Industry 4.0: What next for ERP in the manufacturing sector?
According to iContro’s CEO, Frank Lee, Industry4.0 is driving concerted effort among government agencies, and Malaysia’s recently launched national policy for Industry 4.0, puts it in the limited list of countries that understand the use of technology for advancement.
EITN: What is the impact of an industry 4.0 national policy? What are the sectors that will be affected and how do you foresee this impact for the local manufacturing industry?
Frank: With the worldwide emphasis on Industry 4.0, interest in this area is ever increasing but is limited with the lack of knowledge and information on the matter. With the ID4 national policy in place, it provides the confirmation of the right business direction in the marketplace that will be driven by this Government-Catalyst & Real-competition. The latter alone may take quite some time to materialise.
Of course, Malaysians will be glad to witness the concerted efforts among the government agencies, particularly MITI in the implementation of Industry 4.0. More importantly, the manufacturing sector will receive a big boost, as it will comprise close to 75% of the total companies to be shortlisted for implementation trials.
With the major countries striving to be in trend with this concept (i.e. US Smart Manufacturing, Singapore Productivity 4.0 and many others) and with the Industry 4.0 national policy in place, puts Malaysia within the limited list of countries in line with the advancement and change for the better with technology.
Which comes to the keynote of towards smart manufacturing as envisioned by our PM, Tun Dr. Mahathir bin Mohamad during the launch.
SECTORS TO BE AFFECTED
Up to 98.5% of firms in the manufacturing-related industry are in the SMI/SME sector, with a contribution of up to 22% to the national GDP with a 5.1% GDP growth rate. This segment also consists of the most backward sectors that mean a huge opportunity for technology improvements and adaptation. Primary area of focus is to achieve the following;
- Smart-Manufacturing with Comprehensive & Consistent Increase in Productivity.
- Attract the Millennials/Generation Y talent. As a start to the new approach of today’s Talent Management.
- Data consolidation via digitization of current manufacturing processes and development for readiness towards industry 4.0.
- Workforce skillset for understanding of the roles and benefits of industry 4.0 implementation in relation to their organization’s industry methodologies.
There is currently no International Standard for industry 4.0 but there are developments and progress improvements which acts as guidelines towards a better manufacturing process. By learning from past mistakes, makes a better future and furthermore, the future outlook is now towards Asia due to the potential growth and contribution to the world’s economy. Key countries to learn from are Japan, Korea & China for inspirations and guidance.
Positive impact will depends on the Catalyst Phase to provide continuous momentum to create new levels of achievements in various segments. If not maintained or monitored closely, this trend may fade away and participants will lose interest.
It is important that other than just identifying the government’s critical sectors, the core missing link is that this initiative is carried out by the government & certain solution providers and each party are working in their separate methodologies (i.e. in SILOs). Also as critical is the collaboration required with the many manufacturer associations where their members consist of many SMI/SME organizations.
The primary focus as pointed out in the Malaysian market segments should be SMI/SME due to the majority contribution in the manufacturing industry.
To further envision the success matter of the concept, there must be success stories/models that can showcase the following;
- Government’s Strategic sectors.
- Economy Key sectors (major Industries).
- Critical Sectors that requires assistance.
- Government, Solution Partners & Manufacturers Collaboration
Local players will need to include a yearly budget plan (whether to be subsidized or not) as a start to improve towards the move towards Industry 4.0 based on their industry requirements. This is the first and most important step towards the adoption of this concept by the local industry players.
EITN: What must ERP providers do to keep up/address/stay ahead of this impact?
Frank: In relation to the Manufacturing segment, ID4.0, generally involves the following;
- Usage of Business Intelligence Tools (BI) &/or Artificial Intelligence (AI) to primarily focus on planning to improve the efficiency in production or manufacturing.
- Machine Intelligence & machine Integration like Robotics will give the extra automation power in a current manual oriented environment in most SMI/SME production floors. However, in the Malaysian or Asian context, labor cost is still considered relatively cheap when compared to other countries that may be a hindrance in this aspect.
- Internet Of Things (IoT), coupled with Cloud Computing is the current talk of town globally. However, it is not so CRITICAL for Malaysian Manufacturers at the moment. A major obstacle to this is the availability of suitable broadband connections to cater for the fast changing pace of technological advancement and requirements. This is also the same dilemma that is faced by other countries including the United States for certain areas.
- Big data is another key area of focus in ID4.0. However, big data in this context mean digital data and in our region, consolidation of data is the first phase of moving towards this concept. To cater for this, ERP solutions with the capability to capture all critical manufacturing components, details and processes is the key initial step.
Embarking on any basic ERP that caters for mostly just financial and distribution operations is just not enough. Many try to go beyond by just introducing production assembly features into the solution. Again, this does not meet the requirement of ID4.0 as the need for planning, scheduling and progress status and in most cases, real time cost monitoring that include actual operational costs in terms of actual production time and resources used are crucial to the analytics of the flow.
As Asian’s manufacturers are mostly margin-focused and highly dynamic and flexible, the requirement for such solutions must be of low-cost investment and does not demand for high hidden charges to cater for the dynamic operations. Otherwise, the solution itself will become a major burden/obstacle, just like in the west, as mentioned by Oracle, etc.
ERP solutions must provide workable Manufacturing Planning as most ID4.0 focuses much on planning stage where most data and analysis that will be derived upon. Long gone are the days where a simple Material Resource Planning (MRP) solution will suffice for the planner operations. A full fledge ERP with production planning solution is mandatory for any company embarking towards the ID4.0 direction.
EITN: What can the local industry do now to prepare?
Frank: The government plays a role with the following:
- It is imperative for the government to take the charge of the transformation. More importantly is that the focus must be on the industry as a whole and not just on selected key interest like automotive-related.
- FINANCING is the ultimate critical assistance that the government can provide. This could be in the form of Grants or low-interest loans for the following reasons;
Current weak economic conditions are not the best time for any manufacturer to revamp their operation by incurring additional expenses.
Embarking into ID4.0 can be costly, especially when it includes purchases of new systems and/or new machineries.
As mentioned earlier, most ERP solutions cater for just financial and distribution and does not delve into the complex operations of manufacturing, especially at the Manufacturing Planning stage. Therefore, many manufacturers might need to acquire a totally New ERP system that provides such solutions that will cater for it.
As the manufacturing sector is the core catalyst, focus area on Implementation is critical for the success of ID4.0. Many a times, as historically proven, wrong implementation methodology is the key factor for failure of any transformation.
In the past, many ventured into solutions that is following what is readily offered in the market and thus blindly following and relying on western operation model due to the branding. As experienced by all Asian manufacturers, localized Asian business/operation model fits the best for Asian companies. In terms of ERP solutions, there’s even the emergence of Asian-based business-cultured solutions that have been proven very successful.
SMI/SME is the critical sector to focus. However, there is a caution that many past programs like SMIDECs’ grant failed and never materialized the objective. With the collaboration between the correct solution vendors and respective government sectors would provide the focused target of a proper transformation.
- With the government’s strong initiative, this is the best time to incorporate the ID4.0 concept into their business plan via progressive transformation with a set required budget & roll out plan.
- Adoption of the right full ERP solution that can cater for their Manufacturing Planning stages is crucial. Although this will incur additional budget for the transformation but is the key initial step to digitize all data and processors to enable their readiness to ID4.0.
- Identifying and improving on labor skillsets to be inline with the ID4.0 transformation is another key success factor.
By being one of the first few early adopters to ID4.0 and with the strong government backing, it is in no doubt that the investment and time spent will be beneficial and in return becomes the advantage over the competition.