Steve Gansen

National Manufacturing Manager

Industry Digitization Team

Date

Cisco Digitalization Strategy and Vision for Manufacturing

Customer

Steven Sasson

invents the

Digital Camera

while working at

Kodak in 1976

Disruption…Change and Keep Changing!!

To Better Understand the State of Digital Disruption & Industry Outlook, Cisco Conducted a Detailed Study

Assessed industries’ vulnerability to digital disruption:

Interviews with 941 business leaders across 12 industries and 13 countries

Analysis of market data, looking at investment, timing, means, and impact

Ranking of industries according to their proximity to center of the “Digital Vortex”

8

1

Source: Global Center for Digital Business Transformation, 2015

Technology

Products &

Services

Pharmaceuticals

Oil & Gas

Utilities

Healthcare

CPG &

Manufacturing

Hospitality

& Travel

2 Media &

Entertainment

4Financial Services

5Telecommunications

Education

11

10

9

6

Digital

Vortex

7

12

3

Seismic Changes Will Displace Nearly 40% of Top Incumbents, and It Will Happen Soon

*Disruption = Substantial change in

market share among incumbents

Source: Global Center for Digital Business Transformation, 2015

Expected time to

disruption*:

3 Years

In your industry, how many

companies will lose their

place in the top 10 due to

digital disruption (over next

five years)?

However, Most Companies Are Not Responding to the Threat

45%of respondents

say digital disruption

is NOT

a board-level

concernDoes not

recognize

or is not

responding

appropriately

Taking

“follower”

approach

Actively

responding

by disrupting

our own

business

43%

32%25%

Responses to Digital Disruption

In general, what is the attitude of your

company’s leadership toward digital disruption?

Digital Disruption…Who Cares?

Some thoughts…

“Our next phase of investment in the factory of the future includes a more transparent manufacturing model. … not

only to advance our cost competitiveness, but to drive a different conversation with our customers and suppliers.”

- Rob Goldiez, Scott Fetzer, a Berkshire Hathaway company

"If you went to bed last night as an industrial company, you're going to wake up today as a software and analytics

company.”

- Jeff Immelt, CEO, GE

“…the lines between hardware, software, and services are blurred or are disappearing”

- Tim Cook, CEO, Apple

“Two-thirds of CEOs (66%) see more threats facing their businesses today than three years ago.”

“All CxOs identified the risk of industry disruption caused by an unlikely competitor outside their

industry as a primary competitive threat.”

- IBM Global C-Suite Survey, 2016

- PwC 19th Annual Global CEO Survey

A New Industrial RevolutionLeveraging the IOE/IOT to Digitize Manufacturing

18th Century

Steam

20th Century

Mass Production70’s

Robots

Today

Digitization & Smart Automation

Technology

Progress

Smart

Devices

Priority Investments: #1 Analytics | #2 Connectivity | #3 Automation | #4 Mobility

Source: SCM World/Cisco “Smart Manufacturing & the Internet of Things 2015” survey of Manufacturing Business Line Executives and Plant Managers across 17 vertical industries.

Cisco Confidential 11© 2013-2014 Cisco and/or its affiliates. All rights reserved.Big Data => Open Data for Business, Customers, Consumers

More Important

Less Important

0101010010101010101010101010

1010101010100010101001010101

0101110101010101010101

IoE Transforms Data into Wisdom

Wisdom (Scenario Planning)

Data

Information

Knowledge

Digital Manufacturing Enablers and Focus Areas

#1 Analytics

#2 Connectivity

#3 Automation

#4Mobility

Source: SCM World/Cisco “Smart Manufacturing & the Internet of Things 2015” survey of 400 Manufacturing Business Line Executives and Plant Managers across 17 vertical industries.

