www.pwc.de

Digital Factories 2020
Shaping the future ofmanufacturing

91%

of industrial companies
are investing in creating digital
factories in the heart of Europe

98%

expect to increase
efficiency with digital technologies
like integrated MES, predictive
maintenance or augmented reality
solutions90%of respondents
believe that digitisation offers theircompanies more opportunities thanrisks

Digital Factories 2020: Shaping the future of manufacturing
Published by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC)
Authors: Reinhard Geissbauer, Stefan Schrauf, Philipp Berttram, Farboud Cheraghi
April 2017, 48 pages, 18 figures, softcoverAll rights reserved. Reproducing or microfilming this publication, storing and/or processing it via
electronic media is prohibited without the publisher‘s prior permission.
This publication was drafted for information purposes for the benefit of our clients. Its content
reflects the authors’ state of knowledge at the time of publication. When it comes to solving specificproblems, please refer to the sources stated in this publication or the contact persons mentioned.
All views expressed in this publication reflect the opinion of the individual authors providing them.
The charts provided in this publication may contain rounding differences.

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft adheres to the PwC-Ethikgrundsätze/PwC Code of
Conduct (available in German at www.pwc.de/de/ethikcode) and to the Ten Principles of the UN Global Compact (available inGerman and English at www.globalcompact.de).
© Mai 2017 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. All rights reserved.
In this document, “PwC” refers to PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, which is a member firmof PricewaterhouseCoopers International Limited (PwCIL). Each member firm of PwCIL is a separate and independent legal
entity.

Introduction

Introduction
Digitisation is radically changing the face of manufacturing companies. Digital
factories are transforming manufacturing, as companies implement innovativetechnology and look for employees with fundamentally different types ofqualifications. These new digital factories are being created in the heart of Europe to
produce highly customised products and systems.
Leading manufacturing companies are deploying a number of key technologies
to digitise production as well as their entire supply chain. These include big data
analytics solutions, end-to-end, real time planning and connectivity, autonomous
systems, digital twinning and worker augmentation, among many others. These
technologies provide significant efficiency gains and allow companies to produce
highly customised products, often at lot size one. But the full effect of digitisation is
only realised when companies are connected in real time to their key suppliers andcritical customers.
Our research shows that leading industrial companies have moved beyond pilot
projects and are already investing in rolling out digital solutions. In this report, we
provide an overview of how far industrial companies have come and what challenges
they face.
We also portray digital leaders who have already excelled in implementing
breakthrough Industry 4.0 solutions. Based on a solid digital strategy, theseindustrial pioneers have implemented innovative digital technologies, whileembarking on a complete digital transformation. And they have brought their mostvaluable resource – their employees – along for the journey through digital trainings
and a communication concept that motivates their employees to contribute to thedigital success of their companies.
Please reach out to us for a discussion about the results of this study and thedigitisation of your factories.
For more information, please see:www.pwc.de/industrie40, http://www.next.pwc.de/digital-factories

Dr. Reinhard Geissbauer
Partner and Head of Industry 4.0/Digital Operations EMEA

Digital Factories 20203

List of figures

List of figures
Fig. 1

Digital Factories 2020: Key messages..........................................................6

Fig. 2Nine out of ten companies are investing in digital factories..........................9

Fig. 3 	Efficiency and customer centricity are top reasons for expanding
digital factories......................................................................................... 11
Fig. 4 	Manufacturing companies to serve customers close to theirhome market............................................................................................. 12
Fig. 5 	European companies are focusing most strongly on digital
factory investments in their home markets................................................ 13
Fig. 6

Investment levels vary across industries.................................................... 15

Fig. 7 	Companies expect payback for digital investments in two
to five years............................................................................................... 16
Fig. 8 	Respondents expect both efficiency and revenue gains of 12%
on average over the next five years............................................................ 17
Fig. 9 	Average five year efficiency gains expected from digital factories
vary across industries................................................................................ 18
Fig. 10

Key technology figures of a digital factory.................................................22

Fig. 11	The adoption of key digital technologies is increasing in thenext five years...........................................................................................24
Fig. 12	Use of connectivity technologies and big data analytics is set toincrease dramatically................................................................................26
Fig. 13 	More than half of the respondents expect the size of their factory
workforce to increase or stay the same as a result of digitisation................ 31
Fig. 14 	Digitisation will have a strong impact on hiring, training andfactor cost of employees............................................................................32
Fig. 15 	The level of employee qualification is expected to increase overthe next five years.....................................................................................33
Fig. 16 	Finding and training qualified staff is a major people challenge.................34

4 Digital Factories 2020

Fig. 17

Blueprint for digital success......................................................................39

Fig. 18

Key facts about the respondents................................................................42

Contents

Contents
Introduction............................................................................................................. 3
List of figures............................................................................................................ 4
Executive summary.................................................................................................. 6
Strategy.................................................................................................................... 8
Philips: Innovation and collaboration..................................................................... 10
Nokia: The Conscious Factory................................................................................. 14
Benefits ................................................................................................................. 15
Technology............................................................................................................. 21
Bosch Rexroth: Lot size one through connectivity................................................... 25
Fujitsu: Smart factory on a digital campus ............................................................. 27
Continental Automotive: The interconnected factory.............................................. 29
People.................................................................................................................... 31
Magna Steyr: Drones, data and a digital twin.......................................................... 35
WITTENSTEIN: Future Urban Production............................................................... 37
Blueprint for digital factory success........................................................................ 39
About the survey.................................................................................................... 42
Related thought leadership..................................................................................... 43
Contacts................................................................................................................. 44
Acknowledgements................................................................................................ 45
About us................................................................................................................. 46

Digital Factories 2020

5

Executive summary

Executive summary
Digital factories are high on the top management agenda:
The results of our survey show that 91% of industrial companies are investing indigital factories. However, only 6% of all respondents describe their factories as
being “fully digitised” yet.
Digitisation supports customer centricity and regional manufacturing:Three quarters of the survey participants who are planning further investments indigital factories name regionalisation of manufacturing for better customer proximity
and individualised, flexible production as main investment reasons.
Digital factories strengthen “Made in Germany/Europe”:
A total of 93% of respondents planning further investments in digital factories
intend to locate some or all of these in Germany over the next five years. 77% of all
investments in the next five years will be for setting up new or expanding existing
digital factories in Germany and Western Europe. Digitisation is strengthening thecompetitiveness of Europe’s industrial center.
No quick payback – digital factory investments are strategic with an
ROI of two to five years:
Nearly half of our respondents expect to see an ROI of their digital operations
investments within five years, compared with just 3% who expect an ROI within
one year.
Fig. 1 Digital Factories 2020: Key messages

Top management must lead digitaltransformation − start now

High on the management agenda − 9 1% ofindustrial companies are investingin digital
factories
Digitisation supports customer
centricity and regional manufacturing

Implementing digital manufacturingmeans building a digital workforce

Companies make smarter decisions
using predictive data analytics andmachine learning

DigitalFactories 2020
Key messages

Technologies like cobots, digital twins
or augmented reality drive leaner andmore productive operations

No quick payback – digital factory
investments are strategic with an ROIof two to five years

Connecting factories internally and externally­­through an integrated MES is essential

Strategy

6 Digital Factories 2020

Benefits

Digital factories strengthen „Madein Germany/Europe“Technology

Companies expect efficiency gains of 12% over
five years

PeopleExecutive summary

Companies expect efficiency gains of a total of 12% over five years:
Efficiency gains are the main reason named by almost all (98%) respondents forinvesting in digital factories. Integrated planning, better asset utilisation, lower
quality cost and benefits from automation contribute to efficiency gains.
Connecting factories internally and externally through an integrated
MES is essential:
Connecting machines and other assets to communicate across a common
infrastructure is the first step to digitisation. Manufacturing Execution Systems(MES) plan and control production in real time, enhancing efficiency, manufacturingflexibility and asset utilisation. To get the most benefit, these systems need to be
integrated with the ERP infrastructure. That enables companies to digitise not justinternal processes, but across the entire supply chain as well.
Technologies like cobots, digital twins or augmented reality drive
leaner and more productive operations:
Digital technologies that help workers get more done, faster, and improve
processes and product quality are gaining ground fast – the numbers of companies
implementing them will double in the next five years. Collaboration between workers
and machines is a key area of development, as is creating digital twins – virtual
representations of factories. Augmented reality solutions help employees in building
zero defect products.
Companies make smarter decisions using predictive data analytics andmachine learning:
Artificial intelligence and data analytics are driving the digital factory; more thanhalf of the companies we surveyed already use smart algorithms to make better
operational decisions. Connecting the dots inside the factory and within thecompany ecosystem, as well as intelligent use of information, will be a “must-have” tostay competitive.
Implementing digital manufacturing means building a digital work­force:
Digital factories require a new way of working. The make-up of the workforce
will need to change, and companies will need to recruit and retain employees
accordingly. Data scientists need to find smart algorithms to improve operational
performance and smart man-machine interaction requires new skill sets. Digitaltraining programmes, as well as hiring external “Digital Natives” secure success inbuilding a digital factory.
Top management must lead digital transformation – start now.
The digital transformation of a company requires top management leadership andguidance. Now is the time to act, as competitors around the globe are embarking on
their digital journey.

