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Industry 4.0, Supply Chain 4.0
“Evolution of India 4.0 - Make In India, Smart Factory of
the World”
10th December 2015
Rajiv Bajaj
VP & Partner
Nomura Research Institute (NRI) India Pvt Ltd
Nomura Research Institute (NRI) India
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 1
Introduction
We are living in VUCA times. The fast pace of change and turbulent times are
placing increasing demands on corporates and their management teams
Volatile Global currency flows, Exchange rates
Global commodity & asset prices
Global liquidity, FII flows
Equity, debt markets, interest rates
Global geo political environment, Govt changes
Difficulty in forecasting, different scenarios
New business models, startup disruptions
Industry 4.0, Big data, Smart mfg etc
Customer/ Supplier expectations
External environment, War on terror
Competitor strategies, Disruptions
Political changes, Policy uncertainty
Technological changes, IT, Digitization, IOT
Internal human resources engagement
M&A, JVs, Alliances
Global geo political environment
UncertainAmbiguous
Complex
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 2
Introduction
We at Nomura Research Institute (NRI) believe companies and their leaders
can convert the VUCA challenge into a positive opportunity
V Volatility
U Uncertainty
C Complexity
A Ambiguity
Vision
Understanding
Clarity
Action
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 3
Next Frontier in Manufacturing Collaboration
Companies in Germany have collaborated and launched Industry 4.0 as next
generation manufacturing system
Four Industry Revolutions
18th Century Early of 20th Cen. 1970~ Presenttime
complexity
Industry 4.0
1969Emergence of PLC
1870First Production Line
1784First Mechanical Loom
Follows introduction of
water- and steam-powered
mechanical manufacturing
facilities
Follows introduction of
electrically-powered mass
production based on the
division of labour
Uses electronics and IT to
achieve further automation
of manufacturing
Based on Cyber-Physical
Systems
Source: NRI analysis based on interviews and various materials.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 4
Next Frontier in Manufacturing Collaboration
Next gen smart manufacturing/ industry 4.0 is driven by evolution of internet
of things/ M2M communication, data analytics and smart devices
Transformation of IT-connected
manufacturing to optimized and
sustainable plant and supply networks
an interconnected world … data,
voice, video, etc.
Supply Chain Distribution
Center
Customer
Business Systems, ERP
Smart Grid
Smart Factory
Machine Builders
Supply Chain Distribution
Center
Customer
Business Systems, ERP
Smart Grid
Smart Factory
Machine Builders
Copyright © 2010 Rockwell Automation, Inc. All rights reserved.
Shop Floor to Top Floor
Source: Bosch, Siemens, NRI analysis based on interviews and various materials.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 5
Next Frontier in Manufacturing Collaboration
Siemens Industry 4.0 architecture demonstrates collaboration and smart
integration of hardware & software systems
Siemens Industry 4.0 HW, SW Lineups at different levels
Source: Siemens
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 6
Next Frontier in Manufacturing Collaboration
In order to pursue cyber physical systems (CPS) development, leading
players are changing their closed/ legacy systems to more open
• To cater to 5.0 billion Market
• Business Sustainability
• Resource Capability
Industry 4.0 Concept
Digital Engineering
Platform[Cyber Physical System]
DevelopmentHR
Technologies
Production
Purchasing
LogisticsCustomer
Global engineering Network of
Global factories
Global HR
Education program
“Learn-strument”
Global sourcing of
Parts, materials
Globally integrated
supply logistics
Catering to advanced
customers
Consortium among
German mid / small
firms
Mobilization
Adaptation
Source: NRI analysis based on interviews and various materials.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 7
Next Frontier in Manufacturing Collaboration
Leading companies like Bosch are creating new business model through
convergence between product development, manufacturing & logistics
Smart Factory Concept of Industry 4.0 [Bosch]
Source: Bosch Software Innovation
Fine & agile production & logistics
Flexible trading element technologySelf managed factory networking
Flexible & Agile
Customer involved
Customer integrated
engineering
Technology
Marketplace
Predictive
Maintenance
Networked
Production
Resilient Factory
Adaptive
Logistics
Up-cycling
Local Communication
Communication Services
Development Process
Detection & Integration[Physical Environment]
1
2
3 4
5
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 8
Introduction
Make in India - Vision
A Major New National Program. Designed To Facilitate Investment. Foster Innovation. Enhance Skill
Development. Protect Intellectual Property. And Build Best-In-Class Manufacturing Infrastructure
• An increase in manufacturing sector growth to 12-14% per annum over the medium term.
• An increase in the share of manufacturing in the country’s Gross Domestic Product from 16% to
25% by 2022.
• To create 100 million additional jobs by 2022 in manufacturing sector.
• Creation of appropriate skill sets among rural migrants and the urban poor for inclusive growth.
• An increase in domestic value addition and technological depth in manufacturing.
