Volkswagen is set to take a significant step forward with what Martin Hofmann, the German auto giant’s group CIO, calls “one of the biggest industrial cloud projects in the Western hemisphere.”
This year, the company has piloted its smart-manufacturing initiative, which launched in March, at three of its plants. In 2020, it will roll out to another 15 of its 122 factories around the world as part of a five-year strategy to create a much more agile production base, using a combination of cloud computing, sensor-laden equipment, big data and machine learning. Hofmann is part of a senior team leading the project, which also includes Gerd Walker, VW’s group head of production.
The industrial cloud is a key part of VW’s plan to boost productivity by 30% by 2025 and is being introduced at a time of wrenching change in the German automotive industry. In November, Daimler, which owns Mercedes-Benz, said it would cut 10,000 jobs, or 3% of its workforce, by 2022 and use the savings to invest in electric models. Its announcement followed one from VW’s Audi luxury car unit, which will cut 9,500 jobs by 2025, or 1 in 10 of its staff, as it pivots towards electric vehicles too.
To help it adjust faster, VW, which ships almost 11 million vehicles a year, is counting on cloud computing to solve a big headache. Hofmann says a “spaghetti architecture” of hundreds of different IT systems across each of its factories frustrates some efforts to optimize efficiency. If a better process for monitoring quality in a paint shop is developed in one location, he notes, it can’t be applied easily by others because of differing software languages and protocols. The tech spaghetti also makes it harder to control costs and spin up production of new models quickly.
VW’s industrial cloud project, which it’s developing in partnership with Amazon Web Services (AWS), will solve such issues by creating a digital production platform with common interfaces for all kinds of equipment. Over time, all of VW’s plants will be brought onto the platform and production teams will be able to tap into an app store to share applications that can be implemented in all of its factories.
Amazon’s AWS is providing a range of cloud-related services for the project, whose cost hasn’t been disclosed, while industrial-engineering firm Siemens is working on systems that control the machinery in VW’s plants. Eventually VW hopes to bring its suppliers into its industrial cloud, too, which will mean integrating around 1,500 companies with 30,000 additional locations.
The aim is to share data as well as software. VW is creating a data lake that will suck in information from systems and sensors in all of its factories. The data will be used to develop and train machine-learning models for things such as predictive maintenance that can be deployed within plants, or to optimize operations across them. Once its suppliers are integrated into the industrial cloud, VW will be able to leverage more of their data to boost the efficiency of its supply chain and logistics operations.
It’s a compelling vision, but a recent survey of more than 1,000 executives in 13 countries by consulting firm Capgemini found that only 14% of organizations considered their smart factory projects to be successful; almost 60% said their initiatives were either struggling or that it was too early to comment on progress.
The biggest challenge, says Jean-Pierre Petit, Capgemini’s director of digital manufacturing, in an emailed comment to Forbes, is to “cross the chasm” from an initial pilot in a single plant to full-scale deployments, which is where the real benefits of digitization kick in. In particular, smart-factory projects require IT teams to work closely with “operational technology” (OT) groups managing machinery and other tech inside factories. Often, OT teams have become used to working quite independently and may resist IT’s efforts to drive change.
By working closely together on VW’s industrial cloud project, Hofmann and Walker are sending a strong signal to their respective teams about the need for tight collaboration. The decision to launch pilots at several factories this year rather than just one was also deliberate. “You can put a ton of slides up [about the industrial cloud], but nobody is interested in that,” says Dirk Didascalou, one of the senior AWS executives involved in the project. “They need to see it working first.”
The three factories were chosen partly to highlight the fact that VW’s industrial cloud will span all of its activities. The two in Germany, at Wolfsburg and Chemnitz, make cars and components, respectively. A third, at Polkowice in Poland, makes commercial vehicles. The goal next year is to bring at least one factory for each of VW’s 12 brands, which include Porsche, SEAT and Scania as well as Audi, into the industrial cloud. “We want to give them all a showcase,” explains Walker.
It will take time for workers used to dealing with older, inflexible systems to adapt to a world in which tech services can be tapped on demand via the cloud. But VW sees the shift as essential if it’s to compete successfully in a fast-changing market. The company is also developing an “automotive cloud” to help it deliver software and services directly to its vehicles, and VW’s IT function has championed cloud projects in other areas, such as sales management.
If it can help deliver the industrial cloud successfully, Hofmann’s team will further enhance its reputation. Along with moves to beef up VW’s in-house software-development capabilities, the shift to the cloud is already transforming the way the group’s 15,000-strong IT staff is viewed within the company. “IT isn’t just a supporting function now,” says Hofmann. “IT … is becoming a driving force.”
I am the editor of the CIO Network at Forbes, leading coverage of the rapidly evolving role of senior technology leaders. I also develop topics and programming for Forbes CIO events. Previously, I covered frontier technologies such as AI-driven cybersecurity and quantum computing for MIT Technology Review. Before that, I was a partner at a Silicon Valley VC firm that invests in enterprise tech, which I joined after covering the Valley for The Economist Newspaper for many years. Follow me on Twitter @martingiles.