Digital Factories 20207

Strategy

Strategy
Digital factories are high on the top management agenda
Nine out of ten industrial companies that we interviewed for this year’s survey are
investing in digital factories. In our global study on Industry 4.0 last year1, we notedthat companies had moved from talk to action. This year’s results and the responses
from 200 companies in Germany document a continued strong focus on digitisation.
Digitisation maturity levels vary widely, though. 6% of companies have already fully
digitised their factories and are leading the way. The vast majority – 85% of the
respondents – either say their factories use digital technologies widely, with someelements already connected (44%), or are using digital technologies for standalone solutions within their factories (41%). These figures demonstrate the strong
commitment that industrial companies in Germany place on bringing technologicaladvances to their factories. Over half of the respondents plan to expand theirfactories over the course of the next five years, which shows that there is still a long
way to go before factories are fully digitised.
Getting there will mean investing and partnering with internal and external
stakeholders and using open innovation. Philips, for example, is using this approachat its factory in Drachten (see Philips: Innovation and collaboration, page 10). It
will also mean hiring and developing people, and managing significant amounts ofchange by working closely together with employees to build trust and secure theircommitment. Nokia developed its vision of the “conscious factory” through this typeof collaborative approach. Factory workers and management from all around theworld came together to map out the company’s path for the future (see Nokia: The
Conscious Factory – supply chain management of the future, page 14).
Only a small portion of companies are not planning to make their factories digitalat all (9%). As the rest of our study will show, these companies risk lagging behindand losing competitiveness. Of the companies that have already invested in digital
factories, about a third believe they have already done enough and are not planning
further investments. Given the wide range of clear benefits that the digital factorybrings and that are outlined in this report, we believe these companies risk fallingbehind competitors who are taking a more proactive approach to digitisation andcontinuous improvement.

1

PwC (2016): Industry 4.0: Building the digital enterprise, http://www.pwc.com/industry40.

8 Digital Factories 2020

Strategy

Fig. 2 Nine out of ten companies are investing in digital factories
91% total potential

01101

Industry 4.0
Degree of digitisation
9%
Digital factory
not planned

41%
Use of digitaltechnologies for stand-­alone solutions

44%
Wide use of digitaltechnology, factory ispartially integrated
and connected

6%
Factory is completely
digitised

Q: Which of the following statements on the topic of digitisation and digital factory development best describes the situation
in your company? Please take your most advanced factory with relevant production volumes as a basis for your reply.
Base: All respondents

Digital factories support customer centricity and regional
manufacturing
Customer centricity is key for companies to survive in today’s competitive markets.
Companies are moving ever closer to their customers in order to react to changing
and dynamic preferences more quickly. Customers themselves benefit from tailormade products with little or no delivery costs. In some industries, entire value chainsare becoming more regionalised, as ‘just in time’ and ‘just in sequence’ logistics
strategies drive suppliers to be closer to their customers.
In fact, almost three quarters of our respondents who are planning further
investments name regionalisation of manufacturing as a main reason for setting up
or expanding digital factories (see Figure 3, page 11). Over half of them confirm
that the individualisation and personalisation of their product offering was one of
the main reasons for digitising their factories. Regionalisation efforts can also help
reduce transportation and logistics costs, a significant motivation for expanding
digital factories for nearly half of the respondents.

Three out of four respondents set up digital factories toreact to customer preferences more quickly.
Digital Factories 20209

Philips: Innovation andcollaboration
Philips develops high-quality, innovative products for aworldwide market in Drachten. These products aim to makelife more healthy and comfortable for people and include
Senseo coffee machines, Ladyshaves, hairstylers, hairdryers,
vacuum cleaners, beard trimmers, hair clippers, and wake-up
lights. Next to this, Philips Drachten has been the development
and production center of the advanced electronic Philips
shavers since 1950. More than 2,000 people of 35 different
nationalities work on the site, making Philips Drachten one ofPhilips’ biggest development and production centres in Europe,
taking the lead in applying advanced industrial innovation.
In the factory production engineers and production workers
manage product development and production side-by-side.
Joint development and production are supported by key digitaltechnologies, including automated assembly and digital twins,
robots, 3D printing and big data analytics. These innovative
digital technologies enable differentiation through “first time

10 Digital Factories 2020

right designs”, zero defect manufacturing and demand driven
supply chains. In future, Philips seeks to continually improve
its manufacturing towards further customisation and evenmore flexible research and development.
Philips’ Drachten site forms part of Innovatiecluster Drachten,
a group of 16 high-tech manufacturing companies uniquein Northwestern Europe, attracting employees and otherhigh-tech companies from all over the world. The network
also includes close collaboration with the regional and local
authorities as well as educational institutions. The initiative
helps strengthen and secure the future of the Drachten area asan industrial location in the northern Netherlands.

Strategy

Many companies are using digitisation to make their factories more agile, so they
can achieve far greater levels of flexibility and are better able to adapt to fluctuations
in customer demand. To get the most out of these factories, companies are making
investments to set up or expand factories in markets where they are generating
revenues. 40% of our respondents reported plans to expand production capacity
close to their customers (see Figure 4), and the numbers were even higher forlarger companies with an annual turnover of over €3bn. This customer focus isdriving production decisions more strongly than labour costs. Only about one fifthof all respondents plan to relocate manufacturing capacity to low-wage countries,
although the number is somewhat higher for larger companies (30% for larger
companies compared with 12% for smaller companies). Almost all respondents rejecta potential reshoring of production from low-wage countries back to Germany(see Figure 4).
Fig. 3 Efficiency and customer centricity are top reasons for expanding digital factories
98%

Increased efficiency in production
Local digital factory is more efficient than offshore factories

75%

Regionalisation in order to be able to react to customer
wishes faster and with greater flexibility

74%

Better ability to react to volume fluctuations

70%

Improvement in sustainability through reduction in raw
material consumption

61%

Individualisation and personalisation of the product range

54%

Regionalisation to lower transport and logistics costs

48%
0

20

40

60

80

100

Q: What are your significant reasons for setting up or expanding digital factories?
Base: Respondents planning to set up or expand digital factories

Digital Factories 202011

Strategy

Fig. 4 Manufacturing companies to serve customers close to their home market
Capacity expansion in home country
64%

Reshoring to home country

Capacity expansion close to customers
40%
3%

19%
43%
Offshoring of productionto
low-wage countries

Outsourcing to strengthen core
competencies

Q: Which strategies are you adopting with regard to your production locations?
Base: All respondents

Smaller companies with an annual turnover of less than €0.5bn are generally
focusing much more strongly on their home market: 81% of their investment spend
will focus on Germany, compared to 51% of larger companies’ investments.
Digital factories strengthen production “Made in Germany/Europe”
The respondents to our survey who are planning further investments in digital
factories show a strong commitment to Germany and Western Europe as animportant investment destination.
A total of 93% of respondents planning further investments in digital factories intend
to locate some or all of these in Germany over the next five years. This reflects astrong focus on Germany across the survey sample as a whole, and the high levelof trust that companies place in the country as a strong location for setting up anddeveloping digital factories. As Figure 4 above shows, 64% of respondents overallplan to expand their capacity in their home country. Mid-sized companies are
the most enthusiastic: while 59% of smaller and 55% of larger companies plan toincrease their capacity in their home country, almost three quarters of mid-sizedcompanies (revenues between €0.5bn and €3bn) will do so.

