about the team’s capabilities upon joining the organisation, but outlines where Schnitzer Steel had opportunities to enhance its existing approach “We had a solid and committed group of purchasing professionals at the business unit level. They possessed significant domain expertise in the mining and metals industry and substantial tenure within the Schnitzer business divisions.

“There’s a lot of growth coming from many areas” – MarcusFolino, Senior Director of Procurement

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They already were a group of people that had a strong work ethic, which is really representative of our company’s culture,” he says.

Schnitzer’s people have remained a key pillar in the company’s procurement transformation, and throughout the past three years, the firm has introduced essential change management, incorporating lean concepts and process improvement, as well as standardised existing processes and invested in multiskilling its exceptional workforce.

“We invested in further training for the purchasing group, and I brought in additional talent with specific strategic sourcing, project management and contract management expertise. From a timing perspective, we decided to recruit the sourcing expertise from the market alongside investing to develop it internally,” adds Folino.

“One of the existing benefits to our organisational structure is that we maintained our purchasing staff co-located with the business. Consequently, there are many day-to-day working

relationships which we continue to maintain and further develop.”

Supplier management Working closely with its supply base, Schnitzer Steel has leveraged its spend to effectively manage potential risks, as well as invest in new digital tools across its complex procurement processes.

“We went through a very aggressive selection process with the focus on finding a platform supplier of procurement tools. From here, we implemented a contract management system and another module of this application to manage supplier data. While we were evaluating the supply base, we were running request for proposals (RFPs) and signing contracts,” Folino explains.

“We went from an environment where the spend under contract was managed with limited procurement tools or systems, to one where we had a formalised policy, a procurement platform and a focus on contract management. Today, we have around half of our total spend under contract.”

By implementing a supplier

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SCHNITZER STEEL

“We went through a very aggressive selection process with the focus on finding a platform supplier of procurement tools” – MarcusFolino, Senior Director of Procurement

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Schnitzer Steel has placed significant emphasis on three main areas: its tools, its people and its processes

management program within the first few months of its procurement transformation, Schnitzer Steel has also harnessed the capabilities of strategic suppliers to drive the consolidation of its supply base, reducing the number of suppliers by about half.

“We segmented our supply base and those suppliers that we could develop by applying specific evaluation criteria. We also identified the suppliers that we could target

for consolidation.

Through a rigorous process, we determined what our current supply base in each of our core areas of spend would be,” explains Folino.

“We learned more about our suppliers, enhanced communication, and then managed their ability to execute,” he continues.

“This whole process has been invaluable. Once we established the basic mechanics, we continued to integrate key internal stakeholders to help guide the direction of the

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Schnitzer Steel has approximately

100 locations services and goods that suppliers are providing.”

spanning the US, Canada and Puerto Rico

Expansion plans Aligned with its objective to grow the volume of materials processed through its platforms going forward, Schnitzer Steel is leveraging new technologies to deliver faster, more efficient, effective support across its procurement operations.

“This year we have been seeing the benefits of the past few years of our purchasing and procurement transformation,” says Folino.

“One area we are now looking into is supplier diversity programs. This has been rolled into part of our ‘Know

Our Supplier’ efforts.

As we’ve implemented new technologies, we’re starting to capture better information on our supply base, which is now moving towards a supplier self-service model.”

One of Schnitzer Steel’s goals is to drive increased volumes through its current footprint, whilst looking at ways to further its ambition to deliver sustainable working practices which benefit customers, suppliers, our people and the communities which we serve.

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FILTRATION POWERED

BY DATA HOW MANN+HUMMEL IS HELPING COMPANIES SAVE ON MAINTENANCE AND DOWNTIME Written by John Oâ&#x20AC;&#x2122;Hanlon Produced by Andy Turner

Intelligent filters, smart systems and rapid product development are features of todayâ&#x20AC;&#x2122;s MANN+HUMMEL, a traditional German company that is reinventing itself through the use of data and IoT Charles Vaillant, Chief Technical Officer

MANN+HUMMEL

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filter is a workhorse. It’s hard to think of a mechanical system that does not have filters. They protect the moving parts from damaging particles, and in HVAC systems they protect people’s lungs in the same way. As MANN+HUMMEL puts it, they are there to ‘separate the useful from the harmful’: it may not be the most exciting component in any system, but it is entirely essential because without filters the machine, whether it is part of an automobile, a train or an air conditioning plant, couldn’t do its job – and it certainly wouldn’t have a long life. Mann+Hummel, a German manufacturer with a global footprint, is the largest filtration company in the world, with 80 locations, more than 20,000 employees, and annual sales in the region of $3.9bn. An impressive statistic is that it sells 24 filters every second.

