When Alrik Danielson, chief executive of bearings manufacturer SKF, announced last week that the company is giving 300 employees notice of termination, it was under the flag of the Coronavirus crisis.

“A difficult but still necessary decision to ensure that SKF remains competitive,” Danielson said. “We have implemented a number of measures and cost savings to minimize the effect of the current market situation, but unfortunately we must also make structural changes throughout the company."

He added that SKF will continue to invest in skills, technology and process development, as well as digitization of the company's factories.

This is an interesting addition to the termination announcement, and contains hidden, but significant, reasons for downsizing the organization. It is just as important to not be left with redundancy when demand is pointing downwards as it is to sharpen your product development model and digital tool portfolio to meet a future that has been dramatically changing for several years already.

When it comes to adapting to this future of digital, IoT- and AI-embedded product realization, SKF was already ahead of the changes introduced by the Coronavirus pandemic. Alrik Danielson spoke about this future along with SKF's “World Class Manufacturing Concept” at Siemens Digital Industries latest event in Stockholm.

I was there and listened to Danielson’s great visions, developmental enthusiasm, and how SKF is in the midst of realizing the smart and digitally-controlled dream factory, with its Gothenburg facility as a model. While this occurred before the acute phase of the Coronavirus crisis, the content of Danielson’s presentation tells of a change whose time had come regardless.

Furthermore, Danielson said that Siemens plays an important role as a PLM, automation and IoT partner as the SKF project rolls on towards Industry 4.0. However, the picture is more diversified than that; SKF also works with PTC tools such as Creo on the CAD side, and Windchill as the product data backbone.

ENTIRELY AUTOMATED FUTURE. SKF is currently the only industry player to assemble spherical ball bearings entirely machine-operated, automated and without human hands. This was a key point in Alrik Danielson’s view of SKF's future. "It's good for the environment, good for people and superior to ergonomics," he summed up during a previous Siemens event in Stockholm. The "world-class manufacturing concept" in this context is simply a necessity to remain at the top of the market. Danielson described what this looks like in the company’s Gothenburg factory, where the automation has been driven very far. Engineering.com's Verdi Ogewell listened to Danielson’s story of how this global ball bearing giant is advancing, during Siemens' CLM conference in Stockholm. What Danielson had to say puts last week's termination notice to 300 employees in Sweden into an interesting perspective.

SKF is a global engineering and manufacturing giant operating in 130 countries. The company revenues were just over $8.6 billion in 2019, they had a profit of close to $1 billion and nearly 45,000 employees. Reducing the number of employees by 300 is a marginal reduction—although of course it is tough for the 300 who are affected.

But as stated above, there are other reasons besides the purely financial ones. As in many other recent cases, Danielson noted that regarding the 300 termination notices, the Coronavirus crisis only accelerated a development that was already in motion: a shift in competence within the SKF Group, driven by customer and industry digitization and automation. In some way these changes will arrive, even though the Coronavirus crisis is being given the heaviest responsibility.

However, what exactly did Danielson mean by the fact that this is all driven by the "digitalization and automation of customers and industry?"

I will take a closer look at this matter, based on the keynote Danielson made in connection with Siemens' "Closed-Loop Manufacturing" event in Stockholm.

IT’S URGENT THAT WE DO SOMETHING. “I have a son who has worked for robot company KUKA in China, and he talks about what is happening there. It makes me even more afraid and aware that it is urgent that we do something—and we have to do it very quickly. If we do not drive through the World Class Manufacturing idea, there is a great risk—not only for SKF, but for any company—that it will not remain on the market within just a few years,” said SKF’s executive leader, Alrik Danielson. (Photo: GP.)

SKF is Alone in Mounting Spherical Ball Bearings Entirely Automated

SKF is currently the only industry manufacturer to assemble spherical ball bearings using a process that is entirely machine-operated, automated and without human hands. This was a central point in Danielson’s presentation during the event in Stockholm.

"It's good for the environment, good for people and superior to ergonomics," he summed up. “World-class manufacturing, in this context, is simply a necessity if you want to keep up a position in the top of the market.”

The SKF chief took the company factory in Gothenburg as the good example, where automation has been driven very far.

