Automotive

Industry 4.0
"Connected and Intelligent"
Ensuring competitiveness through
technology adoption

27 September 2017, Gurugram

Contents Page

A. Industry 4.0 – An overview 3

1. What does it mean and what is its impact? 4
2. Why are companies (and countries) interested? 19
3. Key elements and select case examples – focus: automotive 28

B. Opportunities, challenges and way forward for Indian companies 44

C. About Roland Berger and CII 55

This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation.
It may not be passed on and/or may not be made available to third parties without prior written consent from .

© Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 2

A. Industry 4.0 – An
overview

20170927_CII_Automotive_4.0_Summit_v5.pptx 3
A.1 Industry 4.0 – What
does it mean and what
is its impact?

20170927_CII_Automotive_4.0_Summit_v5.pptx 4
The global manufacturing industry is gearing up for the next level of
industrial revolution and it is called Industry 4.0
Development stages of industrial manufacturing
First industrial Second industrial Third industrial Fourth industrial Drivers of this development
revolution revolution revolution revolution? > Large amount of data
available
> Rising demand for (mass)
customized products
> Advanced algorithms
allowing better real-time
and large data analysis
> More affordable
1784 1923 1969 2014 sensor/actor technologies
Mechanical Introduction of a First program- Industry 4.0 > Increasing prevalence of
communication including
weaving loom "moving" mable logic Introduction of wireless technology in the
Introduction of assembly line at controller (PLC) intelligent machines, factory
mechanical Ford Motors Introduction of embedded cyber-
production assets Introduction of mass electronics and IT physical sensors,
based on water and production based on for higher auto- collaborative
steam power division of labour matization of technologies, and
and electrical production networked processes
Time energy

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 5

It can be understood as the full integration and digitalization of the
industrial value creation
Definition of Industry 4.0
> Digital transformation refers to the changes
Digital transformation associated with the application of digital
technologies in all aspects of human society
> Industry 4.0 is the industrial application of the
Car sharing Wearables concepts applied in the digital transformation,
Mobile devices
key elements are:
– Complete connectivity with real-time ability
– Decentralized, intelligent and self-optimizing /
Cloud data Apps Private robots organizing
Industry 4.0 – Modular and reconfigurable

> Assessment of Industry 4.0 impact needs to take

E-Commerce analogies from digital transformation and
Smart handbooks Self-learning
Contactless pay
specifics of the manufacturing industry into account
robots
> The digital transformation in the consumer goods
Smart Home sector is much more advanced than the industrial
Self-optimizing application
systems Predictive
Maintenance Home robotics

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 6

Despite different definitions for "Industry 4.0" there are various
aspects which have developed into common understanding
Key aspects around Industry 4.0

What? > Real and virtual world growing together (humans, machines, technologies, Internet)
Who? > Providers of infrastructure: provide supporting structures and services, e.g.
cloud computing or storage for Big Data (e.g. TelCos, Cisco, Amazon)
> Industrial users: Globally operating manufacturers such as VW or BASF
> Providers of technologies: provide key technologies for production such as
collaborating robots or remote maintenance systems

How? > Via intelligent, horizontal and vertical linking-up

Why? > Individualized or mass customized products

> Highly flexible production
> Integration of customers and value adding partner
into value creation
> Coupling of production and high-value services
> Cost and efficiency benefits and quality improvements

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 7

Industry 4.0 is a holistic concept that affects the whole product life-
cycle from the development to the usage phase
Concept
Revolutionary short
engineering process
Revolutio-
nary flexible
production
systems

Market Engi- Production Produc-

Testing Services Usage
research neering planning tion

Revolutionary
short and
virtual value
chains

Revolutionary
autonomous
production systems
Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 8
It combines a wide set of technologies at different stages of maturity

Example of technology mapping – Extract

1 PRODUCT DESIGN /
PROCESS 2 MONITORING / CONTROL
Monitoring,
command
Virtual Traceability
Flow
industrialization Interconnected management
machines & plants Active sensors
"virtual Automated logistics /
manufacturing Remote monitoring, Internet of Things
3 MANUFACTURING
mobile app, shared Thermal, Precision OPERATIONS
plant" digitalized,
production databases hygrometric, "Smart" machine
process simulation counting sensors...Shared GPAO (self-correction)
Centralized Flexibility
CFAO3) Laser sensors, vibra
planning and Per piece
management of switches, corrective Additive
RFID tracking manufacturing
machines Automated internal programs
PLM2) logistic
MES4) Precision 3D printing,
Cobotics 4
Gravage engineering
laser, Intelligent Assist SERVICES
GPAO, PLM, GV grinding, Multi-support and Devices
flashcode, RFID5) laser cutting, Conditional (INTEGRATION,
Numerical puces multi-operation
CAO, command HFwelding machines Big data, maintenance MAINTENANCE)
Digitalization of
IAO1) Transfer remote
Batch order-flow
center Retrofit maintenance
management Programmed / 5
Traditional De-programmed SNC, programs, Augmented operator
techniques machines Machine multi-spindle, etc. WORK
installation ORGANIZAT
Duty organization
Lean Manufacturing Learning organization
Task specialization ION
Available maturity / Emerging maturity / Future maturity /
Industrial diffusion Limited diffusion Precursors
1) Computer aided Engineering 2) Product lifecycle Management 3) Computer aided design and manufacturing 4) Manufacturing execution system 5) Radio frequency identification 4)
Computer assisted production management
Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 9
Five key indicators determine the relevance and level of impact of
Industry 4.0 on a specific industry
Key indicators for relevance of Industry 4.0 – Roland Berger view

Virtualization of Level of value "Game changer"/ Ressource Foreseeing of new

work processes added and value disruptive efficiency of framework or
chain complexity technologies core processes regulation
> Solutions such as > Intelligent digitization > New technologies will > Energy and raw > Optimized supply
augmented reality will simplify to change established material cost could chains and new
and virtual plants relocate flexibly business models account for more production
enable largely certain value adding > 3-D printing could than 80% production technologies enable
automated steps on a global revolutionize the cost in industrial individualized
information exchange scale machinery industry manufacturing solutions and change
between machines > Specialized > Increasing cost and scale effects
and workers manufacturer could regulation framework > New customer
> New challenges to tap into new markets enforce innovation segments become
software standards on short notice but accessible (for the
and data security and could also lose their own enterprise and
thus potentially high traditional for competitors)
investments competitive position
and competitive edge

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 10

In each industry, there will be new winners and new losers…
Automotive sector one of the most impacted
Ranking of key industries affected by Industry 4.0 – Roland Berger view

Virtualization Level of value added "Game Changer" Res. efficiency1) New framework
Machinery
Print
Electronics, optics, data processing
Electrical engineering
Automotive (OEM, supplier)
Other vehicle manufacturing
Rubber and plastics parts
Metal parts
Furniture
Paper industry
Glass, ceramics, stones, earths, building materials
Feeding stuff
Clothing, apparel
Wood
Chemical products
Metalworking, metal machining
Beverage industry
Pharma
Textiles

1) Ressource efficiency
Source: Roland Berger expert assessment 20170927_CII_Automotive_4.0_Summit_v5.pptx 11
In the end, Industry 4.0 has the potential to promote disruptive
changes in the value creation system in nearly every industry
Improvements targeted with Industrie 4.0
Business Industrial Internet / Industrie 4.0 can enable USD 15 trillion of global GDP by
model 2030
Create USD 9 billion to USD 18 billion additional revenue per year (= up to
25% revenue increase), moving customers from “fix when fail” to predictive
maintenance along with other actions
Customer Enable customers to decrease product time-to-market by 50% using PLM1)
Value software and automation technology

