Community Blog China DMEGC – The Digital Transformation of a Magnetic Industry Giant

China DMEGC – The Digital Transformation of a Magnetic Industry Giant

This article discusses China DMEGC's digital transformation journey with Alibaba Cloud.

By Xiao Jian, Senior Strategy Director from the Alibaba Cloud Research Center

Interview Conducted by Wang Yiduo

Edited by Zhang Nan from the Alibaba Cloud Research Center

Alibaba Cloud and China DMEGC have teamed up to carry out digital transformation step-by-step. They have divided the process into three stages to improve quality and production efficiency. In the future, they will work together to build an industrial internet platform for the magnetic industry and extend digitalization to the entire industry.



"According to our calculation, after the digital system is launched, the overall production efficiency will increase by at least 30% compared with that of the original paper document management process." Li Ming, CIO of China DMEGC, said in an interview.

As an important functional material, magnetic materials are widely used in fields, such as household appliances, automobiles, computers, communications, medical treatment, aerospace, and military affairs.

With the continuous development of emerging application markets, such as 5G communication, Internet of Things (IoT), artificial intelligence (AI), and new energy vehicles, China's magnetic material industry has also been thriving.

Magnetic Materials

However, behind the rapid development of industries, there is a slow advancement of digitization construction in all industries.

Generally, there is no strict management model implemented in the magnetic material industry. Even China DMEGC, a magnetic industry giant, is still in its initial stage of digitalization. The traditional management model relies on manual and paper documents with data not shared between factories. Therefore, it is difficult to achieve collaborative production rapidly, thus affecting production efficiency.

Several common problems have been existing in the whole industry, including massive paper documents in the management process, inaccurate product control data, various disconnected factory system data, and separate upstream and downstream of the industrial chain.

Despite being a leading enterprise in the industry, China DMEGC is no exception. A few years ago, the digitalization of China DMEGC was also in the initial stage, and the production workshops were even worse.

As enterprises grow larger, the difficulties with digital transformation grow as well. Sometimes it feels like rocket science. Despite the digitalization issues, China DMEGC put its digitalization in motion.

1. The Magnetic Industry Forges Ahead without Hesitation

China DMEGC, the world's largest manufacturer of permanent ferrite and soft magnetic materials as well as the undisputed industry giant, is located in Dongyang, Zhejiang, which is crowned as China's “Magnetic City.”

China DMEGC covers three fields, magnetic materials, new energy, and devices. It has obtained a certificate in solar energy manufacturing as a front runner in the industry. Moreover, it possesses more than 70 subordinate factories, which makes it the leading enterprise in the magnetic industry in China.

Leading enterprises should always equip themselves with perfected digital management systems. However, this is not the case in the traditional magnetic material industry. China DMEGC lags far behind other giants around the world in terms of digitalization.


1.1 Development Affected by Traditional Management Model

In the past, China DMEGC had almost no production management system shared internally. Previous production plans and production line schedules could only be completed by manual patrol.

In addition, production workshop management was carried out on paper. Not only was the management process not standard, but the data acquired was also inaccurate, let alone the tracing of problematic fine-grained products.

The manual paper document management was not only inefficient but also prone to errors.

According to Li Ming, the CIO of China DMEGC, a factory once set the parameters of one of the production links incorrectly in the production process, resulting in repeated works when the batch of materials failed to enter the next link.


In addition to the problems in the paper production process, the production coordination between factories was not ideal. Each of the 70-odd factories subordinate to China DMEGC has different IT architecture and information deployments, coupled with different data storage standards and various types of self-developed applications developed that cannot be shared for use.

Furthermore, the data on each of the hundreds of devices in each factory was not transparent. Thus, it was difficult to know the production status of each one, not to mention the effectiveness of the management.

There were no systems to connect different factories, which means each factory cannot realize collaborative production quickly. The flow of products between factories also depended on paper documents.

Problems such as the wrong batch of products, chaotic identification codes, premature or late maintenance of equipment, occur from time to time.


1.2 Highlights about the Needs for Digitalization Construction

The importance and value of digitalization are self-evident, but one of the problems that hindered the digitalization construction was the production equipment. Many old equipment in factories have been used for many years and typically cannot be upgraded. Moreover, the huge investment of money and time is too much for ordinary magnetic material enterprises to afford.


Another reason for the low level of digitalization in the magnetic material industry is the explosion of the magnetic material industry.

Before 2015, the magnetic material industry grew continuously at a compound growth rate of about 15% every year. In 2019, about 2,400 production enterprises were in the magnetic material and device industry in China. Among these, about 200 were listed companies. The total output was about 1.6 million tons, and the enterprise output value exceeded 250 billion RMB, accounting for more than 60% of the global share.

