The Booming of Digital Transformation

No industry is spared by the disruptions wrought by the digital era. Businesses that do not keep up with the current digital trends and do not take pre-emptive measures to apply digitalisation as part of their business’s competitive edge will not survive the market.

According to a survey by TM ONE, 75% of 40 CXO key manufacturing players in the market believed that digitalisation will drive organisations within the next 3 years. Half of the respondents (50%) from the IT professional field said that their organisations are in the midst of implementing cloud computing, system integration, addictive manufacturing and internet of things (IoT) as part of their readiness for Industrial Revolution 4.0, or IR4.0.

Certainly, Malaysia is gaining a huge awareness here, as exemplified by its efforts in adopting digital transformation in various industries, resulting in rapid transformations in the manufacturing and/or automotive sectors.

Many Malaysian-based businesses are predicted to position themselves in adopting IR4.0 in the next few years. Manufacturing accounts for over 80% of all exports and 23% of GDP, according to the Malaysia External Trade Development Corporation (MATRADE) and Department of Statistics Malaysia (DOSM). The Electrical and Electronics (E&E) industry, with its products and services related directly to IR4.0, was expected to lead Malaysian exports in 2018.

What do you need to know about IR4.0

IR4.0, also known as “smart factory”, is the cutting-edge development in the digitisation and automation of manufacturing processes. It incorporates the most advanced and innovative technologies such as advanced sensors, big data analytics, intelligent robotics, 3D-Printing, machine learning and cloud computing, not forgetting cybersecurity and Internet of Things (IoT).

This cyber-ecosystem enables businesses to monitor the physical processes of the factory, which in turn enables them to make intelligent decisions. Physical systems make up part of the sensory mechanism of the Internet of Things – communicating, analysing, cooperating and interacting with each other, and with humans in real time via wireless web-platforms.

IR4.0 covers the entire end-to-end value chain – from suppliers, procurement, production, design, logistics to sales in order to achieve higher productivity and output flexibility.

In a nutshell, businesses can reduce operational cost as IR4.0 emphasises on streamlining overall business operations by minimising wastage or storage, enhancing supervisory processes and maintenance of machinery, at the same time instilling streamlined security and safety efficiencies.

Even though Malaysia is slow in embracing digital transformation as compared to other APAC countries such as Vietnam, Thailand or Singapore, the digitalisation and automation journey will soon push businesses to the forefront of our industrialised world, and set to fast-track business transformation in today’s digital economy – allowing us to work smarter, optimising work streams and enabling growth.

In the next few years, the manufacturing sector in Malaysia will continue to embrace and adopt new technologies in order to help increase visibility in both of their raw production lines and to streamline operational processes.

“IR4.0 covers the entire end-to-end value chain – from suppliers, procurement, production, design, logistics to sales in order to achieve higher productivity and output flexibility.”

Overcoming Barriers to adopt IR4.0

In general, Malaysia is still struggling to adopt IR4.0, and many businesses are stuck at Industry 3.0, in terms of manufacturing technology. The common challenges faced by many manufacturing businesses in implementing IR4.0 are:

1. Uncertainty and hesitation to modernise infrastructure and their legacy system
2. Lack of capabilities in converting huge amounts of data collected into useful business insights and using these insights to improve operational efficiencies.
3. Lack of data security and skillsets needed in digitising their processes.

Because of these challenges, many manufacturers still rely on low cost labour i.e. foreign workers and are hesitant to invest in innovative automation technologies.

Manufacturers need to move with the market, but movement will only happen when it is justified by a viable business case. The Malaysian government, industry leaders, private sectors and the local academia need to work together to prove, with practical and pragmatic business cases, that digital transformation is fundamental for an organisation to enhance customer service and experience.

The Ministry of Commerce and Industry (MITI) is already in the process of formulating a national policy or framework on IR4.0. MITI and its agencies, in collaboration with other relevant Ministries and Agencies, are undertaking various outreach programs to increase public, industry, academia and training institute’s awareness on IR4.0. Targeted incentives and funding are provided to promote the adoption of IR4.0 under the Technical Working Groups (TWG) for Incentives and Funding.