Create USD 5 billion with customized products enabled by decentralized

production planning

Productivity Could boost global manufacture's productivity by 30%: USD 3.3 trillion2)

Overall objective: The sustainable 100% available plant

1) Product Lifecycle Management 2) 30% x USD 11.2 trillion (Manufacturing value added from World Bank)

Source: Deutsche Bank, GE, ABB, Caterpillar, World Bank, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 12
Existing Industry 4.0 use cases already have a significant impact in
companies' core functions and processes
Examples for achieved impact of Industrie 4.0 solutions1)
Engineering 71% reduction of motor engineering time through increased usage of prototypes

Building the first full functional and working prototype of google glass took only 1 day

Released 3 products in first year of partnership with crowdsourcing website Quirky

Procurement Significant reduction in operative C-Parts order processing cost of up to to 80%

Production/ Reduction in manufacturing time for a customized bike by more than 95% -
Supply chain from 21 days to 6 hours
Reduction of production time for tires (from raw-material to end product) by 50% by relying
on a new generation of intelligent robot, integrating several manufacturing steps
Working capital optimization of more than 30% targeted with RFID based unitary parts
tracking in the whole value chain ; Increased output in cylinder head manufacturing by 25%
- Enabled by real-time data mining and analysis to improve process quality
Achieved payback time of 1.8 years with roll-out of RFID based internal logistics optimization –
On-time-delivery and employee motivation increases significantly
Source: Company information, expert interviews, Roland Berger COO Insights 2014, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 13
Most automotive and industrial players have launched Industry
4.0 pilots to test solutions in legacy plants
Automated Collaborative Conditional Humanoid
plant robotics maintenance robotic

MOST INDUSTRIE 4.0 TECHNOLOGY BRICKS ARE EXISTING

Intelligent 3D RFID Augmented
logistic bins printing logistics reality
RFID-based parts tracking across companies
Disruption
 PAS Replanning

2nd Tier Transport 1st Tier Transport OEM

(Karlsruhe) (Nürnberg) iwb/TUM

InfoBroker InfoBroker InfoBroker-

-Khe- -Nbg-M iwb-Logistic
Logistic

Material Information
PAS: Production assistance system flow flow

Source: press review, companies websites, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 14

Overall "Industry 4.0" is a long journey and technologies will take
10~15 years to reach maturity in the market
Industry 4.0 roadmap
Pilot solutions
Today
Solutions barely existing
as products in the market
– Mainly showcases or
laboratory solutions in
development
Source: Roland Berger
Pilot full plant /
Precursor
~2020
Mid-term Industry 4.0 use
cases are driven mainly
by technology; Pilot
solutions in the scale of
full plant will be developed
Broad adoption of
standard solutions
2025
The penetration of the
market with isolated
solutions will lead to an
interconnection of many
solutions via existing
connectivity channels – A
gradual replacement of
most machinery will begin
20170927_CII_Automotive_4.0_Summit_v5.pptx
Transition to "True
Industry 4.0"
2030+
Along the lifecycle of most
production machinery the
transition to true Industry
4.0 will start to be more
comprehensive once most
machinery and
employees are Industry
4.0 ready and the
connectivity infrastructure
has been adapted to the
new needs and standards
15
The true plant of the future is expected to be ready by 2025/2030
Factory 4.0 – Overview

> Give sense to complexity

CYBERSECURITY BIG DATA > Creativity
> Collaborative manufacturing
> Stronger protection for internet CLOUD
based manufacturing COMPUTING
> Technology products with longer
life cycle > Customer & marketing intimacy
SENSORS > Cyber Physical Systems (CPS) > Flexibility
ADVANCED > Numerical command > Perfect match with customer's
> Zero default / deviation MANUFACTURING – Full automation needs with production mass
CLUSTER OF SUPPLIERS > Reactivity
SYSTEMS – Totally interconnected systems efficiency
SUPPLIERS > Traceability – Machine to machine communication > On demand manufacturing
> Predictability
MASS
CUSTOMIZATION

CLIENTS

3D PRINTING / NANOTECHNOLOGY / AUTONOMOUS

ROBOT
ADDITIVE MANUFACTURING ADVANCED MATERIALS VEHICLE
LOGISTICS 4.0 INTERNET OF THINGS
> Scrap elimination > Smart value added products > Real time - Autonomy - Productivity > Flow optimization
> Fully integrated > Mass customization > Technical differentiation > Full transparency (contextualization, > Increased security
supply chain > Rapid prototyping > Connectivity comprehensiveness, collaborative > Lower costs > Object tagging
> Interconnected systems robot) on data reporting > Internet-object communication
> Perfect coordination PLANT OF THE FUTURE A via low power radio
PLANT OF THE FUTURE B
> Real time data capture
> Optimized stocks
CLUSTER OF PLANTS > Reduced wastes

> Clean and renewable energies

RESOURCES OF THE FUTURE everywhere
> Energy Storage
> Alternative raw materials
WIND ALTERNATIVE / NON CONVENTIONAL SOLAR GEOTHERMIC

Source : Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 16

Industry 4.0 is potentially changing the paradigm of manufacturing
strategy
Characteristics of new Industry 4.0
Traditional industry approach New Industry 4.0 paradigm
> Economies of scale through volume > Economies of scale through knowledge

> High hidden complexity cost through product > Affordable product diversity – "cost of one = cost of
variants proliferation thousand"

> Make to stock based on product forecasts and > Make to order based on adaptive production
economical order quantity planning and pricing (yield management)

> New product launch is a source of launch cost > Seamless product launch is a source of value

> LCC footprint localization with large size plants > Proximity footprint localization

> Large size plant with one roof concept > Network of decentralized and small production units
by technology

> Medium / low capital intensity – Low margin > High capital intensity – High margin

> Blue collar driven workforce > White collar driven workforce

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 17

We see five mega trends shaping the value chains of the future –
These trends call for a "next wave" of Industrie 4.0 solutions
Future value chain mega trends
1 2 3 4 5
Distributed Rapidly Complex value Human- Sustainable
value chain responsive chain centered value value chain
value chain chain
Need for
"next
wave" of
Production Firms must Manufacturers Producers face Value creation yet to be
systems must be quickly respond will face the need changes in systems expect a
managed to changing for ever more workforce sharp cost
defined
in distributed customer complex demographics increase for Industrie
environments and requirements, manufacturing while securing the pollution and 4.0
quickly adapt to a innovations and designs, skills needed for energy
global customer social products, future factories consumption solutions
base environments processes and
operations as well
as close supplier
collaboration

20170927_CII_Automotive_4.0_Summit_v5.pptx 18
A.2 Industry 4.0 – Why are
companies (and
countries) interested?

