a study on industrial synergies between two friends ...€¦ · a study on industrial synergies...

Prof. Dr. Steffen Kinkel 1

A study on industrial synergies between two

friends: Suzhou & Baden-Württemberg

Prof. Dr. Steffen Kinkel

Head of the Institute for Learning and Innovation in Networks (ILIN),

Karlsruhe University of Applied Sciences

Opening Ceremony KIT China Branch

Suzhou, China

Friday, May 16th, 2014


Institute for Learning and Innovation in Networks (ILIN)

(Prof. Dr. S. Kinkel, Prof. Dr. A.P. Schmidt)

Innovation in Networks

Open Innovation

Global Innovation, Production and IT

Local Innovation and Production Networks; Integrated Value Chains

Production-IT-Linkages

Networked Learning and Knowledge Development

Enterprise 2.0, Social Technologies in Industry

Knowledge Maturing and Transfer

Agile Methods

Ambient Assisted Living

ILIN – Competences


wbk, Fasanengarten, KIT wbk, Ehrenhof, KIT

wbk

Production systems

Machines, equipment and

process automation

Manufacturing and materials technology

GAMI - Global Advanced Manufacturing Institute

Suzhou, China

AMTC - Advanced Manufacturing Technology Center

Shanghai, Jading Campus at Tongji University, China

Gebäude 276, KIT Campus Nord Tongji University, GAMI, China

wbk Institute of Production Science

Our Partner


The study

Portrait of Suzhou

Portrait of Baden-Württemberg

Industry in Suzhou

Size and sectoral structure of companies;

special focus on machine tools, automotive and e-mobility

Innovation efforts and outcomes

Specialization patterns: sectors and technologies

Differences and similarities between domestic and foreign companies

(with a special focus on companies from Baden-Württemberg)

Industry in Baden-Württemberg

Specialization patterns: sectors and technologies

Special focus on machine tools, automotive, e-mobility

Innovation efforts and outcomes

Identify matches and synergies

Practical guide to start a cooperation

Experiences of cooperators

Success stories

Structure and main topics

of the study


Evidence we can build on

Leading German companies’ production and innovation strategies in China

Investment and production activities – offshoring and backshoring –

of German companies in China

Patent activities and specialization of German – and partially Chinese and

Baden-Württemberg – companies

Innovation and cooperation behaviour of automotive suppliers and machine

tool companies in Baden-Württemberg


Methodology

Semi structured expert interviews, each 2-3 hours, 14 days in May/June 2011

Covered regions: Beijing area incl. Tianjin, Shanghai area incl. Nanjing

Sample of interviewed enterprises (n = 18)

5 Automotive sector (OEM and supplier)

4 Mechanical engineering, plant construction

4 Electrical engineering, automation, metrology

3 Chemical industry

2 White goods & other

Size of the enterprises:

5 < 1000 EMP, 3 < 2000 EMP, 10 > 2000 EMP

A total of 115.000 employees in China,

about 30% of all employees of German enterprises in China,

about 45% of all local turnover of German enterprises in China

Data and methodology


Production „in the market for the market“

If exporting, then within Asia

Rarely re-imports to Europe, almost no “offshore factories”

Cost reduction becomes less important;

wages increase 10-25% p.a

Global standards for production technology, quality level

Process innovations in German lead plants

“Copy and paste”, partly local adaption

Patterns of foreign companies in Suzhou?

Patterns of local companies in Suzhou?

Manufacturing strategy:

Spotlights on main results

QUOTATIONS

Machine building:

„The cost

advantages of China

compared to

Germany are

diminishing more

and more.”

Chemical industry:

„The production

technology we use in

China complies with

international

standards.“


Cost-driven relocation of R&D to China has yet no relevance

Establishment of local R&D: application engineering / product

adaptation; sometimes technology scouting

„gap“ in “real innovation” see competence profile

Cooperation with universities focused on recruiting and scouting

“Fight” for experienced talents; competition by local enterprises

(Top 5 employers); “Finding and binding” people is key

Patterns of foreign companies in Suzhou?

Patterns of local companies in Suzhou?

