Local enterprises need to advance

The Star Online

19 November 2018

Local enterprises need to advance

Unprepared: Local producers are far from ready to embrace Industry 4.0 as they are bogged down by cost, lack of skills and limited market access.

Mindset change important for manufacturers to adopt Industry 4.0 technologies

INDUSTRY 4.0 is the buzzword of the day. The government, and the industry alike, are talking about the technological transformation that will change the face of manufacturing in Malaysia.

Autonomous robots, the Internet of Things (IoT) and computerised manufacturing processes are slowly becoming a reality.

But for all the talk on how these technological advancements will benefit the country, local enterprises seem far from ready to embrace them.

SMEs are not ready at the moment, says Federation of Malaysian Manufacturers (FMM) president Datuk Soh Thian Lai.

In fact, from the association’s survey, it is found that only 30% of its members are ready to implement Industry 4.0.

FMM represents over 2,600 manufacturing and manufacturing services companies. Note that there are more than 900,000 SMEs operating in Malaysia, of which 5.3% are in the manufacturing sector.

One of the main concerns for small businesses is, of course, the cost of implementing new technologies. In this respect, the government is trying to aid SMEs by providing the funds necessary for them to upgrade their operations.

Under Budget 2019, the government has set aside over RM5bil to help businesses embrace the Industry 4.0 age. Among the measures include an allocation of RM2bil under the Business Loan Guarantee Scheme (SJPP) to incentivise SMEs to invest in automation and modernisation and a RM3bil Industry Digitalisation Transformation Fund with a subsidised interest rate of 2% under Bank Pembangunan Malaysia Berhad to accelerate the adoption of smart technology such as automation, robotics and artificial intelligence.

But apart from just waiting for government programmes, Soh says manufacturers must have a change in mindset as well.

“To transform means that all the manufacturers and service industry must have the determination themselves to commit to invest by themselves also.

“We are talking to all the manufacturers to get ready. We are trying, through FMM and our centre of excellence, to create, collaborate and enable our members to come into the Industry 4.0 platform,” he says.

He also points out that while there is a strong emphasis on automating manufacturing processes, automation is, really, only at Industry 3.0.

“Industry 4.0 is an end-to-end smart manufacturing process with cybernetic process through hyper-connectivity. This is the real one. This means that everything from the supply chain to end customers are all linked-up,” he says.

According to FMM, among the pillars of Industry 4.0 technologies are industrial IoT, cloud computing, simulation, additive manufacturing, Big Data, cybersecurity, vertical and horizontal system integration, augmented reality and autonomous robots.

The computerisation of manufacturing will enable companies to counter the rising cost of labour and reduce their dependency on manual labour. Understandably, this is one of the reasons why the government needs to implement Industry 4.0.

This will also help to increase the manufacturing sector’s productivity and enhance the national gross domestic product (GDP) growth.

The manufacturing sector contributes about 22% to the country’s GDP and SMEs make up about 97% of the sector.

“Our productivity now is only one employee in manufacturing generating about RM100,000 per year. By the Industry 4.0 standards, you need to increase at least 30%, which means RM130,000 per employee. But this, we are only talking about manufacturing.

“When you talk about overall, which includes services and everything else, our productivity is only RM77,000. This means that every employee, for one year, only contribute RM77,000. It’s very low. Compare this to Singapore, which is double of ours.

“You don’t even have to compare to countries like Germany. In Asean, countries like Thailand and Indonesia are picking up. Even Vietnam is picking up.

“So all the manufacturers, they must start to focus. They cannot always be talking about ‘I need so many and, so many of foreign workers’. What I want to talk about is productivity,” adds Soh.

He also notes that Malaysia’s long dependence on foreign labour is exacerbating our ability to develop skilled labour that will help increase productivity.

The government’s goal is to have at least 35% of the local workforce as highly skilled labour. We are currently at 18% as most of the work are carried out by foreign workers.

This also does not help in the country’s capability to compete globally.

One of the things, which Entrepreneur Development Minister Datuk Seri Mohd Redzuan Yusof notes is crucial for IR4.0 to take off here, is training and education.

“I don’t think many people understand what IR4.0 is. We have to train them to understand what is IR4.0.

“The second thing is infrastructure readiness. We need to upgrade the Internet speed. And there are technology available to upgrade the infrastructure. We are talking about Big Data and using data to enhance business. So we need to do that,” he said at the recent FMM SME Conference 2018.

Last week, International Trade and Industry Ministry (Miti) investment policy and trade facilitation senior director Faizal Mohd Yusof said the Industry 4.0 Blueprint or Industry4WRD assessment guidelines to assess manufacturing companies’ readiness for Industry 4.0 has been finalised.

It shall be implemented in the screening of 500 SMEs early next year. The Industry 4.0 readiness assessment will provide a better understanding of the current state of SMEs, in terms of technology adoption.

“It is good to gauge the level of industrial revolution of manufacturing companies in Malaysia.

“The government will then be able to decide on the direction of facilitating Industry 4.0 adoption for SMEs, and see where it can intervene by allocating funding or incentives,” he said.

Given that most SMEs don’t have deep pockets to dig into, FMM advises companies to carried out a self-assessment of their entire value chain and operation processes before embarking on any project or implementation of new technology.

This is to enable companies to identify processes which could be improved, integrated and digitised as well as create a benchmark for measurements and target outcomes of the project.

This transformation process will take time and small businesses would do well to also manage their expectations on returns in their investments.

Meanwhile, Globetronics Technology Bhd chief executive officer Datuk Heng Huck Lee notes that the company has yet to commit itself to fully adopting Industry 4.0 technologies despite its innovative culture.

He advises companies not to blindly chase Industry 4.0.

“Industry 4.0 is becoming a catchword that we are chasing. I only have a word of caution. If you look at the progression of industrialisation, I’m not sure if Industry 4.0 will be the eventual point. A lot of the companies, including multinationals, still have a very big gap to close, either moving from Industry 3.0, or even 2.5 to 3.0 and then to 4.0. I don’t think many of the Malaysian companies are even at 3.0.

“So the question they may have to ask themselves is, do you want to leapfrog to Industry 4.0 by bypassing 3.0 or do you want to go through 3.0 first. You need to look at where you are, whether your systems, your people, your processes can take it. The learning curve to leapfrog could actually be expensive. But it doesn’t meant that you should not do it.

“It is very expensive and the investment is quite high and returns may take years to recover. Even at Globetronics, we have been looking at Industry 4.0 but we are still not able to make a decision on whether to put some money in that. Because when I did the assessment of our internals, be it from IT, people, skillset, there are so many things that need to be made good before you can say ‘let’s put the money in’. Don’t be a follower. Do your own assessment in every detail,” says Heng.

Another concern that manufacturers have, adds Soh, is market access.

“Manufacturers are also concerned that when they implement Industry 4.0, they will have increased output. Where will they sell the extra products? So this is another area that they are worried about.

“That’s why we are also talking to the government and Matrade on how to bring them to the global market, especially Asean. And this is why we are urging the government to sign the Regional Comprehensive Economic Partnership (RCEP). And we are also encouraging SMEs to invest in e-commerce. When the output increases, they must have market access.

“That’s why we are taking a longer time to move into Industry 4.0, but we must do it,” says Soh.

 Web source: https://www.thestar.com.my/business/smebiz/2018/11/19/local-enterprises-need-to-advance/