The private sector industry is also being urged to invest in their own digitalisation efforts. Many are already putting in effort in implementing IR4.0, however, more concerted efforts from industry leaders need to be seen. There are organisations from the Electrical & Electronics (E&E), aerospace and the automotive sectors who are more advanced in terms of IR4.0 adoption. These success stories by industry captains can then be set as a benchmark for others to emulate moving forward.

Realising IR4.0

Pacing automation and robotics into the seams of a manufacturing foundation is crucial in the elimination of human errors, and enables businesses to refocus their effort in areas which drives revenue for the company.

It drives and encourages greater enhancements in manufacturing processes and sets local market benchmarks in attaining quality production output, efficient practice and better profit-gaining opportunities for businesses.

With AI riding alongside IR4.0, smart factories will mushroom in high industrial areas fully equipped with smart solutions. It consists of technology enablers such as robotics arm, machine learning, augmented reality, autonomous vehicles and 3D printing that will enable lean, accurate, and real time production, creating business performance efficiencies throughout the manufacturing process.

With an efficient supply chain in place, it will allow businesses to adjust itself to constant shifts in market demand and mitigate risks of unforeseen incidents that will directly impact production and the business.

Pos Malaysia Group (“the Group”) started as a traditional postal service and has since expanded to provide financial services and supply chain solutions.  As reinvention became necessary, Pos Malaysia embarked on a digital transformation plan to redefine its business model.

“The rapid adoption of technology has brought about new challenges to our business. Pos Malaysia knew it must adapt to digitalisation to remain relevant in the industry and to support the changing trend in customer behaviour, from physically going to retail stores to buying goods online,” said Group Chief Executive Officer, Syed Md Najib.

When faced with digital disruption, Pos Malaysia encountered difficulties due to its outdated systems, traditional business model, and a weakening outlook for selected business segments. Legacy systems posed a challenge for the Group when competing with digital-native entrants. Amidst this environment, the company has engaged in notable initiatives to provide consumers with fast and secure delivery, as well as a seamless customer experience. This transformation is crucial for the company to build a sustainable business, one that is relevant in the digital era.

Simplifying the customer journey through digitalisation

In 2019, Pos Malaysia committed to a new mission – to build a truly customer-centric organisation. The Group set out a three-year modernisation and transformation plan to remain relevant, competitive and profitable.

A major transformation area was in the digitalisation of customer-facing functions. Recognising the growth of the digitally-driven consumer, Pos Malaysia revamped its website and enhanced its mobile application to improve customer experience. With over 1.3 million downloads of the mobile app, there was an average of 200,000 monthly users with app-related transactions from January to July 2020.

Handwritten consignment notes have been replaced by the e-consignment note which can be generated via the website or the mobile app. Customers can print the e-consignment note at Pos Laju outlets, kiosks and selected Pos Laju EziDrive-Thru. As of September 2020, there have been 1.5 million e-consignment notes generated – thus reducing errors and enhancing efficiency.

Pos Malaysia’s customers can track their parcel via the Track and Trace system that is available on Pos Malaysia’s website and mobile app. The system allows customers to monitor their parcels via the tracking number or by scanning the bar code. 

Pos Laju SendParcel, an online shipping platform, is also integrated into the mobile app and allows customers to post their parcels without having to leave their home or office. Customers only need to schedule for pick-up at their own convenience and Pos Laju will come to collect the parcels.  The platform has expanded its service by offering international deliveries to over 200 countries, connecting local SMEs and e-commerce businesses to the overseas market. As at the end of January 2021, over 7 million parcels have been shipped via SendParcel.

Additionally, the implementation of the AskPos chatbot and live chat channels gives customers a self-service option to resolve simple issues. Customers are met through real-time conversations and can obtain personalised help online. Since its inception, over 2.9 million conversations were initiated on AskPos, or about 40,000 to 60,000 customer conversations per week – reducing contact centre operation costs.