0% 10% 20% 30% 40% 50% 60% 70% 80%

Wearable Devices

Additive Manufacturing/3D Printing

Social and Collaboration Technology

Collaborative Robotics

Plant Floor Video

RFID and Location Technology

Wireless Networks

Cloud Computing

Modern Plant Floor IT (PLM, MES)

Mobile Devices

Factory Automation

Connectivity Technologies

Big Data Analytics

Primary Barriers

Relate to Information

Visibility

0% 10% 20% 30% 40% 50% 60% 70% 80%

Plant floor security threats or fears

Insufficient investments to modernise plant floor IT

Unable to justify the investment / ROI

Lack of clear manufacturing strategy

Primarily Manual Processes

Lack of reliable plant floor network, linking production…

Lack of understanding what plant floor data represents

Inflexible automation

Complexity of manufacturing operations

Employee skills gap

Siloed Plant Floor IT Applications

Lack of common metrics across plants

Inability to access data within production equipment

Lack of visibility of plant floor KPIs

Lack of supply chain visibility

What are the key barriers that prevent your company from solving its manufacturing challenges?

Source: SCM World/Cisco “Smart Manufacturing & the Internet of Things 2015” survey of 418 Manufacturing Business Line Executives and Plant Managers across 17 vertical industries.

Digital business transformation is organizational change using digital technologies and business models. It requires:

CHALLENGING ASSUMPTIONS that delivered past successes

STRESS-TESTING the ways you deliver value to customers

CHANGING THE ORGANIZATION

ITSELF: operations, culture, revenue models, and more

What is Digital Business Transformation?

Manufacturing Digitization Across the Value Chain

Connected

R&D

Connected

Factory

Supply Chain

Security &

Visibility

Connected

Customer

Connected products providing

innovate insights

Global, Virtual, 3D, Collaborative

Plant-floor platform providing

converged connectivity

Advanced capabilities to

streamline process

Visibility enabling informed

and fast decision making

Security to enable traceability

and confidence

Intelligent customer care through

connected products

Empowered sales to reach the right

customer at right time

Protect and Enhance

Brand Value

Drive Operational

Excellence and ProductivityGlobal and Collaborative

Product Development

Accelerate Development and Scale

of New Products and Services

Connected

Assets

© 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential

CiscoDigital ManufacturingIoT Strategy

Manufacturing Trends –Disruption Across the Value Chain

Shifting Landscape

for Workforce

Changing Customer

Expectations &

Demands

Agile Innovation &

Performance Insight

Disruptive & Accelerated

Technology

Developments

• Shifting Job Landscape

• Globalization & Localization

• Increasing Supply Chain

Complexity & Risk

• Performance Economy

• Personalization

• Maker Movements

• Hyper Analytics,

• 3D Printing

• IOT & Industrie 4.0

• Robotics

• Marketplaces

• Digital Inventories

• Collaborative

Consumption

Copyright © 2015 Rockwell Automation, Inc. All Rights Reserved.PUBLIC INFORMATION

These generations will work differently…

WorkforceTalent Shortages & Skills Gap

Copyright © 2015 Rockwell Automation, Inc. All Rights Reserved.PUBLIC INFORMATION 19

Copyright © 2015 Rockwell Automation, Inc. All Rights Reserved.PUBLIC INFORMATION 20

© 2013 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 21

• Efficiency: 20% reduction of

breaker component tire loss

• Productivity: 21% increase

in tire production

• Return: Payback in less than

6 months

“The combined Cisco, AeroScout and Global Data Sciences solution (using Cisco wifi) provides real-time visibility into the inventory on the plant floor and allows us to drive lean manufacturing without the risk of running out of material.”

Greg Pemberton, MIS Director

Current Situation: Tire production in 11 global facilities, but

NA producing 1000 SKUs in 60 acre facility. Today have long,

manual, search times for inventory needed in assembly line,

often missing components and causing delays..

IoT Innovation: Using RFID tags connected to WiFi,

Continental was able to allow materials

handlers/truckers/mgrs to integrate with inventory tracking

system and search for components by ID, tread number, etc

and alert low inventory

Cisco Confidential 22C97-731884-00 © 2014 Cisco and/or its affiliates. All rights reserved.