LGVs, Robots and Digital Interconnected Production

SKF's Gothenburg factory is an excellent example of the kind of change that Alrik Danielson addressed in his speech. Here, the company manufactures spherical roller bearings (SRB). The environment is fully automated with Laser Guided Vehicles (LGVs), KUKA robots and otherwise digitally interconnected high-level production.

The roller bearings produced here are a result of the "World Class SRB" project, which is about a whole new way of thinking about and implementing production and maintenance, creating flexibility and service around the production of bearings in dimensions 180 to 360 millimeters.

LGVs play a key role in a logistics hub, where they transport and allocate the materials and components needed for manufacturing from one robot cell to the next, in a chain that covers the entire manufacturing process. This means many more machines and dramatically fewer people than before on a bright and clean workshop floor. It’s no surprise that Danielson envisions what he calls "the spotless factory," in the sense of a physically shining clean site.

Changes the Entire Game

"On the bottom line, all this changes the entire game," Danielsson noted. “The production cells in the Gothenburg factory were the first in our experiment, with roller bearings in sizes up to 35 kilos. Previously, our resetting time for the production unit was six hours, the investments in terms of money were very large, we had a lot of people at the machines and we had to produce really large series to be competitive. Today, with the new automated setup, we have reduced staffing by 70 percent, which completely changed the equation in terms of labor costs and we do not have to send production to a low-cost country in order for production to be competitive.”

But it doesn't stop there. Danielson also pointed to factors such as efficiency and full flexibility.

“We no longer have to stand at the production cells all the time, and we don't have to manufacture thousands of bearings before we can do a reset. Instead, we can even put in orders for small series at any time without losing profitability. If we then look at the digitization level, however, we do not have this ready for the entire process yet, but we strive for capacity for complete digital reset,” Danielson claimed.

Here are some gains that the world-class manufacturing concept has resulted in for the company's plant in Gothenburg:

Low cost, high output, and flexible
Zero reset machines
Smart grinding devices
Automatized assembly
Automated storage of components
Automated Guided Vehicles
RFID tagging
Bearings individually ID marked
Low energy machines and flexible LED lightning
SKF Condition Monitoring and mobile connectivity
Operators are real-time information enabled

SKF’s Alrik Danielson discussing with an employee on the factory floor.

"Risks for Those Who Aren’t Betting on Technology Development"

How important is digitalization for SKF? "Very important," Danielson says from the stage in Stockholm.

“Sometimes I am asked if we really need a “digitization manager” as a specific professional role? My answer is yes, this is really important—so important that I have personally taken on that role. Why? If it is not clear to everyone in the organization that I am enthusiastic, or that I do not clearly signal that I am behind the digitization project, it will simply not happen.”

But it is of the utmost importance that this happens, Danielson continued.

“I have a son who has worked for KUKA in China, and he talks about what is happening there. It makes me even more afraid and aware that it is urgent that we do something—and we have to act quickly. If we don’t carry through the world-class manufacturing ideas, there is a great risk–not only for SKF, but for any company–that it will not be able to keep up its market position in just a few years.”

“On the other hand,” Danielson continued, “SKF in a nutshell is about just that. We were a startup already at the beginning of the second industrial revolution, but have been able to adapt all the way from the first years of the 20th century to today (SKF was founded in 1907). In short, we understand that if we do not have the readiness and capacity to change quickly, we will not have an opportunity to compete in terms of cost efficiency, nor will we have any manufacturing flexibility or quality to be generally competitive,” Danielson asserted.

“For us, however, this is not about starting with the ‘BIG TOTAL PROJECT" but to do it where it is most relevant and where it can be done quickly,” he added.

NOT AFRAID TO TAKE BUSINESS RISKS. It's been a year since SKF opened its Rotating Equipment Performance Center (REP) in Gothenburg. Already, a number of major new contracts have been signed which include, among other things, remote monitoring, analysis and improvement work around the roller bearings SKF delivered. After this year, almost 30,000 measuring points are documented—almost double the previous number of measuring points. Together with a new performance-based business model, SKF has now taken the lead in increasing digitalization, and thus the competitiveness of the industry. “I dare to say that we at SKF are pioneers and not afraid to take risks. We believe in our own ability to make a difference for the industry,” says Per Wilhelmsson, sales manager at SKF Sweden. “But this is just the detection phase. When we really come to our right is when we can both identify the faults and then build them away, so they don't come back. The goal is to increase the productivity of customers in the long term to reduce the purchase of stock, and to build sustainable solutions with few breakdowns, stoppages or replacement of components. But this requires a whole new business model.”