20170927_CII_Automotive_4.0_Summit_v5.pptx 19
Industrial ROCE decreased in most countries except for Germany
and US – Need for action
Positioning of main industrial countries on profitability iso-curve [2000-2014]
Profit [EBIT / value added]

35% Korea, South

Brazil
30% China

Spain United Kingdom

25%

Italy iso ROCE:

20% United States 30%
France
Japan
15%
20%
10% Germany

5%
10%
Asset rotation
0% [Value added / Capital
employed]
0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 1,6 1,7 1,8
Evolution btw. 2000 and 2014
Source: IHS Global Insight, Roland Berger analysis 20170927_CII_Automotive_4.0_Summit_v5.pptx 20
Industry 4.0 is an opportunity to revitalize industry

Rationale for Industrie 4.0 – Top 3-4 critical rationales for each country
MAINTAIN ADDED VALUE Lower labor sensitivity / Improve competitiveness
THROUGH COMPETITIVENESS Create entry barriers
RELOCALIZE INDUSTRY VIA NEW Produce personalized products at mass production
BUSINESS MODELS cost

GAIN GLOBAL LEADERSHIP IN 4.0 Develop technologies & standards

SOLUTIONS Create an export solutions
Flexible production lines to reduce demand
INTERNATIONALIZE AT changing need
LOWER RISK
Decrease capital cost of geographical expansion
ENHANCE DIGITAL START UPS Create platform to enable ecosystems
& ECOSYSTEMS Accelerate innovation via incubators clusters

INCREASE EMPLOYEES Reduce pain point at work

SATISFACTION AT WORK Increase meaning of work
IMPROVE SUSTAINABILITY Reduce use of natural resources
AND IMAGE Improve image of the industry

20170927_CII_Automotive_4.0_Summit_v5.pptx 21
Industry 4.0 allows companies to reduce capital employed utilization
and increase profit, thus strong impact on ROCE
ROCE evolution per lever for an average Tier-1 Auto supplier [%]
7% 42%

3%
11% Autonomous plant
steering system
Decreased (24/7)
unavailability due
to maintenance Optimized and
dynamic
Reduction of production
2% maintenance schedule
4% Increased
workforce
Improved overall
Investments in process reliability efficiency
15% automated (scrap, quality,
vehicles / cobots rework) Reduced machine
Reduction of
solutions (incl. park / tangible
launch time and Quicker &
equipment's, IT, ..) assets
costs automated
Reduction of changeover and Reduced stocks
Better reliability
at production logistics workforce machine steering Price premium for
start & mistakes Investments in mass
smart systems customization

Before Industry 4.0 Virtual Automated flows Smart machines Predictive Cyber-production After Industry 4.0
industrialization maintenance system
Machine park:
% Profit -30% less
(EBIT)
6.0% 1.2% 0.9% 4.6% 0.8% -0.4% 13.1%
Direct Labor:
-50% less
Asset
rotation (*)
2.5 0.1 - 0.1 - 0.2 0.1 0.5 3.1 Indirect Labor:
-30%
Overall Total : -45%
Effectiveness
65% +6% 0,1% +9% +3% +7% 90%

Source: Roland Berger analysis (*) Sales / Capital Employed 20170927_CII_Automotive_4.0_Summit_v5.pptx 22

BACKUP

We have applied Industry 4.0 levers to a typical Tier-1 plant

Main parameters

Average plant P&L [EURm] Balance Sheet highlights Staff

> Capital Employed : 26% of sales > # of staff : 300 of which
of which: – 242 MOD
100%
– Working capital: 10% (of – 58 MOI
6% which 6% stock)
8%
31% – R&D & tooling: 8%
3%
– Tangible Assets: 22%
12% Direct labor
> ROCE : 15%
7% Indirect labor > Asset Rotation: 2.5 (Sales / CE)
5% Depreciation & Amortization
52% 7% Site costs (utilities,
rental, supplies,
services)
Operational KPIs
26% Parts & Components
> 65% TRS - Non TRS of 35% of which: > Scrap: 0.7%
– 5% due to maintenance > PPM: 8
– 6% due to change over
Raw Materials
26% – 6% due to product launch
– 8% due to scheduled break
– 10% due to a lack of activity /
Purch. Manufacturing R&D costs SG&A OI Sales changing need
cost Value Added

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 23

Manufacturing employment will come down. Plant staff is reduced
by 45% in the long term for the same volume of activity
Impact of Industry 4.0 on plant staff [# of staff]
-45%
300 -2 -28
Plant MOI 4 -107
58 24
MOD 10
97
-5 0 157 165
242 8
36 44
121 121

Before Virtual Automated flows Smart machines Predictive Cyber-production After Industry Additional After Industry 4.0
Industry 4.0 industrialization maintenance system 4.0 levers software experts

Plant MOI 58 -2% -4% -9% -3% -2% 36 22% 44

Plant controller 2 2 2
Plant HR 3 -10% -10% -10% -10% 2 2
Production MOI 15 -40% 9 9
Maintenance 12 -40% 7 7
Plant ME 7 -26% 5 5
PC&L 10 -28% -18% 5 5
Plant Quality/HSE 8 -12% -25% 5 5
Facility Mgt 2 -24% -18% -8% 1 1
Software experts - - +8 h/c 8
MOD 242 -10% -40% 121 121
Logistics 48 -50% 24 24
Machine operators 194 -50% 97 97

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 24

Productivity improvement will be partly compensated by additional
costs generated by systems automation
Impact of Industry 4.0 on value added [% Sales]

31.0%
3.0%
7.0% 6.0% -2.9%
1.0% 1.0% 2.7%
0.5% -1.0% 23.9%
1.0% 1.0% 1.5%
5.0% > Additional investments in > Additional -1.9%
automated logistics solutions investments in 6.0%
(AGVs, related equipments IT/ Systems > Reduce use of > New
and IT/Systems, Service) tangible competencies
7.0%
> Assumption : 100 MOD labor assets due to to steer 5.1%
cost replaced by 50 of flexible and process
automated solutions (15 of better used
Robots, 15 of equipment and machines 5.3%
12.0% 15 of Systems / IT)
6.0%

Manufacturing Productivity Additional OPEX Productivity Additional OPEX Impact of asset Add MOI staff Industry
added value on MOD and amortization on MOI and amortization reduction dedicated to 4.0 impact
for MOD for MOI new systems
CE 40% 5% -8% 32%1)
[% sales]

Additional OPEX Manufacturing costs Depreciation & Amortization MOI Cost MOD Cost 1) Including additional reduction of stocks and intangible assets
Source: Roland Berger analysis 20170927_CII_Automotive_4.0_Summit_v5.pptx 25
All countries have launched Industry 4.0 initiative, Germany
and US first, followed by China, Japan and rest of Europe
Worldwide initiatives & related investment announced
Declared Funding
Initiatives launched per country Objectives [EUR m]

Industrie 4.0 Commom approach BIKOM, VDMA & ZVEI 200

Create high quality manufacturing jobs & enhance
Advanced Manufacturing Partnership 2.0 US global competitiveness 2,000

Catapult centers Double manufacturing contribution to GDP 370

Intelligent factories clusters
Intelligent factories clusters
Revitalization / Robots strategy
Structure Italian manufacturing community to develop
41
& leverage research, with 4 projects
Support the development of 'Factories of the future" 8
Increase the productivity of service industries,
significantly raise the deployment of robotics by 2020 787

Made in China 2025
Industrie du futur
Turn China into a strong manufacturing nation with
priority on digitalization & modernization of 10 sectors
2,200
Support the development of specific products
(Efficient car, electric airplane, etc.) 1,000