Under such a development trend in the industry, extensive management was applied in the whole magnetic material industry, including China DMEGC. In other words, the industry focuses on mass production with continuous investment in labor to expand production capacity and neglects the investment in digitalization construction.


However, after 2016, due to the continuous increase of labor costs, the whole industry began to suffer from difficulties, such as those in recruitment. Then, the previous simple model of labor accumulation began to show drawbacks.

Furthermore, in terms of production efficiency, product consistency, flexible manufacturing, and other aspects, there was still a big gap between China DMEGC, which was already an industry leader at the time, and other world-class enterprises, such as TDK.

2. China DMEGC Cooperates with Alibaba Cloud

"The backwardness of digitalization has put us at a disadvantage in the competitive globalization trend. In the past, extensive production management has made China a major producer of magnetic materials. However, materials with higher quality and precision require fine O&M and collaboration. Only through digitalization construction can China's enterprises truly stand shoulder to shoulder with Japanese, European, and American ones." Li Ming said in an interview.

Around 2016, the leadership of China DMEGC decided to start the systematic construction of digital transformation and applied for the science and technology project of the application of the new model of intelligent manufacturing from the Ministry of Industry and Information Technology (MIIT) in 2017. It came with unswerving support in investment and determination in digitalization construction.

The goals of China DMEGC for digital transformation are very clear. Firstly, it aims to adopt a paperless management production system. Secondly, it aims to adopt a standard and consistent system for more than 70 factories in the group. Thirdly, the upstream and downstream of the industry chain will be connected, and a unified platform can be used for data aggregation and business collaboration.

However, due to serious internal problems and insufficient digital talent reserves, China DMEGC realized that fighting alone was not the way to go to achieve the digital transformation with such scale.

China DMEGC then decided to pay attention to Alibaba Cloud and another domestic ICT manufacturer.


In terms of digitalization construction, the two enterprises are leaders in their respective fields with experience in providing digitalization services for leading enterprises. Alibaba Cloud is more specialized in customized development software and has strong soft power and platform capabilities, while the other ICT manufacturer focuses more on standardized hardware products. It was difficult for China DMEGC to choose between the two enterprises.

"Based on the status quo and goals, China DMEGC hopes that problems in the paper-based process can be solved through digital production systems, which will also be promoted to all factories of the group. Finally, it can form the Internet for the whole industry by connecting the upstream and downstream of the industrial chains. This requires a brand new information system architecture and a large amount of extensive customized development, all of which can be met by Alibaba Cloud," Li Ming said.

Another reason for choosing Alibaba Cloud was that Alibaba Cloud attached great importance to the digital transformation and construction of China DMEGC.

On July 13, 2018, the top officials from Alibaba Cloud visited China DMEGC and explained how the Alibaba Cloud industrial Internet platform solved the problem faced by factories in digital transformation. They also planned the future direction for China DMEGC in digitalization.

After about half a year's scheme design, China DMEGC finally recognized Alibaba Cloud for its foresight and implementation capabilities in digitalization for many traditional manufacturing enterprises.

In January 2019, two famous giants from Zhejiang province announced strategic cooperation to jointly build the industrial Internet platform for magnetic material industry clusters.

3. Heading Firmly Towards Digitalization

China DMEGC and Alibaba Cloud signed the contract in January 2019, but Alibaba Cloud did not proceed with the implementation until May.

During the four months, a lot of discussions were carried out in terms of the blueprint planning and top-level design of China DMEGC's digital transformation.


3.1 Digital Transformation – Three-Stage Planning

Alibaba Cloud made a specific plan for the three stages of digital transformation for China DMEGC:

Stage One: Intelligent Improvement of Factories

You need to select the pilot factories, develop and deploy the factory production management system, and obtain the data information of production equipment in real-time. By doing so, production efficiency can be optimized based on data, and digital production management within the pilot factories can be implemented. All of these things helped build an enterprise-level industrial Internet.


Stage Two: Interconnection between Factories

After achieving digital production management in the pilot factories, Alibaba Cloud began to provide standardized and reusable products and services that can be commonly used for dozens of factories subordinate to China DMEGC. As a result, the cost of independent development was reduced for each factory. In addition, data was shared among different factories, so business collaborations between factories were directly implemented on the platform to build an industry-level industrial Internet.


Stage Three: Unification of Standards

After the factories of the whole group uniformly completed the migration to the platform, they established a unified IoT standard and data standard for the magnetic industry.

Through the aggregation and analysis of massive data, the allocation of production and service resources was optimized more efficiently and accurately on a larger scale. Moreover, the standardized management of the production process was also improved. By doing so, the deep integration of digitalization, networking, and intelligence was implemented for the magnetic industry, thus building a platform that interconnected industry-level industrial Internet with supply chain finance.


