“Industry 4.0 is not merely a buzzword. It has the potential to reinvigorate SEA’s manufacturing, potentially delivering productivity gains worth $216 billion to $627 billion.”

Industry 4.0: Making it Real in Southeast Asia

Reading Time: 1:45 minutes

By Teck Chang Lim — Director, Industries & Digital Leadership at SAP

Industry 4.0. Yes, again.

Industry 4.0. The fourth industrial revolution. Digital manufacturing. It has been called many names. Whatever it is termed, one thing’s for sure: We have heard much about it over the past year, not just from global sources, but also right here on home ground in Southeast Asia.

Rightfully so.

Industry 4.0 is not merely a buzzword. It has the potential to reinvigorate SEA’s manufacturing, potentially delivering productivity gains worth $216 billion to $627 billion. But with so many saying so many different things about it, what exactly is Industry 4.0?

Is it really the ‘magic pill’ that will increase the competitiveness of companies in the region? Is this just a leap in productivity? Or does it have deeper meaning beyond increasing output divided by decreasing input?

And importantly, how do we make it work for businesses in Southeast Asia?

The larger perspective: Societal transformation

In a blog published by my colleague, Masahiro Furusawa, he describes his session with Prof. Dr. Henning Kagermann. Dr. Kagermann describes Industry 4.0 as an initiative for social transformation. It transforms society, allowing communities to deal with the challenges of climate change and Malthusian pressure on resources.

Clearly, this is way beyond the basic understanding of ‘productivity improvement’. It positions Industry 4.0 as a strategy for transforming society.

There are various concepts of Industry 4.0 which is pertinent to us in Southeast Asia. I will explore them in the next few blogs. In this one, I will focus on the basic component of Industry 4.0 to help businesses here to better grasp and apply it.

The basic building blocks of Industry 4.0: The DNA

To do that, it is useful to examine and understand the basic building blocks of Industry 4.0. And in that regard, I want to share a concept I personally found useful.

In a forum by the Ministry of Industry of Indonesia which I recently attended, Pak Putu, the moderator of the forum, introduced the concept of Devices, Network and Applications, in short DNA. He equated the ‘DNA’ in Industry 4.0 to the biological equivalent: That DNA be regarded as the basic building block of Industry 4.0.

Why is that so? That’s because in any Industry 4.0 scenario, you need the Devices to be connected through a Network to Applications. Applications interpret the data coming from the devices, and add the intelligence needed for the scenario to work well.

A DNA example: Creating a ‘Digital Twin’

Let me explain with an example.

First, let’s visualise an equipment on the shop-floor. This is the Device. The equipment will be connected through the Network (using standards like OPC) to Applications such as Manufacturing Execution Systems or ERP. So, we have the basics set up.

Now, the equipment is typically equipped with a number of sensors that gather data on its status. The sensors stream data on a few fronts: On the machine itself (how old it is, how long it has been running, the production capacities last year, last month, and last week etc.), on the production process (how quickly, number of interruptions, anomalies etc.), and on the product (amount produced, number of defective units, etc.). This data is sent through the Network to the Applications. The Applications make sense of the raw data, turning it into intelligence and actionable insight, such as ‘if we tweak this part of the process, defects are likely to decrease by 15%’.

With all this data and intelligence, what you now have is a digital equivalent of the equipment and the processes it is currently performing. This is what we call the Digital Twin.

You often hear the term ‘Vertical Integration’. Vertical Integration is none other than DNA in Industry 4.0 jargon.

Power of the ‘Digital Twin’

So, having created the Digital Twin, you can perform powerful analysis on the data.

This includes getting deep insights in any or all the following:

  • Condition of the machine
  • Production process status
  • Current performance
  • Associated financials (costs, resource usage, etc.)

And that’s just the tip of the iceberg!

The illustration I gave above on how it can empower manufacturing by suggesting or taking predictive actions to decrease defects is only a tiny aspect of it. There is an ocean of opportunities where Industry 4.0 is concerned.

What we are talking about here is the fundamental building block for Industry 4.0 on the shop-floor. Now imagine extending this building block to other equipment in the plant, to other plants, and to supplier and customer entities. What you will get the DNA for the entire production value chain.

The outcome? The ability to manage the factory intelligently.

Beyond the shop-floor

The basic concept of DNA extends beyond the factory shop-floor.

Let’s look at a service and maintenance scenario. Here, the equipment (Device) is connected via a wide area Network to an Application in the cloud. The application predicts equipment breakdown based on real-time data of the condition of equipment coupled with its past history.

Obviously, the ability to know this live – in the instance as it happens – gives us the ability to preempt and mitigate breakdowns with predictive maintenance. Rather than being reactive, it could also work proactively towards not merely halting breakdowns but improving productivity.

A real-life example:

A customer in Philippines manufactures industrial air-conditioning compressors. The business faces an issue with maintenance due to the geographical spread of the business across 7000+ islands. A compressor breakdown can last anything from 4 hours to a few days. This is due to travel time (the need to fly down to the equipment site) and diagnosis (time spent on necessary diagnostics). The downtime is protracted if the spare parts are not available on site. What that means is a shopping mall or office building could be without air-conditioning for that entire duration – a huge negative impact on business.

To mitigate that, the customer started a pilot: It installed a device to extract data from industrial air-conditioning compressors. The intent is to understand the issue, and thereby resolve it. This data is transmitted through the network to the central application. The application will then analyse – in near real-time – the condition of the compressors.

To allow us to predict compressor failure, we knew we needed to identify the combination of data parameters that result in the failure. To that end, we used machine learning. With that in place, the ‘DNA’ integration is now ready to start flagging out alerts on potential failure before it happens.

So, what does this translate to in terms of business benefits?

  • The customer will gain the ability to send a maintenance team ahead of time to conduct maintenance to prevent failure, in other words, predictive maintenance.
  • The data from the air-conditioning compressors can also indicate the likely parts to be affected, so the right parts can be brought along with the maintenance team – saving time and cost

The result: A potentially a huge leap in ensuring compressor up-time, lowering costs, demonstrating greater reliability to their customers, and improving company image. And that’s just the tangibles! We haven’t talked about the intangibles such as positive word-of-mouth from their customers and the downstream effect.

This is the start of Industry 4.0 journey for this customer. With the DNA integration in place, the business can extend beyond what it is currently offering: To transform the business model in providing air-conditioning as a service.

Industry 4.0: Practical steps for Southeast Asia

When we look at Industry 4.0 from the DNA perspective, it is simplified and no longer seems like a lofty ambition. And the beauty of the analogy is that any, and every single Industry 4.0 scenario needs DNA – just like a functioning body.

So, rather than to think about how to transform my manufacturing business into Industry 4.0, which sounds like a colossal exercise only the big boys can afford, it is no longer the case using the DNA approach. In this regard, the more pertinent question becomes: How can we identify the best areas in the business to test this on?

In Southeast Asia, we tend to want to be sure about the wins before we move on a massive scale. Which makes questions such as the following useful guides:

  • How can we do this in 1 factory?
  • Which business process would most benefit from a pilot test?
  • What are our benchmarks for a successful initiative?
  • When do we start rolling out successful pilots across the business?

These are all good starting questions.

It brings me back to the beginning where I highlighted the importance of Industry 4.0: It is not a buzzword. So, it is imperative that SEA manufacturers start thinking about it now, if plans are not already underway.

Drop me a line if you have questions. I am happy to discuss.

P.S.: Watch this space for the next blog on ‘Horizontal Integration’, what it means in Industry 4.0, and how it can be tapped on to work for Southeast Asian Manufacturers.

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