E-insurance service is Pos Malaysia’s most recent initiative in providing its customers a better service experience. With e-insurance, motor vehicle insurance renewal is made easy, convenient, and available at any time. Pos Malaysia is planning to add more insurance providers and more insurance products soon, to offer its customers multiple options to suit their requirements.

Moving forward, customers can look forward to more services in Pos Malaysia mobile app which include financing, wasiat, will, remittance and others.

Streamlining and securing processes with digitalisation

While the implementation of e-consignment notes has improved customer experience by reducing over-the-counter wait times and human errors, the self-service parcel lockers (i.e Pos Laju EziBox) has been added to give convenience for customers to collect and drop-off Pos Laju items at their own time.

Pos Malaysia’s customers also have an option to pay their utility bills via the Pos Automated Machines that is available at selected post office. Launched last year, customers can pay their utility bills via cashless methods, at their own convenience and reduces over-the-counter congestion.

Pos Malaysia is also giving solutions to their business customers through Pos Digicert, a subsidiary which is responsible for the creation of digital identities through the use of digital certificates. The Pos Digicert Digital Signing feature is another solution that incorporates digital signatures for the company’s BizClient Ivest server and digital certification services. The option safeguards organisations from data fraud, data tempering, and authenticates documents simultaneously, thus enhancing the trustworthiness of the documents in hand. Organisations can now move from a physical certification environment to one that is digital, validated and secure.

As part of Pos Malaysia’s transition into entering Industrial Revolution 4.0 (IR4.0), the company integrated Robotic Process Automation (RPA) into existing Standard Operating Procedures (SOP) for both front-end and back-end processes of our cargo operations at the Kuala Lumpur International Airport (KLIA).

Pos Aviation, a subsidiary of Pos Malaysia that handles in-flight catering and cargo has implemented Robotic Process Automation (RPA) to assist the cargo handling operations team. These robots act as a digital workforce to streamline operations and expedite key business activities thus ensuring efficiency. The human workforce can focus on more valuable work as the system automates repetitive mundane task and increase productivity that are compounded across thousands of transactions.

Pos Malaysia is also improving its procurement process efficiency as it switches from manual processing to an online procurement system. The end-to-end procurement system, from purchase requests, orders to payments, have benefited from the upgrade. Advantages include an overview of the entire process, reduced leakages, improved documentation storage and better budget monitoring.

Promising speed and digital trust with cloud CDN technology

The benchmark for successful digital transformation lies in the ability to provide swift and reliable service. Digital native entrants, in particular, could press on these attributes with its integrated and flexible platforms compared to larger organisations with multiple, siloed systems. As such, Pos Malaysia had a daunting task in hand – to transform its IT infrastructure and mitigate the disadvantages.

Pos Malaysia integrated cloud CDNs (Content Delivery Networks) to provide swifter service delivery for its websites and applications. These technologies reduce information travel distance and server workloads, resulting in lower latency and faster content delivery. The existing Wide Area Network (WAN) services also support cloud CDNs, providing added protection in the information transformation process.

Moreover, to ensure stability and scalability of its software solutions, the Group has introduced Performance Testing Services in 2019. This step helps Pos Malaysia evaluate its system’s performance under normal and anticipated peak conditions. Consequently, it ensures that end-users do not encounter any performance issues when using the applications. Pos Malaysia customers can now enjoy fast, stable, and secure experiences on digital platforms.

Creating a secure infrastructure enforces digital trust in customers, especially when it concerns sensitive personal customer information. A malware attack in 2019 made the Group take a proactive stance in cybersecurity defence. Pos Malaysia has complemented its cloud adoption with intelligent threat detection systems. These systems safeguard end-users and networks from malware and confidential data breach attacks. The digital transformation plan remains secure due to this vital step, and the company now boasts zero complaints from data breaches.

