In a rapidly changing world, we have to rethink our production processes every single day. Digitalization is the key to this. We push boundaries every day, are flexible, and are open to new ways of working together. As is the case for our products.

PLCnext Factory Rethinking production We begin our production tour with a look beyond our own backyard – in fact, overseas. In the 1990s, it was clear to see that Japanese companies were achieving results much more efficiently by applying new ideas. The propagation of these ideas throughout the rest of the world caused a fundamental change in industry. Today, we discuss lean production as a matter of course. For some time now, industry has again been in a state of flux. Companies are successfully utilizing new methods to realize complex projects at incredible speeds. Companies that break new ground are often those in the IT world, such as Netflix, Amazon, and Alibaba, but also manufacturers of physical products, such as Tesla and SpaceX. What all of these have in common is that they use agile working methods and employ digital technologies. As was the case in the 1990s, we now need to look closely and ask ourselves what Netflix, SpaceX, and Co. are doing differently; how they are using digital technologies and benefiting from agile methods. We can learn lessons from this and apply them to our own working practices. For now, let us take a look at Bad Pyrmont: Innovation and technical progress are deeply rooted in Phoenix Contact’s corporate DNA. Back in 2017/18, we set an important milestone on the road to the digital transformation, with the management team developing a common dialog model that has been a guiding principle for us ever since. This model outlines the interfaces through which we are rethinking our processes within the framework of digitalization. 4 Phoenix Contact In the following, we outline why, in our view, the digitalization of production is essential and how we are turning this concept into reality here in Bad Pyrmont.

PLCnext Factory PLCnext Factory: Digital production Products for automation, safety applications, and network security are produced in the PLCnext Factory – the Phoenix Contact Electronics production facility. The very first stages of digitalizing production primarily require a change in thinking. This applies not only to the use of digitalization in production processes, but first and foremost also in our working practices. And this is precisely what the PLCnext Factory is all about: a new mindset. About taking new paths and making them accessible. In other words: • Rethinking digital production • Rethinking processes, working methods, and management • Rethinking innovative products These core elements run through all approaches within the PLCnext Factory. 2001 10,000 m2 550 Employees in the PLCnext Factory 1. 8 M Assembled components per day 2.7 M Data points per day 270TB Of operating and process data per year 6 Phoenix Contact

PLCnext Factory In a rapidly changing world, we have to rethink our production processes every single day 8 Phoenix Contact

PLCnext Factory Rethinking digital production We consider digitalization to be a turbocharger. Here, the motor itself is lean production and the goal is permanently improving processes and thus increasing productivity. Digitalization accelerates this process, for example by enabling direct access to real-time data and enabling key variables from the production lines to be aggregated within hours. This efficiency and speed are ultimately reflected in our productivity. In our production facility, process data is read out from the machines around the clock. This amounts to 270 TB of data a year, to be exact. All of this is recorded and evaluated. Analyzing this data enables us to draw conclusions on how to optimize the processes in production. This does not sound particularly groundbreaking. This approach is also taken in a multitude of other production facilities throughout the world. Unlike in other companies, however, we collect data from every single workstation. And because we make this data available for a long period of time, we are able to make much better predictions. This allows us to act and decide more quickly. 270 TB of process and machine data is read out from our systems annually.” 10 Phoenix Contact

PLCnext Factory Data acquisition with a Data Collection Box on an existing machine – a small step with a big impact 12 Phoenix Contact

PLCnext Factory Rethinking innovative products PLCnext Control To be able to read out and analyze data from a system, we use products from Phoenix Contact. We not only manufacture future-oriented products, we also use them ourselves. PLCnext Control is the control platform for limitless automation. In contrast to classic programmable logic controllers, it has the openness and fl exibility familiar primarily from the IT sphere. This means that it can be used for a wide range of tasks in the automation environment. Since PLCnext Control is compatible with a wide range of software, apps can be easily installed on the controller. As the Production Department, we are not only the manufacturer of our products, but also the fi rst customer for new solutions. We test our products in practice. This is how continuous improvement and further development succeed.” Joachim Hochgräbe, Director Production SMT 14 Phoenix Contact

PLCnext Factory Minimally invasive – an upgrade to future technologies 16 Phoenix Contact

PLCnext Factory Rethinking processes, working methods, and management How do you manage a digital production system? Digitalization not only provides signifi cant support for our production, but has also modernized the associated working methods, organizational structures, and methods. We have transferred the mindset of PLCnext Technology as an open ecosystem over to our production system – hence the name: the PLCnext Factory. The availability of data from production increases transparency and ensures that we make more decisions as a team. Hierarchies are broken down. This requires mutual trust and open communication. You cannot discuss digitalization and the future of production without rethinking established processes and methods of working. Therefore, cooperation without rigid hierarchies is the key for us.” Sascha Klose, Director Manufacturing Engineering 18 Phoenix Contact