12 Digital Factories 2020

Strategy

In terms of the level of investments, respondents intend to allocate 77% of theirinvestments to setting up digital factories in Germany and Western Europe over the
next five years. That’s particularly true of smaller companies (those with annual
revenues of less than €0.5bn) – they plan to dedicate 87% of their total investments
in digital factories over the next five years to plants located in Europe (see Figure5). In contrast, larger companies (annual revenues over €3bn) are investing more
broadly, with 61% of their investment volume in the same time period planned forEurope.
Other regions are much less in focus for setting up or expanding digital factories. For
example, respondents overall only plan to allocate 7% of their investments to Asia,and 5% to Eastern Europe.
Fig. 5 European companies are focusing most strongly on digital factory investments in their home markets
Western Europe 77%
Smaller companies 87%
Larger companies 61%

Eastern Europe 5%
Smaller companies 3%
Larger companies 7%

Asia 7%
Smaller companies 6%
Larger companies 8%

North America 7%
Smaller companies 6%
Larger companies 16%
South America 2%
Smaller companies 0.1%
Larger companies 2%

Middle East/Africa 0.2%
Smallercompanies 0.1%
Larger companies 0.4%

Q: How will you divide your investments in digital factories in these regions over the next five years?
Base: Respondents planning to set up or expand digital factories; figures are rounded and may not add up to 100%

Digital Factories 202013

Nokia: The Conscious Factory –supply chain management of the
futureBuilding the future together: Nokia started its project in 2012
with a clear strategic objective: envision the factory and supply
chain of the future. Both the leadership team and employees
mirrored their current activities, observed important trends
that are starting to impact manufacturing and imagined what
the more distant future could look like. The result was “TheConscious Factory”, a vision for the near future, 2022, and aroadmap on how to build it. This factory is “dark” – minimal
electricity is consumed only on demand – and it is green, withzero emissions, zero waste and no stocks. It is highly lean andcost-effective, so productivity is far higher. And it can be built
and located virtually everywhere: a factory in a box.

In 2017, Nokia is well on track, having implemented changes
across its global network. In addition to lean management,
data analytics are now being used to improve manufacturing
processes and increase stability, as well as to measure yield,
quality and costs. Workplace technologies implemented
include wearables for operators, robots and gesture-based
controlling.

By bringing employees into the process from the outset
and developing a joint vision for the future, Nokia ensured
that employees would be able to shape the future together
with management. In this way, Nokia also built a stronger
intrapreneurial mindset. Cultural changes included anincreased emphasis on global collaboration. Sharing ideas
based on available technologies and having regular innovationclub meetings to introduce new thoughts was very essential.
Instead of isolating knowledge in separate silos, employeeswith different talents began working more closely together
worldwide – from Shanghai to Oulu, Finland.

On the road ahead lies the integration of the whole supply
chain. There are challenges along the way, particularly due todifferent maturity levels. Yet the advantages of an integrated
supply chain are clear: Nokia can make better use of thereal-time information that is currently available internallyworldwide, for example through predictive maintenance, andto collaborate seamlessly with external parties in areas likeorder tracking.

The road to the conscious factory means making not just thefactory smarter, but the company’s people as well. Nokia
achieved that by defining essential competencies, such as social
networking, Six Sigma, analytics and programming skills, andfinding ways to help employees build the needed skills. For
example, staff trainings include “Pizza bots” to help workers
familiarise themselves with programming and using practicalexamples.

14 Digital Factories 2020

As a result of the changes implemented so far, Nokia’s
production now operates at world-class levels, securing global
competitiveness. The company has also taken major steps
towards its vision of the factory in a box.

Benefits

Benefits
No quick payback – digital factory investments are strategic with an ROIof two to five years
The respondents who are planning to expand their digital factories intend to invest
on average 6% of their total annual revenues over the next five years, i.e. 1.2% p.a.
There are some differences between industries, though. Companies in the consumer
goods industry are at the high end of the scale, while companies in the metals andmining and electronics industries are lagging (see Figure 6).
Nearly half of our respondents expect to see an ROI over five years, comparedwith just 3% who expect an ROI within one year (see Figure 7). Around a quarter
expect to see a return over three to four years. These results are consistent acrosscompanies of all sizes and reflect a significant change from our previous studies,
where respondents anticipated much faster returns. We believe that companies
are carefully planning their investments and business cases for digital factories. As
companies gain experience with digital factory solutions, they are getting a clearer
picture of implementation timelines and the level of effort required, leading to moreconservative estimates on how long it will take to achieve a return on investment.
While most do not anticipate immediate returns, our respondents clearly expect
digital factories to pay off in the medium term.
Fig. 6 Investment levels vary across industries
8%
6%
4%

4%

Metalsand mining

Electronics

Engineering/­
industrial
equipment

6%

Process
industry

6%

Industrial
manufacturingØ 6%

Consumergoods

Q: Based on the total revenues of your company, how much will your company probably be investing in total in setting up
and developing digital factories over the next five years?
Base: Respondents planning to set up or expand digital factories

Digital Factories 202015

Benefits

Fig. 7 Companies expect payback for digital investments in two to five years

In 5 years
In 3–4 years
In 2 years
3%

In 1 year

14%

Expected ROI on digital factory investment

26%
Q: When do you expect to get a return on your investments in digital f actories
or digital concepts?
Base: Respondents whose companies have or are planning a digital factory or the use of
one or more digital concepts. 9
 % of respondents did not name the period.
48%

Companies expect efficiency gains of 12% in total over five years
Increasing efficiency is the reason that almost all respondents name as key forinvesting in digital factories. Respondents overall expect solid gains from theircompanies’ efforts to digitise production. Over the next five years, they expect these
initiatives to drive efficiency and revenue increases of 12% on average respectively(see Figure 8). While that is lower than the gains respondents to our broader
Industry 4.0 survey last year expected, last year’s estimates were based on looking at
gains over the entire digital enterprise, whereas this year’s research focuses on the
production environment. We believe that these estimates also reflect an increased
realism, as more companies are now moving from pilot projects to implementation.
The levels of efficiency expectations vary across industries. The engineering/industrial equipment industry is most optimistic, with an average expected efficiency
increase of approximately 15%, while the industrial manufacturing industry
anticipates average gains of around 10% (see Figure 9).

75% think that the local digital factory is more efficient thanoffshore factories.
16 Digital Factories 2020

Benefits

Fig. 8 Respondents expect both efficiency and revenue gains of 12% on average over the next five years
Ø12%
Average efficiency gains

Expected gains

More than 20%

Ø12%
Average revenue gains

10%

11% to 20%

10%
24%

18%
37%

5% to 10%
1% to 4%

8%

0%

8%

25%
4%
22%

Q: An efficiency gain by how many percent in comparison to now do you expect for your company over the next five years fromdigital factories? A revenues gain by how many percent in comparison to now do you expect for your company over the next
five years from digital factories?
Base: Respondents whose companies have or are planning a digital factory or the use of at least one digital concept 

Digital factory approaches can bring other benefits alongside increasing factory
efficiency. In the aerospace and defence sector, for example, companies are using
digital factory solutions to keep up with new types of aircraft and engine design thatare challenging the limits of conventional manufacturing.
Digital factories can also help companies achieve their sustainability goals, as theconsumption of energy and raw materials can be reduced. More than four-fifths
of our survey respondents say they are already using data to improve resource
efficiency, or will do so in the future. Some of the savings are likely the result of morestreamlined supply chains and less warehousing, as raw materials are ordered andsupplied only in the required quantity.

Digital Factories 202017

Benefits

But the vision goes further still. Some companies are planning “lights-out” factories,
where electricity is only consumed on demand. Our survey supports the idea that
digital factories can help protect the environment: 61% of respondents planning
further expansion of digital factory initiatives say increased sustainability is one of
their motivations. As the latest data shows, energy consumption by the industrial
sector has been declining since 19902. In our view, industrial companies in Germany
and Europe still have the potential to further increase their energy savings with thesupport of digital factories.
Fig. 9 Average five year efficiency gains expected from digital factories vary across industries

15%
10%

Industrial
manufacturing

10%

Metalsand mining

12%

12%

12%

Electronics

Consumergoods

Process
industry

Ø 12%Engineering/­
industrial
equipment

Q: An efficiency gain by how many percent in comparison to now do you expect for your company over the
next five years from digital factories?
Base: Respondents whose companies have or are planning a digital factory or the use of at least one digital concept2

 f. Umweltbundesamt (2017), Energieverbrauch nach Energieträgern, Sektoren und Anwendungen,Chttps://www.umweltbundesamt.de/daten/energiebereitstellung-verbrauch/energieverbrauch-nach-energietraegernsektoren.

