What the future of manufacturing holds Podcast – Transcript
Bringing manufacturing closer to the consumer can, for many products, make a lot of sense yet, to achieve that, no single company could hope to have enough facilities to serve all their customers worldwide. To achieve this dream will require the ability to delegate production to local factories capable of rapidly reconfiguring to produce a given product no matter what it might be, something that is currently out of reach, yet still tantalizingly close.
In this episode, host Conor Peick is joined by Alastair Orchard to look at the future of production where AI, digitalization and smart contracts enable the paradigm of the factory owner-operator who can, by contract, locally produce goods from major brands the world over.
Check out the full episode here or keeping reading for a transcript of that conversation.
Conor Peick:
Welcome back to the Future Ready Podcast, I’m your host, Conor Peick joined by Alastair Orchard, VP of Digital Enterprise at Siemens. As we continue our discussion from last time, you talked about smart contracting and how that will be a model for agents interacting with each other and production processes going forward, with the potential for products even being made in someone else’s factories.
Alastair Orchard:
I think that’s almost certainly going to be what’s going to happen. So probably this will kick off with some big companies building their own network. But let’s go back to the example where I said this agentic cell will be in a Walmart. Well, Walmart sells products from 1000 companies. You can’t have 1000 cells, you can have one, right? And that’s kind of the point of these things is that they can produce potentially from multiple different companies. those companies will have the smart contracts and the AI agents in place to ensure that their products are made correctly. I can imagine models, I would say that an efficient network will end up being a mixture of brand owned and operated production nodes, contractor owned and operated production nodes. By the way, Today, if you take any one of those CPG companies, most of them do maybe 50-50 their own factories and contractor lines. And the reason they use contractors is often for flexibility. They say, we’ve got a short run of something. We can’t build our own factory. Will you build, you know, will you pick up this capacity for us? And they usually say yes, but then they will actually today build a dedicated line for that client and for that use case and then decommission it later. It’s incredibly inefficient. What they should be doing is saying, sure, you can access a certain amount of capacity of my adaptive line or better my adaptive network because depending on where your demand is, I’ll just distribute it across the network. I’m also now we’re talking, I’m also thinking what might happen and this might be really interesting is This might attract kind of local entrepreneurial makers who own production nodes with, they plug into the network and they offer capability capacity to companies that need to produce for a local area. Siemens should probably, we should outsource the blueprint of these, open source the blueprint of these cells and also set up some financing. This could be a whole new industry for the future.
Conor Peick:
That’s a really interesting concept, definitely. Yeah. Like owner-operators who can take this and develop their own network of modular factors. Super cool, super cool idea. I mean, that brings me on to the next point, which is Obviously, a lot of the advantages of this approach are about being able to respond to changes in demand, potentially supply disruptions. With this concept, what do you think this means for agility and resilience in the future? Like you mentioned earlier, tariffs, geopolitical situations, helping companies to respond more quickly, more adaptively to these things.
Alastair Orchard:
I think, I mean, you hit the nail on the head. This is the main reason we’re doing it. Again, I don’t think it’s going to happen overnight. I don’t think it’s going to happen for everything. If you look at some of the KPIs or the numbers involved in CPG logistics, I think it’s frightening. These are massive military operations making billions of parts and we’re not going to change that overnight. But probably the goods that are, let’s say, not efficiently manufactured centrally or that are subject to tariffs or that are spiking demand, these are the ones that we’re going to pick up first and we’re going to create this decentralized capacity for those use cases. And then I think that network will be used to increase the resilience of a broader part of the portfolio. You know, it’s not only CPG. This is maybe not a great topic for a CBG podcast, but think about the US military machine, right? Sidewinder missiles are made by one company, probably Raytheon, right? They have one factory that does that. is not a great situation, first of all, from a capacity perspective and also from a resilience perspective. If that one factory is broken somehow or destroyed, then no more sidewinder missiles. But what if my entire production network could make that munition or that critical infrastructure part? So it’s about, I think resilience is a very good word. Also, in that context, there’s this concept of the war of industrial capacity. So We’ve been talking up until now about redirecting demand to individual factories. Well, what if I need to refill my stockpiles? I could actually get 20,000 factories manufacturing in parallel and that would resolve a lot of the problems that we’re currently seeing in the world. I guess this also, back to CPG after our military.
Conor Peick:
Slight detour.