SugarCreek Food manufacturer expands with new Digital Factory of the Future

• Get real-time production

transparency

• Implement sensors everywhere for

Sous-Vide

• Identify emergencies and support

for first responders

• Gain better visibility to real-time

OEE for all users in all locations

• $100m annual energy bill

• Greenfield design & integrated

Cisco Connected Factory

architecture from IoE Services

• Unified network including Location

Based Services (AeroScout) &

Security

• Cisco Analytics to integrate

machine data with digital signage

and mobility

• On time implementation of new product and process capabilities

• Improved labor utilization to 90%

• Integrated visibility of all operations from one screen

• New sensors added predictive maintenance capabilities, lowering costs and increasing OEE by 25%

• Lowered relative energy costs (per sq.ft) at this facility by 15%

ResultsChallenge Solution

“With the help of the Cisco Services and Global Manufacturing Industry practice, we have been able to

expand our product portfolio, production capacities, efficiencies and capabilities with a new plant. We’re

able to achieve many new benefits with the additional insights into our operations not previously

available.” Rob Daley

CEO Sugar Creek

© 2013 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 23

• Detection: 24X7 abnormal

condition alarm detection

• Response: Workers can

now be found within 3 mins at

a cost of $1/worker hour

Consistency: 100%

reporting of exposuresCurrent Situation: In plant environments across oil and

gas, chemicals, etc, one of the biggest priorities for

management is to understand how to reinforce safe work

practices and support the safety of employees throughout

their shift..

IoT Innovation: A partnership between Cisco, Accenture,

AeroScout and Industrial Scientific led to the deployment of

a plant wide wireless infrastructure that can support

Portable Gas Detection, asset location, tracking and video

““This solution not only alerts individuals to potential gas hazards via a wireless network but also allows us to identify incidents and quickly attend to endangered workers. As a cost-effective solution, it can help to transform on-site safety in a wide variety of industrial plant situations.””.

Operations Manager

Immense Business Benefits Expected

What business benefits do you expect to derive from Digital Manufacturing?

Reduced

Downtime

48%

Unplanned

downtime down

from 11% to 5.8%

Reduction in

Defects

49%

Defect rate

down from

4.9% to 2.5%

New Product

Introduction

23%

New product

introduction cycle

time reduced from

15 to 11 months

OEE

Improvement

16%

Average OEE

improved

from 74% to 86%

Improved

Inventory

35%

Inventory

turns increased

from 14 to 19

Reduction in

Energy Use

18%

Annual energy

cost down from

$8.4M to $6.9M

Source: SCM World/Cisco “Smart Manufacturing and the Internet of Things 2015” survey of 418 Manufacturing Business Line

Executives and Plant Managers across 17 vertical industries.

Unleashing Digital Manufacturing Outcomes

Lower

Downtime

Reduce

Defects

Reduce

Energy

Faster

NPI

Maximize

OEE

Lower

Inventory

Reduce

Risk

• Factory

Network

• Analytics and

Big Data

• Factory

Wireless with

LBS

• Factory

Wireless

• Connected

Machine

• Factory

Network

• Energywise

• Factory

Network

• Plant Floor

Virtualization

• Factory

Wireless

• Factory

Collaboration

• Factory

Security

“Reduced labeling

error rateby 16%”

“Achieving 20% energy reduction

with real time visibility.”

“Shaved10-20% off NPI cycle

time”

“Increased OEE mid 70s to high 80s”

“Reduced breaker

component tire loss by 20%.”

Multi-National

Brewery

“$40 million downtime

reduction for customer”

Make Money Save MoneyStay out of

Trouble

“Significantly reduced factory vulnerabilities.”

Business Drivers Are Driving Changing Priorities

2 Exabytesof big data

generated by manufacturing

$65B global installed base of

legacy automation systems

Nearly ¾ of US plants are more than 20

years old

$20B annual cost of

unscheduled downtime

21% have had an IP loss

in last 12 months

<14%Manufacturers

have their machines tied to

the enterprise

SOURCE: Industry Week SOURCE: Kapersky (2014) SOURCE: McKinsey SOURCE: ARC SOURCE: Industry Week SOURCE: ARC

Christian HornerTeam Principal, Infiniti Red Bull Racing

“The network will play a crucial part in how we develop the car; gathering data, learning from it and adapting will ultimately determine our season.”