18 Digital Factories 2020

Digital factories can help companies
achieve their sustainability goals
by reducing use of energy and raw
materials.
Digital Factories 202019

20 Digital Factories 2020

Technology

Technology
Connecting factories internally and externally through an integrated
MES is essential
Connectivity within the factory is accelerating at a rapid pace. Simply put,
it is required to enable machines and other assets to communicate based on
a communication infrastructure and establish a central instance to process
information, like a Manufacturing Execution System (MES).
While today 29% of respondents say their companies have implemented networking
technologies that connect components, machines, production management,
transportation vehicles, workers, and even products, more than twice as many (60%)
expect to do so by 2022 (see Figure 12, page 26). Connectivity usually includes
sensors reading data from RFID chips and sending it to data platforms, and a similar
number of respondents (64%) say they have already implemented such sensor
networks and connected data platforms, or plan to do so (see Figure 11, page 24).
Bosch Rexroth, for example, has already implemented an RFID tracking technology
at its Homburg plant. This plant serves as a global pilot plant for the Bosch group(see Bosch Rexroth: Lot size one through connectivity, page 25). Nearly half of
respondents also say their companies use track and trace systems (or plan to do so)to track the location and progress of components within the production process.
By using an MES, it is possible to use this information to plan and control production
in real time, for example by sensing or predicting unplanned events and generating
automatic response or optimisation actions based on analysed data. Some companies
are also developing system-based shelf-life monitoring to prevent inventory stockouts
and optimise inventory levels. Fujitsu’s server production plant in Augsburg uses
digital factory solutions to streamline inventory processes. The companies uses aninterim storage facility (the plant’s “supermarket”) and self-driving electric vehicles
that are integrated into its MES in order to ensure “just in sequence” delivery ofcomponents (see Fujitsu: Smart factory on a digital campus, page 27).

Digital Factories 202021

Technology

Fig. 10 Key technology features of a digital factory

Parameter A = …
Parameter C = …

13

Parameter A = …
Parameter B = …

8

4

14

12
0 8 2

15

10

11

Alert/
order

4

4
6

5
9

7
1

2

3
0 8 2

22 Digital Factories 2020

Technology

1
2

3

4

5

6
7

8

9

10

11

12
13
14

15

 igital twin of theDfactory
Digital twin of theproduction asset

The digital twin of the factory helps to plan, design and construct the factory building and infrastructure.
It can b
 e used to support testing, simulating and commissioning the building
A digital twin of one or more production assets is used for design, virtual startup and ongoing operation.
The focus is on simulating an asset’s operations, to set and optimise its key parameters and enable­concepts such as predictive maintenance or augmented reality
Digital twin of A digital twin of the product is a digital representation of the product and links Engineering und Productthe product
Lifecycle M anagement (PLM) with factory operations. It is engineered as part of the R&D process andhelps driving frontloading in product development by making it possible to simulate and test the productat an early process stage
Connected
Connected factory refers to the concept of connecting relevant factory objects such as resources,factorymachines, transportation
­
vehicles or products through a connectivity layer for control and optimisation
purposes. Often leverages Manufacturing Execution Systems (MES) integrated with an ERP system (seeintegrated planning)
Modular ­production
Use of flexible, modular production assets instead of traditional production lines. Modular production
assetsassets like r obots, storage vehicles, fixtures etc. are flexibly integrated in the production flow as requiredby the current p
 roduction process
Flexible production
Use of flexible production processes such as additive manufacturing (e.g. 3D printing). These production­methods
processes can support a high variant variety and can increase flexibility drastically
Process ­visualisation/
Visualisation and automation of factory processes, for example with mobile applications (apps) c­ ombinedautomation
with v irtual and augmented reality solutions like tablets or digital glasses. This includes improved­cooperation b
 etween people and machines and innovative user interfaces
Integrated
Integrated planning and scheduling systems within the factory from machine level over Manufacturing
planning­Execution System (MES) to Enterprise Resource Planning (ERP) systems including extended partners
like suppliers and c ustomers. Integrated planning allows an immediate reaction to changes in resource
availability or demand
Autonomous 
Factory systems capable of operating and performing logistics activities without humanintraplant ­intervention. These s ystems sense and process real-time information about digital or physicallogistics­surroundings to navigate safely through in- and outdoor environments, while simultaneously p­ erforming
all necessary tasks. Solutions include a utomated guided vehicles (AGV) as well as aerial drones for­special tasks
Predictive
Remote monitoring of dynamic condition of machines with help of sensor data and big data analytics
maintenanceto predict maintenance and repair situations. This helps to increase resource availability and optimise­maintenance efforts
Big data driven 
Big data analyses can help to detect patterns in production or quality data and provide insights toprocess/quality ­optimise processes or product quality. Models range from pure statistical “black box” models to expert
optimisationand knowledge b ased “white box” approaches
Data-enabled
Optimisation of energy and resource consumption through intelligent data analyses and controls e.g.
resource ­optimisationenergy or pressurised air management in facilities based on actual demand and/or supplyTransfer of p roduction  Fully automatic transfer of production parameters to other factories, e.g. to implement a lead plantparameters­concept w
 here optimisations can be reproduced in other plants
Fully autonomous 
Plant which operates independently, based on self-learning algorithms, where people are only required
digital factoryfor initial design and setup as well as ongoing monitoring and exception handling. While this can reduce
operating cost, m ain applications include use in hazardous or remote production facilities
Track and trace
Location of products and raw material within the factory is tracked via sensors and integrated into a dataplatform connected to internal systems such as MES or ERP systems. This provides full transparency
about the p roduction progress and inventory levels as well as allowing the tracking of individual parts/
products

Digital Factories 202023

Technology

Fig. 11 The adoption of key digital technologies is increasing in the next five years
64%

39%

37%
18%

Today In use in future

Today In use in future

3D printing
VR

22%
12%

13%

Today In use in future

Connected
sensors

33%

20%
9%
2%

Today In use in future
Humanoidrobots

Virtual/
augmented
reality

Today In use in future
Artificial
intelligence

4%

Today In use in future
Drones

Q: Which technologies in detail are in use or planned in your digital factories?
Base: All respondents

Connecting the integrated MES to ERP systems and beyond theorganisation can bring even more benefits
The connected factory is vertically integrated within an organisation, but many
companies are also looking beyond the boundaries of the digital factory itself andare targeting horizontal integration of the entire value chain, including suppliers,
the production network and customers. Enhanced track and trace capabilities anddynamic connections with Enterprise Resource Planning (ERP) systems createtransparency and make it possible to apply data analytics to optimise supply chain
planning from end-to-end. Like networking within the factory, these processes may
use sensors and RFID chips to generate and communicate data to an integrated
planning platform (including interfaces with key value chain partners). That caneven extend all the way to the end customer; more than a third of companies (36%)
have plans to implement product tracking; others will likely rely on information
within ERP systems such as customer orders to achieve an integrated value chain.
To get there, simply connecting systems is not enough. For true synchronisation,
both within production and with external factors like customer demand and possible
constraints on supply, organisations will have to develop tightly integrated systems(MES, ERP, sensor) and overcome the silo culture still found in many companies.

24 Digital Factories 2020

Bosch Rexroth: Lot size one
through connectivity
In Homburg (Saar), Bosch Rexroth has established a leading
plant for Industry 4.0 solutions. The site with 50 years ofhistory and app. 700 employees reflects the company’s position
as one of the first movers in Industry 4.0 in Germany.
A focus on people and a strong innovation mindset lie at theheart of the Homburg plant’s success as it moves forward
to develop new solutions and pilots. Jobs in the plant
are changing to be more interdisciplinary, and so are thequalifications and skills needed by employees. Alongside
traditional manufacturing jobs, the plant is likely to need more
software developers and other IT-related positions.
The Homburg plant is both a user and an internal providerof Industry 4.0 solutions: It is a producer of industrial andmobile controls as well as hydraulic motion equipment, and
it is the global pilot plant for small series within the Boschgroup. Built around top management’s core strategy, theHomburg plant has laid the foundation for how to successfully
implement and leverage digitisation and connectivity. Together
with other pilot plants in the network, the Homburg plantcollaborates closely with the Bosch Rexroth product area
assembly technology and the “Bosch Connected Industry”
project house, which consolidates and coordinates solution
sets, ensuring efficiency and avoiding redundancy. These leadplants develop solutions and have global responsibility forestablishing standards that can be rolled out to other factories.
Every plant also takes advantage of the global services in the
Bosch network like the Bosch cloud or corporate IT structures,leveraging economies of scale.

Bosch Rexroth uses a wide range of innovative technologies.
These include paperless active cockpits, self-guiding products,
independent working cells, automatic employee and productrecognition and inline quality testing. By implementing newtechnologies alongside maturing technologies including RFID
E-Kanban and pick to light, the Homburg plant is able toimprove efficiency and output while increasing the number ofvariants produced at their assembly lines.
By using these technologies and leveraging the increased
flexibility at the line, the goal is to make lot size one affordable.
Customers like industrial OEMs are currently doing latestage customization of the Bosch hydraulic motion control
units at their own lines to ensure in sequence production. By
joining Bosch Rexroth’s product area assembly technology
more closely with mobile controls, the company has laid thefoundation to move from a parts supplier to an agile modulesupplier. This not only allows Bosch Rexroth to verticallyintegrate their supply chain, but also offers opportunities
to develop value added services in the future like remotediagnostics, predictive maintenance or pay per use.

