Industry 4.0: Creating a Standard
In this interview, I sit down with Mentor Graphics Valor Division's Dan Hoz, general manager, and Ofer Lavi Ben David, product line director, to discuss where Industry 4.0 is taking the industry, and the changes it will bring to both large and small companies, customers, and the supply chain, including how Mentor connects different machines on the shop floor to provide universal Industry 4.0 visibility.
Barry Matties: Please start by telling me about your positions at Mentor Graphics and what you're responsible for.
Ofer Lavi Ben David: I'm responsible for the shop floor products from the Valor division of Mentor Graphics.
Dan Hoz: I'm the general manager of the Valor division.
Matties: Good, so what does that mean? I will start with you Ofer.
Lavi Ben David: I look after everything from product development and marketing activities, to sales and business responsibilities for the products within the division. I work with our sales department, our marketing department, and of course our factory R&D resources.
Hoz: I'm the General Manager of the Valor Division within Mentor Graphics. Mentor Graphics acquired us six years ago. I was the CEO and the President of Valor Computerized systems. It was a listed company. The goal or the strategy for Mentor was to get into an adjacent market and expand their solutions—not just within the design market and the design space, but also into other spaces and markets. They found the design for manufacturing flow to be a very interesting one, and so far it has proven to be a successful one.
That was Valor’s strength. Today, we are still a division within Mentor. I'm responsible for both R&D and marketing. We have a direct sales channel, which is the FPO. We also sell through our World Trade organization, which is the largest sales department within Mentor. We also have customer support and a legal department and all the other things we get from the corporate side.
Matties: From the Valor side, obviously you've been affiliated with Mentor for many years. What sort of changes have you seen recently, from your perspective, and what are the real shifts going on there?
Hoz: One of the most recent changes is Industry 4.0. Its six design principles are perfectly aligned with the way we developed our solutions quite a while ago because of business needs that came from our customers. As such, we are a company that can really deliver solutions for Industry 4.0. I'm not just talking about technical solutions, but also at the business level starting from design all the way down to manufacturing. If it's okay with you, I want to show you and walk you through a short presentation.
We are talking about the design for smart factories of the future, and basically the need or the driver in the market is of course to address increased level of complexity and customization, shorten product lifecycle and increase process globalization. This is about designing in one place and manufacturing in the same place versus designing everywhere and building anywhere. The six principles I mentioned are connectivity, decentralization, human-machine interactions, virtualization, modularity and real-time capability. If we talk about connectivity, this is the ability of all the players to connect via the internet of things—I'm talking about humans, machines and factories. Decentralization is also important.
Matties: That's probably the largest area.
Hoz: You're right. This is the ability of systems to make decisions on their own and this is what we calla “single machine factory”. Now, we look at the solutions to support the needs of the six principles. We start with the NPI—a very early stage in the design flow. Taking the design, going down through the machine programming to understand which machines you want to use. You schedule it and then you start manufacturing it. There's process preparation where you do the machine programming, the documentation, and production portability, which is extremely important for this industry 4.0., which is just about software. Industry 3.0 was about hardware.
Matties: It's about software and data.
Hoz: It's about the data—where you can collect the data and then how you normalize the data, so everyone can speak the same language.
Lavi Ben David: In that aspect, I think we are also in a very good position because over the years we have had machine vendors where everyone comes in with their own proprietary interface. What we were doing on the shop floor was connecting and cooperating with those big providers to connect and communicate with their machines and overcome this challenge of a big environment with many protocols, many languages and different capabilities from the machines that are a separate ecosystem in the factory. We are coming to them with our ability to connect those machines and then provide a single, universal communication protocol for these interfaces. I think although we are not an equipment or hardware provider, with our capabilities to connect to the different machines on the shop floor we are in a position to provide this universal Industry 4.0 visibility.
Matties: It sounds like you're coming in as a package or a total solution, from design to completed product.
