Market demand will shape the factory of the future
By Chris Lee September 25, 2015
- With the AEC, Malaysia’s manufacturing leadership will face severe tests
- One way to meet this challenge is to embrace the concept of ‘smart factories’
MALAYSIA’S manufacturing industry constitutes over 25% of the country’s GDP (gross domestic product) and it has been a major player in the Asean region thanks to the country’s pro-business policies, sophisticated financial facilities, and well-developed infrastructure.
In fact, investment consulting company Cushman & Wakefield ranked it the world’s top manufacturing market in its Manufacturing Index 2014.
However, with borders slated to open thanks to the Asean Economic Community (AEC), local manufacturers will face new and increased competition around the region, and Malaysia’s ability to maintain its leadership position will be tested.
One way to enhance manufacturing productivity and meet new market demands is to embrace the concept of ‘smart factories.’
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Before we can understand where factories are going, it’s helpful to look at where they are today. Let’s take an automotive plant as an example.
The typical automotive factory today is set up to have economy of scale on a very limited range of models. Rarely does one factory produce a variety of sedans, trucks, and SUVs (sports utility vehicles).
Instead, the factory has dedicated tooling, equipment, and other resources that are specific to certain car models, and the factory is strategically located in relation to its suppliers to enable economies of scale for mass production and derive further growth through higher volumes.
While leveraging on local capabilities, this is all well and good, but what ends up happening in this type of set-up is that the factory doesn’t necessarily produce what the market is demanding – it produces what it has been set up to produce.
As a result, you have a certain amount of inefficiency built into the marketplace, and situation is aggravated by a shorter product lifecycle that demands the manufacturer be able to respond quickly.
Auto manufacturers can barely keep up with production for popular hot-selling models, and on the other end of the spectrum, they can barely give away models that aren’t selling.
This imbalance is typical of the factory of today.
In order to improve this model of production, the factory of tomorrow needs to move from being resource-intensive and to instead leverage on a knowledge-intensive approach and exhibit greater modularity, flexibility, and re-configurability.
What does this mean? Let’s look again at our example of an automotive plant. In a smart automotive factory, the equipment is flexible and adaptable so that it can be quickly changed over to manufacture multiple models, with an enhanced capability to support mass customisation within the same factory.
If a company has more demand for sports cars or for SUVs, it can quickly adapt the factory to meet that demand.
By managing the flow of materials to the markets more intelligently, companies will be able to produce something that’s much closer to market demand, while riding on the competiveness of global sourcing and global markets.
The ultimate extension of this vision is that a customer could walk into a dealership, figure out exactly what type of car she wanted, and have it manufactured on demand – just for her, by a facility located relatively close by.
Customisation is key
The above scenario isn’t as far-fetched as it seems, given the growing demand for ‘artisanal products’ and personalised and/ or customised offerings.
As demand is shaped by today’s consumers who are drawn by aesthetics and functionality, as well as environmental consciousness, companies that are best able to meet that market demand for individualised, personalised products are going to be the ones who will thrive in this kind of an environment.
For a consumer products manufacturer, that means that instead of producing 100 million smartphones a year that all look virtually the same, it will now offer a high degree of customisation and build phones to customer specifications. Potentially, no two phones would be the same.
In order to meet this ‘small batch production’ trend head-on, the factory of the future will become more decentralised.
This means a couple of things.
For one, it means more local manufacturing. Sneakers, for example, will no longer be manufactured halfway around the world by an anonymous individual – they will be manufactured close to the consumer.
We used to know the people who made our products, and consumers are seeking to regain that ‘personal’ connection with the products they buy today.
Small batch manufacturing also means more urban manufacturing. The availability of 3D printing and other additive manufacturing technologies allows for spaces that normally wouldn’t have been appropriate for a manufacturing facility.
We may also see several different small batch manufacturers organised as communities and co-located in urban manufacturing hubs – a very different kind of vertical organisation from what we typically see today.
Taking sustainability into account
The trend towards producing closer to the point of use – as in the local manufacturing and urban manufacturing scenarios outlined above – makes sense not only from an economic perspective, but also from an ecological perspective, given the lower transport and fuel costs, and other environmental factors.
This is important because there is increased interest from consumers in how the products they buy are produced: Are they produced sustainably?
Sustainability can be something as easily identifiable as energy consumption.
Today’s factory typically has a large amount of equipment on the plant floor that runs continuously whether or not it’s being used, because shutting it down and then booting it back up takes too long or is too tortuous of a procedure.
Obviously, this is not a paragon of energy efficiency. Currently, factories in Malaysia consume 40% of total energy use in the country.
The factory of the future is going to have a more dynamic approach, with demand management systems and energy management systems in the plant that provide feedback at the micro and macro level.
These systems can help the plant owners analyse when the optimal time to operate equipment might be, or whether the equipment can be designed in a way that it can be quickly shut off and brought back online without negative effects on production.
To design for any type of sustainability, the factory of the future will need to have digital model counterparts that allow them to optimise the factory layout virtually before it is built physically in the real world.
Crucially, those digital models will accept data feeds from the real world that will allow them to monitor the overall health of the factory in terms of various sustainability metrics, and then aggregate the data.
With the Internet of Things (IoT), more objects are becoming embedded with pervasive sensor networks and semi-autonomous systems that can communicate and provide the information that workers and factory operators need to make the best choices.
As a result, if a factory wants to adjust its Heating Ventilation Air Conditioning (HVAC) system to reduce energy consumption or optimise the lighting in a plant to increase worker happiness, it can make a decision based on actual data from the factory floor.
The challenge in achieving the 100 green rated factories in Malaysia by 2020 is essentially for manufacturers to understand the return on investments versus the cost of building or refurbishing.
Ultimately, this emphasis on sustainability reflects a shifting mentality on the part of factories.
Rather than asking “How cheaply can I manufacture something?” they are taking a more comprehensive view that looks at all aspects of operations – including labour, capital, transportation, carbon emissions, and the work environment itself – and asking, “What it the total cost?”
For manufacturers and consumers alike, this is increasingly the question that matters – and the factory of the future will need to answer that question.
Beyond adopting quality control such as Statistical Process Control and 6 Sigma Quality control, factories of today are poised to become the smart factories of the future by becoming more dynamic, connected virtually and decentralised, as well as more flexible, adaptable, and reconfigurable.
Smarter Factories will need to harness data intelligence from managing knowledge from human capital to increase ‘Life Time Value’ beyond just the traditional product lifecycle.
This will allow them to produce a wider variety of products from within the walls of a single factory; embrace smaller batch manufacturing that delivers more personalised and individualised products from closer to home; and make sustainability more of a factor in manufacturing.
In accomplishing these goals, factories are merely doing what successful businesses have always done: Give the market what it is asking for.
Those that don’t, risk getting left behind by this latest wave of manufacturing.
Chris Lee is regional industry manager, Manufacturing, at Autodesk Asean.
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