Digital Factories 202025

Technology

Technologies like cobots, digital twins or augmented reality drive leaner
and more productive operations
Helping workers get more done
Many companies are also planning to implement a variety of digital technologies that
help workers get more done, faster, and improve processes. While 28% of companies
report that they are already using strategies for process visualisation and automation
like mobile apps and virtual or augmented reality, 62% expect to do so in just five
years – a dramatic increase (see Figure 12).
There is little doubt that the work environment in the digital factory will change
radically and the process has already begun. Companies are implementing tools
to give workers access to the information they need when they need it, often using
mobile apps that are independent of a particular workstation. In-line quality checks
are also becoming more common, where employees are notified of errors and cancorrect them, and where the accuracy of the production process is cross-checked
automatically. In addition some companies are using mobile apps to help employees
collaborate better remotely, e.g. around scheduling and approval of maintenancetasks. Robots and other digital technologies will also make workers’ lives in thefactory easier, safer and more efficient. Cobots – “collaborative robots” – go far
beyond just performing pre-programmed tasks. Workers can “train” these robots
through interactions, without the need for time-intensive programming, simply by
repeating activities.
Fig. 12 Use of connectivity technologies and big data analytics is set to increase dramatically
In usetoday

Change over the
next five years

In use infive years

Predictive maintenance

28%

+38%

66%

Big data driven process and quality optimisation

30%

+35%

65%

Process visualisation/automation

28%

+34%

62%

Connected factory

29%

+31%

60%

Integrated planning

32%

+29%

61%

Data-enabled resource optimisation

52%

+25%

77%

Digital twin of the factory

19%

+25%

44%

Digital twin of the production asset

18%

+21%

39%

Digital twin of the product

23%

+20%

43%

Autonomous intra-plant logistics

17%

+18%

35%

Flexible production methods

18%

+16%

34%

Transfer of production parameters

16%

+16%

32%

Modular production assets

29%

+7%

36%

Fully autonomous digital factory

5%

+6%

11%

Q: How relevant are the following concepts for your company?
Base: all respondents

26 Digital Factories 2020

Fujitsu: Smart factory ona digital campus
In its digital factory in Augsburg, Fujitsu has brought together
the entire value chain on a single campus, from development
through to interactions with the end customer, including
service and training. At the heart of the factory is sophisticatedinformation technology (IT) driving production and logistics.
For example, in the innovative interim storage facility, the“supermarket”, components are prepared for assembly andstored in special transport cartons for individual orders. These
include integrated dynamic displays that show workers which
components belong to each order. The displays are a significant
part of the strategic method that prioritises an extremely
high level of flexibility and paperless production processes. A
self-driving electric vehicle, the “logistics train” ensures thatthe production units get the components they need “just-insequence”.
With its Augsburg showcase factory, Fujitsu is developing andproducing computer hardware in Germany at competitive
costs. On the campus of the “breathing factory”, that
responds flexibly to the level of orders, the Japanese concern
is using cloud-based services, digital applications and rapid
prototyping to develop a plant that showcases the digital
factory as an integrated part of a comprehensive, customerfocused Industry 4.0 approach.

Following the example of the Toyota Production System, in2011 Fujitsu converted the production floor from the straightline that had been used for many years to production cells
organised in a U-shape. As a result, manufacturing teams
can see the entire development of “their product” from the
beginning of the process to finished device. Up-to-date testing
techniques, modern concepts for making materials available
and the highest level of flexibility for all batch sizes are part ofthe lean production philosophy.
Extremely fast production to exact customer specification ispossible thanks to digital shopfloor data management. “Smartfactory” solutions increase transparency and quality, ensurethat data is always current and reduce costs. These range fromsupporting the supermarket concept through the permanent
optimisation of the transportation and warehousing structures
all the way to customer-specific digital labels and sensors suchas RFID tags. Modular software-based building blocks – the“connected applications” that make up Fujitsu’s Manufacturing
Execution System round out the digitised production process.
These allow for precise/specific changes within an individual
module and significantly faster reaction times.

Digital Factories 202027

Technology

Production processes can be virtually tested and optimised
with digital twins.

Continental Automotive has already begun implementing many of thesetechnologies. The result: increased efficiency, better ergonomics and more flexibility(Continental Automotive: The interconnected factory).
We see collaboration between workers and machines as a key area of development,
and one where many companies may still need to take a closer look. While many
companies are focusing on improving process visualisation and automation, far
fewer are planning to implement some of the technologies that can help increase
acceptance; as one example, “humanoid” robots are being developed that can
produce and read facial expressions, but just 22% have any plans to implement them(see Figure 11, page 24). We look at the importance of how people interact withtechnology in more detail later in this report.
A number of the companies we interviewed in more detail told us about systems they
use to manage logistics processes, but doing so is still fairly rare – fewer than one outof five respondents say their organisations are already using autonomous intra-plant
logistics. That number is set to double over the next five years though, as companies
look to increase efficiency and reduce errors by taking advantage of the decreasing
prices and maturing autonomous technologies available in the market. Today’s
systems go beyond automated milk runs of pre-programmed routes, which have been
available for more than two decades. Instead, logistics is becoming not just truly
autonomous, but also responsive in real-time through the use of connected systems
that identify logistics requirements and communicate these to self-guided transportsystems. These systems communicate with each other, as well as with networked
work stations and warehouse locations and respond dynamically to changes indemand and supply.
Extended use of artificial intelligence (AI) and drones is still far off
In the future, robots will even be able to learn on their own. In fact, one-fifth of
respondents have plans to implement artificial intelligence or self-learning machines.
Only a small percentage of our survey respondents say they will use drones, althoughthat number is also on the increase.
Digital “twins” – virtual products, productions assets, and factories –streamline development and enhance operation
It is now possible to create a digital representation, or “digital twin”, of products,
equipment and even entire production lines and plant infrastructure. Four outof ten companies plan to create and use digital twins within the next five years.
Digital twins are often used during the development of a product or when planning
production. They make the development process more efficient, improve quality
and help to share information between stakeholders. By combining digital twins ofa product and the production line, new production processes can be virtually tested
and optimised before any physical work has been started. And when digital twins areshared with partners, they are better able to optimise their processes to align. Digital
twins are an enabler for many other applications like virtual or augmented reality
and remote maintenance.

28 Digital Factories 2020

Continental Automotive:
The interconnected factory
Facing shorter development cycles while maintaining quality
and efficiency requirements: Continental Automotive isconfronting the constant challenge of how to adapt theirelectronics production lines to ensure the delivery of thehighest quality products to their customers while evolving
towards a truly smart factory. The company is alreadywell on its way and has taken important steps towards theinterconnected and highly efficient factory of the future. In
today’s electronics production plants, huge amounts of raw
production data are already being generated by production
equipment and stored in cloud based data lakes. Smartproducts also recognise where they are in the production
process at all times.
One example of Continental Automotive’s progress is the ideal
SMD (surface mounted device) Line, one of several Industry
4.0 initiatives developed with top management support. The
SMD Line not only reduces failure rates and increases quality,
but intelligent process control systems based on data analyticalmethods also reduce cost. The SMD Line offers high levels of
flexibility. Because it is scalable and modularly expandable,
it can respond dynamically if product volumes or varianceschange.

data analytics tools are constantly monitoring production.
Machine to machine communication allows certain elementsof the production to autonomously correct errors or optimise
the production process. For example, if a machine’s output
deviates from expected norms, an automated notification to
the system manager requests an inspection.
Production employees are becoming improvement managers
and are taking responsibility for all autonomous workflows.
Implementation of state of the art collaborative robots
technology in the production setting allows operators towork hand in hand with robots that use sensors and cameras
to recognise their environment. This technology has led toefficiency gains, improved ergonomics and greater levels of
flexibility, since today’s light weight robots can be programmed
for new processes within minutes. Still, the overarching vision
is that digital tools will only support – not replace – employees.
On the way to the envisioned smart factory, Continental
Automotive will also implement further Industry 4.0
initiatives. Partners such as the Robotics Research Unit of OTH
Regensburg will support them along the way.