The Importance of Understanding Exactly What Happens to the Roller Bearings

SKF is in a digital transformation process and according to Danielson, has also developed the flexibility needed to keep moving forward.

"For us, this is what we mean by moving towards Industry 4.0," Danielson said. “If we can connect with our customers and understand exactly what is happening with the roller bearings in their machines, we are on the right track.”

He also noted in this context that "if you use Siemens IoT software, MindSphere, in the factory, we can also connect to SKF's bearing monitoring system in the environment in which they are located and through this monitoring kit’s feedback to our REP data center, can help to analyze and understand exactly what happens to the roller bearings in place in its working environment."

When and if the results can be integrated into the value chain, things can move fast, become smoother and more flexible, Danielson said.

WHAT CUSTOMERS WANT. The Kross & Infrakt department at Boliden's Aitik copper mine in Northern Europe has signed a five-year agreement with SKF that contains hardware and monitoring as part of the continued digitization of the existing monitoring system. “We were at a crossroads where we either had to demolish the whole system and build a new one, or move on with a new supplier. We chose to continue with SKF,” says Thomas Sundqvist, head of the crusher and infrared department at the Aitik mine. For some time, the department has been digitized with an online system for better control of operations. More than 500 sensors have supplied operational data from three crushing plants and 7 km total length of belt conveyors which transport the ore to the enrichment plant. It was just over six months since the decision was made to switch suppliers and bring in SKF to move forward with its online system.

"With the New Model, No Mega Factories are Needed"

One rewarding point in SKF’s automation model is that it is no longer necessary to build operations at giant mega factories. The products can be manufactured in smaller, flexible and local units, closer to markets and closer to customers, where size is of minor importance. With this kind of flexibility, other costs are becoming more important, such as logistics costs and general expenses related to time-to-market processes.

“In the future, I am absolutely convinced that we will not have to ship these bearings around the world anymore. Instead, we will have ‘in the Americas to the Americas and in Asia to Asia solutions’ and other similar geographically related solutions in place. This is in the making and comes with the type of digitization and automation that we implement,” claimed Danielson.

Is this better for SKF, and is it better for customers?

"No doubt for both," Alrik Danielson argued. “Today, there are generally five to six bearings somewhere in the value chain which are ‘waiting’ for something to break. With this type of installation, we will soon be able to have much fewer of these potentially broken components and can instead offer much more flexibility, quality, service and availability.”

Labor Costs No Longer Determine Competitiveness

Furthermore, competitiveness is no longer as closely related to labor costs as it was in the old model. Competitiveness lies in other things, such as relevant PLM software, digitally connected tools regarding OT (Operational Technology), smart processes, IoT, AI and advanced technologies.

“Today, we are the first in our business area to produce roller bearings completely automatically, where the rest of our competitors assemble them manually. We also do it really automatically—no human hand has touched the bearings during production. As icing on the cake, we also get a super quality, which is outstanding on the market,” Danielson asserted.

He added that SKF's world-class manufacturing concept also honed the ergonomics of production employees. All the negative physical effects related to manual work are gone.

The process of making ball bearings is no longer dangerous, Danielsson says.

Alrik Danielson at SKF’s headquarters. In the background is one of SKF's famous spherical roller bearings.

So far in Danielson's narrative about the development of SKF, it becomes clear that the situation for the workers on the factory floor is changing: while some types of jobs become obsolete, other becomes dependent on and will require new competences and skills.

"True," Danielson commented. “We have a responsibility to work with our employees and the unions to make sure that we really educate people and give them new opportunities. Also important in this context is to remember that this type of technology innovation, which I have talked about, also opens up new opportunities for our colleagues to grow and get new, more rewarding jobs.”

In this context, he also underscored that the company works systematically with environmentally sustainable solutions such as the recycling and renovation of used roller bearings. Again, Siemens MindSphere's features are available.

“If you swap bearings when the monitoring system ‘says’ that it is about to be worn out and should be replaced, the bearing can be sent back to SKF for renovation. This circle can then be done again and again, which not only means new jobs, but also reduces carbon dioxide emissions up to 90 percent if there are as many loops involved as possible. Thus, this is neither more nor less than circular economy in practice,” Danielson says.

