SIEMENS

China has evolved into the world’s second-largest economy. And many signs indicate that it will overtake the U.S. to become the world’s number one economy before the end of this decade. During the first phase of this tremendous economic transformation, one of China’s greatest strengths was a seemingly bottomless pool of labor that gave the country its reputation as the “workbench of the world.” However, all that success has created a new situation. The country is now more affluent and will soon lose interest in lingering at the lower end of the value chain.

As early as 2001, the provincial government in Guangdong began implementing a structural transformation program that provided incentives to companies in technology-intensive sectors. This strategy has led to sharply rising wages. The average monthly salary of an industrial worker in the Shenzhen region is now approximately €320, for example. By comparison, the legally mandated minimum wage in Cambodia currently totals only €50 per month. One of the consequences of this development is that labor-intensive industries are now leaving Guangdong and even the country. Sneakers and T-shirts are more likely to be produced in Bangladesh, Vietnam or Cambodia today than in the Pearl River Delta. Meanwhile, China is manufacturing more and more sophisticated products, such as high-speed trains, computers, machinery, and automobiles. Cheap labor is no longer the key to success in these sectors. Instead, it’s China’s efficient processes, technical expertise, and organizational skills that are giving the country its edge. The best example of this is the Chinese automotive industry.

“Vehicle development is an extremely sophisticated process,” says Zhou Kehu, Senior Business Consultant at Siemens Industrial Software in Shanghai. “For one thing, it requires cooperation among a whole range of functional teams. What’s more, each of these teams has to deal with huge amounts of data. So you can imagine that coordinating this data volume alone is a tremendous challenge.” In order to prevent miscommunication and to ensure smooth production processes, it is crucial that engineering teams not only manage their own data, but also remain abreast of what their counterparts in the manufacturing and quality teams are doing.

Siemens software solutions for Product Life Cycle Management (PLM) applications enable operators of industrial facilities to meet this challenge. PLM helps to bring together all the relevant information — on everything from initial drafts and detailed design processes all the way to manufacturing operations. It then makes all this data available for the optimization of design and production processes.
When applied to the automotive industry, PLM leads to much higher levels of design maturity and to significant improvements in quality management. This is one reason why China’s top automakers and supplier companies began adapting their product development and production planning to PLM requirements quite some time ago.
Chery Automobile is an example. The company manufactured approximately 670,000 vehicles last year, of which roughly 170,000 were sold abroad. This makes Chery China’s top vehicle exporter. Chery — like all other Chinese automobile manufacturers — is a very young company. It was established in 1997 and has been using PLM solutions from Siemens since 2003.

One of the most important PLM tools at Chery is Tecnomatix, which links all manufacturing operations to product development units — from process definition and planning to simulations and actual production. Chery utilizes this PLM tool for dimensions analysis. “This analysis plays a key role when it comes to designing vehicle bodies,” says Wu Shiqiang from Chery’s Institute for Technical Planning and Design. “Dimension analysis allows us to determine in the early stages of body design whether the structure and production methods will meet technical requirements. This enables us to develop solutions early on in order to optimize these factors.”

An important additional component of Siemens’ Tecnomatix software is variation analysis, or VSA, which is a form of dimension analysis that simulates manufacturing processes with the help of three-dimensional computer-generated models. VSA is designed to identify weak spots in the production process before manufacturing operations begin. Chery, for example, used VSA to identify a problem in the production of a headlight for a certain model — and this single software diagnosis ended up saving the company roughly $150,000. “This also enabled us to avoid production delays, of course,” says Wu.
Chery examined a variety of software solutions before choosing Tecnomatix from Siemens. “It was the variety of functions Tecnomatix offers that impressed us the most,” Wu explains. Other factors that Chery considered important were Siemens’ status as the world market leader in this software sector, its first-class customer service, its years of experience in the field, and its long-term partnerships with leading automakers around the world. “That’s why we finally decided on Siemens,” Wu says. Many other automobile manufacturers and suppliers have made the same decision. That’s why Siemens is the number one supplier of PLM solutions for the Chinese automotive industry. The company had a market share of 27 percent in China in 2011, according to CIMdata, an independent global PLM consulting firm.

Why China is Turning to Automation. The benefits Siemens offers to automakers are significant. For example, the FAW Car Company, one of China’s leading automakers, has used Siemens PLM solutions such as Tecnomatix to shorten its planning processes by several months, while at the same time substantially improving the precision of its work processes. “We achieved a 35 percent increase in planning efficiency,” says Yuan Xueyu, Deputy Technical Director at FAW Car. “We also cut the number of process planning corrections we had to make by 18 percent, boosted assembly line productivity by 25 percent, and significantly improved our efficiency in utilizing all the relevant resources.”
Automation solutions and work processes like these are a far cry from the old image of China as the workbench of the world. Indeed, automation is becoming increasingly important for China. After all, the country’s labor pool no longer seems as inexhaustible as it once did. It is already becoming difficult for companies in China’s main industrial centers (in the Pearl River Delta region between Hong Kong and Shenzhen and at the mouth of the Yangtze River near Shanghai) to find enough suitably skilled workers. This problem will only increase over the next few years. Demographics alone will have a significant impact here, as China’s population is aging rapidly. The average age will be a little over 48 by 2050 — four years higher than the current figure in Japan, which along with Monaco now has the world’s highest average population age.

“One of the advantages of automated processes is that they enable a degree of quality consistency and planning security that simply can’t be achieved — not even when a mass labor pool is available,” says Chen Wei, System Application Manager at the Siemens Automotive Industry Competence Center in Shanghai. “That’s why there’s a direct link between investment in automated production processes and product quality.”
The degree of sophistication of the solutions required varies with the level of production complexity. The automotive industry is currently at the high end of the complexity scale, as numerous robots, sensors, human-machine interfaces, and other devices need to be coordinated on manufacturing lines. Such coordination is achieved by means of programmable logic controllers (PLCs) — powerful computers that are the nerve center of automated production facilities. Leading automakers such as Chery, Geely, and the Israeli-Chinese joint venture Chery Quantum Auto utilize these high-performance components from Siemens.

Siemens produces components for the upper-range market segment — for example, for customers like Chery — in Germany. However, Siemens is now also developing other PLCs and similar devices in China itself, not just for the Chinese market, but also for export to other countries, especially emerging markets. All of this is part of the Siemens strategy of strengthening its innovation network by establishing research and development units around the world. It’s also in line with China’s strategy of transforming itself from the workbench of the world into a location that not only uses sophisticated automation solutions but also develops them. China has indeed come a long way in just 30 years.