PLCnext Factory We use a range of tools and methods to keep a constant eye on our daily processes and work continuously on improvements. Above all, digitalization in production requires that we rethink our production processes 20 Phoenix Contact

PLCnext Factory Shopfl oor management includes processes, rules, behaviors, methods, and systems to ensure the most effi cient production possible 22 Phoenix Contact

PLCnext Factory Value stream management: continuous improvement In addition to the day-to-day processes, it is also important to initiate optimizations. With the help of value stream management, we can identify major improvement projects and look for ways to achieve them. There is room here for ambitious projects and visions. Together, we consider what may be the logical and necessary steps towards this goal. In doing so, we work free of any hierarchies, across departments and levels on their implementation. This also includes younger colleagues giving to-dos to their seniors. In addition, we regularly hold mock-up workshops in which we hone new ideas. For example, we fi rst test new system arrangements with Legos before we move systems around and cause downtime. Value chain management provides space for ambitious projects and visions.” 10 % Productivity increase in 2 years Our production as a Lego model 24 Phoenix Contact

PLCnext Factory Collaborating robots help us with our work – we work hand in hand with them 26 Phoenix Contact

PLCnext Factory Nudging: Psychology in production Nudging is a term from behavioral economics. Small tricks are used to try to infl uence people’s behavior in a predictable way. Nudging is ever-present in everyday design, often without us realizing it. We work with psychologists to optimize workplaces in production so that employees perform the right actions almost intuitively. This is how we improve and accelerate psychological decision- making processes. One example of this is at the workstations where printed circuit boards are set up. To provide more order, we have placed yellow arrows on the racks. In conjunction with other optimization measures, we were able to reduce the setup times of the SMT machines by 38%. With the optimized workplaces, we thus achieve tangible time and, consequently, monetary savings. 150 hrs/y Savings in picking and setting up the system due to reuse of durable parts (clips) 28 Phoenix Contact

PLCnext Factory Idea-to-cash: Agile methods in conjunction with lean production Imagine you are about to make a new acquisition in your company. The product that you are considering buying is designed to take work off your hands. The problem: It will not be ready for use for another year or so. It also off ers high savings potential, but only after two years of use. The question now is: Do you dare to buy? At Phoenix Contact, the answer is clearly yes. Furthermore, it is very important to us to improve the process quickly and to rely on temporary solutions in the meantime. Therefore, we do not just see the return on investment as a relevant key fi gure. Equally important for us is the period from idea to implementation, i.e., from “idea-to-cash”. If the optimization potential is high, it is also worth spending money on interim solutions. For us, this is at the core of the idea of agile methods, which we combine with lean production: Not an “either-or”, but an AND. We are already racing off on the skateboard while we are still working on the bike. Integration of a cobot instead of purchasing a completely integrated solution Solution with the greatest potential €40,000 €20,000 2 y 3 y €20,000 Investment Savings per year Return on Idea-to-cash Savings after Investment (ROI) 4 years 30 Phoenix Contact

PLCnext Factory 3D printed parts off er new possibilities and are quickly available 32 Phoenix Contact

PLCnext Factory Microservice architecture: Scalability and a new understanding of standards When it comes to digitalization, the classic approach of fi rst defi ning a standard, which is then rolled out in production over a number of years, makes us too slow in many areas. Furthermore, the speed with which we can realize interfaces between systems today also makes this approach obsolete. To us, it is more important to learn from each other and to use synergies. To make this possible, we need to build transparency in our structures and processes. The basis for this lies in our microservice architecture. What we only had as a gut feeling in the past, we can now prove today. We evaluate data and use the software expertise of start-ups, thus allowing us to identify anomalies at an early stage, improve product quality, and optimize production processes more quickly.” Stefan Schnake, Manager Manufacturing Data Support 34 Phoenix Contact

PLCnext Factory Our mission statement at the entrance to the production facility in Bad Pyrmont welcomes employees and visitors to the site 36 Phoenix Contact

About PLCnext Technology PLCnext Technology is the ecosystem for industrial automation. The combination of an open control platform, modular engineering software, and a digital software marketplace enables easy adaptation to changing requirements and the efficient use of existing and future software services. With easy cloud integration, the ability to use open source software, and the ever-expanding expertise of the User Community, PLCnext Technology is able to meet all the challenges of the IoT sphere. Digital Factory now Data is the most important asset in digitized production for reducing carbon emissions. To build a future-oriented digital factory, intelligent solutions are needed to increase productivity, improve availability, and to generate new business models. With Digital Factory now, Phoenix Contact offers a holistic and scalable concept that provides various products, solutions, and services for your sustainable production. We have already successfully used and tested the various segments of digitalization in our PLCnext Factory. This includes intelligent data acquisition and evaluation, a smart data infrastructure, the secure connection between OT and IT, and an open and flexible automation standard. 38 Phoenix Contact

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