Technology set to spur ASEAN manufacturing growth

Many ASEAN economies are experiencing high growth in their manufacturing industries, as businesses move operations away from traditional production hubs in the region, such as China and Hong Kong.

World Bank statistics from 2013 show manufacturing makes up a significant proportion of most ASEAN member states' GDP. Thailand leads the pack at 33 per cent, while Malaysia and Indonesia are not far behind at 24 per cent each. 

Advances in technology are helping countries worldwide optimise manufacturing processes – and the ASEAN region is no exception. Investing in the right innovations can help businesses reduce costs, drive productivity and improve production quality.

But which technologies are set to have the biggest impact on south-east Asian countries over the next 15 years? A recent report by McKinsey & Company has highlighted a number of areas where disruptive technologies could revolutionise current manufacturing practices between now and 2030. 

Key enablers

McKinsey noted two technologies that will have important roles in shaping the ASEAN region's manufacturing sector: Big data and the Internet of Things (IoT). Innovation in these areas is expected to minimise costs and increase profit margins, adding as much as $45 billion in annual economic value by 2030.

Recent analysis from the International Data Corporation (IDC) revealed changes could be apparent as soon as next year. The organisation predicted IoT and big data will both come to the fore in 2015.

"Data whisperers will emerge in 2015 driving the shift to a data-driven enterprise," the IDC stated.

"[We] predict that in the next three years, those who fail to adopt a data-driven strategy will no longer be able to effectively meet consumer demands."

Big data: Businesses are increasingly using the information held within their organisation to generate important insights. Big data is any data set that is too large for traditional database software tools to handle – and the ability to analyse this information is highly sought after at most firms.

South-east Asia has been slow to pick up the technology until now, but McKinsey & Company predicted huge upside potential for manufacturers. Specifically, big data can help with demand forecasting, production planning and improved customer service levels.

McKinsey estimated profit margins at most manufacturing facilities could jump 2 or 3 per cent due to better demand shaping. A recent survey showed ASEAN respondents are equally optimistic – 15 per cent believed big data's effect on forecasting could boost efficiency and revenues by more than 50 per cent.

IoT: This refers to networks of sensors and actuators that are fitted to everyday machines and objects, which are all interconnected between each other and the internet.

There are several manufacturing applications that could optimise performance, including embedding sensors that can tell when maintenance must be carried out on equipment, preventing costly downtime. GPS tracking sensors would also allow manufacturers to monitor the progress of shipments – a valuable tool in the ASEAN region due to fragmented supply chains.

Manufacturing warehouses can also implement radio-frequency identification technology to monitor supplies and enable more efficient pallet sorting.

Supporting technologies

While big data and IoT are considered the heavyweight technologies likely to optimise manufacturing processes, the McKinsey report also highlighted three trends that will play a crucial supporting role.

Cloud computing: The cloud offers small manufacturers access to secure storage and infrastructure facilities, as well as ERP and basic software. Many companies in ASEAN economies have poor access to advanced IT services, but the cloud makes new technologies available without expensive capital investment.

3D printing: Additive manufacturing will have a large impact on developed ASEAN countries, but are less likely to be relevant in emerging nations. At the moment, the technology is being used in a variety of niche areas in the manufacturing industry. However, wider utilisation in sectors such as oil and gas is lagging.

Advanced materials: Whether it's dent-resistant automotive panels, microelectronic components or lightweight fighter jets, many of today's innovations rely on advanced materials. The continued development of tailored advanced materials will help to spur ASEAN manufacturing across a range of industries.

Challenges to ASEAN technology adoption

Despite the opportunities available for manufacturers that embrace the technology revolution, there are a number of obstacles for ASEAN companies.

Firstly, firms must nurture talent pipelines to ensure they have a steady stream of qualified candidates to fill data-driven roles. This will include analysts, managers and technical support staff.

Businesses should also concentrate on improving supply chains so that new technologies can be effectively integrated, which may involve aligning multiple partners.

McKinsey stated: "Manufacturers will need to consider relationships with research institutes and distributors while keeping select, high-value-adding technology functions in-house in order to reap the benefits in their own operations, as well as in the supply and distribution chains."

ASEAN economies would also benefit from manufacturing innovation-enabling devices such as smartphones and tablets within the region to accelerate implementation of new processes.

Designing or manufacturing in an ASEAN nation? Contact us at SOLIDWORKS to see how we can help inspire engineering innovation and improve every aspect of your product development.