Manufacturing Innovation 3.0 Create a manufacturing eco-system based on new 1,600

technologies/ encourage smart factories development

2010 2015 2020

Source: Interviews, desk research
20170927_CII_Automotive_4.0_Summit_v5.pptx 26
This development will have a positive impact on the economy as a
whole – EUR 79 bn potential for 6 key industries seen for Germany
Estimated potential for Germany [selected industries, EUR bn, Δ value add 2025 vs. 2013]
Value-added
Levers potential Enablers
Agriculture > More flexible and real-time production planning due to ad- 2.8 > Standardized
hoc connectivity of agricultural machinery +15% of interfaces & clearly
segment value add
defined interaction
Automotive > Versatile products due to flexible automation 14.8 protocols between
> Higher efficiency through integration of real-time data at R&D +20% of CPS modules
– Production interface segment value add
> Development of
Chemicals > Improved productivity through real-team usage of operating-, 12.0 intuitive interfaces
status- & environment-data in process monitoring +30% of for M2M interaction
segment value add
> Provision of stable &
Electrical > Increased configurability of world wide production processes 12.1 secure data
Engineering through real-time data transfers +30% of networks
segment value add
> Development of new
ICT1) > Enhanced product offering to offer solutions for easy-to-use 14.1 algorithms for cloud
& flexible real-time production-planning and -monitoring +15% of applications
segment value add
> Respect the to right
Mechanical > More innovation through network-like usage of operating-, 23.0 of co-determination
Engineering status- & environment-data of installed base +30% of of employees
segment value add

78.8
1) Information and Communication Technology 2) Assuming half of the average potential of the 6
Source: BITKOM, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 27
B.3 Key elements of
Industry 4.0 and select
case examples –
focus: automotive

20170927_CII_Automotive_4.0_Summit_v5.pptx 28
Industrial and automotive companies see large potential in Industry
4.0 – Targeted benefits range from engineering speed to sales push
Why do automotive companies plan use Industry 4.0?
Shorten development > Connectivity leading to improved interfaces with suppliers
cycles > The resulting time gain is a true competitive advantage

Attractive products and > Via networked systems located inside and outside company
efficient processes premises, enabled by horizontal and vertical integration

Mass customization > Respond flexibly to meet individual customization needs and
shortening production time through interconnection between
devices, corporate IT systems, and people.

Unique selling position > Trying to combine classic themes such as design with
through classic & digitization new aspects such as digitization

Optimized value chains > Dual approach: Sell Industrie 4.0 solutions and use them in
practical by itself to reduce complexity in the overall value chain

Productivity gains > Goal: 10% improved efficiency for 2018 by using a digital factory
concept, up-to-date ‘tools’, motivation and teamwork

Source: Roland Berger COO Insights, Company Websites, Deutsche Bank,, Germany Trade & Invest , ABC Advisory group 20170927_CII_Automotive_4.0_Summit_v5.pptx 29
As of today, product innovators clearly outpace process specialists
in terms of profitability – Industry 4.0 for further improvements
Key automotive supplier performance indicators by business model, 2013/2014 [%]
Revenue > Innovative products feature higher
4.3% 3.2%
CAGR 2007-13 differentiation potential and
greater OEM willingness to pay
EBIT margin
trend 2014 > High entry barriers through
8.1 intellectual property in many
Avg.=7.2 innovation-driven segments
6.4
> Competitive structure more
consolidated in innovation-driven
segments
EBIT margin
2013 > Higher fragmentation in many
process-driven segments drives
price competition
Product innovators1) Process specialists2)

Industry 4.0 seen as possibility to increase profitability for both kinds of suppliers as well as OEMs

1) Business model based on innovative products with differentiation potential 2) Business model based on process expertise (while product differentiation potential is limited)

Source: Company information; Roland Berger/Lazard 20170927_CII_Automotive_4.0_Summit_v5.pptx 30

Currently, many automotive companies have started Industry 4.0
pilots – Clear forecast on next steps depends on various factors
Industrie 4.0 application phases in existing European Automotive factories
Phase 1 Phase 2 Phase x
> Achieving full horizontal integration
Classic Isolated pilot In-company (shop floor level) and vertical
automation installations integration integration (machine level, plant
level, enterprise level)
> Completion of > Individual Phase y
Industry 3.0 Industry 4.0 > Leveraging new business models
activities based solutions for Inter-company such as low-cost mass
on automation selected "pain- customization, efficient rapid
and robotics points", e.g. in
integration
response (on-demand) production
maintenance or
logistics Phase z
> Achieving full integration of
New business companies in entire value chain, e.g.
models OEM, Tier-1, Tier 2, raw material
producer

Sequence of phases x, y and z depending e.g. on industry and

Implement-
ation status 90% 50% segment, availability of Industry 4.0 solutions, level of
consolidation etc.
Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 31
As of today, first Industry 4.0 solutions are already available or
under research in concrete projects
Currently available Industry 4.0 solutions
Cyber world Intelligent rush/new
order management
Self-reconfiguring machines
Cobotics Physical world
Demand driven provision of
Autonomous vehicles
material and tools
Smart handbooks and process
Modularized production
documentation
System and solution providers
Virtual process optimization Additive manufacturing

Predictive quality /
Smart storage bin
Enhanced Throughput
Demand-response energy
Logistics automation 4.0
management systems
User-friendly operations
Self-diagnosing machines
dashboards

Digital Prototyping Smart products

Mobile device based Unitary, RFID-based parts

machine control tracking

Centralized machinery planning Smart environment recognition

Interactive
Self-learning robots
robotics

Self-optimizing systems Predictive Maintenance

Potential solutions
Source: Roland Berger
Customer triggered
Augmented Virtual work preparation
lot-size 1 production
Reality
Existing use cases – In first use in practice
20170927_CII_Automotive_4.0_Summit_v5.pptx 32
Advanced technologies (Robotics, Big Data etc.), skilled workforce &
resource efficient systems are key elements of Industry 4.0
Elements of Industry 4.0
1
Robotics
> Improvement in productivity
and manufacturing efficiency
is driven by use of robots
7
Resource Efficient Systems
> Industry 4.0 has a positive
impact on the environment by
saving energy, water and other
resources
6
Skilled Workforce
> Skilled Workforce is an important
element of Industry 4.0 as
operations get more and more
specialized
Source: Roland Berger
Advanced and Intelligent Materials
> Advanced materials will propel
2
smart manufacturing to create
better products
Advanced Manufacturing Processes
3
> Technologies like Additive
Manufacturing allows shorter
Elements of product cycle and customization
Industry 4.0
4
Big Data
> Big Data analysis helps companies
run networked production system
Integrated Communication & Technology
> ICT allows higher levels of flexibility,
5
productivity, value and efficiency
20170927_CII_Automotive_4.0_Summit_v5.pptx 33
 B3 1 Industry 4.0 – Robotics

Industry 4.0 involves the use of Robotics to improve productivity and

manufacturing efficiency
1. Robotics and Industry 4.0 - Examples

YuMi Human Robot Collaboration ARENA 2036

> ABB launched a two-armed > Mercedes C-Class has its rear > ARENA2036 – Active
robot called YuMi in 2015 that axle built with human robot Research for Next Generation
is specifically designed to collaboration (Kuka robot) of Automobiles in Germany
assemble small parts > More than 500,000 rear-axle > Academicians will work on
alongside humans gear boxes have been built for versatile production and
> Dual arm that includes flexible Daimler AG as a part of an functionally integrated fiber
hands, parts feeding systems, assembly pilot program composite lightweight
camera-based part location & > The robot is adept at force constructions in the series
state-of-the-art robot control guided assembly tasks production of automobiles