The company was founded in 1941 and is still owned by the families of its founders, Adolf Mann and Erich Hummel. Its success can be attributed largely to its domination of the automotive and transportation

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sector. It’s a position gained and held in large part because of the trust it has gained with MANN+HUMMEL brands such as Wix Filter, Mann-Filter, Filtron and Purolator. A wonderful history, however, as Chief Technical Officer Charles Vaillant is there to point out at every opportunity, good is never good enough, and the businesses of the future will not be able to grow with the practices of the past. As CTO Vaillant has a very exciting job – no less than to drive the growth of a traditional manufacturer into a digital-age manufacturer, finding previously unconceived value in products that used to be considered dull.

For a start, he says, there are large filtration markets that Mann+Hummel has hardly touched. Filtration is a market worth some $60bn a year, and automotive accounts for only 40% of that, despite the fact that automotive and transportation markets give MANN+HUMMEL 90% of its turnover.

“We see a great opportunity for us to take our competence and our capability and apply them in new fields such as life sciences, oil and gas (O&G) and a host of other industries.

USA

â&#x20AC;&#x153;We see a great opportunity for us to take our competence and our capability and apply them in new fieldsâ&#x20AC;?

Charles Vaillant, Chief Technical Officer

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We can take the competencies that have made us the world’s largest filtration manufacturer and apply them in new fields.” Currently, he says, the company is investing strategically in ‘intelligent air solutions’ for buildings like shopping malls, hotels and offices as well as premises where super clean air is required such as clean rooms, data centers and operating theaters.

If filters are changed too early just because they are done to a schedule, that incurs unnecessary cost. If they are changed too late, damage may result. A smart solution would trigger the change at the right time and you could really optimize your operating expenditure and maintenance cost.”

The bottom line is that the filter may be a low-cost item, but by protecting an expensive The filter asset, its value is Looked at one way, intrinsically high. a filter is passive It’s easy to Number of and something underestimate employees at not considered the waste caused MANN+HUMMEL smart, however, by sloppy tools are now maintenance, available catalyze including ‘cleaning’ that transformation. “Combining the filters by reverse-blowing compressed latest smart technology, such as air through them and then refitting sensors, gateways, data acquisition them. Engine damage and warranty and data mining we can build smart problems caused by dust ingestion in filtration solutions. Even at a basic mining trucks or agricultural machinery level example, they can speak to are to be avoided when a replacement us and tell us what is going through engine can cost up to $50,000, not to them, when they need changing, and mention the cost of downtime. A smart what their operating conditions are. filter can save the operator disasters

20,000

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MANN+HUMMEL

Charles Vaillant | CTO Charles Vaillant is the CTO for the MANN+HUMMEL group. He joined MANN+HUMMEL in 1997 and is currently responsible for innovation, new technology research, corporate strategy and corporate ventures.

Charles has held a variety of positions in the areas of program management, design and development, product engineering and corporate development. He is based Raleigh, North Carolina.

In 2015 Vaillant established i-2-m LLC, a startup company to accelerate commercialization of new MANN+HUMMEL technologies in the fields of clean air, clean water, energy and life science. During 2016 he created an IoT Lab in Singapore, at the Heart of Singaporeâ&#x20AC;&#x2122;s start-up ecosystem, to accelerate the digitalization of company products. Later in the year he launched MANN+HUMMEL Corporate Ventures, an initiative to make strategic investments in Technology Startups with a focus on Silicon Valley.

Vaillant earned an Automotive engineering degree from LTR Eiffel (France), a Masters in Industrial Marketing from ESIDEC (France) and an M.B.A from the University of Michigan Ross Business School (USA).

He lives with his wife and two daughters in Raleigh, NC USA.

