Samsung Aims at Building 1,000 Smart Factories by 2017

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Friday, February 24th, 2017
Kang

Kang Hong-sik, expert advisor of KEA,delivers a speech at the APEC policy seminar on promoting supporting industries held at Yasaka Saigon Nha Trang Hotel in Nha Trang, Vietnam.

Samsung Electronics plans to build a total of 1,000 smart factories in the country by 2017, Kang Hong-sik, expert advisor of Korea Electric Association(KEA), said on Feb. 23.

kang

Kang Hong-sik, Expert Advisor of Korea Electric Association

By making this case a model, it started to expand such a project to nationwide in cooperation with the central government from 2016 and aims at building a total of 1,000 smart factories in the country by 2017.

"Samsung aims at 480 companies this year, bringing the total support volume over the three years to 1,080 companies," he said at the seminar designed to promote the supporting industry in the APEC region.

Among major guests attended at the seminar were Luong Hoang Thai, director general of the Multilateral Trade Policy Department of the Ministry of Industry and Trade in Vietnam and Mitsuhiro Fukuyama, director for APEC, Trade Policy Bureau, the Ministry of Economy, Trade and Industry in Japan.

The following is the full text of the speech delivered by Kang.

Manufacturing innovation policy to back up Korea's supporting industry

Today, I'd like to introduce Korea's SME-supporting policy.

The Korean government has launched the "2014 manufacturing innovation 3.0" project to help the domestic manufacturing industry secure competitiveness to effectively cope with advanced countries' manufacturing reshoring and newly emerging countries' rapid chase, and to push for manufacturing innovation through convergence of the manufacturing and ICT industries. It aims to create environment to help enterprises lead the manufacturing innovation. Its main content is to strengthen competitive power and create new value added through convergence of ICT and manufacturing industries.

Today, I will explain centering on Samsung that helps SMEs in cooperation with the government in the electronics sector.

Korea's overseas production

Korea's overseas production has quadrupled over the last decade.
Its main reason is the weakened competitiveness of the manufacturing industry.

Korea's technology gap with China also reduced from 4.3 years in 2011 to 1.1 years in 2014. There is a big difference in price competitiveness of major electronics goods.

Japanese innovation companies reportedly possess 3.6 times more items than their Korean counterparts have.

The overseas advancement by Korea's SMEs is inevitable owing to rising personnel expenses. The portion of the working age population in Korea is expected to drop to 63% in 2030 after hitting a peak of 73% in 2010, showing a similar trend to the U.S., Japan and Germany where aging is in a rapid progress.

Such advanced countries as the U.S., Japan and Germany do not seem to have a different view over the opinion that the manufacturing industry should be bolstered to increase employment and secure tax revenue. For creation of stable jobs, they are striving to develop ICT-based manufacturing technology in order to strengthen manufacturing competitiveness, not to mention the U-turn of their local companies in foreign countries.

Germany plans to raise the manufacturing industry's productivity up to 60% by 2025 by fostering smart factories as the future manufacturing platform. Japan is pushing for development of infra technology such as secondary battery, carbon fiber and ceramic, IoT standardization, and the inauguration of the robot innovation initiative council. Meanwhile, the U.S. is making a strong push for development of advanced manufacturing technology in the 3D printing, manufacturing design and bio sectors with far-reaching powers, centering on IMI that the government, enterprises and universities joined.

Innovative new technologies

Recently, innovative new technologies to change manufacturing paradigm have been emerging.
As a massive production has changed to a personalized production system due to 3D printing, AI, smart sensor, IoT and Big Data, flexible manufacturing reflecting consumers' demand has been possible, ranging from product design to production and shipment. Also the necessity of logistics or packaging companies has disappeared owing to 3D printing, resulting in the restructuring in the supply chain.

There was a concern that even the traditionally manufacturing power Germany might hand over its top position in manufacturing to the U.S., Japan or China as a number of its companies moved to East Europe.
In 2011, German Chancellor Angela Merkel proclaimed the "Industry 4.0," which aims at raising the manufacturing productivity up to 60% until 2025 to recover the Germany's industrial competitiveness and keep jobs.

Concept of smart factory

The concept of smart factory refers to an advanced factory that creates value through the convergence of factory operation technology and manufacturing automatization technology based on ICT. It produces customer-tailored goods with a minimum cost and time by integrating all processes ranging from product design to production and sales.

As the concept of smart factory has been already widely known, I will not give detailed explanation.

The application scope of smart factory includes all manufacturing-related processes, ranging from product development to massive production, and from market demand forecast and a mother company's order to a supporting company's production and goods shipment. The core is the improvement of productivity against time.

- For instance, Siemens' Amberg Factory boasts of its best productivity in the world with a defect rate of a mere 0.0002% and 35 working hours per week.

- GE of the U.S. is pushing for a flexible and smart factory by seeking the concept of a thinking factory by introducing industrial Internet and digital technology to the field of a partner company.

