Industry 4.0 could be the next big thing for Singapore’s economy.
A study by The Boston Consulting Group stated that rapid adoption of Industry 4.0 could boost the country’s labour productivity by as much as 30 percent by 2024. It will also add S$36 billion (US$26 billion) in total manufacturing output and revenue for local and foreign companies as well as create 22,000 jobs with average salaries that are up to 50 percent higher than current ones.
With Industry 4.0 promising increased productivity, lower costs and better customer satisfaction, it will be difficult to ignore the digital revolution.
However, manufacturing companies in Singapore and across the region have not integrated digitalisation as fully as one may have expected. Indeed, they seem to face certain challenges in the adoption of Industry 4.0.
Industry leaders discussed these constraints – which range from internal to external – during a panel session on Tackling Challenges in Integrating Industry 4.0 into Existing Manufacturing Operations at Smart Manufacturing Asia 2017 in Singapore.
Working to increase know-how on Industry 4.0
Lim Yew Heng, partner and managing director of The Boston Consulting Group, explained that many companies are hampered by a lack of knowledge on how to even begin on their digital journey and what steps they need to take to integrate Industry 4.0 into their operations.
“A lot of our clients across Southeast Asia are very interested in the digitalisation of manufacturing operations. However, not many of them have a good understanding of what it even means,” he said.
In Singapore, both the government and private sector are already embarking on initiatives to plug this knowledge gap. The Agency for Science, Technology and Research (A*STAR) will launch two model factories this year, aimed at helping 500 SMEs here by providing them with an environment to learn about advanced manufacturing technologies. In the private sector, McKinsey & Company, The Boston Consulting Group and Siemens are among the companies that recently launched facilities in Singapore to guide and advise manufacturers on their Industry 4.0 journeys.
Industry 4.0 success depends on effective change management
Another challenge – and perhaps the most important one – that manufacturing companies face in integrating digitalisation is ensuring that their people are aligned with this vision. For starters, companies looking to introduce digitalisation should not treat this as an IT project. It should be an agenda that the CEO’s office owns and drives, Lim said.
Even then, that may not be enough to facilitate the adoption of Industry 4.0.
Goh Koon Eng, general manager of manufacturing and supply chain at Chevron Oronite’s Asia-Pacific operations, said that a well-conceived change management plan is key to drumming up support. “The CEO may want to do something, but if he doesn’t get the support of the organisation, he will be a leader without followers.”
He explained that when digital integration is more comprehensive, more jobs would also be affected, including at higher levels.
Change management therefore becomes a necessary process, and this will include identifying the different stakeholders who may be affected and persuading them about the virtues of digitalisation. “You will need to convert the majority… or you will have a lot of blockers in the organisation,” said Goh.
He recommends that manufacturing companies start with small digital initiatives. If successful, such small wins could convince the junior employees of the benefits of Industry 4.0. The success of these initiatives could also give the whole organisation the confidence to initiate more significant digitalisation efforts, in line with the top management’s overarching strategy.
The Boston Consulting Group’s Lim suggested that an effective change management process should unfold in three steps. The quick or small wins are the first step – very important in winning over the organisation for such digital change. At the same time, it is also important to recognise the eventual big wins or significant changes the company needs to pursue. Finally, the decision makers need to prepare the organisation for these important initiatives by ensuring that the requisite capabilities are in place.
Tackling cyber security risks of Industry 4.0
A third concern that companies have about integrating Industry 4.0 is around vulnerabilities. Cybersecurity has become an increasing threat for organisations around the world – and companies fear that Industry 4.0 could worsen such risks.
Mirel Sehic, cybersecurity business development manager (Pacific and Japan) at Honeywell Process Solutions, explained that these risks could mainly come from two fronts: disruptive attacks meant to wreak havoc in the company’s systems and processes as well as state-sponsored attacks, which require governments’ intervention to address.
The problem is that in this era of digitalisation, manufacturing systems are often built on open or standardised technologies to make them more cost-effective and efficient. Hence, companies’ manufacturing systems are exposed to the same online vulnerabilities that previously affected only their office computer systems.
To make matters worse, manufacturers appear unprepared to face these risks. A 2016 study by Deloitte shows that a third of manufacturers have not assessed their industrial control systems for cyber risks.
One way that manufacturers could tackle this challenge is by differentiating the data they have. More sensitive data – such as proprietary recipes, intellectual properties, processes and financial data – can be kept isolated and safe. On the other hand, data such as non-sensitive vendor information may be safe for sharing.
Taking advantage of the ecosystem that Singapore offers
Despite these challenges, the speakers urged all manufacturing companies, including SMEs, to embrace Industry 4.0. Among other benefits, it presents them with a new business model, since for many IoT initiatives, there is little or no upfront investment required, pointed out Jonas Berge, director of applied technology at Emerson Automation Solutions.
Moreover, companies with operations in Singapore should take advantage of its infrastructure, digital readiness, government policies and access to talent to kick-start their Industry 4.0 efforts.
Scott Maguire, global engineering director at Dyson, shared that having a sizable presence in Singapore allows the company to combine its advanced manufacturing operations with technology development – two areas that the country has expertise in.
“Singapore is quite a sweet spot for us. It has got world-class universities with great graduates and talent, and a long-term investment in Industry 4.0 from the government,” he said.
With the undeniable benefits that Industry 4.0 offers and a strong ecosystem of support in Singapore to leverage it, there is little reason for companies not to jump into the fray. Leveraging the advanced manufacturing expertise that is being developed in the nation, setting in place an effective change management process, and working to assess and monitor cyber risk will all go a long way in ensuring the success of Industry 4.0 efforts.
This article was written based on a panel session that Future Ready Singapore attended at the Smart Manufacturing Asia conference (4-5 April 2017).