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“Once fitted Senzit will connect directly to the network wherever

you are in the world”

Charles Vaillant, Chief Technical Officer

like this, Vaillant says. “In construction, mining and agriculture, three of our key markets, they are working in the dustiest conditions imaginable.

They get through a lot of filters and they really don’t have a good way to know when to change them.”

Smart filters are no longer pie in the sky. In November 2017 at CES in Las Vegas MANN+HUMMEL launched its new digital product Senzit. It measures data such as the status of the air filters of agricultural and construction machines in real time and transmits the results to the user’s mobile device. The smart device creates added value for users by displaying the load status of the air filter as well as its remaining service life and machine hours completed.

It is convenient, saves time, reduces maintenance costs, protects the engine and makes it possible to utilize the full capacity of the air filter.

“There are 10 sensors within Senzit,” enthuses Vaillant. “It measures pressure, humidity, temperature, and it has GPS and 2G/3G connection.

Senzit is installed directly at the service port of the air filter housing and is suitable for almost all vehicles and all air filter brands, even older ones. Once fitted it will connect directly to the network wherever you are in the world and stream the data to the cloud. From the cloud we push the data back, after we have run some machine learning algorithms, either direct to the customer or to a web portal – it’s their choice.”

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Thanks to Senzit, it is no longer necessary to manually inspect the air filter to determine the degree of contamination. It makes it possible to plan maintenance in advance, reduces machine downtime, protects the engine and prevents unnecessary filter changes. Originally conceived as a smart filter, Senzit’s horizons started expanding as soon as it was launched.

“Because I know the pressure in the filter I know when the engine is on and when it is off, and because I also have a GPS chip on it I can now provide the users with valuable information. I can provide them with a list of all the trips that the vehicle has done, when they started, when they stopped and where they went. So you have a fleet management component as well. That makes this digitization very interesting for us. By talking to the customers and engaging them we understand their needs and challenges and we are able to provide them additional services in order for them to run a better business.

For example, some of the people that we talked to are using very big pickup trucks that they don’t move much.

They use auxiliary power to work lifts,

drills and the like. Now they can go on the Senzit app to input an alert that will tell them when the truck has run for more than 50 hours and remind them to change the oil or the belt for example. Many customers are running old machinery that has none of the latest technology built in. Senzit turns these into connected vehicles, and we are adding an anti-theft component so they can see when a machine is moving when it isn’t supposed to.”

It’s a revolution, no less. “IoT is really changing the nature of our company,” Vaillant continues. “It’s analogous with the digital service that you get from Amazon or Netflix or connected cars. These are things that are making our lives easier and more convenient. What we are trying to do here is provide the same level of customer satisfaction and convenience to our customers that operate in the harsh environments.”

By leveraging data from climate and allergists, MANN+HUMMEL is currently developing smart filters that will make life easier for asthma and hay fever sufferers, for example.

“FreciousSmart is analogous to

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MANN+HUMMEL

the way the company works with agriculture,” he explains. “We are pushing out individual algorithms for every machine, taking into account the different type of dust and the different weather conditions. A great benefit of digitization is that we can customize products without having the cost of developing separate products. It’s about using big data and machine learning and converting the raw data into useful information like how many hours of safe operation they have left.”

The internet of things in action Developing smart filters may have been Vaillant’s original objective, but digitization goes much further. “The other piece is the data that we have at our disposal now. On the one side we can have our engineers design better products now that I am collecting data from equipment all over the world. I can see how my product is performing in a real-world environment. In the past we were working with very small samples – today, every single filter can be part of my test fleet. Over the past 75 years MANN+HUMMEL was using mainly lab data to confirm a product performance. Today,

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analytics and data science are a major part of our work and a new skill set for a company like us.”

As global CTO, Vaillant is responsible for a team of developers working on a comprehensive range of digital solutions, from sensors and interfaces to cloud programs. At the hub of this effort is MANN+HUMMEL’s IoT lab in Singapore. At this facility, system, hardware, firmware and software engineers and data specialists are working on the development of intelligent technology for filtration. The focus is on intensive cooperation with established technology groups and startup companies. “We have between 15 and 20 people at Singapore, and we are running out of space because we’re growing so fast. The world is our sandbox. We decided we want to be close to our customers, to research centers and universities. By doing this you run a very decentralized organization. Most of our people in Singapore speak Chinese fluently; they are in the same time zone as China and there’s now an extension of our IoT lab in Shenzhen, China.”

