Siemens: The future is smart

Nestled on the edge of the Western Ghats in the eastern suburb of Kalwa near Mumbai is a sprawling manufacturing campus that belongs to German engineering conglomerate Siemens’ Indian arm, Siemens Ltd. A wide spectrum of industrial products ranging from motors to switchgear is made in this factory, which came up way back in the 1960s.

On a wet July afternoon after a torrential downpour, work at the unit churning out switchgear—a key component of industrial equipment—is on in full swing. The factory dating back to India’s pre-liberalisation, socialist era can easily be mistaken for a legacy manufacturing unit—outdated and inefficient. But Siemens’ Kalwa works is anything but.

Siemens, in India and globally, is increasingly focussing on digitalisation as the new way of life for itself and its diverse set of clients. “Customers don’t simply want a product like a motor anymore. They want to know how we can help them become more competitive and the answer lies in greater digitalisation and customisation,” Sunil Mathur, managing director and chief executive officer of Siemens Ltd, tells Fortune India. In 2017, Siemens decided to showcase its Kalwa factory as an example of how it can help brownfield industrial installations transform and become more efficient through automation and digitalisation. The factory uses a variety of solutions—physical and digital—developed by Siemens to allow the asynchronous manufacturing of different types of switchgear on a single production line. “We thought if we are going out and propagating digitalisation, we should be able to demonstrate how it makes economic sense for us,” Mathur says.

Before the transformation, 77 variants of switchgear were made on three production lines with a 21-second cycle time to produce one unit. After the transformation, over 180 variants are produced on a single line with a cycle time of nine seconds. To ensure a greater proportion of products pass quality tests in the first attempt, 22 quality checks were enhanced to 68, which has led to a 99% success rate.

At the heart of this process of transformation are two in-house technologies, which Siemens is also using to make life better for its customers.

The first is called Digital Twin, which allows for an end-to-end virtual simulation of the entire manufacturing process for any product. Say the product in question is a car. Digital Twin can help with its design, determine the materials to be used, and then test the product to evaluate intricate details like what impact a certain airspeed can have on the windscreen. Logically, this helps in cutting down time-to-market for a new product and makes the manufacturing process more cost efficient.

The second technology is called MindSphere, a cloud-based operating system based on the Internet of Things, which connects real objects to a digital ecosystem and harnesses analytics to drive process innovation.

The move towards digitalisation—coupled with Siemens’ legacy DNA of electrification and automation—is paying rich dividends for the company as the greater focus on marrying the physical and the digital is reflecting in improved financials and steady business from a sticky set of clients ranging from Mahindra & Mahindra’s (M&M) automobile factory in Chakan, Pune to the Taj Lands End hotel in Bandra, Mumbai.

In financial year 2017-18 (Siemens Ltd’s financial year is from October to September), the company reported a turnover of ₹12,725 crore, up 15.5% over the year earlier. Its earnings before interest and tax in the same period grew 30% to ₹1,316 crore. Net profit, however, declined 21% to ₹894 crore due to a higher ratio of tax paid by the company. Siemens Ltd was incorporated in 1922 and began manufacturing in India in 1957. It makes everything from gas turbines and distributed control systems for power distribution to propulsion systems for diesel locomotives used by the Indian Railways. The three pillars which the company is broadly banking on for future growth are digital factories (like the Kalwa plant), smart mobility, and smart infrastructure.

Happily, for Mathur, infrastructure, mobility, and manufacturing output were all buzzwords that finance minister Nirmala Sitharaman focussed on in her Budget speech in Parliament on July 5. From committing ₹100 lakh crore for infrastructure development to incentives for promoting electric vehicles and steps to modernise the railways and boost the metro rail network in cities, each of these focus areas for the government opens up business opportunities for Siemens. “Whether it is power generation, transmission and distribution, the development of smart cities and smart infrastructure, modernisation of the railways, Make in India or Digital India, Siemens is present in every single focus area for the government and looks forward to being a part of the journey,” Mathur says.

The government of India wants to increase the share of manufacturing in GDP from 15% to 25% in the next five to 10 years. This translates to an incremental manufacturing output of $700 billion, which would require an investment of $1.5-$2 trillion. Since there is a limit to domestic consumption, companies would need to look at manufacturing for exports and be globally competitive. This is where digitalisation helps.

Balkrishna Patil, general manager and head of powertrain CME (central manufacturing engineering) at carmaker M&M’s Chakan plant in Pune, says Siemens has been instrumental in enhancing the efficiency of the company’s manufacturing operations. “We wanted our plant to be flexible and future-ready with end-to-end integration of the machines, along with data integration and automation. Siemens is one company that has the in-house capabilities in all these verticals,” he says. Siemens has designed and implemented a manufacturing execution system at Chakan, which is the nerve centre of M&M’s operations and helps leverage data analytics to eliminate product defects, keep the production line flexible vis-à-vis varying demand for different types of products, and preventive maintenance of machines through diagnostics, which leads to shorter downtime and hence greater utilisation. A lot of this is achieved through the use of sensors that transmit data, which is stored and mined for insights.