Source: ABB website; Arena2036 website; Rethink Robotics; Robotics.org; Secondary research; Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 34
 B3 2.A Industry 4.0 – Advanced Materials

Advanced materials are expected to form the basis for smart

manufacturing organizations
2.A Examples of Advanced Material – Light Metals, Composites, Steels
Advanced Materials
> Magnesium > Titanium
Light Metals – 22% of weight of iron and 65% of – As strong as steel
aluminium – Corrosion resistant
> Titanium
– Magnesium alloys have 50% the – High melting point
> Magnesium strength of steel and are stiffer than
> Aluminium most plastics. – Requires specialized machining
and annealing processes
– They are prone to corrosion
> Applications
> Applications
Advantages – Aerospace applications: used in
Composites – Transport application, textile and Jet engines and airframes
printing machinery of few
> Carbon Fiber Advanced
> Kevlar materials
> Nano Composites > Carbon Fiber > Nano Composites
> Metal Laminates – Carbon Fiber is lightweight (75% – Nano composites have a
lighter than steel) higher heat deformation
– It has high stiffness (12 times that of temperature than PP1
steel) – 98% more stiff than PP
Steel – It is more durable (infinite fatigue life – Improved fire resistance to PP
with suitable design parameters) > Applications
> Dual Phase Steels
> Applications – Engine covers, blades for
> Trip Steels
– Car bodies, seat frames, crash vacuum cleaners, power tool
> Bale hardening steels
helmets housings

1) PP - Polypropylene

Source: VCAMM, AZO Materials, Scientific American, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 35

 B3 2.B Industry 4.0 – Smart Materials

…...along with Smart materials that are revolutionizing how products

are created by their ability to respond to an applied external stimulus
2.B Popular examples of Smart materials
Piezoelectric > Materials that produce a voltage when stress is applied and vice versa
material > Structures made from these materials can bend, expand or contract when a voltage is applied
> The most common application: touch screens (create voltage when force is applied)

Shape memory alloy > A shape-memory alloy remembers its original shape and that when deformed returns to its pre-
deformed shape in response to temperature or electromagnetic fields
> It is a lightweight, solid-state alternative to conventional actuators such as hydraulic, pneumatic, and
motor-based systems. They have applications in automotive industry, aerospace, biomedical and
robotics

Self-healing materials > They have the intrinsic ability to repair damage due to normal usage with /without mild human intervention
> It lower costs of a number of different industrial processes through longer part lifetime, reduction of
inefficiency over time caused by degradation, as well as prevent costs incurred by material failure

Electro- > Polymers that exhibit a change in size or shape when stimulated by an electric field
active > The most common applications are in actuators, sensors and in robotics in the development of artificial
polymers muscles. They can undergo a large amount of deformation much more than Piezoelectric materials

Magnetostrictive fluids
Source: Secondary research; Roland Berger
> Materials exhibit change in shape under the influence of magnetic field and are used in sensors & actuators
> In the future, these materials might be used in the fuel injection system. A specific amount of fuel injected
at a higher frequency could greatly improve the efficiency of car engines
> Additionally, these materials can be applied in active noise cancellation, vibration cancellation and sonar
20170927_CII_Automotive_4.0_Summit_v5.pptx 36
 B3 3 Industry 4.0 – Advanced Manufacturing Processes

Advanced processes such as additive manufacturing / 3D printing

will impact efficiency and sustainability of manufacturing
3. Additive Manufacturing (3D Printing)
Starting point Solutions provided by Additive Manufacturing Impact
> Improved prototyping and small series
> Shorter Product Life > Additive Manufacturing is the direct production capabilities
Cycles increases the transfer of digital data (3D CAD data) into – Wide range of materials (plastic/metal)
need for fast availability products and colours
of realistic, cost efficient > Objects of virtually any geometry can be – Flexible production of small series
and fully functional produced by this technology even in high – Extremely short Supply Chains are
possible
prototypes performance materials like Inconel or
– New design and engineering
> Customization of Hast-X processes are possible
design elements is a > Due to the direct printing tooling is not > New design capabilities
growing trend, generally required – Functional integration
required in smaller > Production cost are independent from the – New component capabilities like

volumes batch size weight optimization or optimized heat

> Further requirements for
light weight construc-
tion or e.g. improved
combustion processes
require new design
solutions and materials
> Demand for a flexible
and agile decentralized
production
> New manufacturing capabilities allow new
opportunities for light weight designs or
performance improvement (e.g.
combustion)
transfer
> New Business Models
– B2B business from an emerging
supplier base for Additive
Manufacturing
– B2C via internet platforms
> Series production readiness
– As young technology is maturing and
achieving series production readiness,
significant cost decrease is expected

Source: Roland Berger, EOS, SLM Solutions 20170927_CII_Automotive_4.0_Summit_v5.pptx 37

 B3 4 Industry 4.0 – Big Data

Big data will help manufacturing companies run networked

production systems - a key element of smart manufacturing
4. Big data and its benefits
Survey Result of Impact of Big Data (% Respondents) Big Data and IIoT
Better Forecast Products/
46%
Production L5 IoT Enabled Governance and Planning IIoT enabled
Systems Next-Gen
Understand Plant Performance Systems
45% L4 IoT enabled business systems
across multiple metrics

Service and Support Customers faster 39% L3 Smart connected operations – IIoT
Enabled Production, Quality, Inventory,
Maintenance
Real Time Alerts based on
38% L2 L1 L0 Smart connected Assets –
analyzing manufacturing data IIoT Enabled Sensors, Instrumentation,
Correlation of Manufacturing and Controls, Assets, and Materials
36%
Business performance in
Correlate performance across
36%
Manufacturing and Big Data
multiple plants
Mine combinations of manufacturing > A manufacturing plant uses digital sensors, intelligent motors,
31% computerized machines, robotics and other technology which
and other enterprise increasingly generate large amount of data by a growing
Perform predictive modeling number of devices
31%
of manufacturing data > This big data when analysed can have a great impact on the
Improve Interactions operations of the plants which can be networked
31% > As the space continues to mature, it is likely that Big Data
with suppliers
Analytics for manufacturing will become part of the Industrial
Understand Customer requirements Internet of Things (IIoT) Platform for delivering both legacy
24%
for new products applications and Next-Gen systems

Source: CIO, ERISS, Forbes, LNS Research 20170927_CII_Automotive_4.0_Summit_v5.pptx 38

 B3 5 Industry 4.0 – Integrated Communication Technology

Information and Communication Technologies will affect Industry 4.0

by improving mobility and connectivity
5. Integrated Communication and Technology and its impact
ICT1)Tools Impact on Manufacturing Impact on Operations
Cyber – physical Virtual Manufacturing
systems (CPS) > CPS combined with IIoT/M2M and advanced data analytics
allows PRODUCTIVITY
Industrial Internet of – Remote monitoring of physical processes
Things(IIoT) and M2M QUALITY
– Real time communication and co-operation
– Performance management and continuous refinement of
Embedded System process
Production Technology
Customer Centric Production
Global Network > Integrating customer preferences in development and FLEXIBILITY
production processes
> Decentralized production networks/distributed manufacturing
Data Analytics and
Cloud Computing Circular Supply Chain
RESOURCE
> Remanufacturing of products, components and waste; EFFICIENCY
Drones and Robotics circular packaging
Smart Services
Augmented Reality > Creation of a cross-sector ecosystem of services with up and VALUE
Devices downstream integration
1) ICT – Information and Communication Technologies

