This article first appeared in Forum, The Edge Malaysia Weekly on January 10, 2022 - January 16, 2022
Sustainability has moved to the top of the global agenda — and the imperative to combat climate change is particularly urgent in Asia. The region could face more intense impacts than other regions, with its high volume of low-lying coastal cities exposed to flood and typhoon risk, sharp increases in heat and humidity anticipated across the region, and extreme precipitation or drought, depending on the location.
At the same time, significant shifts are happening in the growing role of digital technologies across every sector. As Malaysia seeks to boost the recovery of the manufacturing sector following Covid-19, Fourth Industrial Revolution (4IR) technology adoption can play a critical role.
Take, for example, manufacturing. At present, many assume that improving manufacturing productivity must come at the expense of environmental sustainability. If we are to meet the climate goals set by governments and policymakers around the world, this assumption must be challenged.
Thankfully, in light of a recent report from the Intergovernmental Panel on Climate Change (IPCC), described by the United Nations as “a code red for humanity”, more industrial companies across the world are challenging the notion.
So, how can manufacturers achieve eco-efficiency? The application of 4IR technologies on a broader scale may be the answer.
The Global Lighthouse Network (GLN), a World Economic Forum initiative in collaboration with McKinsey & Co, is showing how 4IR technologies — think artificial intelligence (AI), robotics and Internet of Things (IoT) — build crucial digital capabilities. Collectively, GLN factories are transforming manufacturing by showing how smart production can also be green.
The results speak for themselves: By deploying advanced technologies such as advanced analytics and AI in the production chain, 64% of the 90 Lighthouse factories are already seeing the impact on environmental sustainability.
Almost 64% of Lighthouses report sustainability impact as part of their 4IR transformations — but some companies go above and beyond regarding sustainability, to the extent that sustainability is the foundational driving force of their business agendas. The new designation of “sustainability Lighthouse” has been created to recognise these leaders.
In addition to revolutionising manufacturing operations characteristic of other GLN sites, “sustainability Lighthouses” illustrate their commitment to environmental sustainability in novel and inspiring ways. Although there are no such Lighthouses in Asia yet, all GLN members — whether newly recognised or existing — could be designated sustainability Lighthouses in the future.
Recently, Western Digital's Batu Kawan site in Penang became Malaysia's first Lighthouse in recognition of its 4IR-driven transformation.
In line with the recent surge in demand for flash memory products, Western Digital Penang needed to rapidly reshape its manufacturing operations. In response, the company launched its 4IR-driven “lights-out” manufacturing initiative to automate various aspects of production and logistics through “advanced analytics and proprietary artificial intelligent solutions”.
Through this initiative, it delivered a 32% factory cost improvement, a 360% increase in labour productivity, and a more efficient build-to-order intelligent planning system that allowed the company to reduce product inventory and order lead time by 50% — all the while keeping environmental sustainability front of mind.
Also at the heart of Western Digital Penang's 4IR-driven transformation was its people. Through its IIOT Academy programme, the company is upskilling its employees to build a workforce fit for the future — where employees’ skills are rooted in, and complemented by, 4IR tools and technologies.
The recognition of Western Digital Penang as Malaysia's first Lighthouse not only bolsters the country's reputation as a home for smart manufacturing but also sets the bar for other Malaysian manufacturing players in the years ahead. By utilising 4IR tools and technologies such as AI, IoT and robotics in their operational transformation, companies like Western Digital Penang are setting a new standard for “cognitive manufacturing”.
The acceleration of Industry 4.0 adoption in Malaysia may also pay dividends for environmental sustainability. 4IR transformations based on digital and analytics tools can augment not only green technology but also current production methods by bolstering efficiency. By embracing 4IR-driven transformation, a new kind of eco-efficiency becomes possible, where sustainability and competitive excellence are not only compatible, but interwoven.
4IR-technology adoption could play a vital role in helping Malaysia to advance the recovery of its manufacturing sector following Covid-driven disruptions. As noted in Budget 2022, efforts to accelerate “digital and technological infrastructure” as well as the implementation of various programmes “to boost micro small and medium enterprises’ (MSMEs) contribution to the economy” will be prioritised in the year ahead — such as 5G infrastructure and 4IR technologies.
Similarly, our research revealed that small and medium enterprises (SMEs) may fall behind companies that already have critical capabilities — such as manufacturing-execution systems, IT/OT stacks and data marts — in place. Ensuring that SMEs keep pace with larger manufacturing players will be critical for survival in a post-pandemic landscape.
Implementing 4IR-driven technologies across manufacturing operations in Malaysia will be vital for sector recovery from Covid-19 and will help solidify the country's position as a beacon of manufacturing excellence in the years ahead.
Matteo Mancini is a senior partner in McKinsey’s Singapore office and Vaibhav Dua is a partner in McKinsey’s Kuala Lumpur office
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