This article summarises the key takeaways from a presentation by Alfie Amir, Principal Analyst from GlobalData during TM One’s LEAP Forward Manufacturing 2022 event. Alfie talks about major trends observed in ICT spending within the manufacturing industry and offers a glimpse into where our local manufacturers stand.
While the worldwide growth of the IT industry has remained steady for the past decade, we witnessed a boom in our dependency and usage of digital tools and services as various industries raced to regain their momentum after the pandemic. With several industries grinding to a halt during the global lockdowns and with other macro influences such as inflation and the rising urgency of ESG policies to contend with, many have turned to the power of technology to fill in the gaps.
This adoption of ICT services is reflected in the manufacturing industry where manufacturers have started allocating larger chunks of their IT budgets to ICT services that support their businesses and operations. In fact, a 2022 study by GlobalData estimated that Malaysian manufacturers will spend US$ 2.7 billion on ICT in 2022, with a 7.8% YoY increase.1
These are necessary steps for incorporating pre-existing tech into their operations to transform and upscale their production levels. More manufacturers are now moving to digitise their floors, utilise predictive analytics, and increase the visibility of their supply chains in a bid to improve the efficiency and predictive measures needed for a more streamlined production process and to keep up with new scales of demand in our changing world.
The effectiveness of the successful integration of information technology and operational technology (IT-OT) technologies in manufacturing can be clearly observed when looking at our counterparts on a global scale.
Global manufacturers are showing varied approaches in their utilisation of IT-OT tools. Manufacturing giants such as Airbus, Lockheed Martin and Honeywell have integrated IoT convergence into their operations by developing tools to improve communication between IT and OT services for data collection and for factory monitoring purposes. We also see Toyota funnelling resources into research on AI and Machine Learning (ML) to enhance the performance of vehicles rolling out of Toyota. Manufacturers of consumer goods, like Nestle and GSK, on the other hand, have turned to robotic process automation on their factory floors to enhance the productivity and efficiency of production lines while reducing operational costs.
On a smaller scale, there are also manufacturers working on frameworks to enhance quality control post-production and manufacturers who use 3D printing. A key takeaway from this is that the IT-OT convergence has become crucial for manufacturers to drive their digital transformation. Moreover, there is no “one-size-fits-all” solution for manufacturers – industry manufacturers need a keen understanding of challenges being faced in each on-ground process to be able to choose the right IT & OT services that is best suited to solve their unique challenge.
However, the openness and effectiveness in adopting IT-OT convergence must be strongly supported by key stakeholders of an organisation to bring true impact not just from the IT and operational team, but also other business units such as product, sales, marketing and even human resource. Leaders of top manufacturing companies are now using their voices to demonstrate the benefits that can be observed, and the expected scalability that is to follow when manufacturers start digitising their factory floors.
“IoT tools help manufacturers solve currently unsolvable problems. By utilising enabling technologies like the cloud and leveraging corporate data, we can help our customers address challenges at the enterprise level.” – Andrew Hird, Vice President of Honeywell
“Digitalisation is a major trend and innovation driver. It empowers companies to enhance their production processes, creating completely new business and growth opportunities that would enable them to remain competitive.” – Raimund Klein, Executive Vice President of Siemens ASEAN.
As smart manufacturing is fast becoming the norm on factory floors across the world, a new key technology is set to further supercharge innovations in manufacturing. The introduction of 5G is making higher bandwidths and lower latencies far more accessible. It is also bringing along new capabilities such as network slicing and faster private networks, while also catalysing the usage of edge computing within manufacturing.
Several global companies have already jumped ahead by harnessing the power of 5G. For example, Vodafone and Ford have made strides in creating Private 5G networks to enable real-time operational data management, along with operational flexibility by allowing easier reconfiguration of production lines. In ASEAN, AIS Thailand and Mitsubishi Electric have used 5G for real-time remote equipment monitoring and maintenance – this increases work efficiency for their equipment supervisors while reducing machine downtime.
While smart technology for manufacturers is making leaps and bounds, the uptake of digital transformation solutions among Malaysian manufacturers remains scattered.
Another study conducted by Global Data in 2021 showed that only 11% of our local manufacturers sit within the “Advanced” stage of digital transformation, having transformed a majority of their business processes. By transforming their operations through adopting solutions such as IoT and analytics, these businesses have been able to increase their operational efficiency and overcome labour shortages during the thick of the pandemic.
22% of local manufacturers sit within the next category, “Streamlined”. Manufacturers in this category are also considerably advanced in their digital transformation, having aligned most of the processes within business units, whereas 15% are within the “Centralised” category where company-wide initiatives are being centrally led.
In contrast, more than half of Malaysian manufacturers are still in the early phases of digital adoption. 22% are in the “Diverse” stage (scattered initiatives across the organisation) while 30% are in the “Laggard” stage (no formal initiatives being carried out yet).
This resistance in the uptake of next-gen solutions can be attributed to several factors, one of which is the heavy lifting required for the migration of legacy applications, with 26% of local manufacturers citing this as their main challenge. The difficulty in migrating legacy systems, in turn, makes internal stakeholder buy-in another challenge to contend with as data ownership, accountability and risk grows greatly. The third most common challenge is in addressing concerns related to security and privacy, as the risks of cybersecurity threats grow especially when digitalising operational technologies. For example, a cyberattack on a factory machine could affect production processes and revenue.
Thus, while there is progress in adopting digital services, our manufacturing industry still has a long journey ahead.
A strong digital partner is paramount for manufacturers to be able to step into the new digitalised age of industrialisation with the confidence and readiness to effectively transform. Despite the challenges that come with adopting smart industrial technology, it is imperative for manufacturers to face these challenges head-on, to increase their resiliency and sustain their business.
To encourage a frictionless path forward, it is crucial for top management to embrace and encourage digital adoption to drive change within an organisation, as internal resistance and systemic constraints could be a major stumbling block faced by our local manufacturers.
A strong alignment between ICT solutions and business challenges is also vital to drive successful deployments. The landscape can be overwhelming as it is cluttered with cutting-edge solutions. This requires manufacturers to carefully consider the right solutions before they can confidently take the plunge to address their specific business challenges. Uncertainties and a misunderstanding of tech usage could hamper the digitalisation process as business managers struggle to choose the right solutions that can best solve their individual manufacturing needs.
Manufacturers should also consider providers that offer comprehensive services across multiple technology stacks. It is crucial for manufacturers to address interworking and integration challenges for them to achieve the desired business outcomes from the deployment.
Professional services offered by service providers are also important to drive successful transformation. Consulting and advisory services can help manufacturers identify their business challenges and the right solutions. Additionally, application development and integration can ensure seamless migration while support and service management can offer service resiliency, cost optimisation, but also unlock new opportunities.
Click here for more information on TM One’s Smart Manufacturing solutions and how we can help accelerate smart manufacturing for your organisation.
[1] GlobalData IT Prospector (n=2,480); GlobalData IT Insight (n=335)