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â&#x20AC;&#x153;IoT is really changing the nature of our companyâ&#x20AC;?

Charles Vaillant, Chief Technical Officer

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Within a couple of months Vaillant will find himself in Silicon Valley, Shenzhen, Singapore and Germany, with brief stops at his North Carolina base catching up with reports from his team around the world. He is in Silicon Valley a lot as leader of startups and the venture arm of the company. â&#x20AC;&#x153;We are a traditional manufacturer and you could think that Silicon Valley is only about Tesla and Apple, but we need new materials and smart sensors and you find this in Silicon Valley as well. The world is changing

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at a very rapid pace. Large marketleading corporations like us have been doing the same thing for a very long time and really need to reinvent themselves. We need the courage to experiment with a completely different way of working, and I think IoT is a really great vehicle to show what can be done. Digital companies are able to bring out new products in a very short time compared to, say, automobile manufacturers. Cellphone companies show that itâ&#x20AC;&#x2122;s possible to roll out a new product every six or 12 months, not

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MANN + HUMMEL is building its new technology center in Ludwigsburg

every five years. That is a big challenge and I think a lot of corporates are struggling with it. At MANN+HUMMEL we have the luxury of a leadership and shareholders that are fully backing us to experiment with new things. They understand that speed is of the essence and time is now!”

So how exactly does IoT speed up product development? It’s a matter of escaping from standard manufacturing development processes that are very successive in style and adopting an agile way of working. “I know a lot of people

are using the word agile as a tagline, but what I am talking about is sprint methodology,” Vaillant says. “When we develop IoT products we launch new features in a two-week sprint, check and validate over another two weeks, then start again – so every four weeks we are able to bring new features into our products.” It’s a departure from traditional German product development principles.

Minimum viable product (MVP) rather than perfection is the principle.

From the start of the Senzit project to commercialization took just 12

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“When we develop IoT products we launch new features in a two-week sprint” Charles Vaillant, Chief Technical Officer

months, including pilot testing, prototyping, ramp up, manufacturing and the launch of the product.

“Now we are launching lots of new features. The hardware stays the same but we build on added value in sprints to optimize and enhance the offering to our customers.”

That methodology delivered a sensational new anti-pollution technology platform, “the Fine Dust Eater”, is now being trialed in Stuttgart and soon to be seen on the streets of Bangalore and Shanghai.

The World Health Organization estimates that 7mn premature deaths a year can be put down to air pollution. In Germany, it’s 47,000. The company has developed applications which are designed

to reduce the pollution caused by particulates. A filter installed on the roof or on the underbody of a vehicle retains particulates from the ambient air. A brake dust particle filter minimizes the release of brake dust to the environment. The vehicle occupants are protected by an NO2 fine dust combi filter. The idea is to improve the air quality in cities by sucking up the ambient dust – if enough mobile and static units can be deployed. We do not know yet the impact these technologies will have, but as Vaillant says “if you try nothing you will not get anything.

If your company core competence is to remove the useful from the armful, then it is your duty to come up with answers, isn’t it?”

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Inside room of

the financial engine

Mercedes-Benz

Written by Laura Mullan Produced by Kristofer Palmer

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MERCEDES-BENZ GROUP SERVICES PHILIPPINES, INC

A progressive and dynamic work culture is key for corporate success, and it seems Mercedes-Benz Group Services Philippines understands that better than anyone

B

OASTING ITS ICONIC silver-starred emblem, the Mercedes-Benz Tower has become a landmark in the Philippines, supporting the brand’s position in the Asia-Pacific market.

With offices in both Cebu and Clark, Mercedes-Benz Group Services Philippines (MBGSP) provides finance and accounting services for the Daimler Group, one of the world’s most successful automotive companies.

Supporting esteemed vehicle brands like Mercedes-Benz, Heiko Nitsche, President and CEO, says that the firm’s services are critical for the automotive giant’s success.

