Digital Twin of Cost – Every twin pays off

As Dr. Roland Busch emphasized during the global Corporate Development webcast, it is decisive for Siemens' digital transformation that the company also uses its own technologies. He considers that Supply Chain Management at Siemens is leading the way here, for example with digital twins of cost. Dr. Klaus-Peter Schneider, who heads the Cost and Value Engineering department, explains the important contribution digital twins of cost make to the Siemens' competitiveness.

What is Cost and Value Engineering (CVE) doing in the field of digital twins?

We're creating digital twins of cost - product cost models, with the help of the "Teamcenter Product Cost Management" software. This involves simulating the individual manufacturing steps complete with machines, material and personnel deployed. We multiply this by the cost rates from our database, which contains factor costs from 60 countries, 4,000 machine records and 1,500 material records.

This enables us to determine, to an accuracy of between two and five percent, what a new product will cost to manufacture while it's still in the design phase. This is a core element of our work at CVE. Based on these cost simulations, we work with engineers to identify improvements in product design and manufacturing, for example.

Dr. Klaus-Peter Schneider, Head of Cost and Value Engineering, Siemens Supply Chain Management

We're also creating digital twins of outsourced components. By familiarizing ourselves with our suppliers' manufacturing processes and costs, we can improve our argumentation during price negotiations. At the same time, we can collaborate closely with them to optimize their processes and costs. In this way, both sides benefit.

We generally create digital twins of cost based on specifications, 3D models and drawings. Some components are only available in physical form. We then measure these physically and now also virtually, which involves scanning the parts and generating three-dimensional grid models. From these, we reconstruct manufacturing processes and costs.

And what progress have you made?

We created the first cost models back in 2009. However, these weren't yet complete twins. You could say that they were just an "arm" or a "leg" – individual product components such as an upper or lower housing part. For around four years now, we've been in a position to simulate complete products in order to represent the digital cost twin in its entirety – albeit only statically to start with. It's not yet able to "walk". From controllers, bearing shields and machine housings all the way through to gear units, motors and entire power plant modules as well as the latest medical systems – anything's possible.

At our CVE laboratories in Munich, Erlangen, Mumbai, Shanghai and Atlanta, we've already implemented bench-marking projects generating around a hundred such digital cost twins for complete products, and our Siemens-wide network is producing several thousand component twins every year. We're working closely with all units across Siemens in this regard, benefiting from synergies in terms of cost and work involved as well as from a comprehensive data basis.

What are the success factors?

Benefits for the business: The most important consideration is of course the business value added. In line with our keen cost-benefit mindset, this is a decisive success factor in the development of CVE across the board. Just as we measure the success of every CVE project by the financial value it contributes to the business, so our digitalization strategy is focused firmly on boosting exactly this. By adopting an agile approach, we ensure that this is realized not right at the end of a long development project but, wherever possible, with each new development step.

It's not just the hundredth digital twin that pays off, but the very first. In all projects, the savings achieved surpass our cost and effort many times over.

Today we number more than 200 CVE experts across Siemens – distributed globally over all Business Companies, embedded deeply in the business processes and offering highly developed CVE expertise. In 2019, we were able to cover a volume of about 9 billion euros with our work and, in conjunction with our partners in Engineering, Production and Procurement, achieve a significant value added, thus strengthening our competitiveness.

Digitalization strategy: With the introduction of CVE in initial successful pilot projects, our central team has set itself the task of disseminating CVE across all businesses and providing the expert teams established there with digital and physical CVE infrastructure. With digital cost twins and CVE Companion, we're providing strong momentum for a joint strategy and, with Teamcenter Product Cost Management (TcPCM), the backbone for implementation. Of equal importance is the integration into the business and the resulting impetus for further development.

CVE experts in all Siemens Business Companies are now using TcPCM to analyze manufacturing and material costs, establishing a firm foundation for driving forward the widespread use of digital cost twins. Siemens Digital Industries (DI), for example, is already working on increasing the level of automation of the technology and making it even more dynamic. Healthineers has announced plans to link digital cost twins to the IT infrastructure of its plant in Kemnath. And Siemens Smart Infrastructure is investigating the integration of digital cost twins into its business processes.

And our Mobility CVE colleagues have developed an app that makes cost calculations accessible via smartphone. In this way, a highly effective digital ecosystem is evolving. One of the cornerstones is naturally close collaboration with our colleagues at DI who offer TcPCM, one of the best tools available on the market, and who in turn are working with us to develop new products for the external market.

Do you also have challenges to overcome?

Yes, primarily when it comes to linking the systems together. As things stand, we often still have to download documents individually from the engineers' systems, copy them to the clipboard, and then upload them again into Teamcenter Product Cost Management. This is time-consuming and error prone.

Because we're collaborating closely across the company, it's essential for our software to work seamlessly for all units. To this end, the basic framework must be the same for all, and must then be adapted by the respective IT departments in line with the business-specific needs and systems.

Why are digital cost twins so important for Siemens' success?

Simulation enables us to find out how we can optimize the costs by making changes to the design or in production. This is becoming increasingly important as globalization forces us to compete fiercely not only on product performance but also on cost. If we can prevail over our competitors with an optimum price-performance package, our company will continue to grow. At the same time, we'll strengthen our company's profitability and increase its value – one of the key targets of Vision 2020+.

What potential is there, and what happens next?

Today, we generally get involved once – in the development phase of a product – when we create a digital cost twin, set the course for the costs, and identify potential for optimization. In the long term, however, we want to allow our cost twins to live so that they can develop simultaneously with the real product. More and more details would then be added in an iterative improvement process, giving engineers a direct insight into how their design changes affect the costs. In this way, decisions could be validated very quickly and corrected if necessary, accelerating the development processes.

The key here is to select the right frequency for the updates: instantly, daily or monthly. Only by implementing pilot projects with an agile approach can we find out what is expedient and practicable. In addition, the IT infrastructure has to be adapted accordingly and our software embedded deeply into the engineers' systems in order to enable continuous updates. The interfaces required for this are already available to a certain extent; we now need to extend them and interlink them correctly.

As you can see, there's still plenty for us to do – and it will pay off!

Dr. Schneider has been interviewed by Ursula Derichs, SCM Communications at Siemens.