Closed borders have shown us the advantages of Industry 4.0
As a result of the coronavirus crisis, engineering companies have had to learn very quickly how to work remotely with customers. “At TOS Varnsdorf, we started to do handover procedures for machines remotely, and to a greater extent, we offer remote diagnostics and maintenance,” says Jan Rýdl Jr., president of the Engineering Technology Federation and CEO of TOS Varnsdorf.
The Engineering Technology Federation estimates that as a result of the coronavirus crisis, production by Czech manufacturers of machining and shaping machines this year could drop to the levels of the 2009 and 2010 crisis years. Are companies better prepared for it than they were in the previous crisis?
There are several factors which have a positive influence in favour of companies so that they can deal with the coronavirus crisis. In the Czech Republic, we have a tradition of manufacturers with a strong manufacturing and development background. They can also build on a decent level of capitalisation. And the experience we gained in 2009 and 2010 also plays a great role. The problem is that the coronavirus crisis does not yet have any clear endpoint, and we cannot see the situation starting to improve. But if demand does not pick up relatively soon, it could have fatal consequences even for traditional machine tool manufacturers.
What lessons did you learn from the 2009 and 2010 crisis at TOS Varnsdorf?
One huge difference compared to 2009 and 2010 is the geographic diversification of our product sales. We have established ourselves firmly on new markets, primarily China, but we have also established ourselves in the USA. We have strengthened our position in Russia.
Following the crisis years of 2009 and 2010, did you change the company’s financial management so that you would have greater reserves for the next downturn?
Even at the time, we noted how great a risk a large credit burden could be. We managed to reduce it to a sensible level. In 2009, exchange-rate hedging also complicated our situation. Before the start of the financial crisis, all exporters, including us, hedged against the crown strengthening for a period of two to three years. When the crown weakened rapidly in 2009, the high level of hedging undermined the company’s financial stability. Now our approach to hedging is more circumspect.
Closure of the borders this spring brought about massive complications for engineering companies. What was the biggest problem?
For us, it was like the closure of restaurants and tourist centres. Overnight we couldn’t go to our customers to assemble machines in their factories. We couldn’t repair machines for them. We weren’t able to complete several in-person negotiations. And customers couldn’t come to us either for business negotiations or the physical handover of a machine.
Would it have been possible to come up with an alternative to workers’ trips to customers?
At that time, we weren’t prepared for remote handover procedures for machines. We couldn’t even imagine how we would do it. We were confronted with a situation where the customer had our machine in several pieces in the production hall, and no one was able to come and assemble it. Fortunately, TOS Varnsdorf and other large companies have certified partners and subsidiaries abroad. They helped us assemble a large number of orders and softened the impact of border closures.
Have you taken any preventative measures to ensure that any further travel ban will not threaten you to such a degree?
We have learnt to replace, at least partially, physical handover procedures for machines in our factory. Our people perform the procedure, and we send everything via communications technology to where the customer and their technicians are located. We discuss various matters and demonstrate that the machine is in good condition. For example, we demonstrate the process for machining a test piece. We have handed over machines in this way to customers from Thailand and Australia.
Do you also carry out servicing remotely?
Where possible, we also use remote diagnostics for servicing interventions where we are connected directly to the customer’s machine. We log into the machine’s control system, and using data from this system, we can rectify certain errors and problems remotely, or we can come to an agreement with a local maintenance company on how to fix it.
Are remote acceptance procedures a sustainable model for the future?
We will always have to physically go to the customer to assemble and commission a machine if we do not have a certified partner at the given location. However, customers in remote regions might prefer to perform internal handover procedures remotely since this reduces the time they need for the handover and also saves them travel expenses. But naturally, many customers may be conservative and will want to come to us and see a machine with their own eyes.
Do customers now have a greater interest in the installation of systems for remote diagnostics and maintenance in their machines?
I have to say that they are now learning the added value of these systems, just as we are. Predictive maintenance has a clear advantage over the approach where the machine works until something gets damaged or it stops working. In that case, repairs take longer and are more expensive.
What is the main advantage of predictive maintenance?
For example, our system signals that the bearing of the main mounting should be changed, or it is time to blow through the stock tubes before the main mounting seizes. The customer then says that we should come and perform servicing when it is to their best advantage, not at the moment when the machine stops working. The willingness on the part of customers to pay for these systems and services will increase with as their awareness of the added value increases.
At the start of 2020, you were planning an increase in revenues and profit at TOS Varnsdorf. This was before coronavirus. In reality, how do you think you will be doing?
Originally, we had planned 10 percent growth compared to 2019. However, this was based on information from the third quarter of 2019. The following quarter confirmed our expectations that the situation would not be so good. In reality, we will end 2020 approximately 23 percent down on the 2019.
Do you have enough orders to cover manufacturing for the next year?
The drop in new orders is around 30 percent. But we started preparing over the year. For 2021, we anticipate 15 to 20 percent growth compared to 2020. But we still won’t reach the levels of 2018 and 2019.
Did the support programmes offered by the government due to the coronavirus crisis help engineering companies?
Without a doubt, the most successful programme is Antivirus. Many engineering companies used it. When the borders closed, the people who would otherwise have been assembling machines at the customer abroad had to stay at home. Companies could draw on government support to cover this. They didn’t have to make people redundant in response to the sudden drop in orders. As a result, I welcome the fact that the government has extended Antivirus until the end of 2020, because many companies will still need it.