“MBGSP is responsible for paying Daimler’s supplier, so we

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are ensuring that our factories across the world get the parts, materials and services they need.

“MBGSP also supports many of the Daimler Group subsidiary companies with the production of their financial statements,” he adds.

“So even though we are just 500 of Daimler’s 289,000 employees worldwide, I think we play an important role.”

Since its creation, MBGSP has steadily matured, surpassing its initial growth target.

Serving at the helm of the company for almost seven years, Nitsche has helped to build the Daimler subsidiary from the ground up, working with peer groups and sector leaders to

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Cebu office

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“It was really exciting to be the first person in the Philippines from the Daimler Group and to start something completely from scratch,” he notes.

Building a company from its very foundations is a challenge for any executive. For Nitsche, perhaps the biggest priority was finding the right team with the right skills and attitude for the job.

“In the beginning, most of the

time was focused on recruiting the right people, our pioneer team,” he explains. “It was of the greatest importance that we found the right team with the right skills but, even more importantly, that they had the right attitude and spirit.

“I think we are unique because of our people and our corporate culture.

At MBGSP we believe in the best of both worlds. This mean you can’t copy and paste the corporate culture of our

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MERCEDES-BENZ GROUP SERVICES PHILIPPINES, INC

Heiko Nitsche, Chief Executive Officer of Mercedes-Benz Group Services Philippines A keen eye for numbers, a quest for adventure and the world’s maker of the best automobiles brought Heiko Nitsche, Chief Executive Officer of MercedesBenz Group Services Philippines to Asia.

Heiko who is originally from Stuttgart, Germany started his career with Ernst & Young AG as a young Executive in 1997. He joined Daimler AG as Manager for Corporate Controlling & Accounting in 2003, and as Chief Accounting Officer for Mitsubishi Fuso Truck & Bus Corporation, one of the subsidiaries of Daimler AG’s in Tokyo, Japan.

He eventually established the Philippine office in 2011, after careful deliberation of this strategic location for the company. The Cebu office opened in December in 2011 with only three persons and last November 2017 MBGSP inaugurated its new office in Clark as the latest addition to the Daimler Group’s shared-service network. Currently, it has a team of 500 employees for both Cebu and Clark and is considered among the best in the field who provide finance and accounting services to subsidiaries of Daimler in Germany, the rest of Europe, Africa, Asia Pacific and the US.

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parent company into any country.

“We merged the best elements of the German Daimler culture with the Filipino culture. In the Philippines, you have world class customer service, excellent English skills, and the people are very adaptive to new cultures.

Now, we have a very young, dynamic and customer-service oriented organisation with lots of energy.”

MBGSP has a millennial-centric environment and is committed to providing equal opportunities.

Creating a progressive, open and welcoming work culture is something which Nitsche is clearly passionate about, so much so he describes his team as “more like a family”. It’s an

ethos which is well placed amidst the Philippines’ family-focused culture.

“I would say what also makes the company unique is our working atmosphere and high retention rate.

We have a low employee turnover, which is a critical success factor in this industry. Because of this, we have a higher performance and service quality because every time you lose an employee you have to find a new employee and retrain them to the same level of quality.

“I’m very supportive of open communication and believe everybody should speak their mind. We speak to each other on a first-name basis and we break down the hierarchy

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walls. We treat everyone as equal without tarnishing our roles and responsibilities and without sacrificing our respect for one another.”

By tapping into the local language, embracing the Filipino culture, and creating meaningful relationships with his employees, Nitsche has strived to create a positive work environment.

As such, he says that whilst other companies may list impressive values, they are taken to a new level at MBGSP. “Here at MBGSP we really embrace and live by our corporate values. Our values of passion, respect, integrity and discipline are a part of our DNA. “In order to showcase this, we created an annual corporate value award system, whereby our employees can nominate someone to receive an award for really displaying these values on a day-to-day basis.”

As well as selecting the right team, location was a top priority for the company. Positioned in the fast-emerging Asia-Pacific market, the Philippines may have been a unique choice of location however,

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“It was of the greatest importance that we found the right team with the right skills but, even more importantly, that they had the right attitude and spirit” Heiko Nitsche, President and CEO

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Nitsche believes it has been an ideal choice and one which has given the company a competitive edge.

