Industry 4.0: The journey towards automation

Automation is viewed as inevitable in manufacturing in view of rising labour costs and the need to improve the country’s productivity, which still lags behind several high-income regional economies, according to the World Bank. Accelerating labour productivity is key to nudging Malaysia towards becoming a high-income nation and it can be achieved by adopting new technology.

Although companies are generally aware that they need to automate to deal with rising labour costs, many of the smaller ones may be less incentivised to do so because machines are expensive and they lack the economies of scale to make the investment financially viable.

There is also the challenge of understanding how to get the process started and apply for incentives or grants, observes Datuk Tang Chong Chin, managing director of United Sweethearts Garment Sdn Bhd and president of the Malaysian Knitting Manufacturers Association.

“Some of them may find it difficult to handle some of the paperwork and documentation for the Malaysian Investment Development Authority (MIDA) and SIRIM. A lot of us know what to do, but do not know what to write.” he said.

While different companies require different solutions when it comes to automation, even within the same industry, there are varying challenges to automation. For instance, in the textile industry, the upstream players (such as yarn-spinning factories) can automate more than the downstream players.

 “We mainly depend on people who sew and it depends on what sort of sewing they do. For example, if they sew uniforms, the styling is the same all year long, so they can probably do more automation because it is standardised. But I am doing children’s wear, adults’ casual wear and sportswear, so the production keeps changing and the level of automation is not very high,” Dato’ Tang added.

Step by step

One government agency spearheading the automation effort is MIDA. CEO Datuk Azman Mahmud says the lack of understanding about automation technologies and the high cost of equipment are two common challenges cited by SMEs.

MIDA has introduced several measures to help SMEs. One incentive is the Automation Capital Allowance (ACA), which was announced in 2015. Depending on the category, companies can claim up to 200% allowance for a fixed amount of qualifying capital expenditure. The claimable period is from 2015 to 2020.

MIDA has approved 88 applications for the incentive as at January. Of those, 38 are in Category 1 — which represents the labour-intensive industries of rubber, plastic, wood and textile products — while 50 are in Category 2, which represents the other industries. The agency says the companies that applied for the incentive have managed to achieve an average increase in production volume of 200% to 300% so far.

Based on the applications it has received, MIDA says the investment in new automated systems can range from RM99,000 to RM11.7 million.

Three companies that have been successful in their ACA application are Joe Green Precast, a manufacturer of precast wall panels for building and construction; SYW Industry, a manufacturer of anchor belts, steel bands and U-bolts; and United Sweethearts Garments.

United Sweethearts Garment was able to increase its production volume by more than 300%. With the automation, it has the capacity to produce a much higher volume, which would otherwise require at least 100 workers. By automating its operations, the company has also managed to reduce its defect rate by 80% to 90%.

 A stitch in time

Companies need to automate to stay competitive, says Datuk Tang Chong Chin, “The adoption of automation can result in savings in terms of hiring manpower and energy consumption. It can also decrease defect rates,” he adds.

Tang started the automation journey by identifying processes that could be automated. One example is the elastic splice machine that creates the elastic bands in trousers. The process involves three parts: cooling down the elastic band and pulling it out, measuring the length needed and cutting it, and using a sewing machine to connect the two ends. The entire process requires two people.

“We bought very advanced machines at a high cost [about US$35,000 each]. Once you fit in the elastic, the machine can automatically pull it out and measure whatever length you want and cut it. After cutting, the sewing head attached to the machine sews it for you. In our case, one person can manage three machines. I bought three machines, so we reduced about five workers,” he says.

Tang also bought software to draw the pattern of the design and digitise it. “From there, we can enlarge and reduce to different sizes because when you draw, you can only draw one size. By using manpower to draw and match the marker, you may need two to three people. But how many stylings can you do a day? This software can help complete seven to eight in a day so it saves a lot of time,” he says.

A more unusual item is its Enterprise Resources Planning (ERP) system. While the business software is typically not claimable, Tang says his company’s case was an exception because the ERP was extended to the shop floor for production control. Instead of just managing administration issues, the ERP is used for productivity and quality inspection. The data is sent to the server and an LED television is installed for every production line.

“Otherwise, the supervisor need to keep recording production and quality inspection, then punch it into Excel, which is not a living document,” he says.

“But we extended the ERP to our shop floor so that every minute, you can check it on the TV. The ERP itself is not claimable. But if you have software related to the operation of production, it is claimable.”

Tang says he has claimed an estimated RM3.5 million in the past three years. His company — which has an annual turnover of almost US$60 million — has cut its foreign workforce to 900 from more than 1,000.

Nevertheless, he suggests that companies should talk to the MIDA before buying any equipment. We should make use of this benefit to improve the automation level and be more competitive. Otherwise, you will lose out one day.

He advises companies to visit exhibitions. Normally, machine suppliers will showcase the latest technology, software or hardware there.

 (This article is an extract from The Edge Malaysia Weekly, published on July 9, 2018)

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