In this episode of The Deep Dive, A&M Southeast Asia and Australia (SEAA) Senior Director Tingfeng Ye and Raimund Klein, CEO of INCIT, delve into Industry 4.0's transformative role in Southeast Asia's manufacturing sector. They discuss the pivotal advancements in technology driving growth, the critical distinctions between top and bottom performers, and forward-looking trends.

Featured Experts:
Tingfeng Ye - Senior Director (Singapore)
Raymond Klein - CEO and Founder Of INCIT

TRANSCRIPT

[00:00] Tingfeng Ye: Thank you for joining our podcast to discuss about industry 4.0 and its impact on Southeast Asia manufacturing companies. Today we have the pleasure to invite Mr. Raimund Klein, CEO and founder of INCIT to offer some insights on the latest trends and opportunities in this industry. To set some context, with the advancement of technology, more is being made possible. Leveraging on areas such as RPA (robotic process automation), big data analysis, Artificial Intelligence to identify new opportunities, and unlocking value for companies. We have seen rapid growth in the manufacturing sector in recent years supported by an influx of private equity investments. As the industry landscape continues to evolve it enables opportunities for businesses - to achieve sustainable growth and deliver enhanced value for investors. Well, Raimund, before we get started can you tell us a little bit more about yourself about INCIT and how Siri is being used as a global tool for manufacturing companies.

[01:09] Raimund Klein: INCIT is known for profit organization. We are a member of the World Economic Forum and what we focus in on is we catalyse the transformation of manufacturers globally, so to help them to advance their productivity development and growth. We built and deployed globally referenced frameworks. One is the smart industry readiness index focusing on productivity. We also have a consumer sustainability industry readiness index focusing on reaching the net zero and measuring the ESG establishment in the manufacturing or in the company side overall. And with these frameworks we have an iteration of improvements. So, it's not like let's say certification you get, reached the target state and you sit down and relax, you always reach a stage, and our indexes calculate, the next step of your improvement. So, we position the manufacturers for their future success in the next level of productivity and sustainability.

[02:13] Tingfeng Ye: And we all understand that Siri has been running since 2017, and you have measured over 2,000 companies around the entire globe. Based on your experience, where do you see the latest trends?

[02:35] Raimund Klein: From the data, when we look to our database of the digital transformation in sustainable transformation, we can see that the so-called Industry 4.0, trends are clearly starting with connectivity and then going to horizontal integration What we also see is from the trend is that the front runners, the best performance in class. They focus on asset and equipment efficiency, and on planning and scheduling effectiveness. And these top best in class guys are normally MNCs. If we are going to the bottom performers, unfortunately, here 2 very much described by the SMEs (Small medium enterprises). They focus very much on, number one, workforce efficiency and number two, on product quality. So, you can see already that the front runner, they have a completely different focus from a data pattern recognition, then those lagging behind, which unfortunately are the SMEs and here is our framework, prices index.

[03:59] Tingfeng Ye: I think this is very consistent with what we have seen with our if our clients. So, we do serve both MNCs as well as SMEs. The mid-sized companies are struggling with, what you mentioned, the intelligence part of Industry 4.0. And we also helping them to start on introducing simple automation on some of the repeatable tasks. Case in point, you know, I just recently served a MedTech company and we do see that, you know, they are starting to introduce simple automation for even, the visual inspection stuff.

And on the MNC itself, we see that they are trending towards intelligence starting with a Digital Performance Management even for big mining operations.

[04:43] Raimund Klein: Now if we look at the pattern recognition in this case, I need even to go one step further. Unfortunately, looking into the data, I found out that automation is not the first step. The first step is job shop connectivity to measure the impact of the automation you put in place. So even before coming to these, what you just mentioned automation, you need to have the job drop connectivity to measure the impact of the automation you put in place.

[05:23] Tingfeng Ye: Thanks, Raimund. We also see companies struggling to actually move to the next level of improvement. And I think from some of the trends that we see companies tend to get stagnant in terms of adopting Industry 4.0. Looking at some of the data what can you see why companies tend to struggle when they make this jump and on stagnation typically happens during their course of transformation.

