This article first appeared in Forum, The Edge Malaysia Weekly on August 1, 2022 - August 7, 2022
As environmental sustainability rises to the top of executives’ agendas — both globally and in Malaysia — manufacturing leaders are finding innovative ways to accelerate environmentally sustainable production. This is driven not just by changing sustainability standards and regulations, but also by the need to stay competitive as both consumers and brands are increasingly looking for suppliers with proven environmental credentials.
Earlier this year, we explored how the use of advanced digital technologies is transforming Malaysia’s manufacturing sector, enabling profitable growth that does not sacrifice environmental sustainability. As manufacturing players in Malaysia plan for a post-pandemic recovery, it seems the adoption of Fourth Industrial Revolution (4IR) technologies is only going to accelerate and present opportunities for manufacturers to truly transform their operations to leverage the demand for sustainable products and services.
The adoption of 4IR technologies in manufacturing is delivering significant impact, with a small but growing number of organisations capturing first-mover advantage. These frontrunners are members of the Global Lighthouse Network, a World Economic Forum initiative in collaboration with McKinsey & Company. The network recently welcomed 13 new Lighthouses to the select group — and 10 of the new cohort are in Asia.
Lighthouses continue to set the bar for manufacturing players around the world by using advanced industrial technologies to drive sustainable and responsible growth. These pioneers are demonstrating how smart production can also be green by deploying 4IR technologies — from artificial intelligence (AI) and robotics to Internet of Things (IoT) and advanced analytics — to power technological innovation, accelerate sustainability and boost competitiveness.
It’s exciting to see the number of Lighthouses in Asia continuing to rise, with many of the sites having interesting stories to tell that can help other organisations shape their transformations. For example, Johnson & Johnson’s site in Bangkok, Thailand, is harnessing the power of 4IR tools and technologies — from computational fluid dynamics to AI energy optimisation and advanced data analytics — to boost agility and drive step-change improvements across various aspects of the business. These include everything from improving speed to market to cutting logistics costs and energy consumption. Notably, “the value chain delivered 47% revenue growth with a 25% inventory reduction and reduced 43% end-to-end supply chain lead time, improved productivity by 42% and resulted in 20% carbon footprint optimisation”.
4IR tools and technologies can play a critical role in boosting Malaysia’s manufacturing sector — and driving sustainable, responsible growth. The potential opportunities this could unlock for both the country and individual manufacturers are significant.
Last year, Western Digital Penang became Malaysia’s first Lighthouse. After further robust evaluation by a third party, this site has now reached Sustainability Lighthouse status — the first of its kind in Asia and a demonstration of the high benchmark sites must achieve to be given this standout designation. Sustainability Lighthouses demonstrate innovative breakthroughs in environmental improvements while simultaneously boosting productivity and profitability.
To get there, the company deployed a host of 4IR technologies. The range includes IoT sensors and digital twin modelling, an analytics-powered plant management system, and a machine-learning-driven lights-out automation effort.
Notably, the site reduced the amount of time that machines are idle, thus reducing the energy consumption for each machine. Overall, the site minimised energy consumption and greenhouse gas emissions by more than 40%, respectively, optimised water consumption by a factor of 44%, and reduced material waste by 15%. It is due to these sustainability advances that the site also received certification by the Malaysia Green Building Index.
Today, there are 103 Lighthouses globally, all of which are unlocking the benefits of 4IR-driven transformations, from enhanced sustainability to cost reduction and increased profits — and people are at the centre of these transformations.
In today’s landscape, leading companies not only empower their workers with access to innovative digital technologies — they also equip them with the skills they need to use them. This brings the importance of digital capability building to the fore. As digitisation evolves and the use of automated technologies increases, more jobs will be created — and they will be more fulfilling, rewarding and sustainable. In the hands of a workforce empowered with the digital skills required to use 4IR technologies, a manufacturer’s digital transformation journey can move from aspiration to reality faster than they may have previously thought.
Sustainability is top of Lighthouses’ minds too. Recent research revealed that 66% of Lighthouses unlocked sustainability improvements by minimising consumption, resource waste and carbon emissions — and an impressive 82% boosted productivity. But some Lighthouses are taking this even further, and becoming Sustainability Lighthouses as a result.
To date, six Lighthouses have met this bar. By achieving an impressive degree of eco-efficiency, they clearly illustrate that companies no longer have to choose between competitiveness or environmental sustainability — smart manufacturing helps them unlock both.
There is no one-size-fits-all strategy for growth when it comes to the manufacturing operations of the future. The power of innovation lies in its capacity to renew, transform and create something that has not been done before.
However, there are several key components that all Lighthouses have in common that can help other manufacturing players navigate a 4IR transformation. Our experience of working with Lighthouse companies shows that these can be boiled down to the following six core enablers:
1. The agile approach
2. Agile digital studios
3. The industrial Internet of Things (IIoT) stack
4. The IIoT academy
5. Technology ecosystems
6. Transformation offices
It is these six core enablers — innovative approaches used by Lighthouses to power successful 4IR transformations — that proved vital in maintaining operations when Covid-19 upended global production. These enablers are essential for any 4IR transformation to be successful, and span everything from adopting an agile approach to having robust technology ecosystems and transformation offices in place.
Two of these six core enablers in particular have proved critical to maintaining operations during Covid-19: an agile approach and a transformation office.
Only in an agile environment can innovation — and from this, experimental product iterations and creative solutions — truly flourish. As well as encouraging innovation, adopting an agile approach can unlock a variety of benefits for organisations, from boosting workforce engagement to bolstering the business’ ability to scale up quickly. And when paired with a strong transformation office, agility can become an even more powerful enabler.
Over the course of the pandemic, it has become clear that Lighthouses prioritise agility — and one of the ways these companies were able to remain agile and navigate such a rapidly changing landscape was by nurturing a shared sense of purpose among their employees and implementing formalised workforce development. This includes everything from tailored learning and development opportunities to building a culture of empowerment in the workplace.
A company can have all the latest tools and technology at its disposal — but if it lacks genuine workforce engagement, it is unlikely that it will be able to scale up a 4IR transformation successfully and sustainably. The glue that holds sustainable 4IR transformations together is an engaged, upskilled workforce — and any investments in technology will be wasted without also investing in the people who are going to use and benefit from this new technology.
Lighthouses across Asia are setting the bar for 4IR transformations — and this industry leadership shows no sign of slowing down in 2022. The fact that Asia now has its own Sustainability Lighthouse further enhances the region’s reputation as a home for smart manufacturing — and sets the bar for other Malaysian manufacturing players.
What we will likely see in the next few years is the continued accelerated growth of manufacturers that place sustainability at the core of their operations — and what will be interesting is that local manufacturers that do this right have the opportunity to become global leaders in this area.
To learn more about the Global Lighthouse Network — and how Lighthouses are scaling 4IR technologies — read our new playbook, which takes a closer look at how responsible production in 2022 successfully combines productivity, sustainability and workforce engagement.
Thomas Hansmann is a partner at McKinsey & Company’s Jakarta office while Ying Wan Loh is a practice specialist at McKinsey & Company’s Kuala Lumpur office
Save by subscribing to us for your print and/or digital copy.