Source: SMARTer2030 Report, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 39

 B3 6 Industry 4.0 – Skilled Workforce

Availability of competent and skilled workers are expected to drive

factories of the future which will create specialized jobs
6. Skilled workforce is required in all the industry going forward
Disruptive shifts in working environment Skilled workforce required in India by 2022 [in mn]
Building, Construction
Extreme & Real Estate 31.1
Globally Longevity Rise of Smart Transportation &
Connected Logistics 11.7
Machines and
World Systems Retail 17.3
6 Drivers of
Change Beauty and
Wellness 10.1
Super-
Computational
structured Furniture and Furnishing 7.2
New Media World
Organizations
Ecology Tourism, Hospitality and Travel 6.5
Handlooms &
Ten Skills for the future workforce Handicraft 6.1
Auto & Auto
Sense-Making Social Intelligence 3.9
Components
Novel & adaptive thinking Cross-cultural competency Media and
Entertainment 0.9
Computational Thinking New Media Literacy
Trans-disciplinarily Design mind-set Around 119 million additional skilled work force will be required by 24
sectors such as construction, retail, transportation logistics, automobile,
Cognitive Load Management Virtual collaboration and handloom by 2022

Source: IFTF Report-Future Work skills 2020, NSDC, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 40
 B3 7 Industry 4.0 – Resource Efficient Systems

Industry 4.0 is also expected to operate with resource efficient

systems which ensure less consumption of energy
7. Resource Efficiency of Industry 4.0 - Example
BMW's Intelligent energy data management for sustainable production Comments
> Industry 4.0 helps improve production costs
HOW? and quality, while minimizing environmental
> Using intelligent electricity meters, BMW constantly measures the energy impact, natural resource use, and energy
consumption of production facilities and robots and align them with a central big data consumption
network of the company. > One example of BMW factory: A comparison
> They plan to integrate it with existing systems that record the energy consumption of of three machines showed that one of the
building and supply structures, offering a valuable addition facilities required about double as much
electricity per unit tested as the other two.
BENEFITS The reason was a program error in the
ventilation’s run-time management.
> Because of these ‘smart meters’, deviations leading to excess consumption can be > In addition, the comparison of production and
identified early on. consumption data demonstrated that the
> Moreover, the data helps to prevent imminent disruptions or even breakdowns of machines used up an unusually high amount
individual production facilities or robots, thus ensuring the required premium quality of energy during breaks. This was due to the
of the vehicle production fact that during breaks, vehicles remained on
the test rigs, keeping the facilities from
TARGET automatically turning off
> Together with further optimization activities,
> Reduction in specific energy consumption per vehicle produced of >45% by 20201)
the continuous monitoring of the three
> Global energy savings in production due to iEDMS are supposed to reach 7% facilities via iEMDS resulted in total energy
annually savings of over 100,000 kWh in the first year
1) From the level in 2006

Source: BMW website; Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 41

Automotive OEMs already started to implement Industry 4.0 –
Currently several projects in pilot stage (1/2)
Overview of selected current automotive Industry 4.0 projects
Focus area Company Industry 4.0 Projects Partners

Production "Collaborative Robotics"; A new generation of safer, more user-friendly robots

works more closely alongside humans as a team in assembly line as a team
focus
"3D Printed Thumb"; 3D printing customized thumb that can reinforcement for
factory workers to help them to work safely and efficiently with minimum strain
on their hands.
"Gesture-based quality assurance"; Gesture-based quality assurance"; to
improve quality assurance process for painted bumpers by gesture interaction

"IWEPRO"; Modular/job-shop production with de-central intelligence

"mecPro2"; Model-based new development process for cyber physical systems

"smARPro"; Smart assistance for humans in production systems

"KapaflexCy"; Self-organizing capacity flexibility in human-cyber-physical system

"LUPO"; Performance assessment of autonomous production objects

Source: Company websites, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 42

Automotive OEMs already started to implement Industry 4.0 –
Currently several projects in pilot stage (2/2)
Overview of selected current automotive Industry 4.0 projects
Focus area Company Industry 4.0 Projects Partners

Production "Applied reference architecture for virtual services and programs"

planning/
maintenance "Synchronous production through partly autonomous planning and human-
centric decision support"
focus
"Collaborative Robotics"; A new generation of safer, more user-friendly robots
works more closely alongside humans as a team in assembly line as a team

"Condition monitoring" – Optimized up-time of Schuler presses in the key plant

in Wolfsburg

Logistics "RFID-based parts tracking"; Optimizing logistics processes based on RFID

and technologies for the automotive industry
production
focus "Optimization of cylinder head manufacturing" – With the help of data mining
technologies and real-time analytics capabilities

Customer "Intelligent headlamp technology"; Actuator-based systems for self-aligning

value through intelligent headlamp to improve road safety, incl. new production concepts
engineering "Intelligent heat transfer for efficient electric vehicles"; to develop a self-
focus regulating thermal management system for electric vehicles

Source: Company websites, Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 43

B. Opportunities,
challenges and way
forward for Indian
companies

20170927_CII_Automotive_4.0_Summit_v5.pptx 44
Indian manufacturing industry is currently not prepared for the
changes which Industry 4.0 brings
India currently has only 1/8th of automation rate compared to China
Current Automation Rate: Industrial Robots/1,000 Workers (2013) Comments

Republic of Korea 490

> Industry 4.0 is – besides other
challenges – seriously threatening
Japan 330 India's position as a low-cost country
Germany 225 The Leaders
> With increasing digitalization of the
USA 140 manufacturing Industry in the Triad,
cost advantage through availability
France 125
of cheap labour vanishes
Australia 75
The Aspirers > Low automation rate shows that
United Kingdom 60 India is not ready for Industry 4.0 yet
China 23 – urgent changes are needed
Brazil 8 > India needs to reposition itself, and
Russian Federation 3 The Laggards go beyond current efforts to focus on
'Make in India'
India 3

58
(Global Average)

Source: World Robotics 2013, Roland Berger Analysis 20170927_CII_Automotive_4.0_Summit_v5.pptx 45

Because while India has an advantage in terms of strength of the
workforce in the future, their skill training is a major challenge
Expected average age of countries in 2020; low levels of skills training in India
Present extent of formal skill training in India & skilling
India's demographic dividend: a large future workforce requirement
> Today 62% of India's population is in the working age group of 15- > It is estimated that ~170M (15-45 years age group) in the non-farm
59 years, with 54% of the total population below 25 years of age sector would need skilling, reskilling & upskilling
> The demographic dividend of India is expected to last for another > Similarly, in the farm sector, ~128.25M would need the same
25 years

Expected average age in 2020 [years] % of total workforce which has undergone formal
47
skill training [%] 96
46
40 80
75
68
29
52