R&D and innovation strategy:


QUOTATIONS Plant construction:

„Despite of the big local

capacities in R&D, 80%

of the research topics

are still set by our

parent company.“

Automotive supplier: „In

the long run we aim for

developing products for

the global market in

China.“

Metrology: „Chinese

enterprises become more

and more attractive – at

this stage are five of the

most popular

employers in China

national enterprises.“


Level of competencies for product

innovations – „Chinese gap“

5

4

3

2

1

Technology

Monitoring/

Scouting

Basic Research Applied Research Basic Innovation/

Development of new

Products/

Technologies

Enhancements/

Reengineering/

Improvements

Adaption/ Application

of Products/

Technologies on

local Requirements

Product Innovation

Lo

cal C

om

peten

ce L

evel

:: Singular pilot activities

:: Common competence level


Strategic roles of foreign factories (Ferdows 1997; Kinkel/Zanker 2007)

Lead Factory

Source Factory

Offshore Factory Outpost Factory

Contributor Factory

Server Factory

Cost Reduction Market Seeking

Vicinity to Key Customers

Technology/

Knowledge

Seeking Resource Seeking

Strategic Objective of the site

low

S

ite c

om

pete

nce

hig

h


Strategic roles of foreign factories (Ferdows 1997; Kinkel/Zanker 2007)

Lead Factory

Source Factory

Offshore Factory Outpost Factory

Contributor Factory

Server Factory

Cost Reduction Market Seeking

Vicinity to Key Customers

Technology/

Knowledge

Seeking Resource Seeking

Strategic Objective of the site

low

S

ite c

om

pete

nce

hig

h

Advanced Server Factory

Which strategies and factory

roles are companies from

Suzhou and BW pursuing?


German FDI (foreign direct investment)

stocks in China

Almost 35 billion Euro investment


Strong dynamics since 2000,

short “slowdown” in 2002/03

Even growth in the global crisis

(2009), when global FDI flows

were going significantly down

Chinese FDI in Germany approx.

1/10 of German FDI in China

Approx. 5000 German companies

active in China, approx. 900

Chinese companies in Germany

BW FDI in Suzhou?

Suzhou FDI in BW?

Which activities are performed?

Production? R&D? Source: Deutsche Bundesbank, own calculations

Year

Value

(Mio. €)

Diff. to

prev. year

Rel. diff. to

prev. Year (%)

2011 34.955 7.554 28%

2010 27.401 6.220 29%

2009 21.181 2.460 13%

2008 18.721 4.272 30%

2007 14.449 2.210 18%

2006 12.239 1.837 18%

2005 10.402 2.235 27%

2004 8.167 1.184 17%

2003 6.983 618 10%

2002 6.365 -569 -8%

2001 6.934 1.193 21%

2000 5.741 1.467 34%


Global distribution of German

international companies’

production capacities

Germany 61%

EU 21%

Asia 8%

North-/ Latin America

7%

EE beyond EU 3%

South America 1%

RoW 1%

German Manufacturing Survey (GMS) 2012, Fraunhofer ISI

20% of foreign

production capacities

in Asia

BW production

activities in Suzhou?

Suzhou production

activities in BW?

R&D?


Production relocation and

backshoring activities over time (German metal and electrical industry)

17%

26%

27%

19%

25%

19%

12%

11%

4% 6% 6%

4% 3%

3%

2%

0%

10%

20%

30%

1995 (n = 1.305)

1997 (n = 1.329)

1999 (n = 1.442)

2001 (n = 1.258)

2003 (n = 1.134)

2006 (n = 1.011)

2009 (n = 817)

2012 (n = 820)

Verlagerung in den zwei Jahren vor .... realisiert

Rückverlagerung in den zwei Jahren vor .... realisiert

VG

Relocation in the two years before …

Backshoring in the two years before …

German Manufacturing Survey (GMS) 2012, Fraunhofer ISI

Sh

are

of co

mp

an

ies (

%)

Lowest relocation

level since mid 90s

Every 4th relocating

activity is followed by

backshoring;

ca. 400 backshoring

companies p.a.

Dynamics in BW

and Suzhou?


Target and source countries for

production relocation and back-

shoring activities (2010 to mid 2012)

„New“ EU 12

China

Other Asia

EU 15

North America

Other Eastern Europe

South America

RoW

Source countries of

backshoring activities (n = 32)

Target countries of relocation

activities (n = 154)

Share of reloc./backsh. companies (%)

Main backshoring

reasons:

Quality

Flexibility /

Ability to deliver

Patterns in BW

and Suzhou?


