Week in Review: Higher costs can be catalyst to adopt digital
By Karamjit Singh March 11, 2018
- World’s largest glove maker, Top Glove, sees digitalisation as answer to labour costs
- 3rd Edition of Digerati50 with latest group out to make an impact on Malaysia's Digital Economy
THE siren call has been sounded for all Brick & Mortar companies to adapt digital technologies into their business or face the consequences of being disrupted.
Those consequences will be wrecked on them by competitors who move quicker than them or by innovative, fast moving startups.
Consider yourself lucky if your sector does not attract the interest of startups with serious venture capital money backing them. In this case your competitors are your rivals and the speed of disruption depends on how aggressive they are in adopting to digital.
But as our article on Top Glove Bhd, the world’s largest glove maker reveals, it need not be startups or fast moving competitors that compel you to begin your digital adoption journey. Keeping a lid on costs can be a powerful driver as well.
For Top Glove, it turns out that disruption is caused not by competition which has always been there, but more by regulatory factors that drive up costs of its manpower.
With a staff strength of around 10,000 – many of whom are foreign workers, management thus sees better adoption of SCADA systems and digitisation as the way to counter the cost increase through the higher automation that both efforts will naturally lead to.
Interestingly, while digitalisation is an on-going process, Top Glove says the knowledge inhouse of how to truly integrate the available technology into its systems to improve efficiency is relatively new.
But that is not surprising as technology is not Top Glove’s business and even its inhouse IT team will not know how to properly integrate digital into its processes. Even its 100-strong R&D unit will not know how to integrate digital. I’m betting that’s not why they were hired into Top Glove anyway.
This is why you partner with experts and this is where the Malaysian Digital Economy Corporation (MDEC) comes into the picture with a specific grant that helps companies apply digital to improve their efficiency.
From what I understand, the grant amount is not large, at below RM500,000. And wisely, the grant does not go to the grant recipients but to the MSC Malaysia company that helps the grant recipient implement digital technologies.
In the case of Top Glove, some portions of its ongoing pilot digitalisation projects are done by a MSC Malaysia company (MDEC declined to reveal which company) with the rest by Top Glove. The pilots are in process chemistry quality assurance, overall equipment effectiveness, chorine emissions and combined heat and power system energy efficiency.
The wide range of the pilots is a great example of how digital can be applied to so many areas of a business to help it improve efficiency and reduce cost over the long term.
For Top Glove, its ongoing adoption of digital over the past three years has already helped it reduce manpower cost by one third. Where it usually hires 1,000 new workers a year, over the past three years, it only hired 2,000 workers.
Expect its overall headcount to come down as well as it progressively applies digital technologies to all its plants. That’s a massive undertaking for a company that, by May 2018, will have 600 production lines spread over 30 glove plants across three countries churning out 56.8 billion gloves per annum.
Imagine the impact of this on the MSC Malaysia company if Top Glove keeps using them for its ongoing work.
And impact is what our latest group of Digerati50 hope to achieve! You can get your hardcopy of that once-in-two-year publication in the current print issue of Focus Malaysia or you can download it here. All of us at DNA are super excited over this and we hope you will enjoy reading their stories.
From April onwards, DNA will also run each of their articles on our site, on a weekly basis.
With that, I hope you had a restful weekend and here’s wishing you a productive week ahead.