This article first appeared in The Edge Financial Daily on May 13, 2019

Technology sector
Overweight: The Smart Manufacturing & Smart Data conference on Industry 4.0 (I4.0) organised by SEMI at MITEC recently discussed issues faced by players when adopting I4.0 in a manufacturing plant, and solutions to avoid the “pilot trap”.

SEMI is the global industry association representing the electronics manufacturing supply chain.

According to Alpesh Patel, director of Digital Capability Centre at McKinsey & Company (McKinsey), 79% of Asean companies are aware of I4.0 but only 13% of the companies have launched pilot programmes for I4.0 implementation.

What’s more of concern is that out of these 13% of companies, 71% of them are still stuck in the pilot phase after one to two years.

One of the challenges identified is the implementation of too many isolated solutions, resulting in countless data silos.

In a study conducted by McKinsey and the World Economic Forum (WEF) involving over 1,000 manufacturing companies across all industries, they have identified 16 “lighthouses” or manufacturing sites that have successfully taken I4.0 from pilot to integration at scale.

Two main success factors were observed across these sites. First, I4.0 needs to be implemented with a holistic approach. Technology decisions should be made to attain long-term comparative advantage as opposed to an isolated technology exercise for an immediate fix.

Second, building necessary skill sets through internal training or acquiring new talent is vital for overall transformation in an organisation.

With a shorter product life cycle of consumer electronics and rising pressure on margins, there is an increasing need for local technology companies to adopt I4.0 to mitigate downtime and allocate resources more efficiently in order to maintain healthy margins.

Malaysia Pacific Industries has started pilot testing automated guided vehicles in its plant to eventually replace human operators. Transformation may not take place as quickly as expected but the 16 successful manufacturing sites identified provide a beacon of light for others to learn from. — AmInvestment Bank, May 10