Being the "Factory of the world", China is synonymous with manufacturing. However to tame 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 the Southeast Asian region to lead economic development. This is where IoT technologies can play a crucial role for industries to give China a run for the manufacturing dollar.
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.
Complement current operations with IoT
This view was echoed at a public dialogue held ahead of the 12th World Islamic Economic Forum, in Jakarta. A government official said, "Businesses in Indonesia and Southeast Asia must take advantage of disruptive innovations and technologies to leverage their global competitiveness, instead of worrying about the negative impact."
In a joint statement by the Habibie Center, the Indonesian Ministry of Finance and the World Islamic Economic Forum Foundation, Zamroni Salim, a senior economic researcher at the Indonesian Institute of Sciences, also said that, "Big data and the Internet of Things help analyze details of operations, real time data from suppliers' inventories, shipments in transit; to downstream customer demand, does complement conventional operations."
Challenges & Considerations
However this technology opportunity is still waiting to be realized. 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, Southeast Asian companies are 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 expect to see increasing case studies as more Southeast Asian manufacturers learn about the benefits of IoT
Extracts taken from "The Smart Manufacturing Opportunity in Southeast Asia"
Join the discussions at the 9th & 10th edition of Asia IoT Business Platform, in Jakarta, Indonesia & Kuala Lumpur, Malaysia where international & regional speaker will be discussing their insights on IoT in Manufacturing.