​This is an audio transcript of The Morning Brief podcast episode: Explained Industry 4.0 (Part 1)

BG 0:02
Welcome to the Morning Brief from the economic times.

Kiran Somwanshi 0:10
Hi, Kalpana Good morning. You are just back from Europe. How was your trip?

Kalpana Pathak 0:14
Good morning, Kiran. Yes. So I visited a Siemens facility in Berlin, and got a glimpse of how factories in Europe are gearing up for the future. You know, on the shop floor machines are calling the shots. They're all in sync, like they're communicating with each other. And there's practically no human intervention. Companies are relying on augmented reality, big data and 3d printing for faster manufacturing, which is all very interesting to see. It almost sounds like a dystopian movie where machines have taken over well, that's actually the first thought. But it's not just automation, to be honest. It's also virtualization that is transforming manufacturing.

Kiran Somwanshi 0:51
Yeah, it's interesting that you know, till recently, the virtual reality world was just limited to kids and gaming zones. But this is a whole new reim that has opened up and that simulates manufacturing realities like anything.

Kalpana Pathak 1:03
Yeah, something like that, you know, you can bundle all your raw material, your conveyor, belts, scanners, elevators, machine tools, put them all into a software package and create a virtual factory, which is an exact replica of how a physical factory should be

Kiran Somwanshi 1:19
Kalpana this whole digital industrial revolution has intrigued me. And now I realize that Indian companies are no longer an audience but are participating in it to drive this change.

Kalpana Pathak 1:30
But there are some big questions that need to be answered here. Kiran is smart manufacturing of FOMO, or a trend which will really revolutionize the system.

Kiran Somwanshi 1:38
Is the ecosystem in place to support this digital transformation?

Kalpana Pathak 1:42
What are the costs and challenges faced by firms as they push to be smart manufacturers?

Kiran Somwanshi 1:47
We seek answers for these questions from the early adopters of this new industrial revolution.

BG 1:52
When traditional system people come to work to solve problems in a four IR world, the people will come to drive improvement, the frontline will be armed with capabilities with access to data that data would be democratized.

BG 2:05
So I would say it's not a question of if you should adopt these technologies is more of a question is When you adopt those technologies to make yourself more productive and attractive towards your customers. We are reaching close to a tipping point, wherein manufacturing will expand in this country in many segments and industry 4.0 and 5.0 will become a kind of a norm.

Kalpana Pathak 2:30
It's Thursday, the third of November. From the economic times I'm Kalpana Pathak

Kiran Somwanshi 2:35
and I'm Kiran Somwanshi

Kalpana Pathak 2:37
and today on the morning brief, we decode industry 4.0 Joining us is Sanjay Sharma manufacturing head of pharma major Dr. Reddys laboratories, and Sanjeev Sharma, the CEO of ABB India, an automation and electrification company

Kiran Somwanshi 2:56
to Indian pharma firms Dr. Reddys and Cipla recently joined the World Economic Forum's Global Lighthouse network. But what does that mean? Well, it recognizes them as one of the leading manufacturing companies in the world that are applying Fourth Industrial Revolution technologies, such as big data, AI and 3d printing. I got talking to Sanjay Sharma from Dr. Reddys on this. Sanjay Welcome to the Morning Brief.

Sanjay Sharma 3:24
Thank you,

Kiran Somwanshi 3:24
Sanjay, what exactly is four IR or fourth industrial revolution? Can you break it down in layman's term what this really is,

Sanjay Sharma 3:33
let me sort of help demystify that. Talk of evolution of the industrial revolutions. The first Industrial Revolution was more around using the water and steam in terms of mechanizing production. The second industrial revolution was more around using of electrical power to move to mass production. Third Industrial Revolution is what you and I have seen in our lifetimes in terms of use of electronics and computers to spread high level of automation. The fourth industrial revolution has been more around capturing all the data and technology to move to the next level of advanced analytics and machine learning. When traditional system people come to work to solve problem in a four IR or world the people will come to drive improvements. The frontline will be armed with capabilities with access to data data would be democratized. They would be trained and made capable in terms of understanding of the data understanding of the trends and run their operation in a very, very autonomous manner, freeing up the leaders to drive continuous improvement in a four IR world the role of machine and the role of people would not change in a four IR world it will only enable people and machines to do the role better. Like I said it will help people become more productive and focus on predictive problem solving and drive continuous improvement.

Kiran Somwanshi 4:50
Can you take us through Dr. Reddys journey of making its factories smart.

