Factory of the Future and the Small Manufacturer in Asia

There's no shortage of media coverage concerning Industry 4.0 or the Factory of the Future. While a valid subject for improving manufacturing operations, SMEs should make sure their foundation is set before venturing into the Industry 4.0 woods and get lost in a sea of buzzwords that serves no real benefit to their business.

The Factory of the Future or some may be more familiar with other terms such as Industry 4.0, Smart Manufacturing or the Digital Enterprise has been a hot topic among manufacturers in recent years. While it is enticing to improve manufacturing operations with the latest IoT and Robotics, Small Medium Enterprises (SME) should make sure their foundation is stable before venturing too deep into the Industry 4.0 forest and get lost in a sea of technology and varying jargons.

In a study conducted by Mckinsey & Company - Industry 4.0: Reinvigorating ASEAN Manufacturing for the Future 2018, it is shown that some companies in the ASEAN region have already begun to introduce these new technologies into their business models. Some examples include Infineon Technology, a fairly large semiconductor company in ASEAN plans to invest more than $84 million in its Singapore plant to test some of the Industry 4.0 technologies. They expect the smart factory setup to reduce cycle times by half and increase productivity by 10% as well as save $1 million worth of energy per year.

It is true that Industry 4.0 capabilities now act as competitive differentiators between the digital haves and have nots. Businesses that are taking initiatives to equip their factories with Smart Factory capabilities will reap the benefits of sophisticated new technologies while the laggards struggle to catch up. However, adding on these new capabilities without having a solid operation foundation is akin to adding bells and whistles to a car that has flat tyres. Industry giants will have no issue in multi-million-dollar investments into systems and technology, but where does that leave the small manufacturer?

Why should small manufacturers not buy into the Industry 4.0 hype immediately? At face value, being a Factory of the Future seems very appealing with increased automation through robotics, big data analytics and improved supply chain management with IoT. However, does all this technology contribute to an increased production throughput which is the ultimate goal of most manufacturers.

Before you even think of investing in expensive robotics and IoT technologies, ensure you have a solid foundation in managing your day to day business operations. You would never renovate your home if the building’s foundation is already crumbling, would you? So why would you do it to your business?

Instead, strive for foundational improvements such as implementing a full featured, and integrated ERP System. Your ERP System will serve as the center of your business intelligence that will support your decision-making process as well as ongoing improvement plans.

The book, The Goal – A Process of Ongoing Improvement by Dr. Eliyahu Goldratt and Jeff Cox describes a conversation between the lead character, production manager and an old instructor. The instructor asks the lead character about the state of his factory, to which he mentions how good business is going following a recent investment in industrial robots. He also says that the robots have helped put all work centers on the shop floor running at full capacity and efficiencies have gone way up.

The instructor then goes on to say, “Ok, but has the increase in production with the robots resulted in an increase in profit?” to which the lead character answers a resounding no. The reason behind this is because they had not first looked at the organization to identify flow constraints and submit all other processes to the constraint’s capacity.

Essentially, what they have done is add extra production capacity everywhere, therefore likely overloading the constraint, increasing WIP inventories, and decreasing throughput. The main goal of any business should be to make a profit which is achieved through an increase in throughput and not by simply increasing production capacity where it is not needed.

The main message to small manufacturers in Asia is to remind yourself to build a strong foundational system that provides you with a connected network of intelligence between all related departments in your factory. An ERP System like MONITOR G5 is a good example of an all-in-one, fully integrated system that consolidates data from manufacturing, purchasing, sales, warehousing and finance in one central database. It also allows for attendance and work recording.

Having business and operations intelligence at your fingertips allows you to make better business decisions, perform detailed planning and work schedules, arrange for predictive maintenance and much more. All this translates to improved efficiencies, better cost savings and increased revenue which you can quickly observe and experience.

So, give careful calculated consideration to your current modus operandi and ensure you are clear where your constraints exist, and manage them appropriately. Once you’ve completed that exercise, then you can start looking at what Industry 4.0 enhancements you can add to your operations.

Get in touch with us if you need help making sense of how you can constructively transition your business into a Factory of the Future.

Todd_Abraham.jpg

Todd Abraham

Business Development Director,
Monitor ERP System Asia