[05:50] Raimund Klein: Companies at the moment, they're not really knowing what their digital maturity profile is currently. And when you don't know where you are, you also don't know in which direction to go as a next step. So, this digital maturity assessment, what we normally deliver is giving the baseline. And then our system is doing something what SMEs cannot do. They do give a strategic input, what is your focus on the bottom line? What is your business objective? And then our system calculates the next step in their transformation. So, we give these guided roadmaps with our framework.

And if we now looking to, let's say, adoption trends. It's very much moving from an Industry 4.0 perspective to a sustainability perspective, because what we can see is that the MNCs intend to delete Scope 3 upstream of the suppliers, which then has also an impact on the manufacturing processes in the future. Give an example to delete Scope 3, you need to insource, former outsource production processes by example, with 3D printing. So here you're not really have your assets on the stock laying, but you use when needed with your own 3D printers and with it you insource, formally outsource processes.

[08:18] Tingfeng Ye: I think what you said really makes sense, and it's also what we see in a lot of our private equity clients. So, a lot of our due diligence cases that we support our clients in, do take into account, a sustainability factor in terms of their investments. And it's also one of the things that we typically help our clients with, their operations efficiency but also, how they are handling their sustainable, the efforts in the company.

Let's shift gears and speak about the industries from the data that you have seen so far, you know, what are some of the top performers, top performing industries in the Southeast Asia market.

[08:58] Raimund Klein: When we're looking to the top performers, you have typically electronic, pharmaceutical, aerospace and semiconductor industries. If we go to the low performance that is general manufacturing – textile, precision engineering. Because these are now becoming again normally SME dominated markets; these industry segments. And as we stated before, these SMEs don't have, let's say a strategic objective, they have an operational objective – daily surviving – as they, they don't have a strategic roadmap. Like you have in semiconductor in aerospace, electronic industry for big manufacturers.

[10:04] Tingfeng Ye: What are some of those characteristics that you see other than the strategic side of things for the high performing Industries versus the low performing ones? Is it purely because of the size of the companies? Are there some SMEs they are doing better than the rest?

[10:23] Raimund Klein: That is an interesting question because we did correlation analytics in the data and find out that currently those having more employees perform better in terms of productivity and digitalization compared to those on average that have less employees. If we are now looking into SMEs which sector are really performing, then those are from the automotive industry, because in the automotive industry here, they assess the suppliers in terms of productivity gains. And this is very much driven by what we have seen in the automotive industry, it's not driven in the commodity industry.

[12:01] Tingfeng Ye: Building on to what you have said for private equity who are investing into some of those mid-sized companies. In the lagging sectors, one of the key things that they should do, is to set a longer-term goal and not to look at some of the short-term gains. Number two, build on the workforce and development to get the right talents into the organization. And number three, embark on to some of the characteristics that you have seen in, for example, the automotive industries.

All right, thank you Raimund. I think last but not least before it ends. This podcast wanted to get your thoughts on where you see this Industry 4.0 continuation to in terms of development, what are some of those trends or innovations that's catching your attention.

Raimund Klein: There are three pain points worldwide of manufacturers pain. Point number one is productivity digital transformation. Pain point number two is sustainability, reaching net zero. Pain point number three is a digitalized supply chain to make it resilient.

If we look to the hot topic in the market, it's sustainability. The sad part of sustainability compared to digitalization is industry for the zero is now 10, 13 years old. And when we aggregate the 12 industry, cluster 59 industry, segments. We measure with our smart industry readiness index on a world's top level. We reach between zero and five. Zero is bad. Five is fully digitalized. For the 13 years of Industry 4.0, we are at the beginning. For sustainability, climate change. I'm now 62 years old, we are discussing climate change, since I left university when I was 23.

Now, we measure with COSIRI the CO2 reduction efforts of manufacturers. It's less than one. So, important for surviving is sustainability, although this will merge with Industry 4.0 but need to be driven in parallel.

There might be some reinvention of how things are traditionally being made. You need to have new material. Specifically, no CO2 material.

[18:36] Tingfeng Ye: Perfect. Thank you so much for being with us today Raimund. Wish you all the best.

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