Sanjay Sharma 4:55
We actually started off on this close to about four years back

Sanjay Sharma 5:00
And it all started with the global benchmarking, we set ourselves a goal to be the most productive and the most efficient pharma manufacturing in the world. And when I say productive is not just from the point of view of number of units produced, the number of units produced in terms of quality in terms of people productivity, in terms of financials, all of that, we started investing on operational excellence. In fact, we almost certified most of our leaders as being as operational excellence practitioners, and we saw significant improvement. But then over a period of time, those improvements started slowing down because the low hanging fruit you had capped. And so we saw more challenges in terms of making subsequent improvements. And that was the time, we actually stumbled upon some work being done at a few places. So we listed with multiple certified World Economic Forum digital lighthouses in India, in London, in Milan, and we built that conviction that there's something that we can try out. And that was the time, we actually got convinced that this is what we need to embark upon for our next phase of efficiency and productivity improvement.

Kiran Somwanshi 6:05
So how did you decide where to start from? Dr. Reddy's has large and spread out operations,

Sanjay Sharma 6:10
with a lot of debate internally that we had that where should we do it? So we took out one of our oldest factory, and our largest in the most complex factory in the world. And we said, we will do it over there. And that's when we started this whole journey. In terms of broad based, we did a 40 use cases across multiple areas, and five out of the seven industry 4.0 technologies. And when we did that, we saw a lot of improvement coming through.

Kiran Somwanshi 6:35
So when you went ahead, making your largest factory future ready, which is now Lighthouse certified, tell me how different it is from your other factories.

Sanjay Sharma 6:43
So the difference is a in terms of performance, we've been able to deliver close to about 30 to 35% improvement in terms of cost efficiency, we've seen almost 2x improvement in terms of people productivity and a step improvement customer service view, we saw a 75% improvement in our notifications. And this is a very important part, it means 75% reduction in documentation, it means 75% reduction and CAPA's CAPA's. As in former blingo We call it corrective and preventive actions 75% reduction in those 75% reductions in task, therefore a far far simpler workplace with less number of touches. But the biggest benefit of this, the biggest change that I see over here is our top talent, and young leaders, all of them they want to be a part of this aspirational journey.

Kiran Somwanshi 7:31
Just to understand the technical term that you know touches when you say touch means how many times the worker is or the person is kind of intervening in the batch.

Sanjay Sharma 7:41
So touch means from the time the raw material comes into your gate, to the time it is it goes to the consumer to the patient, it's called the value stream, the value of the product, you add value keep adding value to it and it flows to the final consumer of the product, how many times you touch it is touches. So when I say within the factory zero touches from the time you dispense the material to the time it goes to the patient, it should be zero touches, I feel that a large part of our time and energy are in the pharma industry goes in terms of resolving problems and failures, post facto, zero touch lights out environment, you would move away from failures and correction centered industry to a predictive and as your failure and zero error industry something similar to aerospace. So there will be again, no failures, no incidents, no touches, and a dramatically simplified operation machines can do repetative works much better than humans can do. So the moment you talk about touches coming in, that's when the deviations start to occur. So you would create a situation from the point of view of product quality, patient safety and compliance, you will be top notch.

Kiran Somwanshi 8:54
So does it also mean that if we have more and more pharma factories which are smart and for four IR compliant, then we will have less of US FDA observations or any any such manufacturing deficiencies.

Sanjay Sharma 9:08
Certification would be a byproduct of that, it won't be the driver of that. But for sure, the moment you have when you move to a lights out operation means what you creating an operation with does not allow you to touch anything that means by design, you will have to build an infrastructure where your product is so robust and doesn't require touches. Your infrastructure is so robust that it doesn't require touches, your data is so powerful that even if there's any deviation happening, you're able to predict it and the machine because it's converting into smart machine they self correct themselves. Again, there will be no touches. So in effect, you will have a situation that you have very, very low deviations. So the chances of any kind of an observation coming in beat from a USF D or from an Indian inspection or from Europe or from any regulatory agencies would come down dramatically. And if you read the Northstar, I would say it will be zero chance of any kind of a notification coming in.

Kiran Somwanshi 10:01
That was wondering what is the edge that companies like Dr. Reddy's, and others who have this kind of recognition and have become smart in their factories in some way? What edge do they have against their peers? Like what is the incentive for companies to even become smart in their manufacturing?

Sanjay Sharma 10:16
Very good question. And in fact that that the most important part of doing all of this at the end of the day, it will make your manufacturing far more efficient, far more cost effective. And it's at the end of the day going to drive, better access and affordability for the consumers, and if you're providing better access and better affordability to the consumers to your customers, you would definitely be far more competitive in the market as compared to your peers.