Hitting ideal processing capacity with automation

Pos Malaysia continues to ensure that it is capable to handle the surge in demand driven by e-commerce growth. As such, the Group continues its pursuit in optimising operational efficiency. With parcel volume reaching 800,000 a day during peak seasons, Pos Malaysia commits to leverage on automation for its distribution and fulfilment centres.

To date, Pos Malaysia has equipped 35 distribution centres with semi-automated sorting systems. These upgrades were crucial in easing the strain on manpower, resulting in greater capabilities and lowered costs. The improved sorting systems were especially beneficial during peak seasons, where deliveries can go up to over 8 million parcels per month, as experienced in the 11.11 online mega-sale. As such, the Group plans to continue this initiative by deploying semi-automated systems across 20 distribution centres this year.

To further supplement the vision of an ideal processing capacity, the Group is also investing in fully-automated and integrated fulfilment centres. Pos Malaysia aims to launch its first regional Mini-Integrated Parcel Centre (IPC) in Senai, Johor, to cater for volume growth, with a target to process a total of 1 million parcels daily.

Driving growth by forging strategic partnerships

To remain competitive in the industry, Pos Malaysia forged strategic partnerships to diversify its revenue stream. The Group’s most recent partnership with Allianz Life Insurance aims to improve life insurance accessibility for all Malaysians. Together, they have launched PosLifeCare, an affordable life insurance plan with a premium from as low as RM0.14 a day.

The Group formed a partnership with CollectCo, a leading parcel delivery and collection network. Through this collaboration, Pos Malaysia secured an additional 1,255 partner outlets. The Group was able to expand its customer reach while achieving financial sustainability through agent and partner-operated outlets.

The main focus for Pos Malaysia at this juncture is to win market share in the fast-growing e-commerce driven courier delivery segment. The investments made by the Group in technology augurs well for the future. Pos Malaysia is well-placed to address the shift in consumer demand for digital services.  

Frontier technologies such as AI, machine learning together with more responsive, pervasive cloud platforms, which have triggered mounting disruption of multiple industries and much of our daily life, will continue to accelerate in 2021.

With an eye on the manufacturing sector, a recent online industry debate — the Smart Manufacturing Circuit (SMC) held mid-December 2020 — conducted a reality check of technology-induced benefits and values.

Moderated by Maznan Deraman, head of Innovation Solutions at TM One, the enterprise solutions arm of Telekom Malaysia, the leadership panel comprised Eng Chew Hian, Business Development director of Huawei Cloud, and Sudev Bangah, managing director of IDC ASEAN.

Given the rapidly shifting global economic ecosystem, manufacturers are earnestly looking for the right matrix of technologies, people and process changes that will enhance competitiveness and get ahead of the pack, agreed the speakers.

To extrapolate best practices from current industry case studies, the panel distilled several short to long term strategic priorities. The discussion included a deep dive into the challenges faced by the manufacturing business, which largely reflect the overall industry scenario, i.e. keeping abreast of the competition in a fragile and fast-changing environment.

According to IDC’s Asia Pacific Insights Annual Survey 2019, 78% of the region’s manufacturing businesses saw declining sales, while 74% reported demand variability, and 37% pointed to increased competition, and lack of innovation (27.8%), as well as rising internal costs (20.4%).

In addition, 24% of manufacturing costs were attributed to downtime, 90% of maintenance work was categorised as ‘crisis work’ to fix breakdowns, and the amount by which total downtime cost was usually underestimated by 300%

Bracing up for the Next Normal

Addressing these business challenges demands transformative strategies to deliver results, declared all three panellists. These include improved supply chain performance, enhanced operational excellence and operational risks, stronger focus on product innovation and tapping new markets and customer segmentations.

However, the road that must be travelled has to be built on digital frameworks, the panel continued. On 1st January 2021, Malaysia’s government said its 12th Malaysia Plan (12MP) will increase focus on new economic drivers such as the digital economy in tandem with the green economy. In line with this, a national digital policy is expected in Q1 of 2021.