India USA Europe Japan India USA UK Germany Japan South

Korea

20170927_CII_Automotive_4.0_Summit_v5.pptx
Source: National Skill Development Policy (http://www.skilldevelopment.gov.in/assets/images/Skill%20India/policy%20booklet-%20Final.pdf); Roland Berger 46
Industry 4.0 will also have fundamental impact on traditional ways of
doing business in India
Impact of Industry 4.0

1 Flexibility / Mass
customization
> Ability to reduce changeover time – seamless production change
> Dynamic product schedules allowing real time adaptation to customer needs

2 Direct client > Closer relationship between producer and customers

> Disintermediation and change of business rules
relationship
> Development of market specific solutions relevant for Indian production system

3
> Required workforce would move from blue collar jobs to software operators
Higher demand > Reduced share of labour cost and upward movement of India in the value chain
for skilled labour > Higher labour work quality achievable on a broader scale with implementation of smart manufacturing
> Less working forces in daily operations due to automated robotics
> Increase machine up time & utilization; reduce breakdown time due to conditional maintenance

4 Asset
rotation
> Reduce stocks along the value chain
> Increase in efficiency but complemented with better physical infrastructure

5
Decentralization > Reduce impact of size / scale effect – Ability to decentralize processes
/ Regionalization > Possibility to relocate production process close to customer needs
> India centric manufacturing which is not for exports but for India's advantage

6 Fast-product > New product industrialization is performed seamlessly and without disruption
launch > People are guided through virtual tools to adopt new products and have a better product experience
> Simultaneous global launches would be possible

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 47

….by negatively impacting the cost differential India enjoys

Industry 4.0 will reduce cost advantage of low-cost labour countries

Germany: Expected cost reduction in next 5 yrs. Germany: Expected efficiency increase in next 5 yrs.

>20% 21% Ø 13.8% >20% 37%

11-20% 38% 11-20% 36%

0-10% 41% 0-10% 27% Ø 17.9%

Cost advantage India vs. Germany [RB est.] Comments

Current cost advantage Industry 4.0 > Industry 4.0 promises substantial cost savings for German
companies, 1 out of 5 firms believe they can save >20%
within the next 5 years
25-30%
<15%
> India currently has a cost advantage of 25-30% to developed
countries like Germany; China has a cost advantage of 20-
22%, and Indonesia 30-34%
> With a more efficient use of resources, these cost
advantages will significantly reduce thereby limiting
manufacturing in low-cost countries

Ø Average
Source: Consulting reports; Roland Berger Analysis 20170927_CII_Automotive_4.0_Summit_v5.pptx 48
Getting prepared requires to address key challenges

Risks / Challenges Industry 4.0

COMPETENCES New competencies emerging : data scientist, developers, data managers, etc.
DEVELOPMENT Education of people at all level
Flexible labor environment
LABOR FLEXIBILITY
Entrepreneurial contract
New qualification of tasks (new tools, tasks and methodologies)
SKILL EVOLUTION
Evolution of jobs : less repetitive tasks, more client oriented tasks

CYBER SECURITY Ensure protection of data and technologies

LEGAL & STANDARDS Create standards/ norms to support disruption

ENVIRONMENT Develop common infrastructure (e.g. RAMI4.0)

20170927_CII_Automotive_4.0_Summit_v5.pptx 49
The case of Industry 4.0 shows, how smart mfg. has the potential to
change the manufacturing landscape – India needs to take action
Implications for India
Summary & Outlook
> Industry 4.0 is – besides other challenges – seriously
threatening India's position as a low-cost country
> With increasing digitalization of the manufacturing industry
the current cost advantage of 25-30% over Western
countries diminishes to less <15% - considering additional
logistics and supply risks, manufacturing in the home
country instead of in low-cost markets becomes a viable
option for Western firms again
> India has an extensive pool of well-trained engineers and
software developers – this advantage is not yet tapped to
make Indian manufacturing companies work at the forefront > Ensure that Industry 4.0 does not remain a
of Industry 4.0
Source: Roland Berger
From 'Make in India' to 'Make it Smart in India'
> Create environment to drive low-cost
manufacturing now. Leverage China's move
from make to innovate and compete effectively
against other low-cost options (Vietnam,
Indonesia, etc.)
> Create awareness in manufacturing sector
that Industry 4.0 has the potential to
dramatically change the manufacturing world
map
> Develop a concept and a strong incentive
program to increase automation across the
country
'threat' – but rather a great opportunity to
evolve manufacturing to the next level
20170927_CII_Automotive_4.0_Summit_v5.pptx 50
 Structured approaches to identify Industry 4.0 impact on companies
need to answer three key questions
Key questions to secure I4.0 initiative

A > What is the full potential of Industrie 4.0 technologies for CLIENT Operations ?
What is the overall > What is the economical benefits (ROCE, Margin, ..) ?
vision of Industry > Which performance KPIs targets can be achieved ?
4.0? > What is the impact on Métiers / Skills and Competencies ?

B > What are the most critical pain-point ?

Key How to quickly > What are the root causes ?
questions leverage solutions > Which solutions could help, leveraging I4.0 technologie (Data, IIoT, Automation, etc..)
to pain-points? > How to implement quickly

C > How to encourage Industry 4.0 pilots led at local level, so as to: create disruption in
existing processes, enable agile working modes (test & learn), involve local management
How to federate
and manage all > How to provide support to pilot teams (resources, competence, etc.), challenge outputs
the initiatives? > How to ensure consistency of initiatives, break silos and involve all necessary
stakeholders and prepare flow down to the full supply chain

20170927_CII_Automotive_4.0_Summit_v5.pptx 51
A structured 3-phase approach to frame Industry 4.0 vision and
priorities can deliver a tailor-made roadmap in 10 weeks
Proposed approach for our feasibility study
1 Product / process 2 Opportunities for COMPANY 3 Strategic roadmap
trends and issue for COMPANY
analysis
A VISION: 4.0 NEW DISRUPTIVE OPERATIONAL MODEL
> Benchmark possible disruptive operational models
> Identify and > Create scenarios for the selected model > Design and
characterize main > Build high-level Business Case select Target
COMPANY 4.0 > Assess impacts on COMPANY organization
Models
initiatives (scope,
stake, stakeholders,
maturity, etc.)
B OPERATIONS IMPROVEMENT THROUGH 4.0 LEVERS
> Identify and describe pain points (gaps of performance) > Overall impact
Structu- Vision
> Define root cause on competences, Action
> Realize a 360° ration and
> Identify opportunities to leverage Industrie 4.0 technical levers FTEs etc. plan
diagnosis of the workshop > Quantify solutions through individual business cases blueprint
manufacturing > Prioritize and select future POCs
processes to identify > Create strategic
potential additional
areas for
C CONTROL TOWER: FOLLOW-UP OF 4.0 INITIATIVES
PORTFOLIO roadmap
improvement: > Manage the portfolio process of 4.0 initiatives (gates)
> Ensure consistency with overall Industrie 4.0 vision for COMPANY
> Prepare deployment of successful pilots at Group level
> Directly support critical/complex initiatives

3 WEEKS 6 WEEKS 1 WEEK

Source: Roland Berger 20170927_CII_Automotive_4.0_Summit_v5.pptx 52

Industry 4.0 operations improvement follows a rigorous, step-by-
step methodology to prioritize promising Industry 4.0 opportunities
Detailed selection process

I Pain points II Identification of root III Industrie 4.0 technical IV Individual business V Prioritization and
characterization cause levers cases selection of future POCs

