When one think about manufacturing, China is likely the first country to come to mind. However with rising costs, even Chinese companies are increasingly turning their gaze southward to Southeast Asia.
This, coupled with the implementation of the ASEAN Economic Community (AEC) integration plan, presents a tremendous opportunity for the manufacturing industry in this region to lead economic development, and one of the reasons why IoT technologies can play a crucial role.
According to a report by McKinsey, new technologies could increase profit margins and lower costs in manufacturing, potentially creating $25 billion to $45 billion of annual economic impact in ASEAN by 2030.
For example, the use of big data and the IoT could improve demand forecasting and production planning, leading to better customer service and higher profit margins. On the cost side, IoT can also improve supply chain management and by analyzing real-time data on suppliers’ inventory and shipments in transit, companies can tighten inventory control and maximize production capacity.
15% of ASEAN respondents in the study said that they were optimistic that the ability to improve forecasting accuracy could potentially increase revenue or efficiency for their company by more than 50 percent.
However this technology opportunity is still waiting to be realised. One reason is the lack of awareness of these opportunities. Many manufacturing firms are also worried about not having the right talent to implement these technologies. Perhaps key to the issue is also the security challenge that manufacturing firms will have to face when they move to what IDC term as the 3rd Platform (cloud, mobility, big data/ analytics).
To realise the potential savings of up to $3.7 trillion per year by 2025 through IoT in manufacturing, the ability to scale up security is important. It is estimated 70% of IoT devices are vulnerable to cyber attacks and overcoming this challenge would accelerate the IoT adoption among manufacturers.
That said, it is encouraging to see Southeast Asian companies starting to experiment with IoT despite the varying levels of infrastructure development. From predictive maintenance of air-conditioners to pilot projects of IoT improving agribusiness, we continue to see more case studies and will contribute to this growth by educating more industrial companies about the business potential of IoT.
Listen to speakers from Japan Industrial Value Chain Initiative, Fraunhofer IAO and Korea Evaluation Institute of Industrial Technology on how they have implemented digital factories and smart manufacturing at our Asia IoT Business Platform events this year.