Hoz: If you look around through software providers that might have an Industry 4.0 solution, most will only talk to you about the manufacturing, per se. We are taking it a few stages earlier, from design. That's the advantage and this is what we call the left shift concept—every time you can identify something at an earlier stage, it will probably save you 10 times the amount it would cost to repair an error detected at later stage.
Yesterday, there was a very nice NES panel discussion here. There were six people talking from different companies and the last question was, "I work through so many processes and so many machine vendors in so many spaces. Everyone speaks different language. Can we have a standard language for everything like in other spaces, like the semiconductor spaces?" In the past, we used a format called ODB ++. That's a very elegant way of saying 'getting the data'. We came up with that. Now we are going to do the same for manufacturing. It's going to be a standard language for everyone that will enable them to get the data, collect the data, normalize it and share it between the different machines.
Matties: And the machines can be connected universally? And when I say universally, I don't mean from machine to machine in one factory, but across the globe—like being able to have my machine in Brazil talk to my machine in London.
Hoz: Without naming names, a customer of ours in Brazil that runs some programming for his product said, "Okay, I want to use this programming now in China, how do I do that?" We sent his manufacturing data package over to China and they got the programming, the set of instructions, and everything was documented. They went to the lines and programmed it and then started to manufacture the product.
Matties: This is part of the human machine interaction, and the idea is that we're really limiting that with 4.0, right? There's still an interaction, but it's reduced.
Hoz: Yes. We do see it happening and everything will be automated. I think that we'll get more people or customers that say, "Okay, what about my job?"
Matties: What do you say to that?
Hoz: Everything is going to be automated, that's why we come in. We will be able to take you to the next level, to do something smarter that will challenge you but give you the opportunity to contribute more.
Matties: In some cases, the reality is those jobs might go away. That's just the reality, because we're reducing our labor by bringing in smarter systems.
Hoz: It's about lifestyle. We want to have a better lifestyle. We want to do things much easier than what we do today. We want to use a system to connect everything to each other. We will enable that. This will become much cheaper to buy, so maybe even the blue collar guy that works in the factory level, in order to buy this device, he has to work something like a month. Now, he will be able to work only two weeks, in order to get this device.
Matties: There's a benefit. I'm not arguing with that. The Whelen Factory that just came in America, in New Hampshire, was spending $7 million a year on circuit boards in China, and for $12 million they set up a facility that is completely automated. That factory normally, without that automation and 4.0, would have been maybe 80–100 people, and they're doing it with 17.
Hoz: Two weeks ago I was in China and I visited different customers there. They're all talking about Industry 4.0, or as they call it IT2. They were talking about automating everything, computerizing everything and they were saying that in 10 years, instead of people going on the lines there, it will be robots that make it faster.
Matties: Because they realized that labor rates was their competitive advantage, but that's gone. Down in Dongguan and those areas in some cases I have that the government is coming in and saying, "You can't hire people. You have to automate." They say it’s because they don't want more traffic on the roads, but what they don't want to do is lose the industry to India or Vietnam or somewhere else.
Hoz: They've gone through this transformation faster than anyone else, although they're carrying like 1.4 billion people behind them. So many people but they still want to put robots there. If you look at our results, you will see that the majority of our business today is generated through the Pacific Rim and the Japan area, not in the U.S. This is where the business is, with big volumes and many manufacturing sites. It might be an American logo and an American company, but the manufacturing won't be done there. They want to have the design in one place. Send it over here to Europe and then ship it then to South America or wherever.
Lavi Ben David: A few years ago investing in software in China was never even considered. The answer was to put in another line and put more people there. Today, they invest in software to increase their performance, utilization and efficiencies and this is seen clearly with our results.
Hoz: Another aspect of Industry 4.0 is from the design stage and this is the digital product model. Everything is digitalized. You get the design, the schematic and the layout. You get the X-ray shapes from our library and then compare the CAD and the BOM. You compare, and you see that there is a match there and you send it to the panel design. Everything is automated. You do the product summary and start giving work instructions to all of the machines, like line programming, documentation, and stencil design. You then start programming the SMT line and the other machines in the process. Everything is digitalized and sent to the assembly.