Before Industry
4.0
Virtual
industrialization
Automated
flows
Smart
machines
Predictive
maintenance Prioritization matrix
Client Information/ Financial KPis
"Virtual" Production facts ROCE 15% 4% 2% 11% 3%
routing OI [% sales] 6.0% 1.2% 0.9% 4.6% 0.8%
Building automation Analyses
Information/ Asset rotation (Sales/CE) 2.5 0.1 -0.1 -0.0 0.1
facts Capital Employed [% sales] 40.0% -2.0% 1.0% 0.9% -1.2%
Factory 4.0
Statement 1.1 - Working Cap. 10% 0% 0% 0% 0%
ERP System
Information/ - R&D & tooling 8% 0% 0% 0% 0%
M
Analyses facts - Int. assets 22% -2% 1% 1% -1%
MES System
Issue 1
M
Staff
M Core issue MOD 58 (2) (4) (10) (5)
M Analyses Information/
facts MOI 242 - (24) (97) -
Controls & Automation Statement 1.2
MES System
Operational KPIs
Analyses Information/ Eq. non utilization (Non TRS) 35% -6% 0% -9% -4%
facts
Issue 2 - Product launch 6.0% -4.2% 0.0% 0.0% 0.0%

Information/ Automated Automated Automated Monitors to - Maintenance

- Change over
5.0%
6.0%
0.0%
-1.8%
0.0%
0.0%
0.0%
-3.0%
-3.5%
0.0%
facts supplying changing collecting visualize - Scheduled break 8.0% 0.0% 0.0% -6.0% 0.0%
- Lack of activity 10.0% 0.0% 0.0% 0.0% 0.0%
materials machine tools cutting chips the status Scrap [% sales] 0.7% 0.0% 0.0% -0.2% 0.0%

> Identify the precise
manufacturing process
affected by the issue (support
function, logistics, core
operation, …)
> Define the precise symptom
of each issue and associated
performance gap (cost or
KPI):
– Reliability
– Availability
– Maintainability
– Safety
Source: Roland Berger
> Determine the root cause of > Define potential technical > For each of the technical > Assess the accessibility of the
the pain point: solutions of different nature: levers: technical solutions with impact
– Process inconsistency – Internet of Things – Quantify the gains on:
– Lack of data transparency – Big Data / Analytics / (Operating Income, Capex, – IT systems,
– Gap in Artificial Intelligence Opex…) – Competence and training,
competence/knowledge – Automation, robotics, – Assess corresponding – …
– Lack of anticipation cobotics investments > Prioritize and select potential
– Problem of – Additive manufacturing cases based on their Stake
communication/localization – Simulation and Accessiblity
– … – Augmented reality
– System Integration
(middleware, PLM-MES)
– Cyber security
20170927_CII_Automotive_4.0_Summit_v5.pptx 53
RB has supported several clients globally and in India – several robust
tools and frameworks to help you succeed in this new environment
Our offerings
Users (discrete, process industry)
(focus on efficiency improvement)
1 Long term vision of Industrie 4.0
> Potentials (market, sales, cost…)
> Roadmap development
> Operations concept of the future
> Impact on clients bus. models
2 Operations improvement
> Addressing pain points root causes /
performance gaps
> Developing solutions leveraging I4.0
technologies
3 PMO work
> Structuring digital initiatives
> Anticipating Skills & Competencies
change
4 Partnership selection
> Technology selection
> Partnership / vendor selection
Enablers / Providers (focus on long term Governments
strategy and product portfolio) Industry assoc.
5 Scenarios 2025 9 Potential analysis for countries
> Future plant types > Framework optimization within a country or
> Potential business model industry
> Technology demands and competitor trends > Development plan for industries or regions
> War gaming > Studies and surveys
> Product / technology portfolio
> Implementation preparation
6 Portfolio of technologies
> Technology radar
> Technology portfolio management
7 Building and dominating new markets
> New business models
> Protecting current business
> Roadmap and implementation plan
8 Clients business models
> How does I4.0-technologies impact
clients business modells
20170927_CII_Automotive_4.0_Summit_v5.pptx 54
C. About Roland Berger
and CII

20170927_CII_Automotive_4.0_Summit_v5.pptx 55
About Roland Berger

Roland Berger, founded in 1967, is a global Top 4 strategy consulting firm and the only leading global consultancy of European origin. With
2,400 employees working in 36 countries, we have successful operations in all major international markets. Our 50 offices are located in the
key global business hubs.

Roland Berger advises major international industry and service companies as well as public institutions. Our services cover the entire range
of management consulting from strategic advice to successful implementation: e.g. new leadership and business models; innovative
processes and services; M&A, private equity and restructuring; and management support on large infrastructure projects.

At Roland Berger, we combine sound analyses with creative strategies that generate real and sustainable value for the client. We develop
and consolidate our expertise in global Competence Centers that focus on specific industries and functional issues. We handpick
interdisciplinary teams from these Competence Centers to develop the best solutions.

Roland Berger has been operating in India since 2012 and currently has offices in Mumbai, Delhi, Pune and Chennai. We have worked with
almost all leading domestic and MNC OEMs and suppliers on a wide variety of strategic and operational topics. The firm in India is led by Dr.
Wilfried G. Aulbur.

Dr. Wilfried G. Aulbur

Rahul Gangal Jeffry Jacob Dr. Premendra
Managing Partner, India
Partner Principal Principal
Member, Global Supervisory Board
M : +91 81308 31818 M : +91 88793 87635 M : +91 88796 34896
M : +91 99206 30131
E : rahul.gangal@rolandberger.com E : jeffry.jacob@rolandberger.com E : premendra@rolandberger.com
E : wilfried.aulbur@rolandberger.com

20170927_CII_Automotive_4.0_Summit_v5.pptx 56
The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering industry, Government, and civil
society, through advisory and consultative processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in India's development process. Founded in 1895, India's
premier business association has over 8,300 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over
200,000 enterprises from around 250 national and regional sectoral industry bodies.

CII charts change by working closely with Government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business
opportunities for industry through a range of specialized services and strategic global linkages. It also provides a platform for consensus-building and networking on key
issues.

Extending its agenda beyond business, CII assists industry to identify and execute corporate citizenship programmes. Partnerships with civil society organizations carry
forward corporate initiatives for integrated and inclusive development across diverse domains including affirmative action, healthcare, education, livelihood, diversity
management, skill development, empowerment of women, and water, to name a few.

The CII theme for 2017-18, India Together: Inclusive. Ahead. Responsible emphasizes Industry's role in partnering Government to accelerate India's growth and
development. The focus will be on key enablers such as job creation; skill development and training; affirmative action; women parity; new models of development;
sustainability; corporate social responsibility, governance and transparency.

With 67 offices, including 9 Centres of Excellence, in India, and 10 overseas offices in Australia, Bahrain, China, Egypt, France, Germany, Singapore, South Africa, UK,
and USA, as well as institutional partnerships with 344 counterpart organizations in 129 countries, CII serves as a reference point for Indian industry and the international
business community.

Confederation of Indian Industry

The Mantosh Sondhi Centre
23, Institutional Area, Lodi Road, New Delhi – 110 003 (India)
T: 91 11 45771000 / 24629994-7 • F: 91 11 24626149
E: info@cii.in • W: www.cii.in

20170927_CII_Automotive_4.0_Summit_v5.pptx 57