Trends in foreign R&D and

global innovation networks (GINs)

Increasing – but slowed down – trend to locate R&D in emerging countries

Market-seeking motives (e.g. need to adapt products to local markets,

support foreign production) remain most prominent

Knowledge-seeking motives gain importance

High demand and growing (lead) markets at foreign locations primarily

foster the establishment of local Development and design activities

Foreign Research activities are particularly driven by local skills/talent

and the quality of the research system

Multi-hub networks of “centres of excellence”, stepwise assigned with global

R(&D) mandates

Localization of D – globalization of R !?

Patterns in BW and Suzhou?


Number of transnational patent

applications for selected countries

(1991-2011)

Source: EPO – PATSTAT; Fraunhofer ISI caculations


Shares of high-

tech at total patent

applications for

selected countries

(1991-2011)

Source: EPO – PATSTAT;

Fraunhofer ISI caculations


Technology specialization of

Baden-Württemberg and

Germany in transnational

patent applications

(RPA 2008-2010)



RPA – Revealed Patent Advantage:

+ Machines, machine tools

+ Motors, Transport

+ Precision instruments

+ Electrical equipment

- Basic and organic chemistry

- Plastics and materials

- ICT

- Biotechnology


Technology specialization of

Baden-Württemberg and

Germany in transnational

patent applications

(RPA 2008-2010)



China Invention & Patent

RPA in Baden-Württemberg:

+ Machines, machine tools

+ Motors, Transport

+ Precision instruments

+ Electrical equipment

- Basic and organic chemistry

- Plastics and materials

- ICT

- Biotechnology

Frequencies in Suzhou:

+ Material analysis, chemical &

physical properties

+ Measuring, testing, controlling

microbiological processes

+ Semiconductors

+ ICT, digital transmission

RPA in Suzhou?

Complementary competences?


Countries shares at EPA

applications in technology fields

relevant for E-Mobility (2000-2007,

% of all applications per technology field)


GER BaWü US JP KR FR IT CN

Internal combustion

engine

28 17 13 36 0 8 4 0

Hybrid Drives 16 11 36 32 0 7 1 1

Electric Motors 28 14 13 33 2 7 2 0

Mobile Fuell Cell 15 3 11 48 7 6 2 0

Batteries for E-Mobility 11 5 17 42 12 5 1 3

Break Energy Recovery 10 10 20 20 0 30 0 0

Heating / Cooling 44 0 4 19 0 26 4 0

Emission Reduction 9 2 9 68 0 7 0 0

Patent activities of companies from Suzhou?


19

23

29

25

16

9

16

23

38

4

6

11

8

17

13

22

18

20

37

47

0% 20% 40% 60% 80% 100%

Car suppliers NRW

Car suppliers BaWü

Machine Tools NRW

Machine Tools BaWü

Price

Quality

Innovation/Technology

Short delivery times

Flexible adaption of products to customer req.

Erhebung Modernisierung der Produktion 2006 , Fraunhofer ISI

Competitive strategies of BW and

NRW machine tool and automotive

supplier companies

Strategies and patterns of Suzhou and BW companies?


Potentials of co-operations for

innovation performance

Sales with new products

20%

18%

20%

18% 19%

16%

19%

17%

0%

10%

20%

30%

R&D co-operations

with research

institutions

No R&D

co-operations

with research

institutions

R&D co-operations

with other companies

Machine tools

Car suppliers


Innovation and co-operation activities and potentials of

Suzhou and BW companies?

No R&D

co-operations

with other companies


The study

Analysis of existing regional studies and data

Patent analysis

Expert interviews (5-10 in Suzhou and Baden-Württemberg)

Online company survey (core element

100 domestic companies and 50 foreign companies in Suzhou

150 companies in Baden-Württemberg

Questions on: Competitive strategy, use of technology, product

innovations, R&D activities, co-operation activities (within and between

Suzhou and BW), foreign production and R&D activities, important

location factors, personnel structure

Interviews with successfully cooperating companies

3-5 success story profiles

Interviews with partners from Suzhou and Baden-Württemberg

Please help us to make it a success!