What's good about this is that when we are finished doing that is there is feedback. In Industry 4.0, you have to connect with everything. What do you do with that information and data? You have to have a system that can really take the feedback and bring it all the way back to the designers, so next time they designs there's improvement and you will find the manufacturing constraints in zero time. The feedback loop that we do is another angle for Industry 4.0.
Our vision and strategy is to try to get into this design to manufacturing flow everywhere and start connecting everything together. This is about connectivity and modularity that will enable manufacturers to decide what goes on each machine line of each factory. They don't need to go back to the ERP system. They can make their own decisions and say, "Okay, I'm in China, and I'm going to send this one to Brazil. They can do it there." This is about globalization, in a nutshell.
Lavi Ben David: The discussion around design in Industry 4.0 is how to make the manufacturing better, but once you get the design into manufacturing, eventually the manufacturer doesn't have a lot of space left. We want to make the design more intelligent and want to find more of the problems so when it goes to the manufacturers there are less mistakes and less chance that it will fail. In order to do that, you want to give feedback for the designer about the manufacturability of the processes—feedback on connecting the machines, collecting all the manufacturing data, and the result of the manufacturing process. By sending this back to the designer the design will be more intelligent. This is where we think Industry 4.0 will also benefit the design process itself.
Matties: Now when we look at materials though, the other huge benefit is reduction of cost, reduction of inventory and less materials sitting because instead of having material there 48 hours in advance, it's there 20 minutes in advance.
Lavi Ben David: Yeah, and this is something that we’ve been doing for many years now. It's called material management, and basically this is something that we've done before Industry 4.0. This is where we have complete visibility of material across all manufacturing sites. We are also in a position where we can provide solutions for all generic equipment, regardless of which machines and tools you are using.
With the visibility of the right materials and the scheduled work orders, we make sure that materials are kept in the warehouse and are delivered just in time to the shop floor, just before they need them. We have a customer site where all the materials are being delivered by robots, as they need it, to go into the manufacturing line. The operator stays by the lines and they keep minimal manufacturing materials on the shop floor. When it is in inventory, we also form a transactional point of view and keep the material stock accurate in the supply chain management solution. The reordering mechanism is more efficient and provides huge savings on the materials.
Hoz: Some expensive components have a very short life and expiration. If you don't mix work orders and use it properly and program it in advance, so that you know exactly how to make the right order, you will lose money. It's not just talking about meeting some standards or that this is a nice trend that you need to adhere to, just look at the ROI. And of course, we also provide you with all the compliance requirements coming from the guys that sit at the top of the food chain or their customers.
Matties: When you order the material and manage it the way that you do, on a percentage basis, what sort of advantage have you brought for a customer??
Lavi Ben David: Close to 70% of the manufacturing costs is the labor to materials. It's a big money saver. With production, we can reduce the materials spending by around 70–80%. This is a very significant level. Now you can argue, "Okay, what's the ROI for that?" Usually, with our product there, the ROI is less than six months. They already advance all of their investment based on their saving of materials alone.
It's not only just on the arrivals of materials, but it's also on making sure the right materials go to the right place, because sometimes there could be leftover materials—materials not used on the next line but can be used in manufacturing. We're really optimizing the materials and material ordering all the way through the manufacturing site. It was huge savings for our customer that was using robots to collect leftover materials and put huge piles of materials on the shop floor. Now it's all clean and he just sends the robots to resupply to the machine.
Hoz: Just to give you an example, if you have a reel with 1,000 components and you want them on one work order. Let’s say you consume 700, what do you do with the rest? Do you put it back in the warehouse? First of all, once it has left the warehouse, the ERP system has an open balance. Now it turns into a work in progress and you cannot go back. You can go down to the finished goods, but you can’t go back. The 300 will probably stay there on the line. If they are lucky and there's another order they'll find something to do with it. If not, it will just be next to the machine in the trolley and then you will see it will add up. We eliminate this problem.
