When President Barack Obama meets with Chancellor Angela Merkel in Hannover, Germany on April 24, 2016, the subject will not be the refugee crisis or the dangers of terrorism. Instead, the two leaders will look at the offerings of their countries’ manufacturing industries, as presented at the world’s largest industrial fair. There’s a great deal at stake for the U.S., this year’s Hannover Messe partner country — most importantly, the preservation of its industrial sector, which shaped the 20th century via the second Industrial Revolution and its focus on mass production. Today, companies in Asia can produce goods more cheaply than firms in the U.S., and the 2007 financial crash put a damper on the hope that the world’s number one economy could live primarily from services. In response, the Obama administration has launched a big reindustrialization campaign in order to attract more manufacturing companies while consistently relying on digitization and exploiting the strengths of the country’s own software industry.
Manufacturing’s Digital Dividend
The Industrial Internet – what is called “Industrie 4.0” in Germany – is a hot topic in the United States. With a view to reclaiming its leading position in production technologies, the American manufacturing industry has launched a digital transformation offensive.
“Everyone in Germany is talking about Industrie 4.0, and in the past two years or so this topic has also become a major issue in the U.S., where it is subsumed under general headings such as smart manufacturing or advanced manufacturing,” says Siegfried Russwurm, a member of the Siemens Managing Board and chairman of the governing body of the Industrie 4.0 platform.
From Screwdrivers to Tablets
Regardless of which expression is used, the idea is to reconcile the conflict between maximum efficiency and minimum cost (the driving forces of mass production) on the one hand, and maximum flexibility, customized offers, and fast product lifecycles on the other. “In the future, the tool of the industrial age will no longer be the screwdriver but the tablet computer,” claims Eric Spiegel, CEO of Siemens USA. The United States is by far the most important market for Siemens, which has around 80 production facilities and generates over $22 billion of its income there. According to Spiegel, the U.S. is ideally positioned to digitally transform its industry just as Germany is doing and thus ensure its sustained success.
The digital transformation of industry isn’t advancing simply because of its ability to reduce costs. Instead, it serves as a basis for new business models that can pay big dividends in terms of quality and documentation. For example, a Toledo, Ohio automotive plant that produces Jeep Wrangler bodies for Fiat-Chrysler is owned by Kuka, the world’s leading manufacturer of industrial robots and automation systems. But thanks to the plant’s reliance on digital systems and its central data management system, it can provide its customers – in this case Fiat-Chrysler – with precise production data, thus obviating the need for a dedicated plant. Around 60,000 devices at the plant are connected to the data management system. Every component, every spot weld, and every quality check is digitally documented so that it can be called up even years later if quality issues arise.
Value Creation across Industries
One positive side effect has come out of the decline of the U.S. automotive industry in the greater Detroit area. It is now is easier for new business models, which use digital technologies to create entirely new supply chains, to become established. “Digital technologies are making possible completely new value creation networks that extend beyond company boundaries,” says Russwurm. “This increases flexibility and accelerates development cycles. In these respects, Germany can learn a lot from the United States.” Furthermore, digital technologies are changing the way automobiles are designed and built. The Rally Fighter, an unusual 6.2-liter sports car with 430 hp, is the joint creation of thousands of people who meet in the virtual world to use Siemens PLM Software’s Solid Edge CAD platform to make their automotive dreams come true. The result of this co-creation process is now being manufactured by the start-up company Local Motors in Phoenix, Arizona.
The oil and gas industry has also recently become aware of the advantages of digital technologies. Automation had not previously played a big role in the process industry, which does not produce a specific number of products over and over again; instead, it produces chemical substances in continuous processes. But now that a barrel of oil only costs about $40, the oil industry has suddenly become interested in ways to increase efficiency. “We help to make processes simpler and better,” says Todd Gardner, Vice President of Process Automation at Siemens USA. Among other things, Siemens is making gas chromatographs in Houston, the oil hub of Texas. Siemens is the world market leader in this field. These devices consist of sensors and other measuring systems that determine the composition of the end product in oil refineries every few minutes. They do this by analyzing tiny amounts of gas that are extracted from the refining process. If the quality fluctuates, the mixing ratio is automatically adjusted. Because such measurements had to be made by hand in the past, it used to take manufacturers a long time to detect and react to quality defects. Siemens also offers another service for these chromatographs — predictive maintenance, which is probably the most frequently mentioned digital service related to Industrie 4.0.
Here, software sends an early warning if a component’s data indicates an impending break down. Siemens now offers similar service models for most of its products in the U.S. and the rest of the world. For example, the company remotely monitors and maintains a fleet of Siemens gas turbines as well as wind turbines and computer tomographs.
U.S.A: An Increasingly Tough Competitor?
What do experts think about Industrie 4.0’s effect on jobs? “For decades, people have been complaining that jobs in manufacturing are disappearing,” says Eric Spiegel. But now, he explains, jobs are beginning to come back. That’s because technology is helping to produce high-quality goods in the U.S. as inexpensively as in Asia, while at the same time being closer to the customer and faster to market. Rainer Hundsdörfer, the Chairman of the Board of Directors of ebm-papst , a ventilation system manufacturer, is also convinced that the digital revolution will create a Golden Age for industrial workers. “Work will become more interesting and demanding,” he says. At its plant in Farmington, Connecticut, ebm-papst trains mechatronics specialists who are also IT experts. In this regard the company is a role model for the entire U.S. manufacturing industry. The important thing now, says Spiegel, is that government agencies, companies, schools, and associations pull together to close the gaps in education that undoubtedly exist in the United States.
As a result, the U.S. is expected to become an increasingly tough competitor — as well as a partner — of German companies on the world market. The German Industrie 4.0 platform and its U.S. counterpart, the Industrial Internet Consortium, announced in March that they had formed a partnership in order to develop common standards. Both countries will benefit equally by combining the United States’ strengths in the fields of software, big data, and new business models with the manufacturing expertise and customer proximity of German industry. As Siegfried Russwurm has said,“No country can master digital transformation on its own.”