The SMD Line is comprehensively networked and automated.
It knows the material demands for current and upcoming
production cycles and autonomously orders the requiredcomponents from the connected warehousing system.
Automated Guided Vehicles (AGVs) pick up the ordered
components and deliver them to buffers at the assignedlines. The AGVs also simultaneously manage the removal of
empties and trash. During the manufacturing process, big

Digital Factories 202029

Technology

Re-thinking production: mid-sized companies are furthest ahead
It is notable that the most popular technologies being implemented in the digital
factory today, and even those most likely to be planned for the next five years, will
drive increases to efficiency that still rely on the traditional model of the assembly
line, as pioneered by Henry Ford back in 1913.
But what might happen if companies re-think that process entirely? Only around athird of companies are planning to make use of modular production facilities (36%)
or flexible production processes (34%, see Figure 12, page 26) over the next five
years; more concretely, just 37% plant to implement 3D printing or have it in use
already (see Figure 11, page 24). That may reflect the fact that these technologies
often imply the need to completely re-think the manufacturing strategy or even thecompany business model – a risk many companies aren’t willing to take. In our view,
it’s absolutely critical for companies to have a holistic digital strategy that’s informedby both their overall business strategy and technology development.
Mid-sized companies with €500m to €3bn in annual revenues are generally more
open to new manufacturing technologies such as modular production facilities oradditive manufacturing (3D printing). These companies have sufficient scale to makeinvestments in new technology – something smaller firms often lack – but are often
more flexible and able to implement new technologies more quickly than their larger
counterparts.
Companies make smarter decisions using predictive data analytics andmachine learning
Data is driving the digital factory; more than half of the companies we surveyed
already use it to optimise their resource use. Around three out of ten companies
have also started using big data to optimise quality and processes, and to institutepredictive maintenance – and respondents tell us those numbers will more thandouble within the next five years (see Figure 12, page 26). The largest companies –those with over €3bn in annual revenues – are most likely to be adopting big datasolutions. That is not surprising as some of these solutions require significant
investments and the capacity to structure and analyse large data sets, which meansdeveloping expertise in data analytics and system integration.
The digital factory of the future will generate significantly more data through theuse of sensors. And because capabilities in data integration and memory continue toincrease, it will also be possible to integrate digital factories into future supply chain
ecosystems in real-time. As we’ve already noted, companies will be able to connect
their machine data vertically into their MRS and ERPs and then connect to their
suppliers and customers. Key data on supply and demand will be available in realtime, throughout the entire supply chain. Tomorrow’s digital factories will be able toplan maintenance activities and needed downtime during periods of low-customer
demand, optimising margins – something a few companies have already started
doing today.
Connecting the dots inside the factory and within the company ecosystem, as well as
intelligent use of information, will be a “must-have” to stay competitive. As our study
last year showed, companies are recognising this and significantly developing their
big data capabilities.

Data is driving the digital factory.
30 Digital Factories 2020

PeoplePeopleImplementing digital manufacturing means building a digital workforce
Digital factories require a new way of working, so your company will need tobuild a digital workforce. That has a whole host of implications. The make-up of
the workforce will need to change, and companies will need to recruit and retain
employees accordingly. Just as important will be working closely together with yourpeople before and during implementation of new technologies. We are enteringa new era of man-machine interaction and it is critical not to underestimate theimportance of people in the digital factory.
Fig. 13 M ore than half of the respondents expect the size of their factory workforce
to increase or stay the same as a result of digitisation

Will increase

16%

Stay constant40%

Will decrease

42%

56%

Q: What changes do you expect to the number of employees in your factories intotal in 10 years as a result of digitisation?
Base: all respondents

Digital factories can help companies meet demographic challenges
Germany currently has an ageing society. In our 2016 study of German workforce
trends, we discussed the impact of this demographic shift. By 2030, there will be ­3.5 million fewer German workers available compared to today3. For most sectorsthat is likely to lead to significant shortages of qualified employees as large numbersof workers enter retirement. Digitisation can help level off these shortages andreduce them to two million, as another PwC study in 2016 has shown4.

34

PwC (2016): Demografischer Wandel: In Deutschland werden Arbeitskräfte rar.
PwC (2016): Der Einfluss der Digitalisierung auf die Arbeitskräftesituation in Deutschland.

Digital Factories 202031

People89% say digitisation will drive the hiring of new employeeswith the necessary qualifications.

While 42% of respondents expect the number of employees in digital factories tofall, even more – 56% – say it will stay the same, or even increase over the next ten
years (see Figure 13). There is strong evidence to suggest that digital factories will
help German companies meet the challenges posed by an upcoming shortage oftrained workers. Nearly half of companies (47%) say they intend to replace some ofthe expected attrition due to age by using digital technologies (see Figure 14). And
half of our respondents tell us that they believe digital technologies will help older
workers continue working longer (see Figure 14). Of those companies that do expect
to decrease their headcount, most anticipate reductions that are largely in line withexpected productivity increases, rather than extensive lay-offs.
There will be abundant opportunities for job-seekers with the right skills; 89% of allof our survey respondents expect to hire new employees who have the qualifications
needed to make the most of digitisation (see Figure 14). However, our respondents
see finding employees with sufficient qualifications as the biggest people challenge
they face – 81% expect to have difficulties in this area (see Figure 16, page 34).
Fig. 14 Digitisation will have a strong impact on hiring, training and factor cost of employees
89%

Hiring of new employees with the necessary qualifications

84%

On-going continuing education, in particular for older
employees, as well as to meet new demands

82%

Higher personnel costs are offset by efficiency andproductivity advantages
Digital technology enables older employees to remain
employed longer

50%

Replacement of employees retiring due to old age withdigital technologies

47%
0

20

Q: What effects do you expect for your company as a result of digitisation?
Base: all respondents

32 Digital Factories 2020

40

60

80

100

PeopleWorking together to reshape vocational training (“Ausbildung”) andhigher education
Making sure that enough workers have the right skills to support digital factories will
not be easy. The vast majority of our survey respondents are convinced that it willtake pro-active collaboration between business, government and academia to turn
digitisation’s promise into reality.
The German vocational training system, known as “Ausbildung”, has long been
based on giving apprentices exposure to theoretical concepts in a classroom setting
alongside real work experience. The newer “duales Studium”, or dual course of
study, model takes a similar approach, where college or university students gain
initial experience in real business environments while simultaneously earning a
degree. Both models represent a clear opportunity for academia and industry to
work together to develop new training programmes that meet the evolving needs ofthe digital factory. That is already happening in some areas; for example, a major
German automaker now offers a programme where students can earn a degree inbusiness studies and Industry 4.0 through the dual course of study model.5 These
kinds of programmes can help companies face the challenge of finding sufficientnumbers of qualified employees.
Fig. 15 The level of employee qualification is expected to increase over the next five years
Qualification

Status quo

In five years

Higher education

19%

24%

Vocational training (“Ausbildung”)

59%

59%

Unskilled

21%

17%

Q: What is the structure of the workforce of your company in Germany with regard to qualifications?
And what structure do you expect for your new hires in five years?
Base: all respondents; figures are rounded and may not add up to 100%

Overall, companies expect to use somewhat more graduates and fewer untrained
employees, but the main focus will continue to be employees trained through theGerman “Ausbildung” system (see Figure 15). The types of jobs they need to be
trained for, however, are likely to change dramatically. Digital factories will need
fewer line workers, but more data scientists and programmers, for example.

5

 undesministerium für Wirtschaft und Energie (BMWi) „Die digitale Transformation im Betrieb gestalten –B
Beispiele und Handlungsempfehlungen für Aus- und Weiterbildung“ November 2016, p. 44.

Digital Factories 2020

33

People98% will continue to need graduates with traditional
degrees but 83% believe they will need apprentices in fields
for which there is currently no standardised training.
Our survey respondents see developing new types of vocational training as apriority – 83% told us they believe they will need apprentices in fields for which
there is currently no standardised training. And while 98% expect to continue toneed graduates in traditional fields like business, natural sciences and engineering,around three-fifths also believe that education at all levels will need to change
fundamentally to keep pace with digitisation. For example, classical engineeringstudies should be re-designed in a multidisciplinary way so that the “DigitalEngineer” also acquires skills in data analytics, product management, (multi-)project
management as well as IT architecture and security6.
Aside from these technical skills, we believe training should emphasise some
important soft skills that cannot be replicated by machines, like creativity andinnovation as well as leadership.
Fig. 16 Finding and training qualified staff is a major people challenge
81%

Difficulty in finding adequately qualified employees
Large investments in training and continuing educationof
employees needed

71%

Technology for cooperation of people and machinesnot yet
fully developed

60%

Difficulty bringing together stengths of older andyounger
employees

52%

Lacking digital corporate culture

52%

Lack of openness by employees to innovative
digitaltechnologies

49%

Present training in schools (colleges, universities)
notadquate to qualify employees for the digital factory

44%
0

20

40

Q: Where do you see challenges for the digital factory with regard to your employees?
Base: all respondents

6

PwC (2017): Forschung und Entwicklung 4.0, p. 19.