Methodology

of the study


Prof. Dr. Steffen Kinkel

Faculty of Computer Science

and Business Information Systems

Karlsruhe University of Applied Sciences

Moltkestr. 30, 76133 Karlsruhe

Tel.: +49 721 925-2915, Fax: -2965

[email protected]

Contact

mailto:[email protected]




Backup


STATUS QUO

Efforts for a high share of local sourcing in China, ranging

quantitatively (# parts) from 30% to up to 90% of the inputs

But on a value basis considerably less local source;

complex parts are still mostly imported

Partly already high-performing local suppliers, but

long development time: 10-15 years until 80% local source

ongoing high efforts for support and supervision

lower level of “variant flexibility” of local SC

(but high volume flexibility)

IN THE FUTURE:

Challenge: Build-up and maintain local SC-structures

Procurement / SCM strategy:


QUOTATIONS

„Metrology: „The lack of

competence of some of

the local suppliers is a

problem for changes

in products or

processes. This needs

to be checked

consistently, otherwise

the local procurement

can be even more

expensive than the

import.“


Pathways of strategic roles

of offshore plants in China

Global hub role for product

and/or process knowledgeLead Factory

Supply of global markets

Testing ground for new (basic) process

technologies and productsContributor Factory

Local product and process

development (no basic innovation)Advanced Server Factory

Choice and development

of suppliersSource Factory

Procurement

Production planning and process

changes

Product customization

and redesignServer Factory

Product and process improvement

recommendations

Local logistics

Technical process maintenance Offshore Factory

Production

Collect information Outpost Factory

Access to low-cost production Access to skills and

knowledge

Proximity to market

Sit

e C

om

pe

ten

ce

Strategic Reason for the Site

Technology Scouting


1. Production: From cost orientation with focus on wage costs

also opportunities for German mechanical engineering firms

2. Sourcing : From selective supplier development in single source to

systematic development of strategic local suppliers in a dual source approach

3. Innovation: From product adaptation mode and partly technology scouting to

„Bottom-up design” of products/ solutions focusing on functional and cost

requirements and strategic research co-operations with technical universities

4. HR: From curbing employee fluctuation to establishing

systematic personnel development concepts and career paths

Four guiding principles

for the future development of

Chinese factory sites


Risk management and relocation

to China

Risk management is more

important for firms

relocating production

activities to China

Particularly important for

Chinese activities is

considering

Production risks

Know-how risks (IPR)

(Procurement and

financial risks)

47%

49%

57%

28%

39%

4%

15%

11%

58%

56%

61%

30%

45%

17%

35%

21%

66%

64%

73%

32%

52%

6%

39%

43%

0% 20% 40% 60% 80%

Procurement risks

Financial/fiscal risks

Production risks

Manpower risks

Sales/distribution risks

Locational risks

R&D risks

Risks through loss of know how or product piracy

no production relocation

production relocation elsewhere

production relocation to China


Number of transnational patent

applications from Baden-

Wuerttemberg and Germany



Specialization profile of BW and

Germany in selected technology

fields (RPA 2008-2010)


Baden-Wuerttemberg

Germany

Sustainable Mobility

Climate Change and Energy

Resource efficiency /

protection of environment

Life Sciences / Health

ICT


Innovation performance of BW and

NRW machine tool and automotive

supplier companies

Performance and patterns of Suzhou and BW

companies?

21 20

15 15

17

20

17 17

0

5

10

15

20

25

Car suppliers NRW Car suppliers

BaWü

Machine Tools

NRW

Machine Tools

BaWü

Sales with new products [%]

Time to market [Months]



Process innovations

20

6

22

7

25

8

51 53

17

25

25 23

2729

18

34

0

10

20

30

40

50

60

70

80

AZL MB AZL MB AZL MB AZL MB

genutzt, geringes-mittleres Potenzial

genutzt, hohes Potenzial


Bildverarbeitung Prozessintegrierte

Qualitätskontrolle

Industrieroboter PPS/ERP-System

Patterns of Suzhou and BW companies?


Factors supporting

Re-localized Manufacturing

Advantages of cost-based relocation activities to low-wage countries diminish,

market related expansion investments in emerging markets gain importance

New strategic imperative of local manufacturing “in the market for the

market” – the end of the era of cost-focused GVCs !? Supporting factors:

Complexity of global supply chains (up to 30-40 stages)

Vulnerability of global supply chains (e.g. Fukushima)

Individualized consumption and production modes

Massive market shifts (e.g. China as market for German car manufacturers

already bigger than whole Europe – and still growing)

Rising labour costs in LCC and reduced relevance of production-related

labour costs for total costs due to further automation (< 10% of total costs)

Innovative ICT and manufacturing technologies supporting

individualization and automation:

3D Printers/ Additive Manufacturing: “Individualization for free” vs. low EoS

Industry 4.0: Cyber-physical systems and “internet of things”

a study on industrial synergies between two friends ...€¦ · a study on industrial synergies...

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