Cisco Confidential 28© 2013-2014 Cisco and/or its affiliates. All rights reserved.

Electrical Equipment Manufacturer Car Manufacturer

Plant Uptime and Asset Utilization

Rapid Fault Isolation, Predictive Maintenance, Connected Machines

• Lower downtime

•Mobile visibility to robot diagnostics

Machine-as-a-Service

Factory Security

•Rapid fault isolation / 50% downtime reduction

• Improved Quality

Network Mgmt in HMI

Machine to SAP Integration

Connected Factory Solutions

Visual Factory

Collaboration

Connected Factory

Automation

Connected Factory

Wireless

Connected Factory

Energy

Shifting Landscape

for Workforce

Agile Innovation &

Performance Insight

Disruptive & Accelerated

Technology

Developments

Average Cost of a breach = $1.57M USD

Security…..

Gartner estimates that IT security spending will soar from $75 billion-plus in 2015 to $101 billion in 2018. Research firm Markets and Markets sees the cybersecurity market hitting $170 billion by 2020.

Manufacturing is targeted in nearly 1/3 of the attacks

IP is the prize!

2016 Ransomware Attacks:Manufacturing - 54% Healthcare – 44% Education - 35%Tech - 29% Banking - 28%

IoT Cyber Security & Business Concerns:Growth Risks & Vulnerabilities in Industrial Technologies

Source:1 Cyberattacks against critical manufacturers nearly doubled in 2015: Government report - The Washington Times in Jan 20161“The FBI estimated that $400 billion of intellectual property is leaving the US each year because of cyberattacks” - Dark Reading 2016

A Targeted Environment with Accelerating Incident Growth

2000

Australian water utility

released sewage into

water ways via remote

access by former

contractor.

Software bug in alarm system

control room at First Energy corp in

Ohio cause a northeast blackout

that left 50 million American and

Canadian residents without power

for 2 days.

2003

2005

Data on Several Japanese

nuclear plants and electric

utility companies was

released on the Internet in a

data breach, after a virus

infected an employee’s

computer.

2008

A 14-year-old Polish boy

hacked a local tram system,

disrupting traffic, derailing

trams, and injuring 12

passengers

2010

Stuxnet – geopolitical

attack - first proven case

where a cyber attack

caused physical damage.

2012

Malware in Saudi

Aramco hit 30,000

employees and

impacted

operations.

2013

Multiple OT tool

vendors had their

firmware images

hacked /

compromised on

their websites

2014

German smelter

damaged – second

known cyber attack

with proven physical

damage.

2015

Ukraine power grid

shut down

impacting 225,000

people during

Christmas time.

2016

Hackers shut down

Hollywood Presbyterian

Medical Center IT

systems, demand $3.6M

ransom.

2016IOT devices used

as botnets to bring

down Krebs site

and large portions

of web (Oct 22

2016)

Cybersecurity Vendor SprawlSecurity Vendor Sprawl

Source: Momentum Partners

NEIL F. HERSHFIELD Deputy Director, ICS-CERTU. S. Department of Homeland Security

Neil Hershfield is the Deputy Director of the U.S. Department of Homeland Security’s (DHS)

Industrial Control Systems Cyber Emergency Response Team (ICS-CERT). ICS-CERT operates within the National Cybersecurity and Integration Center (NCCIC), to bring a control systems focus to the mission of protecting the Nation's critical infrastructure from physical and cyber threats.

Examples: Alcoa Spear Phishing, Off shore oil platform, WWTP in Wisconsin…etc

“What used to take hours or

days to triage and troubleshoot

problems now takes seconds.”

- David Gutshall,

Harley-Davidson Motor Company

1200 possible BTO

configurations

A new

motorcycle

produced

every

79seconds

Factory Network at Harley Davidson

Watch Video

Start Your disruption….or Someone Else will

You can’t change the world through your rear view mirror…