The opportunity and threat of Industry 4.0

The opportunity and threat of Industry 4.0

Now a fourth industrial revolution is building on the third, the digital revolution that has been occurring since the middle of the last century. It is characterised by a fusion of technologies that is blurring the lines between the physical, digital and biological spheres.” — Schwab

Malaysia cannot and should not compete with other less developed countries. We should count ourselves developed and move with this revolution, otherwise the middle-income trap will become a declining income trap.” — Yoon

SMEs in specific sectors such as agriculture, mining, manufacturing, and food and beverage can form an ecosystem of partners. These ecosystems can help Malaysian companies bridge the technology divide, boost productivity and lead in the Industry 4.0 revolution in Asean.” — Chellam

INDUSTRY 4.0, the latest iteration of the Industrial Revolution, is upon us, but despite the almost constant barrage of information about it, many Malaysian small and medium enterprises (SMEs) are not prepared. In fact, most would be hard-pressed to define it or say how it is going to affect their businesses.

Datuk C L Yoon, a pioneer in the Malaysian tech industry and having been in the sector for 40 years, has watched this phenomenon develop over that time and thinks that local companies that choose to be ignorant have no excuse. “For those left behind due to complacency or lack of knowledge, the impact will be disastrous. Our industries need to get into this revolution now. The playing field, while levelling because of this revolution, is also exclusive to those who have the knowledge and energy for change,” he points out.

Yoon will be one of the speakers at The Edge SME Forum 2017, entitled “Industry 4.0: Thriving in the age of disruption”, at Connexion @ Nexus, Bangsar South on July 15. He will be speaking on the implications of Industry 4.0 for Malaysian SMEs.

The other speakers are Hasnul Nadzrin Shah Abdul Halim, director of government and regulatory affairs at IBM Malaysia, who will be speaking on the transformative power of artificial intelligence (AI); Raju Chellam, Fusionex International Bhd’s vice-president of new technologies, who will talk about which new technology Malaysia should be betting on; Dr Dzaharudin Mansor, Microsoft Malaysia’s national technology officer, who will be speaking on digital transformation for industry; and Stanley Wong, Chubb Asia-Pacific head of financial lines, who will talk about whether one’s business is at risk from cyberattacks.

Yoon says it is unfortunate that local industries are much more complacent than their counterparts in developed countries. “Malaysia cannot and should not compete with other less developed countries. We should count ourselves developed and move with this revolution, otherwise the middle-income trap will become a declining income trap.”

Chellam agrees. He points out that Malaysia is an industrial nation with manufacturing accounting for about 30% of its gross domestic product and therefore it must leverage new technologies and processes that are rapidly evolving in the Industry 4.0 initiative worldwide, which include big data analytics, hybrid cloud computing, the internet of things (IoT), robotics, machine learning and AI.

Industry 4.0 was a term coined in Germany to reflect the massive changes in machine intelligence and automation driven by software, computing power and sensor hardware. As World Economic Forum executive chairman Klaus Schwab points out in his book on the subject, the First Industrial Revolution used water and steam to mechanise production. The second used electronic power to create mass production while the third used electronics and information technology to automate production.

“Now a fourth industrial revolution is building on the third, the digital revolution that has been occurring since the middle of the last century. It is characterised by a fusion of technologies that is blurring the lines between the physical, digital and biological spheres,” says Schwab.

What makes it the fourth and not just a prolongation of the Third Industrial Revolution is the velocity, scope and systems impact. “The possibilities of billions of people connected by mobile devices with unprecedented processing power, storage capacity and access to knowledge are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the internet of things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage and quantum computing,” he adds.

The bottom line, says Yoon, is that machines will be able to do a lot of the work that people used to do, including non-manual and repetitive tasks. In addition, he says, these future machines are highly networked and work without boundaries across the globe.

He adds that the impact on human activity — industrial or otherwise — will be very significant. “They can take over a lot of jobs, both in the blue and white-collar segments. Also, the operating structures in the industries will change as machines start coordinating themselves to deliver work.”

Yoon points out that developed nations are starting to become very serious about machine learning and networking, as can be seen in autonomous vehicles, as a start. When this sort of autonomy finds its way into factories and offices, it will create a lot of new opportunities for those who are able and want to take advantage of this revolution.

It need not be intimidating or expensive. “The cost of this revolution, fortunately, is not as hardware-based [as the previous one]. This is a knowledge revolution and talent is everything. There really is no excuse to say this revolution is too costly to participate in. I believe the biggest investment will be in our education system. The physical assets may be more expensive, but we will need a lot fewer of them due to a much higher productivity and less labour to manage them,” Yoon says.

Microsoft’s Dr Dzaharudin says lessons from past industrial revolutions have taught us that organisations that are not evolving the way they operate or serve their customers will be less competitive or even obsolete as they face disruptions.

“SMEs account for the majority of business establishments (97.3%) in Malaysia. So, as we go along, a large chunk of new technology adoption will be driven by SMEs,” he points out.

However, the reality is rather grim. “According to Malaysia Productivity Corporation, ICT adoption by SMEs in Malaysia is a mere 10%. This is in stark contrast to other developed countries where the adoption stands at 50%,” he adds.

IBM’s Hasnul points out that Industry 4.0 is about a data-driven reality. “The domino effect of transparent cognitive technologies will transform industries and reshape our engagements, creating visibly positive impact on our day-to-day lives. Winners and losers are differentiated by those who know what matters and are able to act with speed and agility.”

What are the drivers of Industry 4.0?

Fusionex’s Chellam says they are interoperability, data transparency, technical assistance and decentralised decisions. Interoperability refers to common and open-source connectors or application programming interfaces that allow sensors, devices, machines and people to talk to each other, while data transparency refers to the ability to create virtual copies of the physical world with digital plant models that are connected with IoT or sensor data.

The sensor and IoT data can be aggregated to check for anomalies and alerts, which can be sent automatically to humans to correct faults (technical assistance), and these cyber physical systems will have the ability to make decisions on their own and perform tasks as autonomously as possible, he adds.

Schwab, in delineating the impact of Industry 4.0 on businesses, says, on the supply side, many industries are seeing the introduction of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing value chains. “Disruption is also flowing from agile, innovative competitors who, thanks to access to global digital platforms for research, development, marketing, sales and distribution, can oust well-established incumbents faster than ever by improving the quality, speed or price at which value is delivered.”

Major shifts on the demand side are occurring too. “Growing transparency, consumer engagement and new patterns of consumer behaviour [increasingly built upon access to mobile networks and data] force companies to adapt the way they design, market and deliver products and services,” Schwab says.

A key trend, he says, is the development of technology-enabled platforms that combine both demand and supply to disrupt existing industry structures such as those within the “sharing” or “on-demand” economy.

“These technology platforms, rendered easy to use by the smartphone, convene people, assets and data, thus creating entirely new ways of consuming goods and services in the process. In addition, they lower the barriers for businesses and individuals to create wealth, altering the personal and professional environments of workers. These new platform businesses are rapidly multiplying into many new services, ranging from laundry to shopping, from chores to parking, from massages to travel,” he says.

How can SMEs leverage Industry 4.0?

Chellam points out that SMEs by their very nature are used to working in a rapidly evolving work and technology environment. “They may not have the resources of a large enterprise but they are agile and can adapt and use innovation to enhance product and process value.

“SMEs in specific sectors such as agriculture, mining, manufacturing, and food and beverage can form an ecosystem of partners. These ecosystems can help Malaysian companies and industries bridge the technology divide, boost productivity and lead in the Industry 4.0 revolution in Asean, for a start.”

Source : The Edge Markets

Posted on : 13 July 2017


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