Kiran Somwanshi 10:40
Here we heard Dr. Reddy's journey of transforming one of its factories, Kalpana are other companies also doing something similar?

Kalpana Pathak 10:50
Yes, Kiran. In fact, I spoke to L&T is chief financial officer Mr. R Shankar Raman, on how L&T is preparing its factories for industry 4.0. This is what he had to say.

Mr R Shankar Raman 10:59
So our effort all along has been to make sure in the last two, three years, particularly, to use IOT and the technology developments have actually been a great boon for us. So we do think that efforts that we have taken in our manufacturing plants of connecting the equipment's making sure that the control dashboards are able to monitor and control productivity, reduce waste gauges, get things like welding done right the first time, so that there is no rework or rejection that happens. All of this happens out of industry. 4.0. Today, much of the reactors that we supply across the world are product of this industry. 4.0. The other things the client is looking out nowadays is for improved GHG footprint. As critical vendors, they want to make sure that we're using energy efficiently. We're not having accidents at our sites. There's no reduced reportable incidents, nobody's fingers get chopped off, and they're working on a equipment and stuff like that, you know. So I think they're also tracking because I think their ESG score depends on their ecosystems ESG score. So the fact that we are automating it more and more, actually reduces the risk of accident.

Kalpana Pathak 12:19
So as early adapters of industry 4.0 We heard L&T and Dr. Reddys lab share their experiences. Let us now hear from Sanjeev Sharma, Chief Executive Officer at ABB, India, the automation and electrification company on how ABB changes factories for its clients. Sanjay Welcome to the Morning Brief.

Sanjeev Sharma 12:39
I'm glad to join this podcast with you

Kalpana Pathak 12:42
will it be fair to say that industry 4.2 Revolution may have started with the MNCs in India, but local industry is catching up fast.

Sanjeev Sharma 12:50
So in the multinational corporation environment is fairly deep and obvious, it's becoming kind of standard operating practice earlier only the multinational corporations used to participate in it because they had tried this concept somewhere globally, but increasingly we find that the local company or have increased in scale and they are adopting this at a much larger scale,

Kalpana Pathak 13:15
which are the sectors that are embracing this change Sanjeev. And are there sectors which can do without embracing an industry 4.0 element

Sanjeev Sharma 13:26
thing is increasingly becoming more and more penetrated, especially those businesses which are scaling up and especially the businesses which are also export oriented, when it comes to large scale Indian industries, manufacturing industries, like automotive, we see that penetration coming quite deeply, especially in the EV manufacturing, where in that scale, certain companies are going for very high scale is highly penetrated like OLA scooters, and OLA other future ventures. And now we see that a much bigger penetration of it in the electronics manufacturing also in the fast moving consumer goods. So we also see the penetration of it is happening in the aerospace industry as well. And many other sectors, wherein they find that anything that can be properly interconnected. It can provide you a lot of data and insights. And it can help management take good decisions. So I would say the all the new age as well as scale companies which are coming in, they're adopting it as a de facto standard. Now we have an equal participation of multinational corporation, as well as the domestic large corporations in this particular space.

Kalpana Pathak 14:39
Sanjeev, what really changes on the ground for these factories, if you could give us an insider's insight.

Sanjeev Sharma 14:45
So for example, one of our manufacturing plants close to Bangalore where I'm sitting, we have converted into an industry 5.0 It's a combination of 4.0 We started about three years back, wherein we had

Sanjeev Sharma 15:00
A shopfloor which used to produce certain equipment, switch gears. And now what we have done it we redesign that based on industry 4.0 principles, we have reduced the size of the shop floor to produce double the equipment that we used to do three years back, we use 15% less energy, and the productivity gain is about 40%. So that is one classic example of industry 4.0, wherein we introduce robotics, when introduced the Internet of Things sensors in the manufacturing process, and completely robotised the testing process. And by doing that, we continue to gain a lot of data from the different manufacturing cells. So this was never possible before. And that has given a big flip on our productivity,

Kalpana Pathak 15:49
if you can help me understand what is the role of 5g and AI in industry 4.0.

Sanjeev Sharma 15:55
as sort of the 5g is concerned, it's a more robust communication network or technology, like for example, the latency, you know, that is the time you send a signal and when it received and when you get the acknowledgment back in 5g is much much shorter compared to 4g in the real technology terms. So that means if earlier, in order to reduce the latency between machines, you wanted to wire them up with each other, right. But now, if you are setting up a place wherein you don't want to wire them up, and you want machines to talk to each other, or 5g networks is much easier for the machines to do so. And these machines can also be kind of sitting in different locations and they're connected with the bandwidth of 5g they can communicate with each other with the minimum latency. So that's what 5g does. So it means the machines become more and more interconnected, that means the processes can be more and more interconnected.