Sudev Bangah cited IDC’s studies of organisational recovery, which highlighted an increased prioritisation of business resiliency. “Organisations need to look forward, and it is important for strategic priorities. Moving towards targeted investments — AI, IoT, robotics, cloud, machine learning — are typical areas for investment.”

IDC’s APAC studies confirmed that when building a digital transformation use case, clarifying strategic priorities will better build resiliency, and enhance yield from digital implementations, Sudev explained.

Speaking of four value chains of manufacturing, he said: “Across the board, manufacturers are looking towards technology adoption to drive strategic priorities: engineering oriented; technology oriented; asset oriented and brand oriented.”

A major component of digitalisation is cloud computing, Huawei’s Eng pointed out. Earlier in 2020, TM One announced an agreement with Huawei as another step in its aim to aggregate partners and solutions to become the country’s first locally owned end-to-end comprehensive cloud AI infrastructure provider.

He outlined several cross-industry use cases which included Alpha Edge implementations such as one that uses drone and AI image processing applications to perform aircraft surface inspections “(This solution’s) emphasis on security, trust, speed and robust scalability,

TM One’s Maznan said, “Some of the benefits that cloud delivers to companies include bringing products to market faster; enhancing performance and productivity more efficiently; heightening competitiveness; simplifying and speeding up modernisation plans; as well as more effective collaboration with ecosystem partners.”

“Using digital solutions to achieve enhanced, connected production, real-time manufacturing and predictive analytics is part of the process of the transformation of the ecosystem, which includes people and existing processes.”

As an example, Maznan detailed the company’s Overall Equipment Effectiveness (OEE) — a tool for manufacturers to tackle efficiency and productivity gaps without human intervention. “OEE helps to reduce common causes of equipment failure, maximise workforce effectiveness, and gives the capacity to visualise overall performance more easily.”

Transition to Industry 4.0

Tackling the bigger picture, the panel agreed that, to varying degrees, pandemic-related lockdowns procedures have indeed accelerated digital disruption. “People and businesses have had little choice: to take control of their transformation or bow out of the arena.”

Government initiatives to encourage smart manufacturing include the international trade and industry ministry’s (MITI’s) Industry4wrd policy. This framework includes three core elements and eight core thrusts designed to create a pathway for enhanced productivity, job creation, and growing a high-skilled talent pool in the manufacturing sector.

Atillea Razali from SME Bank Malaysia presented another example, in a separate session, on technology grants such as SME Technology Transformation Fund (STTF), which offers financing up to RM3 million to help in various transformation projects.

Sourcing intelligence

In the concluding sequence, the panel emphasised that, “Understanding and optimising operations is interlinked with the use of data and analytics.”

Bangah commented: “The acceleration of digital transformation is causing a rethink among manufacturers. This may call for a tweak to the 2021 playbook for many manufacturers: as an example, digitalising your supply chain will be one of the most critical areas.”

Bangah concluded by citing one of IDC’s key takeaways for 2021: “Technology is one complementing element, to enable your business to reach a new level on your journey. It is critical to find a partner on this journey who can offer all the support to enable a smoother journey.”

Maznan’s concluding summary included TM One Alpha Edge offerings to manufacturers to smooth the transition to smart manufacturing In tandem with the uphill recovery this year. “This is coupled with an ongoing partnership, as well as industry-specific solutions that offer a more holistic collaborative path to manage the transformation effectively.”

This article was first published on Disruptive.Asia (https://disruptive.asia/2021-smoothing-transition-smart-manufacturing-malaysia/)

In the pre-digital era, manufacturing plants were deemed an unstoppable force in many economies. However, the Covid-19 pandemic has brought sharp lessons resulting in factory shutdowns and multiple supply chain disruptions. Even with the continuing battle against the pandemic, the manufacturing sector must intensify its efforts to survive and find new avenues of growth.