Alastair Orchard:
I think it is interesting to think about the fact that this whole concept doesn’t just affect logistics. So I think it’ll have a big effect on business models as well. I kind of mentioned before, if I remove all of the latency from the system, and here’s another interesting fact I think. A typical, if you centralize production like we see today, a typical CPG company, even one which talks about consumers and this kind of thing, they’ll have three monthly times for an order and maybe a minimum order quantity, a minimum batch size of 25 tons. Now you could personalize that, but who’s going to wait for a quarter of a year and buy 25 tons? So this really unlocks the whole personalization thing. And if my latency goes to 0, then then I think this will allow these companies to challenge existing kind of business models. Maybe billion dollar brands in the future will be a billion transactions of single dollar brands.
Conor Peick:
Right. Interesting. Just a huge volume of, like you said, a huge volume of new product introduction every time an order comes in. Really interesting future. Yeah. So as we’re kind of wrapping up our discussion here, if you were to sort of look out 10 years into the future, for example, how do you see these AI-enabled modular factories redefining the competitive landscape? We kind of touched on that maybe just a second ago. But yeah, I guess the main question is, do you think the companies that come out of this future in the best position are those that have maybe the best brands or is it the best manufacturing network?
Alastair Orchard:
I think it’s both. So maybe that’s, I’m weaseling out of the question here. But I think products will remain key to consumer demand. So things like personalization and sustainability and tariffs and this whole manufacturing aspect, these will be built or layered on top of the foundation of a great product. People will still buy products that delight them. That’s actually why Siemens has these digital threads, these comprehensive digital threads. It’s why we connect product design and production. And we’re not just focused purely on manufacturing, I think. It’s also why, but we do take this whole idea seriously as Siemens. It’s why we sanction this DMAX cloud, this digital manufacturing platform. It’s why we partnered with PepsiCo on this big showcase here, which by the way is always 10 people deep in customers and journalists and analysts and so on. So I think it’s certainly resonating. One thing maybe we could end on, I didn’t appreciate this until relatively recently, going back to AI because this is all AI enabled, it’s all agentic. Did you know that Have you ever heard of anything called the AI Act? Now this is a European act. Europe loves legislation, right?
Conor Peick:
I’ve not heard of this. No, I’d love to hear about it.
Alastair Orchard:
Yeah, so it’s really important, I think, for this topic. If I use AI as a person, then, you know, as a copilot, whatever, then really all the laws regarding health, safety, environmental, ethics, fraud and so on, they apply to me as an employee. And this rolls up to my bosses and to the CEO of the company. As soon as AI becomes agentic, then it becomes a digital employee. And those same laws, actually, these are captured within this AI Act, but it’s essentially the same laws and now apply to the agent. And that’s really interesting. So When you’re thinking about how these agents operate in the context of a distributed network or an adaptive factory, it’s not only about product and operational safety, these kind of these guardrails, let’s say, we also have to use an agentic framework which considers these laws. The sanctions are horrible. 7%, up to 7% of global revenue of the company can be sanctioned. And that’s why companies want to work with a company like Siemens and not just kind of randomly experiment with large language models.
Conor Peick:
Something that I’ve heard multiple times. It’s just this idea of deploying AI within a framework that limits that risk and helps you ensure the reliability and the security of what it does.
Alastair Orchard:
Yeah, you need to audit trail it, you need to trace it. You mentioned this before, but you need to be able to come back and prove that that you had covered all of the bases and you didn’t just let something, leash on the world that was bound to cause chaos because then you’re liable for it.
Conor Peick:
Right. And we already talked about pharma. I mean, talk about that.
Alastair Orchard:
Yeah, exactly.
Conor Peick:
Awesome. Well, Alastair, thank you so much for your time. It’s been a real great pleasure for me talking to you about this topic. Super fascinating.
Alastair Orchard:
Me too. Thanks very much, Conor. Awesome.
Conor Peick:
Thank you.
Alastair Orchard:
Thanks. Bye.
Siemens Digital Industries Software helps organizations of all sizes digitally transform using software, hardware and services from the Siemens Xcelerator business platform. Siemens’ software and the comprehensive digital twin enable companies to optimize their design, engineering and manufacturing processes to turn today’s ideas into the sustainable products of the future. From chips to entire systems, from product to process, across all industries. Siemens Digital Industries Software – Accelerating transformation.
