With the world in the midst of a historic transition driven by technology, there's need for a rethink.
In the not-too-distant future, different car models will be manufactured on a single, flexible production line "manned" by smarter, nimbler, autonomous robots that collaborate with humans and each other. Car parts will be able to recognise each other.
Car components, meanwhile, make their own way down the assembly line and are re-ordered when needed, maximising just-in-time logistics. Once on the road, the car itself communicates performance data to systems at the plant, which analyse it with data from other sources to optimise the design of future models. Individual components, too, communicate with relevant systems - to signal impending failure, for example, and request a replacement to be sent straight to the repair facility.
This is Industry 4.0 at work, where integrated computing, networking and physical processes are revolutionising manufacturing. This Fourth Industrial Revolution headlined many discussions at the World Economic Forum's annual conference in Davos last month for both the threats and opportunities it presents.
Speaking on the opening day, Facebook chief operating officer Sheryl Sandberg said: "While we have major issues that we need to address in terms of jobs that are being destroyed, we also have the possibility of job creation that is even larger… The answer needs to be the triumph of hope over fear."
Done well, the impact of Industry 4.0 can be tremendous. For example, the Boston Consulting Group's research shows that, in the next five to 10 years, Industry 4.0 could boost productivity in Germany's manufacturing sector by €90 billion (S$141 billion) to €150 billion, contribute 1 per cent per year to gross domestic product and create up to 390,000 jobs.
As Singapore's manufacturing sector continues to face unprecedented challenges amid global economic headwinds, the time is ripe for a holistic revamp of its manufacturing sector to reap the full benefits of Industry 4.0, while proactively managing the challenges and dislocations created by this historic transition.
THE NEED FOR CHANGE
Manufacturing accounts for about a fifth of Singapore's GDP and more than 400,000 jobs. But even as it is expected to remain a significant component of the economy, regional competition and domestic restructuring have put the sector under considerable pressure. Manufacturing activity contracted for the sixth straight month in December amid a decline in new orders and production output, exacerbating an ongoing decline of manufacturing here.
Constraints, especially on the labour front, are biting. Singapore faces high costs, stagnant productivity and an ageing workforce in a slowing global economy. And it's likely to get tougher for manufacturers to survive in a "business as usual" mode.
Enter Industry 4.0, with technology that is ready to go the distance in addressing these constraints and opening up new opportunities for innovation. In fact, some companies are already drawing on the nine technological advances that power the Industry 4.0 approach: autonomous robots, big data and analytics, augmented reality, additive manufacturing, the Industrial Internet of Things, horizontal and vertical system integration, simulation, the Cloud, and cyber security.
GlaxoSmithKline's manufacturing plant in Tuas uses "continuous manufacturing", gathering and analysing data, and making corrections through the production cycle, allowing for drugs to be produced more cheaply and with less impact on the environment.
Additive manufacturing, used to produce small batches of customised products, is at work at South-east Asia's largest commercial 3D printing facility in Singapore, recently opened by Ultra Clean Asia Pacific. It targets the aerospace, dental and medical sectors with its ability to create product prototypes and 3D engineering services.
What Industry 4.0 does is take these developments to the next level by connecting multiple devices and machines at every step of the process, from raw material to end-user. This would allow for an unprecedented level of integration between information, communication and manufacturing systems, as demonstrated by the car industry.
The technology and tools that enable Industry 4.0 are already becoming more sophisticated. European manufacturer Kuka offers robots that automatically adjust their actions to fit the next unfinished product. Siemens, meanwhile, has developed a machine that can simulate the machining of parts, reducing time taken for the actual process by as much as 80 per cent.
PERFORMANCE, NOT PRODUCTS
Singapore has much to gain from embracing this revolution.
First and foremost, it can leverage on the technologies to create premium products and services that would fit in with its desire to become an innovation- driven economy. In this new model, Singapore would sell engine capacity, not engines; tyre performance, not just tyres.
Combining the most cutting-edge Industry 4.0 technologies and a sophisticated consumer base of diverse races and nationalities would also put Singapore in an ideal position to become a test bed for Asia. This would drive its competitiveness as a research and development hub, and favourably impact inbound investments to bolster the economy.
Industry 4.0 also addresses Singapore's worsening workforce crunch as automation reduces the need for low-skilled labourers doing routine tasks.
For manufacturers, especially SMEs, this enhances cost predictability and reduces operational variability. In tandem, new higher-skilled jobs in machine programming, data analysis and network maintenance will be created, reinforcing Singapore's SkillsFuture initiatives to drive lifelong education and learning.
TAKE DECISIVE ACTION NOW
In Singapore, Industry 4.0 would build on the strides the nation has already taken as part of its Smart Nation initiative to incorporate smart technology into the everyday lives of Singaporeans.
The next step would be for the Government to scale up the information and communications technology infrastructure dramatically to ensure that it is fast, secure and reliable enough to support the hundreds of billions of industrial devices that will connect to the global Industrial Internet of Things, consistent with the objectives of Infocomm Media 2025.
Companies need to deeply understand Industry 4.0, its implications for their businesses, and be ready to adopt and leverage on the technologies to their advantage. To have meaningful impact, companies have to develop new applications that are relevant to their customers and profitable to bring to market, as well as invest to build up the necessary capabilities in the longer term to apply these technologies in their businesses.
At the industry level, workers must acquire the skills for new, value-creating roles. The education system will also have to shape perceptions about rewarding careers in manufacturing among the young, and start planning now for a future-ready workforce.
Singapore needs to intensify systematic private- and public-sector partnerships to support innovation and bring technological breakthroughs to fruition. It would help connect the dots, forming collaborative networks between companies and innovators, and transform legacy industries while cultivating new ones.
Ultimately, Industry 4.0 will allow Singapore to draw on the endless possibilities offered by advances in information and communication technology.
While the shift towards Industry 4.0 may take 20 years to reach fruition, key advances are expected to be established in the next five to 10 years; the time to leapfrog to the forefront is now.
•Michael Tan is principal, and Jeffrey Chua, senior partner and managing director, at the Boston Consulting Group.
A version of this article appeared in the print edition of The Straits Times on February 10, 2016, with the headline 'Industry 4.0 and S'pore manufacturing'. Print Edition | Subscribe
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