• Enhancing the global competitiveness of the Indian manufacturing sector.
• Ensuring sustainability of growth, particularly with regard to environment
Sectors: Auto, Auto Components, Aviation, Bio Technology, Chemicals, Construction, Defence Mfg,
Electrical Mch, Elec Systems, Food Processing, IT & BPM, Leather, Media & Ent, Mining, Oil & Gas,
Pharama, Ports, Railways, Renewable Energy, Roads Highways, Space, Textiles Garments, Thermal
Power, Tourism Hospitality, Wellness
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 9
Made in India Vision
India manufacturing companies should create the right mix of cost,
performance & innovation as the “made in India – smart factory of the world”
value proposition
India Value Proposition
High Performance
High Technology
Industry 4.0
High Precision
High Quality
Flexible Smart Mfg
High Innovation
High IT Integration
Scale, Robust
Frugal Engineering/ R&D
Cost Performance Innovation
Local Market + Export Hub
Cost
Scale
Limited Reliability
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 10
Manufacturing in India
India “frugal engineering & solution mindset” can help in development of
lower cost models for emerging markets
Local Needs
• “No More, No Less”
product development
“Frugal Engineering Example – Product Development”
High Speed Light Asset
• Digital development
enabling less prototypes
• Using ESOs to reduce
capital investments
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 11
Implications for MNCs in India
Leveraging India not just as market but as R&D hub/ Export hub, MNCs can
stabilize the Indian business even in volatile FX and market conditions
Make in India Value Proposition for MNCs New three challenges towards the 3rd biz model
“Utilizing Frugal Engineering”- Towards the global R&D hub for emerging markets
(design, development)
- Proactive utilization of ESO (Engineering Services
Outsourcers)
“Exporting from India to ROW”- Market needs are similar to that of India
- Possibility to leverage Indian human network
- Government support for exports to Africa
“Capturing New Indian Middle Class”- The middle class is expanding from Tier1 to Tier 2
- Mid priced products matching local needs
- Acquiring low cost production and sales channels through
M&A
1
2
3
Service Export
Product Export
Domestic Sales
Growing
domestic market
with 1.2 B people
Global
R&D base
Export base for
Other Emerging
Countries
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 12
Made in India Value Proposition - Example
Indian machine tool players – can leverage their understanding of Indian
customer requirements an lead via “Smart Frugal Indian Machines”
India Value Proposition
Smart Frugal Indian Machine
Pricing
Economies of scale
Performance
Simplicity
Robustness
Automation
Design & Footprint
Low price Medium price High price/premium
High volume Medium volume Low volume
Simple Complex
Robust/maintenance-friendly Fragile/laborious to maintain
Low-Mid Mid HighVery low
Low Cost Automation AutomationFull Integrated
Automation
Lean TPM Friendly MediumLarge Size, Loaded
with Features
Source RBSC ACMA IMTMA Study
Machine Attributes and Indian Companies Value Proposition
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 13
Platform
Upper
Body
Diesel
Engine
System
Manufacturing MNCs in India – Success Examples
Taking BRIO and diesel engine platform developed in EU as basis,
AMAZE was developed with limited efforts, reducing its cost for development
Maximizing the utilization of existing platforms
‒ Downgrade the emission
performance
‒ Increase displacement to match
with tax exemption program
‒ Existing platform used as it is
‒ Upper-body development based
on Indian consumers’ needs
Engine Developed
in European Market
Engine Developed
for Indian Market
BRIO AMAZEBRIO
Source: Honda
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 14
Indian automotive industry vision 2026 – 5X growth – Collaboration is key to
success
19
8318
71
10
40
8
74
6
32
FY14 FY26
• Government (Central, State, City)
• Institutions, Trade Agencies,
Financial Institutions
• Roads
• Railways
• Ports
• Aviation
• OEMs
• Suppliers
• Logistics Service Providers
• Consultants, Advisors, Project
Managers
Units: USD Billion 300
61
Component -
Aftermarket
Component -
Export
OE - Exports
Component -
Domestic
OE - Domestic
Automotive Industry Vision 2026 [Revenue Size]
Made in India Vision
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 15
Make in India Vision
Clearly we will see OEMs, Suppliers, LSPs upgrade their activities &/or pursue
new activities
Industry 4.0 Supply Chain 4.0
Automotive
Industry
Return
Time
Upgraded activity
Current activity
Return
Time
New activity
Current activity
Doing same things better
Doing newer things
1
2
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 16
We look forward to working closely with our clients to move from–ive VUCA to
+ive VUCA
V Volatility
U Uncertainty
C Complexity
A Ambiguity
Vision
Understanding
Clarity
Action
NRI India Vision & Promise
Rajiv Bajajrajiv.bajaj@nri.com
VP & PartnerNomura Research Institute, IndiaMobile +91 99100 34445
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