Precision industry requires more than special skills
Over the past twenty years, the Dutch precision industry has been able to grow, mainly on the basis of competencies, and thanks to technological knowledge and manufacturing experience. The next twenty years will be much more about business and process innovation than technical innovation, says Hans Priem and Ton Peijnenburg of VDL Enabling Technologies Group. Delivering a piece of art alone is no longer enough. For example, in order to remain internationally connected, standardization, digitalization and business innovation are needed throughout the ecosystem.
The Dutch precision ecosystem is regarded highly internationally oriented. The select group of companies from the beginning of this century has broadened. Foreign OEMs also recognize and acknowledge this. They see the Dutch precision industry as a network that has many competencies, especially when it comes to precision machining and the development and construction of complex mechatronic systems. "Slowly, however, you can see other things becoming more important than just the technical competences ," says Hans Priem, Business Manager VDL ETG. “How you deal with customers, business models, and collaboration is something in which we can still make a difference. It’s just like economies of scale”, agrees Ton Peijnenburg, deputy director at VDL ETG Technology & Development. With 3,500 employees worldwide, VDL ETG is big by Dutch standards.
New competitors with different DNA
American and Asian contract manufacturers have their origins mainly from the electronics industry. Standardization, thus, is in their DNA; they have centralized purchasing and standardized it in their supply chain. In addition, they have digitally linked their ecosystem, allowing orders and other information to be sent quickly throughout the chain. The combination of scale, standardization and digital access enables these companies to respond flexibly. These contract manufacturers are gradually moving towards the markets in which the Dutch precision industry is successful. Especially now that cost pressure is increasing in the B2B market, this calls for alertness and business innovation. Ton Peijnenburg: "As a contract manufacturer, from our background as a machine factory, we mainly compete with craftsmanship which is in our DNA. Our ecosystem is fragmented and much less standardized; information can be exchanged less easily. We rely very much on craftsmanship. That remains necessary, but the precision industry will demand more than just a piece of art in the years to come. In order to remain competitive, we have to organize the ecosystem differently. That is where the big challenge for the Dutch precision industry lies. The Dutch precision industry leads the way when it comes to developing and building extremely high-quality components and systems; just as it does when it comes to integrating them into machines. Where the sector is in danger of falling behind is in the supply of regular parts for these systems. This is partly due to the lack of standardization and digitization. This puts pressure on the competitive position of the entire precision industry.
In the current ecosystem, this is still 'compensated' by the Tier 1 suppliers. Hans Priem: "In our region we help each other. Many of the companies are in the supply chain of large contract manufacturers. We need each other. If it delivers something for the entire ecosystem bottom line, it's good if one company compensates for the other". Compensating doesn't always have to mean accepting a higher cost for value. It can also mean compensation in a digital sense, for example that companies accept that certain information cannot be exchanged digitally because the entire chain has not yet been digitally accessed. Ultimately, this also increases costs. "In the light of global trends, this is obviously finite," says Hans Priem. The advance of digital platforms, such as 3D Hubs, or fully digitalized companies, such as 24/7Tailorsteel, is putting pressure on this model. The platforms manage to use the capacity of the connected machinery very efficiently, because they are digitally fully integrated. Ton Peijnenburg finds it worthwhile to look at what the precision chain can learn from these platforms and to examine how the forces can be combined to make the current supply chain digitally accessible. Because fair is fair: he wants to keep the current suppliers on board. "These suppliers often have a lot of knowledge and flexibility. And there is always room for specialization". However, he realizes that the implementation of Industry 4.0, which is already quite a challenge for VDL ETG, is an even bigger challenge for these smaller manufacturing companies. "We must therefore do this together in order to take the next step. Because we need each other".
Standardization and cooperation
A first step towards consolidation in the sector is standardization of data formats for exchanging data, such as the further roll-out of Model Based Definition. Ton Peijnenburg sees this as the key to further digitization. After all, if standards are introduced for data exchange, digitisation will be easier for the entire ecosystem. "The industry must collectively agree on an open operability standard, so that we can streamline data exchange. The supply industry must call the developers of CAD and PLM software to account for this, while large OEMs must be prepared to get out of their comfort zone. "The car and aircraft industries have solved this problem. Why then would you want to reinvent the wheel? "Standardization is easier when people look over their own shadow," notes Hans Priem. In addition, cooperation should become more explicit, he adds. ASML's scanner - one of the most complex systems developed by humans - is a good example of what is possible when people work together in the ecosystem. The way in which the sector reacted to the fire at ProDrive a few years ago is another example. Hans Priem: "At the end of the day, we are there for each other. The competition is not in the region, but far abroad, that is what we need to focus on".
Innovation model for SMEs
What can also be done differently is the way in which the smaller players in the ecosystem innovate. Smaller companies are less likely to invest in a PhD student because they then make a significant commitment without any immediately demonstrable benefit. This is why High Tech Systems is looking into whether it is possible for several companies to form a consortium in order to hire such a PhD candidate. The problem here is how to deal with Intellectual Property. A solution that is legally difficult, but can be workable for Ton Peijnenburg (who, in addition to his job at VDL ETG, has a part-time appointment at TU Eindhoven), is to place IP with the region. "If you co-invest, you can use the IP. This is how we keep the knowledge in the region". An example of this can be found in the way the Swiss watch industry cooperates with the University of Lausanne. Hans Priem: "The entire industry benefits from their research programmes.
Standardisation of data formats for data exchange the key to the necessary digitization of the precision ecosystem
VDL ETG's development over the last ten years illustrates the cultural change in the high-tech and precision industry. The reactive culture in the DNA of a contract manufacturer is making more and more room for proactive thinking. "That is why we have grown," says Hans Priem. Tier 1 suppliers are able to prove their added value for OEMs. Because they bring solutions from other sectors. That is why he believes a clear technology roadmap is necessary. You should not relate the TRL (Technology Readiness Level) level to current opportunities but to the opportunities you see for using the technology elsewhere. "Then you have multipliers. Designers construct on the basis of what we think. As a contract manufacturer, we are ahead of the OEMs in talking to multiple segments". For him, strengthening cooperation means that not everyone aspires the same role. Hans Priem: "It's not realistic that we say we are good at everything because of our scale. Everyone has a different role. If you recognize and acknowledge that, then we have a world to win". Because in the coming decades it is no longer so much about developing and building an even better vacuum chamber. "We should no longer think in tricks but in working together to make things smarter."
"We should no longer think in tricks but in cooperation to make things smarter”.
"We need to retain the knowledge of smaller suppliers without compromising the competitiveness of the ecosystem”.