Technology Driven by Manufacturing Practice
Zhang Xiaoyi, Vice President and Chief Information Officer of Midea Group gets talking with British Herald on digital transformation, Industrial Internet and more
The internal logic of digital transformation
British Herald: Midea’s digital transformation since 2012 has been aimed towards the reconstruction of the whole value chain. Why has it been such a reason behind development?
Zhang Xiaoyi: This year, Midea Group went public as a whole, which required internal integration and system management of all businesses and data. Before listing, Midea has set out with newly designed system solutions, namely the three 1’s of ‘one beauty, one system and one standard’.
Midea then began to promote the ‘T+3’ reform, from the mass manufacturing and mass distribution of stock system production mode to the market demand based order delivery mode.
Midea has advanced the digital 2.0 strategy: large-scale flexible delivery led by “T+3” and C2M (Customer-to-Customer Manufactory). We further linked machines, people, materials, equipment, products and so on with digital platforms, to maximise the level of efficiency, and launched the industrial Internet strategy.
BH: What are the vital changes that Midea has analysed through the digital transformation?
Zhang Xiaoyi: One major change is from result management to process management. ERP becomes a real accounting system, and all functions are transferred to the surrounding system and the self-made system to manage the whole process. The second is the transformation of the whole value chain. The third is to gauge the transformation from online to transparent and intelligent and the last is the change towards the management driven by data and ‘data + experience’.
Through C2M mode now, products can be delivered to users within two weeks.
BH: How has the inventory declined with regard to the industry?
Zhang Xiaoyi: Inventory has been reduced a lot. In 2018, self-owned inventory decreased by 36%, and inventory risk was basically released. Channel inventories have fallen even more sharply. This is the good mechanism of ‘T+3 + a stock + digital transformation’.
During the entire year in 2018, Midea’s channel inventory decreased by 32%, product quality indicators increased by 17%, and overall efficiency increased by 15%. The company’s operating revenue grew from 93.1 billion yuan in 2011 to 261.8 billion yuan in 2018.
Path and strategy are closely linked
BH: How does Midea’s development strategy integrate with digital transformation?
Zhang Xiaoyi: From 2012 until now, Midea has been adhering to product leadership, efficiency drive and global operation. Through real-time online control, the experience of people is transformed into system data, and the optimal recommendations are given through analysis.
In addition, use artificial intelligence to do product quality testing. The next step is to extend the system to suppliers as well.
BH: Does the Industrial Internet enable products to lead and improve quality, which is consistent with efficiency?
Zhang Xiaoyi: In terms of efficiency drivers, Midea has very close coordination with our suppliers, who arrange production, inventory and logistics according to our schedule.
In 2011, 190,000 people in Midea made an output value of more than 100 billion yuan. Now, Midea has 150,000 people around the world and made an output value of more than 260 billion yuan (2018). Midea’s output doubled, but its workforce dropped from 190,000 to more than 150,000. That’s efficiency drive.
BH: How do you understand the role of the Industrial Internet specifically?
Zhang Xiaoyi: Midea Industrial Internet is very pragmatic. First, we are based on manufacturing practice to grow gradually, only in the actual operation of successful products will be taken out to promote; Secondly, the software drives the hardware, and the combination of soft and hard. Another advantage of Midea is that it has automated Kuka robots. The third is to use software to manage the whole value chain.
BH: Does that indicate that you have come up with ‘man-machine collaboration’?
Zhang Xiaoyi: In software, with a few exceptions, Midea is primarily self-built, all of which we build code by code, which very few domestic enterprises can do.
In terms of hardware capability, automation capability, we acquired Kuka, which has strong robot capability and also do PLC controller and intelligent gateway, as well as Swiss grid automation logistics.
‘Pan-manufacturing’ exports M IoT services
BH: As a leading enterprise in Foshan, what is Midea’s vision for the intelligent development of local SMEs?
Zhang Xiaoyi: Guangdong Yueyun Technology Co., Ltd., led by Midea Group, has undertaken the work of Guangdong Industrial Internet Innovation Center. This company is by the YunZhi number, the pearl of new ceramics, south China intelligent robot research innovation, wide wisdom institute and other units’ set-up. The main goal is to develop manufacturing cloud platform technology research, using data mining technology, large data analysis technology developed application tools, big data technology platform construction enterprises, set up perfect industrial cloud platform.
By adopting a supportive approach, exporting management capabilities and IT systems to provide digital platforms for enterprises, we want to apply it to small and medium-sized enterprises in Foshan, Guangdong and even the whole country.
However, it should also be noted that the situation of some enterprises is relatively complex.
BH: When would it be available and will it be free of charge?
Zhang Xiaoyi: The cloud will be open to small and medium-sized enterprises around April 2020. Basic functions including quality management, plan management, factory management, logistics management and so on, can be operated directly on the cloud platform.
The platform is not free, but the price is not high. A basic account only charges one or two thousand yuan a year. Moreover, the Guangdong Provincial Government and the Foshan Municipal Government will provide some subsidies to the small and medium-sized enterprises on the Yue Cloud platform.
The key is whether SMEs are willing to accept change. This is a mutually reinforcing process. We are willing to actively promote through Meiyun Intelligent Data, especially Yueyun platform, and lead everyone to do digital transformation together.