34 Digital Factories 2020

60

80

100

PeopleMagna Steyr: Drones,
data and a digital twin
It is not a scene from a Hollywood production. The action istaking place live, at Magna Steyr’s automotive production
plant in Graz. Silent drones swoop through a logistics hall,
independently capture and scan material labels in thewarehouse area and compare these with the available stocks.
The Austrian-Canadian automotive supplier calls the research
project “autonomous inventory”. Drones are indoor-controlled,
fly independently when necessary during regular processes,
but can also be used for ad-hoc research.

The implementation of new projects happens in three steps:
evaluation of the technology, prototype testing in a learning
line and, finally, a roll-out in serial production. It has proven tobe especially important to get employees involved as early as
possible. Working together to prepare and implement use cases
can allay any lingering skepticism.
In this way, Magna Steyr ensures efficient, cost-effective
production and fills the increasing demand for the productionof highly individualised products.

The factory of the future is already well advanced in Graz: selflearning robots, driverless transportation systems and manybig (smart) data solutions allow for pilots of more individually
tailored production methods. People, resources and products
communicate with each other in real-time. Transparency is
critical. It is only possible to intervene and support valueadded processes in real-time if you are able to identify what ishappening within the process chain in real-time. For example,
machines can direct a request for maintenance directly to the
responsible department or supplier.
The ability of man and machine to work seamlessly together
makes this factory “smart”. Machines must adapt to people,
not vice versa. New technologies are used where they havebeen proven to make sense. While robots help with tasks thatare monotonous and difficult to perform ergonomically, thedigital twin, the virtual representation of the real factory,
provides necessary information on the work that needs to be
performed. People in turn contribute their core skills, such as
skilled reactions, creativity, flexibility and years of experience.
Magna Steyr also uses collaborative robots. Workers can train
them for special processes without the need for complex
programming. Robots support workers in different ways, suchas cooperatively providing a “third hand”. Starting in 2017,
the first robots will be available for workers to use during theassembly process.

Digital Factories 202035

60% believe that technologies which enable people andmachines to collaborate are not yet fully developed.

Are your people ready for new technologies? Getting the man/machineinterface right
It is not enough simply to hire more staff, or train existing staff, though. Companies
also need to make sure that employees feel comfortable working with newtechnologies. A total of 60% of our respondents feel that technologies which enablepeople and machines to cooperate are not yet fully developed (see Figure 16,
page 34). In our view, understanding the impact on the people in your company is atleast as important as calculating the financial benefit of a potential technology.
Companies need to reach out and work together with employees to shape theirdigital transformation. And this is where some of our respondents see hurdles:
around half believe employees are not open to digital change (49%) and that theircompany lacks a truly digital culture (52% see Figure 16, page 34). Therefore, it is
all the more important to actively build your people’s trust in the technologies you
want to implement and to make sure that developing a digital culture is a priority –from top management on downwards. The executives we interviewed in detail oftencame back to this core idea: people will continue to be at the heart of the production
process and it is vital to get buy-in and commitment from your staff as you start andcontinue your digital journey.
Our experience shows that it is absolutely vital to include employees at all stages ofdeveloping and introducing new technologies. Magna Steyr is taking this approach atits digital factory in Graz. For new projects, such as introducing collaborative robots
that workers can train for special processes without the need for programming, thecompany takes a three step approach of evaluating the technology, prototype testingin a learning line, and finally rolling out in series production. Workers typically get
involved in all three stages (see Magna Steyr: Drones, data and a digital twin,
page 35).
When selecting use cases for development, it is helpful to choose those that cangenerate a high level of employee acceptance. Build trust by showing employees thebenefits that new technologies will mean for them. They may be relieved of work thatis highly repetitive and physically difficult, or will be able to improve their accuracy,
for example through better instructions that reduce mistakes. Wittenstein is alreadydoing just that. Its systems provide workers with tailored information at the righttime to increase their productivity and flexibility; the company also developed its
MES in-house with its users in mind. (see WITTENSTEIN: Future Urban Production,
page 37).

49% say employees are not open to digital change, while
52% believe that their company lacks a truly digital culture.

36 Digital Factories 2020

WITTENSTEIN: Future
Urban Production
WITTENSTEIN SE has built the “Future Urban Production”, anurban production plant on-site in Fellbach near Stuttgart. This
production facility for innovative gear technology in the centerof town places the primary emphasis on developing a smooth
working relationship between human operators and machines.
The production plant’s “milk run 4.0” at WITTENSTEIN
bastian GmbH in Fellbach evokes long-past days when milk
was delivered by tractor: every hour a logistics operator drives
through the gear technology factory. He uses a scanner to readbarcodes at the delivery and pick-up areas, deposits neededmaterials and takes processed components with him. Eachdelivery is displayed centrally on a digital planning board.
By combining this information with data from production
planning, the system generates an exact online replica of theflow of materials. A traditional order folder in paper form
also accompanies the vehicle, as this is a trusted source of
information for operators. WITTENSTEIN takes care to get its
people on board with digitisation efforts. The company sees its
employees – and their combined creativity – as the core of allof its production processes.

The factory building itself was also designed with people
in mind; the architectural style helps to foster internal andexternal communication and transparency through the use oflarge glazed surfaces. The aim was to provide the people whowork for the company with a comfortable setting that allows
them to interact closely alongside highly digitised processes,
from development through production to sales. The unusual
location for an industrial facility offers a high quality of life andwork with short distances: the low-noise and low-emissions
Future Urban Production plant is located directly next toan energy-efficient residential neighborhood. The nearest
commuter train station is only four minutes away by foot.

Staff are provided with tailored information at exactly theright time to increase their productivity and flexibility. Timely
escalation management takes place via WhatsApp. In case of aproblem, the person who detected it scans in the machine with
their tablet and sends a photo or video to the shift supervisor
or foreman. And although people, machines and products
now communicate via intelligent cyber-physical systems, thecompany has developed its own Manufacturing Execution
System (MES) for the shop floor that ensures maximum user
friendliness.

Digital Factories 2020

37

People66% of respondents say that IT skills should be taught inprimary schools.

Top management must lead digital transformation
Top management should lead digital transformation and encourage
life-long learning
Digitisation is now fundamental to business success. We believe it is vital for senior
executives to provide “tone at the top” and demonstrate their commitment.
Our respondents believe that learning how to navigate a digital world should
start early. Two-thirds of our respondents said that pupils should be taught IT
skills in primary school. They do not expect the process to stop when apprentices
or graduates are done with their training. Our respondents recognise that they
will need to actively build their employees’ skills and knowledge. More than fourfifths (84%) expect they will need on-going further education to bring employees(especially older employees) up-to-speed (see Figure 14, page 32).
Not all of these efforts will come cheap. Most companies see the high investments
needed in training and education as one of the major challenges they face in getting
their workforce ready for the digital future. But most also agree that the investments
are worth making – more than 80% expect that increased costs will be offset by
efficiency and productivity gains (see Figure 14, page 32).
Overall, the large majority of our respondents see digitisation as a positive; 90% told
us they believe it offers more opportunities than risks for their companies.
Rising levels of prosperity through digitisation
That is not just true for corporations; there is good news for workers, too. Aroundhalf of companies expect salaries to increase, while 86% expect that the number ofhours worked will stay the same. Ultimately, this suggests that some of the increases
in efficiency and revenue companies generate will be shared directly with theirworkforce, leading to new levels of prosperity in Germany. In addition, aroundhalf of companies expect salaries to increase, while 86% expect that the number ofhours worked will stay the same. Ultimately, this suggests that some of the increases
in efficiency and revenue companies generate will be shared directly with theirworkforce, leading to new levels of prosperity in Germany.

90% believe digitisation offers more opportunities thanrisks for their companies.
51% believe that the average salary in a digital factory will
increase.
38 Digital Factories 2020

Blueprint for digital factory success

Blueprint for digital factory
success
Leading industrial companies have made a clear commitment to building andenabling digital factories. They increase production efficiency and make it possible
to produce more customised, high quality products to serve markets quickly andreliably.
We asked respondents whose companies are not planning digital factories what isholding them back. Their top challenge: a lack of digital vision and culture. In ourview, that is also a “must-have” for companies that have already established digital
factories, or are planning to set up or expand them. It is critical to have clear visionthat takes into account not only individual technologies, but also how they work
together throughout the entire life cycle of your products and within the network andyour company‘s wider ecosystem.
Other major concerns holding companies back from taking advantage of thepotential of digital factories include uncertainty about opportunities and unclear
economic benefits, as well as worries about the level of investment needed. These
factors point to the need to establish not just a clear vision, but also a realistic
roadmap to digitisation.
To help you in developing or refining yours, we have adapted the six-step blueprint
for digital success published in our Industry 4.0 report last year to the specificchallenges companies face when building or expanding digital factories andintegrating them into a digital ecosystem7:
Fig. 17 Blueprint for digital success7

Map out yourdigital factory
strategy

Createinitial pilot 
projects

Define thecapabilities
you need

Become a virtuoso indata analytics andconnectivity

Transform
factories into
digital factories

Integrate into
your digitalecosystem

1

2

3

4

5

6

PwC (2016) Industry 4.0: building the digital enterprise.