- Denso, Japan's global auto parts company, is also carrying out a program pursuing the "world's top factory" by selecting an optimum production method that considers output and product life cycle.

Korean government's policy

Let me introduce the Korean government's policy to foster the supporting industry.

In 2014, the Korean ministry of commerce industry and energy announced the "Manufacturing Innovation 3.0 Strategy" that aims at creating 10,000 smart SMEs in cooperation with such large enterprises as Samsung Electronics, LG Electronics and Hyundai Motor.

The basic direction is to accelerate smart innovation in the production field, product and regional ecosystem, find successful cases at an early stage and spread them to the overall manufacturing industry.

Its implementation aim is to revamp SMEs' business structure and create innovation base through the spread of smart production method and construction of smart ecosystem of the regional manufacturing industry.


The implementation system is to merge the factory operation system such as PLM, MES and SCM and manufacturing technologies such as precision processing, automatization and simulation under the target of realizing smart factory.

You may have a question over the relation between the content of the manufacturing basement and smart factory. Theoretically, the convergence of the above-mentioned ICT-based operation system and manufacturing technology can maximize the factory's effectiveness and enhance the productivity remarkably.

If you go to SME factory actually, however, all factors, including the status of production facilities, employees' working attitude, and even the arrangement status of workplace, affect the productivity complexly.

For SMEs lacking in the manpower and management side, the innovation of workplace is more important than applying advanced technology to factory. "Keeping the basics on the manufacturing field" such as placing all machines and instruments in the right position before starting work, cleanliness of workplace, the status of arrangement and workers' attitude toward having enough knowledge about work manual is very closely linked to productivity.

Major supporting contents to build smart factory are largely classified into the three - field innovation, factory operation system and ICT-based manufacturing technology. SMEs can select any of the three cases. A selection of plural cases is also possible within a budget bill and 50% of the building cost is supported. (About $4,500 per company)


Samsung Electronics' supporting case

Now, I'd like to introduce Samsung Electronics' supporting case to you.
The reason of mentioning the Samsung's case specially is that Samsung began to build an innovation center in the North Gyeongsang Province where its factories are located from 2015 in keeping with the government's "Industry 3.0" policy. Samsung is also supporting the construction of a smart factory at an annual cost of 20 billion won over the coming three years in matching with North Gyeongsang Province.

By making this case a model, it started to expand such a project to nationwide in cooperation with the central government from 2016 and aims at building a total of 1,000 smart factories by 2017.

Samsung's performance

Samsung aims at 480 companies this year, bringing the total support volume over the three years to 1,080 companies. Major achievements were +23% in productivity, -46% in the defect rate, -16% in cost saving and -35% in the shortened period for delivery.

Through the Samsung case, I'd like to say the fact that there is a limit in achievements if the climate of workplace and workers' attitude are not sufficient, even if factory automatization or operational system is built.

After hearing a story in the initial supporting stage that there was no achievement although money was spent for system construction and consulting, SME presidents decided to hand over Samsung's belief and manufacturing mind.

About five persons resided in SMEs for three months and began a mentoring drive that plants the DNA of the Samsung's manufacturing mind, "keeping the field," and Samsung's management motto, "speed management," in employees' mind.

Samsung-supported adhesive tape factory

This is the Samsung-supported adhesive tape factory.
When Samsung mentors checked the field for the first time, sticky glues were all over the factory and many things were scattered on the glues.

As mentors demonstrated the "keeping field" drive by erasing glues on the bottom, cleaning dirty facilities and arranging tools before starting the business on the first day, the CEO who had seen the scene joined the drive and workers began to follow.

Related to speed management, carts drawn by hands were replaced with low-cost automation facilities that they attached a motor to the carts by themselves. Since then, employees have begun to suggest an idea voluntarily and the CEO introduced a reward system in return for their efforts, enhancing the employees' morale. After all, it led to the achievement that a French buyer who had visited the field concluded a long-term contract instantly.

Thanks to the SCM system support, this company changed the inventory management system to a bar code from manual work and enjoyed a 60% improvement in production,

Through the molding process improvement under the support of process simulation, it improved capacity utilization by some 20%.

Samsung hands over its top global-level factory management knowhow and smart factory system and supports the sales of output additionally. It is the reason that I specially introduced the Samsung's case to you today.

As you know well, most finished goods companies regard their subcontractors as a trade secret and employ a policy not to reveal the list outside. Samsung also had many different views internally about the issue to reveal the list of its subcontractors outside, but it decided to open the Samsung-supported smart factories as part of the public projects after all.

In October 2016, Samsung helped some 200 smart factories participate in Korea Electronics Show held at COEX in Seoul and backed up their marketing activities.

In the future, it plans to expand the SME-supporting project to the construction of a remote data center in order to help individual factories do not need their own server requiring high cost.

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