Digital technologies form a key component of generating recovery and building resiliency for the industry, a fact well-recognised by manufacturers across Malaysia and the Asia Pacific, said Sudev Bangah, Managing Director of IDC ASEAN, at the recent Smart Manufacturing Circuit 2020 virtual event organised by TM ONE. IDC analysis has also found that many companies are shifting towards targeted investments in machine learning, cloud, robotics, and internet of things (IoT) to drive a path through future crises as well as to secure growth.

Meanwhile, Maznan Deraman, Head of Innovative Solutions at TM ONE, the enterprise and public sector business arm of Telekom Malaysia Berhad (TM) believes, “Digital adoption brings great potential for improving product quality, increasing productivity and creating more high-skilled jobs.” He shared how TM ONE will support the manufacturing industry’s digitalisation journey.

Data-driven Efficiency

Data is deemed to be crucial for building a resilient manufacturing company. Understanding how well each part of the production line works will help managers minimise wastage, speed up production, and produce better products. Manufacturers need to think about what data they need and what tech they can use to collect it, shared Sudev.

Another crucial aspect is data analytics. Most manufacturers currently record data on paper and transfer it manually to a software for analysis, explained Nazman Fariz Mohd Noh from TM ONE’s Smart Manufacturing Solutions. “This is labour intensive and prone to human error.”

TM ONE has an analytics tool that helps companies gain deep visibility to their production processes. The Overall Equipment Effectiveness (OEE) platform delivers an overview of all the processes within a factory using data collected from IoT devices. Supervisors can use this to optimise production hours, identify faulty machines, redistribute production, and monitor products for defects.

The platform consolidates real-time data for each machine, including its schedule, availability, and effectiveness. Managers can chart this on a graph to monitor individual performance over time, or zoom out to see how the overall production line is faring.

The OEE shares all data via online through TM ONE’s Cloud Alpha platform. Staff can monitor the status of each machine anytime and anywhere, said Nazman Faris.

Minimising Costs through Predictive Maintenance

Predictive maintenance is a key feature of the OEE. This will help cut time and costs substantially. Manufacturing companies report that more than a fifth of its costs are due to downtime, and that 90 per cent of maintenance work is eaten up by having to fix breakdowns, Maznan shared.

The OEE platform monitors levels of concern for each machine: low means it’s doing well; middle to high means it might need immediate attention. It also automatically compiles a list of machines with higher attention scores, arranged according to severity.

Once a machine has been identified for maintenance, the technician will take a look at its timeline, alerts, and any notes on the OEE to carry out the repair work more efficiently. Machine experts can also study this information to analyse causes and develop better fixes.

Other Must Have Solutions for Your Digital Operations

In addition to the OEE analytics platform, TM ONE also offers cloud and cybersecurity tools to protect companies’ data. “Nowadays, we can’t have all information or systems on premise, because we know for a fact that on premise solutions carry a certain level of risk,” Maznan said. For instance, businesses may not have the proper disaster recovery services to react to potential cyber-attacks, he explained.

TM ONE is collaborating with technology companies such as Huawei to develop new tools for Malaysia’s manufacturing sector. Eng Chew Hian, Business Development Director at HUAWEI CLOUD Malaysia, shared details of how artificial intelligence (AI) can be used to improve manufacturing processes.

Huawei’s drone inspection tool uses high definition (HD) cameras, 5G connectivity and AI image processing to study the surfaces of planes. Aircraft technicians run on a tight schedule when conducting safety checks between flights, and manual inspections are time- and labour-intensive.

The drone flies through the plane to search for scratches, corrosions, and loose screws. It also cross-checks the model of the plane to ensure each part meets specific safety standards.

Huawei has also developed an AI image analysis tool for safer aircraft manufacturing. It uses thermal sensors to find gaps when wings are welded onto a plane. Planes have to withstand tremendous vibrations and wind speeds, and any gaps could be disastrous, Eng explained.

“Although the movement control order was gradually lifted, the overall impact on the whole supply chain has been dramatic!” said Maznan. Digital technologies such as IoT and data analytics are helping Malaysia’s manufacturing plants navigate the uncertainties in a recovering economy.