Digital Factories 202039

Blueprint for digital factory success

Map out your digital factory strategy
Defining a coherent, consistent strategy is absolutely critical. Digital factories makeuse of a wide range of different technologies; it can be tempting to integrate theseon an ad-hoc basis. Digital factory initiatives need to be more than the sum of theirparts, though. You are likely to get more value if you have a clear idea of how eachtechnology fits into your overall strategy and operational goals and how it works
together with other technologies already available at your company. Your vision
should span your entire organisation. To develop your digital factory strategy,
start by understanding your current level of maturity. Make sure that people are asimportant as technologies and that you focus on projects that will bring the mostvalue. Finally make sure you have a strong network of champions that includes top
leadership, management, and workers or team leaders on the factory floor.
Create initial pilot projects
It can be difficult to secure funding and stakeholder buy-in, as the economic benefit
case of digitisation is not always easy to calculate. And initially teams will only beable to provide very limited proof of concept and demonstration of technologies.
Pilots can help address these issues. They will help you learn the approach that works
for your company. With evidence from early successes, you can also gain buy-in fromthe organisation, and secure funding for a larger roll-out. Because the digital factoryis likely to bring profound changes for your workforce, it will also be important
to make sure that workers and their representatives are integrated into any pilot
project.
Possible options for pilots include vertical integration within one or two
manufacturing sites including digital engineering and real-time data integrated
manufacturing planning. Installing sensors and actuators on critical manufacturing
equipment and using data analytics to explore predictive maintenance solutions
can also provide some quick wins. Another good approach can be to digitise specificproduction lines within a particular plant, which can serve as potential starting
points for you to learn and optimise.
You may want to consider collaborating with digital leaders outside yourorganisation, by working with start-ups, universities, or industry organisations toaccelerate your digital innovation.
Define the capabilities you need
What is most important to your production process? Better, more automatedlogistics? Just-in-time, customised information for workers? Integration of sensor
networks? We think it can be valuable to think in terms of capabilities, which canevolve, rather than technologies. Most, but not all, of these are IT-related. The real
goal is not to implement the coolest new gadget, it is to achieve a particular outcomethat increases efficiency, improves quality, or in some other way enhances yourbusiness. The capabilities you focus on in digital factory initiatives need to be closely
linked to your company’s production strategy and to overall business goals.
Building on the lessons learned in your pilots, map out in detail your (factory) systemarchitecture and what capabilities you need. Here you will need to consider four
strategic dimensions: organisation, people, process and technology.

Pilots serve as proof of concept.
40 Digital Factories 2020

Blueprint for digital factory success

Become a virtuoso in data analytics and connectivity
Data is driving the digital factory as companies accelerate their use of data-driven
technology for process and quality improvement, resource management andpredictive maintenance. In the digital factory, these solutions are almost always
intimately linked to connectivity. Sensors help gather data, which is analysed by an
information layer, and then communicated back to connected logistics facilities andproduction assets to fine-tune production in real-time. Every company will need tomaster both the connectivity tools and systems, which produce and communicate
data, and the analytical tools that put it to work to improve efficiency and quality.
Transform factories into digital factories
The digital factory journey is a transformative one. And as with any kind oftransformation, managing the change – particularly how it impacts your company’s
people – will be vital. Difficulty finding adequately qualified employees tops the listof workforce challenges identified by survey respondents. Other challenges include
an insufficiently digital company culture, or reluctance on the part of workers toembrace digital change.
Ways to address this can be through early partnering with your workforce, and it
is encouraging that companies both recognise the need to invest in training andcontinuing education, and believe its cost will be offset by the efficiency gains digital
factory initiatives bring.
Cultivating a digital environment can only happen with committed leadership. Top
management must place the digital factory strategy squarely at the centre of theC-suite agenda and make it a top priority. They can help free up their digital teams todrive quicker progress by avoiding classical project approval processes, which tend to
be quite conservative. More streamlined reporting channels can ensure that digitalteams focus on adding value rather than getting bogged down in administrative
activities.
Integrate digital factories into your digital ecosystem
Many companies are focusing most strongly on vertical integration within individual
plants as the main driver of their digital factory initiatives. Connecting MES with ERP
systems enables significant improvements within the four walls of the factory. But
digital factories should be one part of a broader digital ecosystem that potentiallyoffers much more. When companies integrate supplier and customer information
into the digital factory – horizontal integration across the supply chain – thepotential for efficiency improvement accelerates. Imagine fine-tuning your planningand your production using real-time short-term customer demand and being able toflexibly adjust to your customers’ requirements at minimal cost and with maximum
customer satisfaction. This strategy of vertical and horizontal integration using
track and trace will not only allow companies to optimise planning processes andproduction execution. It will also make it possible to deepen the bonds between acompany and its strategic suppliers and customers.
However, in our view, that is just the beginning. If companies integrate digitalfeatures into products, they can potentially offer a whole range of services that takedata and turn it into concrete value, for example by selling enhanced maintenancepackages alongside equipment. There may also be ways to monetise the data
generated by the manufacturing process itself. The implications are profound.
Companies may be able to expand current business models or even rethink themcompletely. Instead of focusing solely or primarily on production, some companies
may have opportunities to improve their margins by increasing market share in thelucrative after-sales market and to develop wholly new business areas.

Digital Factories 202041

About the survey

About the survey
This report “Digital Factories 2020 – Shaping the future of manufacturing” is basedon quantitative research conducted by market research firm Kantar Emnid in January
and February 2017 with 200 executives from industrial companies in Germany,
supplemented by our editorial team’s in-depth interviews with executives fromleading companies.
Quantitative survey participants were decision-makers with responsibility for atleast one of the following areas: product development, production or technology.
Companies of all sizes and in a diverse range of industries were surveyed (seeFigure 18).
Fig. 18 Key facts about the respondents

Industry split of surveyed companies

Revenue split of surveyed companies

Consumer­goods

Process
industries
14%

Electronics

Metalsandmining

Revenues<€ 500 million
p.a.

20%

23%

12%

41%

15%

21%
15%

Industrial manufacturing

42 Digital Factories 2020

Revenues>€ 3 billion p.a.

Engineering/industrial
equipment

Revenues€ 500 million −€ 3 billion p.a.

39%

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Digital Factories 202043

Contacts

Contacts
Authors of this study:

Dr. Reinhard Geissbauer
Partner and Head of Industry 4.0/
Digital Operations EMEA
Tel: +49 170 9391263
reinhard.geissbauer@strategyand.de.pwc.com

Stefan Schrauf
Partner and Co-lead of Industry 4.0 EMEA
Tel: +49 151 46123326
stefan.schrauf@strategyand.de.pwc.com

Philipp Berttram
Principal
Tel: +49 151 46123358
philipp.berttram@strategyand.de.pwc.com

Farboud Cheraghi
Manager
Tel: +49 151 46123312
farboud.cheraghi@strategyand.de.pwc.com
Editorial board:
Dagmar Schadbach
Elizabeth Montgomery
Jens Wunderlin
Marc Münch
Moritz Knepper
Project management:
Dagmar Schadbach
Dominique Herl

44 Digital Factories 2020

Acknowledgements

Acknowledgements
We would like to thank the following executives for sharing the experiences of theirdigital factories, which are portrayed in this report:
Bosch Rexroth, Homburg, Germany
Günter Krenz
Frank Hess
Continental Automotive, Regensburg, Germany
Dr. Markus Fischer
Thomas Kleinert
Fujitsu, Augsburg, Germany
Frank L. Blaimberger
Karlheinz Wintergerst
Magna Steyr, Graz, Austria
Franz Weghofer
Nokia, Oulu, Finland
Karl KirschenhoferJose Menendez
Philips, Drachten, The Netherlands
Rob Karsmakers
WITTENSTEIN, Fellbach, Germany
Philipp Guth
Patrick Hantschel
We would also like to thank the companies portrayed for providing the images usedin their profiles.

Digital Factories 2020

45

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46 Digital Factories 2020www.pwc.de