Selecting a strategic site in Cebu, the MBGSP headquarters has become a distinctive landmark for the region.

“We chose this location because it’s very important to have the right infrastructure, transportation, and facilities,” Nitsche says. “Today we now have a seven-tonne star on the rooftop. It’s really a landmark in Cebu. Everybody in the city knows the building, which is good for us as it strengthens the company brand and also helps us recruit our best talent.

“The key to our success has been how we attract and then retain the best talent,” he adds. “With our company culture and brand, which is symbolised by that star, we really can attract the best talent in Cebu.

I think the proof that we are an employer of choice is the fact that the vast majority of our employees are recruited by through an employee referral programme. It shows people actually enjoy working here, and they encourage their friends to join also.”

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Keen to keep up momentum, the Daimler subsidiary has also opened a second state-of-the-art Philippines office, in Clark. This not only ensures there’s capacity for growth, it also means MBGSP’s services are not disrupted and always available.

“If something were to happen to our operations like a natural disaster, for

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The Mercedes-Benz Future Truck 2025 provides a glimpse of driverless trucks

instance, that could be a significant issue for us,â&#x20AC;? Nitsche explains, â&#x20AC;&#x153;therefore, we have developed a very sophisticated business continuity management programme. As part of this, we created our second office in Clark which gives us additional operational stability, security, and a world-class business solution

for our global customers.â&#x20AC;?

Keen to ramp up its operations further, MBGSP has focused its investments on two pivotal areas: the upskilling of its staff and digitalisation.

As part of this, the whole Daimler Shared Service network is investing in robotics, automation and artificial intelligence, for example, to improve

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“In 2011, we started with just three employees in total.

Now, we have almost 500 in both Cebu and Clark. I'm very excited for the further growth of that family” Heiko Nitsche, President and CEO

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its productivity and efficiency.

“For our business, technology is very important. It’s crucial for the finance and accounting function, but it’s also vital across all of Daimler’s subsidiaries,” Nitsche says.

“With technology comes the opportunity to automate certain activities to free up your team. This means they can do fewer manual tasks and focus on the more interesting, value-adding jobs.

“On the infrastructure side, when we established our second site in Clark, it became a hub site for IT,” he continues. “For example, in this site, we installed a stateof-the-art server room, which houses Smart Row cabinet.

“Our Cebu and Clark site are fully integrated and capable of absorbing the load of each other in case one site fails to perform,” he adds.

On the other hand, whilst technology has been a core focus, MBGSP hasn’t forgotten its most important asset: its people.

As a result, the Philippines firm is investing heavily in development and

training programmes to help attract and retain the best talent in the region.

“We have soft-skills programmes from communication to change management and stress management to leadership, which are all equally important,” explains Nitsche. “These programmes are not given arbitrarily; each employee’s career plan is carefully designed by their respective managers together with HR.” It’s been seven years since MBGSP was first founded. Years before, Daimler has already started its Shared Service journey with Daimler Group Services Madrid (DGSM) and Daimler Group Services Berlin (DGSB).

Since then, the Daimler subsidiary has gone from strength to strength, offering state-of-the-art finance and accounting services and more.

In doing so, MBGSP has bolstered Daimler’s position in Asia-Pacific but, not one to rest on its laurels, Nitsche believes it’s only the beginning for the firm.

“In 2011, we started with three employees in total. Now, we have almost 500 in both Cebu and Clark.

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Vision MercedesMaybach 6 Cabriolet ALL PHOTOS COPYRIGHT

BY DAIMLER AG

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I’m very excited for the further growth of that family. The company still has the potential to grow, whether that’s in terms of headcount, processes, or value-added services.

“Our most important target is to have a very good relationship with our global business partners, our customers so that they earn the trust and the confidence in us,” he continues. “For our employees, we want to ensure that there is always an opportunity for successful career growth.

We also want to have mature and standardised processes.

We want to integrate robotics and automation into our processes. It’s a journey which we’re currently on but it won’t happen overnight.

“As a responsible employer we create job opportunities within MBGSP and beyond in our supplier network to encourage business growth in the region.”

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