Kalpana Pathak 16:52
And where does AI step in

Sanjeev Sharma 16:54
AI is nothing but the data which is coming out of your production processes, whether they are coming from your customer side. So what you do is you gather data, and you will do the machine learning on top of it, where in the machine learning keeps on capturing data. And it does the pattern analysis of the data to identify what are the patterns of the data, once the patterns of the data or stabilized and understood, then you can put an artificial intelligence algorithm on it, which feeds on this data feeds on this pattern and starts making decision for the correction. And once the patterns are established, then AI becomes a more like like an automatic loop wherein it reads that data and is able to make the adjustment automatically without interference of a human being in it.

Kalpana Pathak 17:44
But Sanjev in addition to increase production, tell me what else does a future ready factory provide

Sanjeev Sharma 17:50
other is the flexibility, you can change the different product mix in the same plant much more easily. You can increase the reliability of your machines as well as deep, you can identify the productivity of your workforce as well as your processes. So it keeps on giving you the feedback. And by doing the machine learning pattern analysis, you can see where the bottlenecks are. So it means the productivity gains are much more continuous. And it is based on facts, not based on necessarily only on the domain expertise and experience because that data speaks by itself. So that's the one main advantage you get with industry 4.0 that it gives you a much faster feedback loop so that more higher quality decisions are taken by management to stay relevant for the customers.

Kalpana Pathak 18:42
So what are the challenges involved for a particular organization or a company to reach industry 4.0 level.

Sanjeev Sharma 18:49
So the biggest challenges are not technological. I think biggest challenges are more towards the mindset for the medium size organization. So the first, I think recognition should be that you should hire more young people who are more comfortable with new generation technologies and are willing to experiment to make your processes more modern and more productive using the technology. Number two, get the exposure not within India, but also travel around the world. And wherever you get an opportunity look into similar industries, how they have implemented the automation as well as industry 4.0 concepts and adapt it to how the working environment and working conditions and the labor conditions and the skill levels exist here, then you're not only able to adapt, but at the same time you're able to adapt at a much lower price. I can give our own example, our own production unit which has adapted industry 5.0 We send young engineers to our European plants. They looked at that automation, they came back they adapted that automation and implemented it at 25% of the cost compared to if we had simply copied the source

Sanjeev Sharma 20:00
machines which are available in Europe, because here the skill level that is available with the worker is different. So, we adapted the solutions accordingly, we have much more productive gain. And at the same time the workforce is much more comfortable dealing with the solution, because it is implemented which with aligning with their skill level.

Kiran Somwanshi 20:19
So, the writing is on the wall, that if India wants to be the manufacturing capital of the world, its factories have to become smart. Also, if companies have to effectively leverage the various production linked incentive schemes, digital transformation is the way out, which means keeping industry 4.0 At the heart of manufacturing, and digitally transforming shop flows is just the beginning, especially when engineering and tech companies are working on a host of IOT enabled platforms that users can merely plug and play. And there is probably a digital solution for most of the real world problems companies face in their production. Also, it helps companies become ESG compliant and improve their environmental footprint, reduce accidents and be sustainable. Basically, it's not a choice for India INC, but a necessity. So the change is here and now. But the question is, are we ready?

Kiran Somwanshi 21:20
On the other hand, there are concerns about the massive workforce in India. What happens to them when machines take over? And do we get to see more women in smart factories? How will consumers like you and me benefit from industry? 4.0. We will continue this discussion in our next week's episode, which drops on Thursday, November 10. You have been listening to industry 4.0 On the morning brief. I'm your host Kiran Somwanshi and I'm Kalpana Pathak signing off. Thank you, Sanjay and Sanjeev for your insights. And thank you for tuning into this podcast brought to you by the team economic times. Show producer Vinay Joshi sound editor Rajas Naik, executive producers Anupriya Bahadur and Arijit Barman. We hope you liked this episode, do share it on your social media networks. The morning brief drops every Tuesday, Thursday and Friday and is available on Spotify, Apple podcast, Amazon and Google podcasts, as well as Jio Saavn. do tune in to ET play our latest platform for all audio content, including the morning brief. Thank you for listening. Have a nice day ahead. All clips used in this episode belong to the respective owners credits mentioned in the description.

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