The Current State of Manufacturing Industry in Malaysia, For the Rest of Us

I've spent the last 5 months talking to various people in Malaysia from different backgrounds, and a dichotomy was clear between people who have worked in manufacturing, and people who haven't. The ones who have no experience in manufacturing, think that that robots and automation are ubiquitously used in Malaysian factories, big or small. The ones who have worked in manufacturing know that, this is only the case in very specific parts of manufacturing, and a large majority of the industry is still very much powered by manual labour. In relation to this situation, the government recently launched a policy to address the coming wave of Industry 4.0, which is branded as Industry4wrd. There is a reason why the government had to make such a significant policy announcement. As of 2018, 22% of Malaysian GDP comes from the manufacturing sector. In the past few years the 4th Industrial Revolution is causing a shift in the sector, and Malaysia is in danger of falling behind in the global market.

Before we continue, let me give a brief description of what are these 4 phases of industrial revolution. The image in the paragraph, was the very first picture that popped up when I googled for Industry 4.0. It is a very popular way of illustrating the 4 phases of industry. The 1st revolution came with the introduction of steam power and basic machines, back in the last 19th century/early 20th century. Instead of using raw human labour to do heavy tasks, people employed steam engines and basic machinery to move heavy thing. Later on, with the availability of electricity, and introduction of assembly lines, which happened as early as the 20th century, came Industry 2.0. Humans now started building large scale factories & built specific goods, like cars or radios, very-very quickly. And in doing so, made it affordable to the masses. And then, in the later part of the 20th century, robots and computers were invented, and was made easily available to the many parts of the world. This introduced many, with the means, the chance to further increase their productivity, many times fold. Thus came Industry 3.0. But the cost & complexity of such technology also means that there is a high barrier to entry for many people. And so, some have not adopted the shift. And now, we're in the age of IoT, Big Data & other advanced computing. All your robots are now supposed to be aware. In fact your entire factory is essentially a massive robot, with all the machines inside speaking to each other and a massive brain is making decisions to optimize the output of the factory. Little to no human intervention is needed to run this sort of factory. And thus, we have coined this new era as the 4th Industrial Revolution.

I myself, until recently, forgot that my late grandfather, ran a small rice mill factory in Perlis. And much later, after I graduated university, my first job 20 years ago, was with Panasonic at their electronics factory in PJ, before I moved into IT. Funny enough, I eventually went full circle in my last job with Hitachi Vantara; I was based in Japan, and spent a significant amount of time at various Hitachi factories and had a chance to see the state of manufacturing in Japan. And recently, I've had the good fortune to mingle with manufacturing stakeholders in Malaysia, and even got to visit an automotive factory. I grew up knowing what the inside of a factory looks like. I've also spent time working in factories, while also being an IT professional. I have cross industry insight that many don't and I came to this conclusion. In many instances, as how my grandfather ran his factory 40 years ago, to how factories were run 20 years ago, and even how they are operating today, the adoption of technology fundamentally has stagnated after 2.0. Human labour drive a majority of the work in factories in Malaysia, where automation could instead be used. I would make an educated guess that a majority of the SMEs in manufacturing are in fact still at 2.0, and barely have adopted 3.0.

Why am I focusing my attention to SMEs? We go back to the details shared in the Industry4wrd document, which states that, 98.5%, a majority of manufacturing companies, are represented by SMEs. To make matters more interesting a presentation by MIDA (Malaysian Investment Development Agency), stated that SME companies have significant productivity gaps due to low tech adoption. Which means, that a significant number of companies in Malaysia still have not adopted newer technology to improve their productivity. But why are SMEs reluctant to adopt new technology? If you go by what the agencies are saying, it's because the businesses see upgrading as a cost, and not as an investment. It's certainly cheaper in some cases to hire low skilled labour instead of installing a fancy robot. But, in my opinion, maybe it's because the cost of the technology are indeed prohibitively expensive, that the owners cannot justify the cost. And cost can be broken down into a few components:

1. Purchase Cost: Industrial automation technology is almost exclusively sold by foreign companies, and is prohibitively expensive due to the high price, exchange rates, and the cost of shipping.
2. Operation Cost: Related cost of maintenance is expensive, such that if there is a breakdown, a replacement part and/or trained repair technician will have to be brought in from overseas, to fix the machines.
3. Time & Effort Cost: In my experience, industrial automation systems are legacy systems built during the days prior to open source software. And to maximize their development investment, vendor companies provide little improvement to the system to make it easy for the factory operators to self program, or make it compatible to 3rd party control systems.

Compare to robots and computers automating the factory, it's a lot easier to have humans do the tasks, as they are more flexible to work with, easier to instruct, and for Malaysian price-levels, are cheaper. Even though in the long term, cost of managing human capital will creep up, and efficiency & productivity levels drop due to fatigue, and the motivation & emotional aspect of the human operator can impact the productivity of the factory. The factory owner knows these issues, and continue to bear with them, until something changes the balance of his scale.

So to mitigate the situation, what things could be done to help change the balance & make the factory owner consider adopting Industry 4.0? I'll list down some proposed ideas that can make it an easier sell for these owners, on top of the policies outlined in Industry4wrd:

1. Technology cost needs to be affordable, which means, the solution must be designed with price as the main criteria. A price that is high enough, so that the vendor can still make a fair profit, while being low enough that the customer can see tangible cost reduction within a reasonable time window. It may be preferable to develop the technology locally, to keep the cost as low as possible and as in sync as possible with the conditions of the market.
2. Technology needs to be easy to operate and inter-operable with 3rd party systems. With the current landscape of IoT, open source technology and inter-operable protocols, the technology being sold should not be locked in to any proprietary protocol, or control system. New solutions can be built on top of open standards platform that can provide an intuitive graphical user interface, and also a management system that can easily connect various sensor & robot systems under a single control by using open protocols & API.
3. Technology needs to be cheap to repair and easy to maintain. No matter what, one must keep in mind that SME owners tend to be as DIY as possible, to keep the cost of running their business low. As such, and as counter-intuitive it may be, the technology solution must be designed from the ground up to be easily self-fixable within means, and using as little exotic and expensive parts as possible. This will be beneficial to the technology provider too, should he get a major share of the 98.5% of the manufacturing sector business, and struggle with managing resources to do on site customer support.
4. And last, but not least, the technology must be able to prove their cost benefit before factory owners will buy. In order to get factory owners buy in, the technology provider must be able to illustrate clear cost and profit improvements to the business, in order to convince them that the technology is an investment, and not a cost.

I myself am on this journey to develop new technology solutions to offer to the under served SME market in Malaysia. As much as I can, I am using the design principles I laid out in the article, to build smart solutions that SME customers have always wanted to buy, but could not afford. Malaysia is a unique market where the country is small, very modern, globally well connected and technologically advanced, but with a very low earning power. Therefore, we need to invent technology locally to address the gap, and catapult the manufacturing capability beyond our local borders. Imagine every factory in Malaysia using affordable and easy to use technology like smart sensors to monitor machine health, or smart cameras to detect reject parts, or autonomous robots to operate the factory 24/7. They can then be more productive and competitive in a global market. And, if these smart solutions are affordable & successful in the Malaysia, then imagine their potential to disrupt the global smart factory market.