Manufacturing companies in Asia must adopt Industry 4.0 or risk being overtaken
Digitalisation promises to help companies improve cost efficiency, productivity and quality. Even traditional sectors, such as agriculture, are taking up the digital challenge. The focus is now on manufacturing companies and how they leverage Industry 4.0.
Disruptive technology is already changing our daily lives through services such as Uber and Airbnb. However, it’s not just business-to-customer models that are being disrupted. Specifically, within the manufacturing industry, digitalisation is driving Industry 4.0. The automation of manufacturing processes and better use of data to transform operations are all working to create a ‘smart’ factory. Regardless of their size, companies have no choice but to embrace digitalisation.
Digitalisation is key to future growth in APAC
According to one industry leader, companies must disrupt or risk getting disrupted. “It’s not a choice that you have – whether you want to move towards digital or manufacturing 4.0. It is imperative for every organisation,” said Indranil Sen, general manager and head of supply chain management, APRIL Group, Asia Pacific.
Companies stand to gain substantial business benefits through digitalisation, which impacts costs, productivity and quality, Sen elaborated. He was speaking at an industry leaders’ panel discussion titled The Industry 4.0 Outlook: Opportunities and Risks in Asia at the recently concluded Smart Manufacturing Asia 2017 conference in Singapore.
Indeed, studies have shown that the benefits of digitalisation can be wide-reaching. According to Singapore’s Minister for Trade and Industry, S Iswaran, the digital economy in Southeast Asia could potentially grow to US$200 billion (S$270 billion) by 2025. It is no wonder that the Singapore government has set aside more than S$80 million to help SMEs build their digital capabilities.
Within the Asia-Pacific, seven countries are ranked in the top 20 of the world’s most digitally ready economies, panelist Abhik Chatterjee, digital advisory leader (resources) at Accenture, pointed out. Among these, Singapore ranks top of the World Economic Forum’s 2016 Networked Readiness Index, followed by Japan, Hong Kong, South Korea, New Zealand, Australia and Taiwan.
Thanks to the ecosystem created in these Asian countries, flourishing companies and sectors tend to have a higher level of technology adoption, which drives favourable outcomes. The panelists listed automotive, semiconductor manufacturing, technology, electronics, pharmaceuticals, financial technology, banking and e-commerce as the early adopters of digitalisation. However, other sectors are not far behind. Even sectors that traditionally shy away from digitalisation, such as oil and gas, shipping and agriculture, are slowly coming onboard.
“Traditionally slow adopters are learning the game very fast and certainly getting up to speed with the rest of the players now,” said Hogberg.
Raimund Klein, executive vice president and country lead for Digital Factory and Process Industries and Drives at Siemens, added that there is also potential for digitalisation in countries with high inflation rates, high salary increases and a high amount of manual manufacturing activity, such as Thailand and Vietnam.
“The government (in these countries) is driving very hard at the moment for Industry 4.0… Everyone needs to improve productivity to keep production on their home turf,” he said.
Resistance to Industry 4.0 within the manufacturing sector
At the opening ceremony of Manufacturing Technology Asia 2017, Sim Ann, senior minister of state, ministry of trade and industry lauded the manufacturing companies pioneering advanced manufacturing initiatives here in Singapore. Seagate Technology, for instance has organised a special task force, consisting of 30 engineers and data analysts, to research and explore full automation under its ‘Dream Factory’ project. This project is a first-of-its-kind initiative in the electronics industry, aiming to move the Hard Disk Drive (HDD) manufacturing towards Industry 4.0.
Not everyone has taken to digitalisation as warmly though. Paul Boris, vice president, manufacturing industries, GE Digital explained that many manufacturing companies have been slow to adopt some Industry 4.0 ideas, including digitalisation, the Internet of Things or automation, due to their lack of comfort with complexity and in having too many touchpoints handling data.
“We get very nervous when we think that the CIO or CEO and front men operating machinery are having a direct conversation with respect to what they should do and how it is done. That sort of upends the whole organisation,” explained Boris. Change management and cultural transformation hence become important drivers of digitalisation, pointed out Chatterjee.
Chong Kian Fatt, senior vice president of Seagate Global Drive Operations, identified the biggest challenge in the region as downstream suppliers who lack awareness of Industry 4.0. These suppliers are not embracing digitalisation, and this is one reason why they find it difficult to keep up with cost pressures.
According to Fatt, one of the reasons these companies are reluctant to embrace Industry 4.0 is the lack of capabilities and infrastructure, around big data analytics for instance. He acknowledged that while his own company, for instance, collects a lot of information through its supply chain and within the business, it only uses 10 percent or less of that data.
Not only do the bigger companies need to become more effective in their use of data, they also have a role to play within the ecosystem. “We have to step in and help our suppliers be more competitive by upskilling them. This will also make it viable for them to support us,” said Fatt. “If our suppliers can’t survive, then as customers, we will be in trouble too.”
Partnering to build a collaborative ecosystem in Singapore
Leaders in adopting digital solutions, such as GE, Siemens and ABB, are already helping the rest to catch up quickly.
Siemens, for instance, opened its Digital Factory Manufacturing Design Consultancy in Singapore late last year to help its customers implement automation, digital processes and augmented reality within their operations. It further uses the data from the factories to simulate and identify bottlenecks. The consultancy also offers free training to its partner companies in Southeast Asia to ramp up their digital capabilities.
The panelists lauded Singapore for its efforts in driving Industry 4.0 on various fronts. Besides building a beneficial ecosystem for industry, the government is also focusing its efforts on higher education, encouraging universities to work closely with the private sector to develop a pipeline of talent.
Klein revealed that Siemens, for instance, is collaborating with the Singapore Institute of Technology on curriculum design to ensure that it will have suitable candidates for the jobs it needs to fill in the future.
Digitalisation is the way forward
Industry 4.0 is likely to have a wide impact on Singapore’s more than 2000 manufacturing companies – and that in itself justifies an integrated and comprehensive strategy. For one, adopting Industry 4.0 will localise the manufacturing industry here. Asia will no longer just be the factory of the West, Hogberg said.
He explained that digitalisation will result in more localised production nearer the consumer. “This is a great opportunity and being part of this manufacturing revolution is really exciting.”
As Klein concluded, if manufacturing companies don’t drive the change now, they will be overtaken. “We have to jump on the train now or we will miss it.”
This article was written based on a panel session that Future Ready Singapore attended at the Manufacturing Technology Asia 2017 conference (4-7 April 2017).
Edited by Kritika Srinivasan, Clement Cher and Marisa Low.