In 2012, Germany launched the concept of “Industry 4.0″ in its manufacturing sector. Three years later, China implemented a similar initiative, dubbed “Made in China 2025″ plan, to modernize the country’s manufacturing through technological upgrades, and knowledge-based industries development.
EJ Insight recently sat down with Matthias Herrmann, managing director of Roy Ceramics, a Germany-based manufacturer of ceramic sanitary ware, to discuss his firm’s operations as well as the broader German industrial landscape. Among the subjects that came up during the interview were his views on how “Industry 4.0″ can help drive a smart-toilet revolution in the West.
Excerpts from the conversation:
EJ Insight: First, can you give us a brief introduction of your company?
Herrmann: Roy Ceramics was incorporated in 2004 in Germany. In the past, we only focused on sanitary ceramics production. We have been engaged in construction supplies and fixtures for hotels, public and commercial buildings, and real estate developers, expanding our operations to China and the US.
As the business model transformed over time, we moved into property development in the US, with focus on high-end real estate and homes.
Q: As a player in the bathroom ceramics industry, how does your firm go about expanding its business in the European market?
A: Germany has a long history of producing sanitary ceramics; you have all the big players, like Villeroy & Boch, Duravit, and Hansgrohe, coming from Germany. We have two kinds of market segments; one involves supplying the basic ceramics products, but you don’t earn any money on that, so our key market would be the higher-end market.
Our goal is to create the next revolution for the smart toilet seat, and to establish Roy Ceramics in the newly developed market of smart toilet seats in Europe and the US. As for Europe, the market for smart toilet seats is still small, but it is increasing slowly but steadily.
For high-end smart toilet seats, it costs about 8,000 euro in Europe. With our advanced and highly efficient production technology, we aim to price our products at less than a quarter of that.
In addition to competitive pricing, we are trying to create market demand by seeking collaboration with local partners. That’s one of the reasons why we partnered with property developers in the US, so that we can decide the sanitary products for the homes and apartments.
Q: Japanese brand Toto has been gaining steam with its bathroom products in overseas markets. What are your views on entering the Asia markets, in particular, China and Japan?
A: Toto is very good, its quality is top-notch. However, we want to be better, that’s our driving force. We want to compete with Toto in both quality and pricing. We do understand that entering the Japan market is difficult for our products; we are aiming to enter the huge Chinese market. We know that Chinese people would go for products and brands coming from Germany and they are willing to pay a higher price for that.
Q: Home appliance makers have jumped into the Internet of Things (IoT) integration. With the smart-toilet product, what would be Roy Ceramics’ response in the IoT and ‘smart home’ space?
A: As for IoT, you can only achieve connectivity among home appliances when you have a common practice and standard of various products. Therefore, collaboration is very important. With the common standards for smart toilet seats, I can think of various applications. It could be very useful for the medical sector, for instance, to run an analysis for its users.
German manufacturing industry
Q: China’s nation-wide industrial strategy has been connected with the “Industry 4.0” of the German government. As a Germany-based manufacturer, what do you feel China can learn from Germany’s industrial policy?
A: Germany’s “Industry 4.0” is, in fact, about the collaboration of different industries, and companies coming together, to benefit from each other’s know-how, technologies… as well as the cooperation between universities and companies.
What you can see in Germany, for example, is the carmakers learn from other types of businesses, say from SAP, a software company, on how to optimize the manufacturing process. Volkswagen, one of the largest car manufacturers in the world, now uses software to program production projects. We have seen many cases in Germany where a product coming from the software sector is applied on the car manufacturing sector.
Q: With automation in manufacturing expected to rise further, will it lead to more job cuts?
A: Yes and No. In a digitalized world, you need a different skillset. You don’t need people moving parts from one place to another all day long; you need people who can control a robot to do that.
I think automation would bring a cut in the overall headcount, in the manufacturing process for manual work, but you may see an increase in headcount in some operations, for example engineers, as you need people working on AI so that the system can learn to improve itself.
At the moment, there is already a high demand for people with a background in applying high technology know-how in the sense of being able to control robots, along with the understanding of traditional manufacturing process. We are in the stage of hunting the talent by offering additional benefits, to hire the right people to the factory because there are so many companies competing for the people. And many companies have started hiring abroad.
Q: From your observation, do you think Chinese manufacturers are ready to put the Industry 4.0 initiatives into operation?
A: I think there is still some way to go for China. They need to create the space where companies start to cooperate with each other. I don’t mean just to copy from each other, it is really the cooperation and taking the key benefits from one another and also offering competitive advantages to each other.
Q: Do the current trade tensions between the world’s two largest economies, China and the US, bring any impact on Roy Ceramics’ business?
A: There is no impact on us for now. But we do have concern, because uncertainty is not good for business. But I think it all depends on the business perspective. With regard to construction-related operations, given that President Trump comes from the property development field, I think he would protect the sector’s interests. I personally believe the tensions will cool, everyone will get back to the table, and think about the business.
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