Matties: If you need 700, then 700 will show up and not 1,000.
Hoz: Exactly, and if you do have 1,000, we'll take care of the 300. We know in the production plan to use the next work order that will consume these 300 components and not others.
Matties: With the Industry 4.0 smart factory, there's a new kind of workforce that needs to emerge. It's not going to be the same kind of employee we've hired in the past. It's going to be somebody that might be more computer oriented, etc. How do you see it?
Hoz: To some extent they will be more computer oriented, but on the other hand we're going to make it very simple. You just connect it and it will work. Maybe at the engineering level there will be some people that will be more responsible. But it's not just about needing smarter people. We need people that will be more responsible because now they can extend the responsibility not just over one line, but it could be over a factory or even multiple factories. We can virtualize the manufacturing in Brazil from where I'm sitting now in China. It's giving them more responsibility, but they don’t necessarily need a higher IQ.
Lavi Ben David: We see also in China a lot of manufacturers, whether they are local or whether they are international, adapting those technologies and adapting to our software and using it for Industry 4.0 implementation.
Hoz: The nice thing about our solution is that we don't need to change everything that’s already in place. It shouldn't be an ERP system, in terms of the amount of implementation time that you have to put in or that you have to invest in order to implement that. We come in, connect the systems, get the data, collect the data, normalize it, and send it up.
Matties: You're standardizing the language, so that solves the problem and that's your advantage. Is there anything else that we should talk about that we haven't already covered?
Hoz: Maybe we can talk about decentralization, in terms of big data. Not to keep everything in one place, so you can put it at risk but decentralize it, or distribute it even.
Lavi Ben David: From a data collection perspective, instead of housing it in a centralized place that is in danger of failure when you have a complete shutdown, we decentralize it to a lot of small computers that can share and also store all the information, so it's decentralized at the collection level.
The last is big data, which suddenly everyone is collecting and there is a standard way to collect the data and everything is visible. We want to take this information in the big data capabilities and perform a sophisticated analysis and provide feedback to the designer and to the OEMs. We’ll provide them the visibility of how they can improve their products on the next cycle so it will be faster and have better quality with their design. This is really where the next step is from our perspective.
Hoz: In my view, the world of manufacturing starts at the design level. It's very important to capture everything into one picture and really control, communicate, and exchange data between the different entities here and run it back and forth. Our goal is to connect everything together. Industry 4.0 is an important milestone for these businesses and for these manufacturing houses but for us, it has been for years in the making. We would like to create an ecosystem for every company that manufactures anything to be able to virtualize everything and feel like all their global manufacturing can be controlled over one basic machine.
Matties: Now what you guys are describing is tier-one level. What about the smaller guys that have one facility? Do your solutions fit for them as well?
Hoz: It’s the same, but scaled. These types of factories are characterized with, in most cases, low volume and high mix because the mass production is done, in most cases, in cheaper places. These shops are expertizing in different types of manufacturing. They do lots of prototypes in very high mix but the volume is low. How do you change the programs like that? How do you move from one prototype to another?
Hoz: Yes, exactly. We take the program into account, computerize it and generate one program that can run all the different work orders at the same time. The changeover time is quick and there’s also the material savings and production planning in that respect.
Matties: The small guys have to feel like there's a solution that's affordable and achievable because they don't always have the infrastructure and resource to implement such systems.
Hoz: These board shops also need to have some kind of competitive edge from others. Everything is automated, everything is computerized and there is no room for mistakes for them. They cannot just afford buying another machine. Everything has to be optimized and everything has to be manufactured right the first time.
The connection with the designers is extremely important with the checks that they have to run and the programs that they have to do for the machines. The documentation that they have to provide to the customers is also extremely important. If you look at our customer portfolio, you'll see tier ones, tier twos, but also many others. We have more than 1,000 customers worldwide; not all of them can be tier one, but this is their aspiration.
Matties: Gentlemen, thank you so much for your time. I really appreciate it.