In conversation: SAP's playbook for manufacturing reinvention

Industrial companies today are traversing a path of cautious reinvention

With ongoing and evolving disruption in the market – from changing customer preferences and supply chain challenges, to labor shortages and geopolitical tensions – companies are stabilizing operations on the one hand, while seeking business transformations on the other. From new business models to digitally empowered ways of working, the pressure is on to stabilize and reinvent at speed, at the same time, to compete.

“Transformation, resilience and sustainability – that's what we’re focusing on,” says Georg Kube, Global VP Industrial Manufacturing at SAP. Georg and his team are helping clients realize their own transformation ambitions by putting the pieces in place to enable a more connected, networked industry that can evolve with agility. We spoke to Georg about what it will take to encourage that change across businesses and industries, the five challenges manufacturing industry needs to overcome to advance, and why digital twin technology, while not new, is just beginning to realize its potential.

In conversation with Georg Kube, Global VP Industrial Manufacturing at SAP

Accenture’s Christophe Mouille, Senior Managing Director – Industry X and Supply Chain Partnerships lead sat down with Georg Kube, Global VP Industrial Manufacturing at SAP to find out about the five challenges manufacturing industry must overcome to advance, on the industry´s reinvention agenda and the role digital twins and open data platforms play in this context.

Where do industry and manufacturing companies stand in terms of leveraging digital technologies to achieve sustainable change? And what challenges do they need to overcome?

Last fall a major German newspaper led with the headline: Industry 4.0 – “Ten Lost Years.” The article argued that despite Industry 4.0 and digitization, productivity isn’t where it should be. I believe we could be further ahead, but without digitalization and industry 4.0 – given the ongoing disruption – we would be way behind. However, there are a few things not going well. We’re seeing huge implementations and lighthouse projects in large companies, but not across the board. 

There are five major challenges we need to overcome as an industry when it comes to industry 4.0:

1. Prioritizing technology over business scenarios. Companies talk about sensors, protocols and connectivity first, but the conversation should begin with business scenarios.

2. Taking a cost-driven approach. Initiatives are centered around making manufacturing more efficient. But the real opportunity is in the top line, not the bottom line. Companies should think about how to make more money instead of how to make money with less costs.

3. Thinking in silos. Many business initiatives are in manufacturing – the initiatives don't look at engineering, sales, or finance. That's a big problem, as many of these intitiatives have  financial implications across the entire enterprise.

4. Reluctance to share data. Digitalization requires data sharing, and if people do not share data, that’s a problem.

5. Limited scalability for small and medium-sized businesses. Many implementations work for big companies that have lots of resources. But they don’t scale for small and medium-sized businesses (SMBs) in the industry. When it comes to implementation projects, digital technology adoption and scalability is essential for faster SMB growth.

What is the wider industry’s role in addressing these challenges? What role do business networks play in this context?

We’ve all heard about Manufacturing-X – an initiative to digitalize supply chains in the industry – as the next big thing in the German and European marketplace. Manufacturing-X is an open data ecosystem, which uses concepts from Catena-X – the collaborative, open data ecosystem for the automotive industry – and applies it to all industries, with a focus on industrial manufacturing. It addresses many of the challenges I have mentioned, especially the data sharing aspect. Because in a business network where data is shared in an open and trusted way and where every participant maintains sovereignty over their own data, suddenly the reluctance to share data reduces. I believe business networks are key to ensuring industry success, especially open data ecosystems like Manufacturing-X and Catena-X.

How can manufacturers drive real value from circular business models?

A client we work with that produces roller bearings has so much pride in the fact that they recycle and remanufacture their products. They do this for the larger ones that you find in wind turbines, but not the smaller ones found in household machines. Yet it's a relatively simple product and remanufacturing makes total sense because it saves them about 40% on energy and raw materials by re-using what they already have. Another example: Volvo Construction Equipment completely refurbishes big engine blocks from construction machines. This is one of the most effective ways for industrial manufacturers to drive sustainability, because it directly reuses raw materials and reduces their energy consumption and carbon footprint. Savings of around 40 to 60 percent can be made, which is significant.