Supply chain, logistics and the entire manufacturing process are facing disruption. It is rooted in globalization, consumerization and the difficulty in forecasting supply-demand trends in today's dynamic market landscape.
In response, many manufacturers are choosing digital transformation. However, as their peers in other industries are finding out, the journey is fraught with challenges and pitfalls.
According to a recent IDC survey, some of the key concerns in the manufacturing industry have been around increased competition, rising internal costs and increased cybersecurity threats. To mitigate these challenges, organizations have been looking at integrating technologies, such as internet of things (IoT), cloud, and blockchains, that can increase visibility, credibility, and transparency across the value chain, in essence, launching digital transformation drives across the complete value chain.
In the Cxociety C-Suite roundtable discussion titled Mastering Digital Disruption: The Supply Chain Opportunity, sponsored by Epicor, we asked leading manufacturers and supply chain players in Singapore their experience, insights and challenges in mastering disruption.
B2C vs. B2B
It is called the Amazon effect. It is a catch-all phrase for digital platform players disrupting logistics, it highlights the impact of digital platforms in shaping business-to-consumer (B2C) processes and meeting the needs created by consumerization. It aims to give manufacturers direct access to consumers, simplify their supply chains for cost efficiency and agility, help them to reach new markets faster and lower industry barriers for competition.
Digital transformation of the business-to-business (B2B) market, in comparison, remains slow. “There is one big difference between B2C and B2B. In B2C, you are selling to the consumer; in B2B, your end customer is a function in another company,” said Vincent Tang, Vice President, Sales, Asia, Epicor.
For example, Supreme Components International is transforming for better logistics. “Our transformation is driven by the logistics of electronics components. Digital transformation gives us a massive opportunity to drive better user experience and B2B conversation,” said Piyush Aggarwala, the company’s Director.
One delegate to the roundtable noted that better management of spare part inventories is a huge motivator for their organisation, allowing employees to track and retrieve information about the spare parts” from the cloud, allowing the company to plan better for future needs.
Automation is another reason many manufacturers are embracing digital transformation. Amy Chung, Chief Executive Officer, Container Printers noted that as manufacturers move automation and real-time processes, “digitalization will become a huge driver.”
“To me, whatever that helps the company to grow its revenues and profits should always take priority,” said Sian Chin Phua, Chief Financial Officer, TEHO International Inc, who added speed and agility are now becoming vital differentiators in the manufacturing industry.
Brandon Lee, Chair, Smart Automation Industry Group, Singapore Manufacturing Federation sees three phases of digital transformation in the manufacturing industry. "Phase one begins with digitization, which allows you to monitor the manufacturing better. The next phase is to explore how to do things right, so you have to leverage data intelligence for business efficiency...then the last phase is to move from a human-based approach to a systematic one."
Having the needs clear, the tools available, the framework developed and funding support available does not mean digital transformation is any less painful.
Singapore Manufacturing Federation’s Lee noted, “We can come up with a feasible plan to transform the industry, but implementing it is never going to be easy.”
One challenge is identifying the benefits. While digital transformation offers general benefits for all industries, there are not many use cases for Singapore-based manufacturers.
It is one of the reasons why many balk at adopting new software and solutions, said TEHO International’s Phua. Without a clear idea of the benefits, it then becomes difficult to gauge the value in investing in the solution.
“The moment you mention the cost, everyone sits back. Companies lose out not because they have a bad solution but because their initial investment was too high. Businessmen can’t see past the initial investment,” he said.
However, Phua admitted that part of the problem is also complacency. “[Manufacturers in Singapore] are so comfortable. But every industry is like that until something disrupts them and then the industry wakes up,” he added, pointing to how Uber and Grab impacted the taxi industry.
Market size is another challenge, said Kim Poh Ng, Director, Sunjet Aluminium International, which is creating a common data platform to link up its manufacturing plants and outsource some of their processes to third-party players.
“Singapore is too small to focus all your manufacturing resources. So, for a [Singapore] manufacturing company to survive, it needs to have enough of a market. Besides, a lot of [multinational corporations] move to where the market is,” Ng added.
Irene Hwa, Marketing Director, Asia Pacific, Epicor Software noted that the challenges are similar to other industries. "The ultimate objectives of digital transformation remains the same across all industries. So, everyone wants to have real-time access to what is happening in their business because that allows them to be more efficient and drive real-time decision making, which also allows you to make quick adjustments to individual customers' [needs] at any one time."
Hwa sees new advances in the internet of things (IoT) analytics and sensors helping manufacturers to drive digital transformation. But she also warned that digital transformation is a journey and software is only a tool. "It is no replacement for good strategy."
Singapore Manufacturing Federation’s Lee observed that any digital transformation effort needs should also create an ecosystem and deep skills within the industry. “Why do [Singapore manufacturers struggle when multinational corporations leave Singapore every few years? It is because we do not have the ecosystem and deep skills. In short, we do not have a unique competitive advantage.”
Lee noted that the Singapore government agency is already looking to address these issues through the Local Enterprise and Association Development (LEAD) program.
"LEAD is trying to use collaboration to upgrade the industry capabilities and promote deep skills," he added.
Participants agreed that a successful digital transformation journey is not just a sum of the digital solutions and processes. It also requires a strong implementation partner.
“The biggest pain point is execution. The product can be fantastic, but if the [vendor] team is not as smart or do not tell you what to do, it takes away time that I could have used for other tasks,” said Supreme Components International’s Aggarwala.
This raises the importance of references for most organisations. The challenge, however, is that there are not many industry references in Singapore.
TEHO International Inc.'s Phua and Sunjet Aluminium International's Ng observed that industry experience should not be limited to the software knowledge but should also include the vendor's understanding of the industry and its best practices. While such an investigation could take time, "it is necessary," said Phua.
Epicor’s Tang saw the relationships between customers and vendors as a two-way street. His company often vets potential customers for product fit.
“A lot of people buy the brand, but do not realize whether the product matches their needs. Then you end up using [the product] less or customizing a lot. This is why we first find out whether our product can meet the customers’ needs,” he said.
Tang also noted that top management commitment is vital. "When there are problems among departments, you need someone at the top to make a decision. It is something ERP vendors cannot do."
In the IDC FutureScape: Worldwide Manufacturing 2019 Predictions, Reid Paquin, research director, IT Priorities and Strategies, IDC Manufacturing Insights, noted that the manufacturing industry continues to evolve. Digital transformation is a discussion that has touched every part of the value chain.
"No matter if you work in design, the supply chain, operations, or service, the adoption of digital capabilities to create business value has become critical to success. Our predictions create a framework for IT and line-of-business executives to plan and execute technology-related initiatives in the years ahead," he concluded.
At the conclusion of the Cxociety C-Suite roundtable discussion on Mastering Digital Disruption: The Supply Chain Opportunity, delegates agreed that digital-led business transformation will continue to evolve in response to changing economic, environmental, and socio-political conditions. These businesses will also need to keep a pulse on changing customer-consumer preferences if they want to remain relevant in a constantly evolving marketplace.