Bhaskar Mandal, head of Siemens’ digital industries business, says that his division is helping customers enhance manufacturing operations across process-based industries (like cement, steel), as well as discrete products (like cars). “We are in an era of Industry 4.0 and the move up the technology scale is helping companies become more productive and cost efficient. Siemens is helping them connect the tangible, physical side of manufacturing with virtual technologies for greater impact,” says Mandal.

While factories may be the temples of modern India, as Jawaharlal Nehru had famously remarked, 40% of energy consumption in the country—where energy security and environmental concerns are of utmost importance—is on account of buildings coming up in cities because of rapid urbanisation. It is projected that India will become the most populous country in the world by 2025 and 70% of its population will stay and work in cities. While the government wants to establish smart cities in India, it is easier said than done because existing cities have cumbersome and complex infrastructure. Also, the multi-agency coordination, at a government level, needed to make a city smart by digitally empowering energy, traffic, and sanitation management may not always be possible.

Siemens, therefore, is focussing on ‘smart infrastructure’. “A smart city is just a collection of smart campuses, which can be a factory or a hotel or a commercial building,” says Robert Demann, head of Siemens’ smart infrastructure business. “When you group a lot of solutions like the Internet of infrastructure, charging infrastructure for electric cars, and smart metering for energy consumption under one roof, you get a smart campus.”

Take the case of Taj Lands End, a popular five-star hotel in Mumbai’s tony suburb of Bandra. A few years ago, the management realised that energy was the largest cost centre that was eating into the profits of the hotel. They got in touch with Siemens, which helped them install sensors and a patented algorithm that helped the hotel regulate temperature optimally.

“In the first year itself we were able to save 1.2 million units of energy (which according to commercial tariffs for power in Mumbai could be worth ₹12 crore) and we could recover the cost of the technology in 16 months,” says Nilesh Mahajan, director of engineering at Taj Lands End.

While micro campuses like hotels are one part of creating smart infrastructure in a city, the other crucial component is smart mobility. Through this vertical, Siemens predominantly works with the Indian Railways and metro projects coming up in different cities. Siemens started off as a signalling partner for the Indian Railways, helping the largest railway network in the world transition from manual interlocking to relay interlocking. It then started making components for rolling stock such as the air conditioning apparatus that runs on alternate current and propulsion equipment that helps propel diesel locomotives. It is also doing the electrification of metro lines in eight of the 13 cities that are building new metro lines. Siemens has since moved up the value chain and in October 2018 it was awarded the contract, in partnership with the Tata group, to develop Pune Metro Line 3 from Shivajinagar to the IT hub of Hinjewadi.

The future for Siemens’ mobility division also lies in digital. “Today we service the high-technology components used in the railway ecosystem on behalf of the railways. Tomorrow we want to move into ‘services’. We have already connected locomotives with a remote monitoring system that generates data which informs the railways of the need for predictive maintenance,” says Tilak Raj Seth, head of Siemens’ mobility division. Siemens has also developed a prototype, along with the Indian Railways, of a rail break detection system, which can help prevent serious accidents by routinely collecting data from sensors and identifying patterns that can lead to early detection of faults in the rails.

These new initiatives focussing on digital products and services have helped Siemens partially mitigate the slowdown it faced in new business from large infrastructure projects, which have slowed down due to a number of reasons.

“The strong focus on products and services has helped Siemens mitigate slowdown in industrial capex, as it has been able to capitalise on op-ex related spending,” say analysts Nilesh Bhaiya and Amit Shah of Motilal Oswal Financial Services in a recent report.

“Customer value enhancement is at the centre of all its digital initiatives where it strives to enhance efficiency in terms of energy savings, reducing development time, streamlining production, predictive maintenance of assets using AI etc.,” say analysts Dhirendra Tiwari and Abhijeet Singh of Antique Stock Broking in a recent report. Not only is India an important market for Siemens, it is also a crucial development centre for its global digital solutions. “India is a key focus market and plays an important role in our global digitalisation strategy.

Research and software development in India coupled with the sharpened focus on startup innovations… will actively drive the implementation of cutting-edge technologies,” Roland Busch, chief operating officer and chief technology officer of Siemens AG, said during the company’s Innovation Day event in Mumbai in May.

Around 4,000 software engineers based in India will collaborate with Siemens’ worldwide teams to develop, test, and commercialise applications in the areas of smart urban infrastructure, digital enterprise, connected mobility, future of energy and artificial intelligence.

Through its own transformation and that of its clients’ businesses, Siemens is demonstrating that combining nuts and bolts with bits and bytes can be good for business.

This was originally published in the August 2019 issue of the magazine.