Siemens’ Role in SKF's Journey Towards Industry 4.0

The fact that Siemens plays a significant role as a catalyst for Danielson’s vision of the future is beyond doubt. In this context, it is also relevant to address Siemens' broad launch of the concept of "closed-loop manufacturing" (CLM). This is equivalent to closing the circle in product development, with the digital twin as a central concept and where the processes, from development to physical production, are held together by means of digital threads and tightly integrated, real-time based PLM/IT and Operational Technique (OT) systems.

CLM is about flexible, “beyond Industry 4.0 solutions”—from digital product ideation, definition and construction to digitally-built manufacturing management on the workshop floor, which then transitions into the physical production processes.

With the digital twin at the center, it is possible to simulate everything at every stage, to make sure things work as intended before moving on to the physical equivalents, when changes and detected errors become expensive to fix.

Against this background, SKF has chosen to invest in the solutions from Siemens, which is also a digital partner in SKF's world-class manufacturing project.

This is important, and in some ways typical of the diversified IT landscape that generally meets suppliers and PLM-related market players. No system from one monolithic PLM supplier can do the entire job alone.

This means that the solutions SKF runs in the Industry 4.0 direction are currently met by a diversified environment of other systems, which in turn must be—and generally are—sufficiently open to allow them to be integrated in a coherent context, at reasonable cost.

In the case of SKF, in product development they generally work with PTC's CAD solution Creo and PLM suite, Windchill, as the product data backbone.

But now that SKF has started the Industry 4.0 journey, they have decided to look for another supplier. The reason, according to Alrik Danielson, is that the company believes that Siemens’ strength in this context is that they can "embrace the whole" diversified environment. While the project is focused on automated production and end-user interaction, a classic PLM strength—which is extremely important from a holistic perspective—is that Siemens’ program portfolio, with Teamcenter as the PLM backbone, is aimed at openness and integration-linked environments to achieve the seamlessness that is a prerequisite for Industry 4.0.

DARE TO BET HARD, BUT SENSIBLY. “To be effective, you have to choose and invest in a factory and a production line and go all in. It's not dangerous; if it does not work you will not affect more than just one factory and a production line. You still have the rest of your old fixed assets at your disposal," said SKF's CEO, Alrik Danielson, during the CLM event in Stockholm.

Danielson Does Not Believe in Incremental Implementations

So, what does the implementation of the new technology look like?

One thing is clear: Danielson does not believe in incremental solutions here.
If you bet, you must be prepared to go all in, not putting the future of an entire fully-functioning existing factory at risk in a technology experiment. Far from it; instead, the "full effort" is about selecting a production line in a factory, and in this line run the new system fully.

SKF's selected model is to be implemented according to three main phases:

Icebreaker
Scale up
Set benchmarks

“Yes,” Danielsson commented, “that's right. To be effective, you have to choose and invest in a factory and a production line and do it fully. It's not dangerous; if it does not work you will not affect more than just a factory and a production line. You still have the rest of your old fixed assets at your disposal.”

There are also lessons to be learned from every failure, he added. With those experiences in your backpack, you can start over and hopefully succeed better next time.

So: Don't start big, don't start with all at once, but where you do place your bet, go "all in!"

Why is SKF Investing in Siemens in the Pursuit of Industry 4.0?

“There are many people and companies that work with you in certain and specific parts of the value chain. But there are very few who can take on and embrace the whole chain. That's why we're partnering with Siemens and why we work together throughout the value chain,” Danielson said.

He also claimed that Siemens has ambitions to be the main supplier of digital solutions in SKF's journey towards Industry 4.0.

“We start in Sweden, we will do it in Germany, we will do it in China and the U.S. In the latter case–we bet on a project which began a little less than a year ago–we aimed at creating a complete solution in our racing factory in Alaska. It is not too large of a facility and is great for us to run integration and implementation in.”

No matter how you look at it, SKF's journey is exciting—but it is really just the beginning. Unless the effects of the Coronavirus crisis put obstacles in the way, the company will face a very bright future and once again show that it is neither more nor less than something as paradoxical as a more than one-hundred-years-old startup.

With Alrik Danielson at the helm, this proactive culture seems to be reinforced.