Adopting automation technologies like robotics, and digitalising factories with advanced software analytics will be vital for manufacturers to stay competitive, says Van Wersch
Malaysia is a trading nation. The country’s economic growth over the last four decades has been largely driven by the manufacturing sector.
Both large and small corporations, and small and medium-sized enterprises (SMEs) have been instrumental in driving the country’s economic boom.
And Malaysia continues to be an exporting nation. Local large firms’ exports recorded a double-digit growth of 17.9% last year, supported by electrical and electronics (E&E), liquefied natural gas and crude oil exports.
SMEs’ exports rose 7.9% last year versus 7% previously due to higher commodities exports, such as palm oil and rubber, and manufactured products, inclusive of E&E.
The SME sector contributed RM435.1 billion and posted a higher real gross domestic product (GDP) growth of 7.2% last year compared to 2016.
The higher GDP growth among SMEs was reflected across all major economic sectors including services, manufacturing and agriculture.
But over two-thirds of the SMEs have reported a 20% yearly increase in their operating costs as a result of increased material prices, based on SME Corp Malaysia’s third quarter of 2017 SME survey.
International Trade and Industry Minister Darell Leiking was reported as saying that the cost rise was due to increased prices in raw materials and other input costs.
The rise includes utility bills, cost of fuel and gas for transportation, and higher salary and wages.
How will the country’s industries cope with the rising costs, while trying to maintain productivity and expand their contribution to the country’s economy?
General Electric Co (GE) Asia Pacific president and CEO Wouter van Wersch spoke on the challenges and how the country’s manufacturing sector can brave the new ever-changing frontier.
Q: The Federation of Malaysian Manufacturers predicted positive growth for the manufacturing sector in the first half of 2018, however, the recent survey results by IHS Markit reported that operating conditions across Malaysia’s manufacturing sector deteriorated in May, stretching the current period of decline to four months. What do you think of the manufacturing prospects in Malaysia over the next two years?
The manufacturing sector has always been a key contributor and engine for growth in Malaysia. The country has a well-educated work- force and strong infrastructure compared to many of its Asean neighbours, and strong government incentives to push the sector to the next stage of higher-value-added products.
I prefer to look at this longer term to strengthen Malaysia’s competitiveness in this space. There is a need for continued technological transformation of its industrial base to ensure that Malaysia is well-placed to compete in an increasingly competitive and open global market, especially with the establishment of the Asean Economic Community in 2015.
Q: What are some of the challenges for Malaysia in this sector? And what can manufacturers do to stay ahead of the curve?
One of the biggest challenges for manufacturers in Malaysia is the growing reliance on external markets. China is Malaysia’s largest trading partner and any economic slowdown in the country or globally may have an impact on the demand of goods from Malaysia.
Raising productivity will be crucial for manufacturers to stay ahead of the curve. However, it is another key challenge for manufacturers.
Combining hardware and soft- ware, such as adopting automation technologies like robotics, and digitalising factories with advanced software analytics, will be vital for manufacturers to stay competitive.
They also need to invest in workforce development; to ensure that employees are well-equipped to lever- age the benefits of Industry 4.0. Examples include upskilling, retraining and changing the mindsets of employees, to help them take control of new systems and processes.
Q: But industrial automation technologies have already been in use for over 50 years. Do you think that Industry 4.0 is overhyped?
Modernisation of industry is the biggest opportunity that exists today. More than 50 billion machines and nine billion people will get connected through machines, sensors, cloud computing, data and analysis to help enhance plant productivity and efficiency.
The Industrial Internet of Things (IIOT) will outpace the value of the consumer IoT, and could add US$10 trillion (RM41.1 trillion) to global GDP by 2020.
What is exciting about Industry 4.0 is the spectrum of possibilities arising from a smart, connected, data-driven factory. Industry 4.0 encompasses a multitude of trends, such as artificial intelligence, additive manufacturing and robotics. The underlying commonality is the use of data to drive decisions, learn, self-adapt and predict scenarios. This will lead to a more flexible, agile manufacturing network that is more responsive to change.
Globally, industrial productivity was at 4% for more than 20 years. Since 2011, it has declined to 1%. To combat this, many companies are turning to technology. This will increase productivity and create demand for new roles. Jobs will evolve, as it did throughout the past three industrial evolutions. New roles require higher cognitive skills, technical skills and creativity.
Employees and organisations will have to ensure that workers can keep up with the technological changes.
Q: Why do you think that some companies in Malaysia have been slow to implement advanced manufacturing systems?
While there is great interest in advanced manufacturing technologies, companies are understandably wary of the risks involved. Manufacturers may lack expertise and data to understand and make a compelling business proposition for the adoption of new technologies.
Significant organisational change may be required as well. Existing systems may have to be reorganised, and mindsets will have to be aligned with the new, advanced production methods.
There are also concerns about security risks and finding skilled workers who know how to work with these technologies.
Q: Has GE seen success in advanced manufacturing then?
The future of manufacturing lies in our ability to fully leverage the productivity gains from Industry 4.0. This will require new ways of working, and of thinking about work.
With 130 years of industrial know- how, combined with our digital expertise, we have a strong advantage. Some of the technologies that GE has adopted include Additive Manufacturing and IIOT, which involves the use of sensors and analytics to improve productivity.
At our GE Aviation’s Bromont facility in Canada, there are 180 robots to do 50 million repetitive tasks that used to be done by hand. As such, cycle time has greatly reduced.
From 4,500 aircraft engine parts in 1983, the factory produced more than 3.3 million parts in 2017. Employee numbers have increased, along with a significant decrease in incidents.
Efficiency gains have also been observed at our newer factories across the world. At our Haiphong facility in Vietnam that produces wind turbines, welding robots, crane-free operations and moving line manufacturing were introduced after it began operations. Using digital tools to help welding has increased efficiency from 12% to 30%. This would not have been possible without employees who have been empowered to turn data insights into informed action.
GE actively invests in training and re-skilling to build digital capabilities in its workers. As such, where facilities were once dominated by manual tasks, we now have production that only involves skilled labour.
We also invest in innovation, and research and development through our global research centres. There are facilities worldwide, helping to find new and better ways to utilise these exciting technologies.
Q: Lastly, how do you envision the future of manufacturing?
Our global innovation survey earlier this year revealed that executives in all regions are excited about the potential of additive manufacturing, saying it will have a positive impact, increase creativity and get goods to market faster.
Over the next 10 years, US$280 billion will be invested in additive manufacturing products and services. This will power an industrial transformation that will change the way we think about design and manufacturing.
We view additive manufacturing as a transformative technology — part of the new world of advanced manufacturing. Combined with an entirely new approach to industrial design, GE believes additive can help transform businesses by improving their products, manufacturing operations and opening up entirely new business models.
For example, GE Aviation’s LEAP engine’s fuel nozzle — consolidated 20 pieces into one, making it lighter, more fuel efficient and a robust jet engine. Another example is GE Aviation’s advance turboprop engine — consolidated 855 components into just a dozen parts. The simpler design reduced weight, improved fuel burn by as much as 20% and achieved 10% more power.
I also see the future of manufacturing as one where people are working in harmony with machines, employees will be empowered and engaged in continuous learning to lead the digital transformation.