In short, the plan was about constructing digital workshops for pilot factories, establishing management and data standards for China DMEGC's IoT, and building an autonomous and controllable industrial Internet platform for the magnetic industry.

After completing the blueprint planning and top-level design, the two sides selected four benchmarking factories to be in charge of the production of soft magnetic, permanent magnetic, magnetic, and battery pieces. In May, Alibaba Cloud officially initiated its deployment.

Although the plan is very detailed, problems were inevitable during the implementation.

3.2 Personnel Adjustment Difficulties and Their Thoughts

In Li Ming's view, the biggest problem lies in the people.

"It is indeed difficult to transform the equipment, but to change the ideology of the frontline employees in the production workshops was even more challenging at the time because they have been too used to the previous working model. The grassroots personnel do not understand the "system," so they are reluctant to use that equipment."

The digital transformation of the production workshop involved the actual work adjustment of many grassroots employees. Vulnerabilities in the past paper management have been resolved after digitalization.

"For example, they must input the number of products they produced to go through the system process. The workers don't want to bother because they consider it adds to their workload."


A more serious contradiction lies in personnel adjustment. Many manual occupations were gradually replaced after the digital system launched. Furthermore, some grassroots employees with lower educational backgrounds also had trouble adapting to the system operation process. They either changed jobs internally, took over other jobs, or left for self-employment.

However, the great resistance from grassroots employees at that time didn't change the determination of the group's top officials to promote digital transformation. Not only did the group's information department actively participate in the process, but the senior management also paid close attention. They tried to convince grassroots employees to change their minds and organized regular communication meetings and inspections to fully promote digitalization construction.


3.3 Initial Successes in Digital Transformation

"The implementation takes about half a year, and the pilot factories have generally completed the deployment and operation of the system. Later, the grassroots employees also changed their thoughts. When encountering problems, they will actively communicate with the information department first and consider how to solve it through technical means."


For example, previously, the defect detection of solar cells was completed manually. Now, with the help of high-definition cameras and AI algorithms, the system can complete intelligent, quality product inspection quickly. The misjudgment rate has also dropped from 1% to 0.3%, and the missed detection rate has also been controlled at 0.15%.

"The original AI model training took about 12 hours, but after migrating to the cloud, it takes less than 30 minutes. AI-based quality inspection is a typical application of smart manufacturing."

With Alibaba Cloud's services, such as real-time data collection with edge computing, industrial IoT platform, big data analysis tools, and industrial Internet applications, China DMEGC can realize intelligent monitoring of production lines to improve production efficiency.


Meanwhile, the digital factories integrated the original MES, ERP, and other equipment management systems, intelligent production equipment, intelligent detection equipment, and intelligent logistics storage equipment. Moreover, the factories shared the data from the group to the factory, the factory to the workshop, the workshop to personnel, personnel to equipment, equipment to product, and product to the warehouse. As such, the whole process management of the production, warehousing, and logistics was realized, accelerating the efficiency of materials and work order flow.

In terms of the equipment O&M, the production personnel can fully grasp the running states of the equipment with the prompting of data. They can calculate the maintenance frequency of the equipment to reduce the cost loss caused by excessive maintenance.

4. Building an Industrial Internet to Face Global Competition

According to Li Ming, China DMEGC has completed the digital transformation of the four pilot factories in the first stage and is pushing digital transformation forward to other factories within the group and outsourcing factories.

The data collection platform was tested by the pilot factories. Then, other common applications in this industry, such as production efficiency improvement, equipment management, mold management personnel management, were implemented. The platform and applications mentioned above can be replicated and delivered to similar factories and enterprises within the group for direct use and deployment. This solution saves time and expenses for R&D.

Now, more than a dozen general use, lightweight industrial applications have been released. Next, China DMEGC will use the IoT and the cloud to coordinate and share services for more than 70 factories in the group. Therefore, one common application can service more factories and reduce the IT investment costs significantly.

There is a meaningful, long-term plan. After these applications are perfected, China DMEGC plans to build magnetic industry-level industrial Internet in Dongyang, Zhejiang. They plan to set general standards and specifications, establish application markets for the magnetic industry, and host these industrial applications for the magnetic industry. As such, China DMEGC wants to extend these applications to other enterprises in the magnetic industry to help reduce costs and improve efficiency.

"When digitization construction reaches a certain degree, China DMEGC can carve a way out in the whole magnetic material industry in Dongyang and implement the large-scale production of high-quality products. Moreover, the competitiveness of the industry will be enhanced with the help of China DMEGC. Therefore, China will increase its competitiveness in the future global competition," Li Ming said.

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