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Urgent need for industry to speed up technology change, KPMG study finds

Jan 03. 2019
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By   THE NATION

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THE FOURTH industrial revolution (Industry 4.0 or i4.0) requires transformational change at a pace that the majority of manufacturers will fail to meet if they continue on their current trajectory, according to new research from KPMG International.

 KPMG yesterday issued a warning to manufacturers that they are vulnerable to disruption from competitors and new market entrants. KPMG is calling for CEOs to create a top-down strategy and implement large-scale change now in order to meet the realities of manufacturing in today’s market.

“Few organisations have developed holistic, end-to-end interconnectivity – our definition of the highest level of i4.0 maturity – among today’s breakthrough i4.0 tools and technologies. Most are still at the beginning stages, where investment is made due to projected cost savings. 

The digital revolution is about so much more than efficiency, and manufacturers not embracing a new business model will likely face threats to their survival in the very near future,” the research concluded.

In the new report, “A Reality Check for Today’s C-suite on Industry 4.0 – Experimentation is Ending”, KPMG has identified a false sense of security held at the top levels of many manufacturers. As organisations implement single-project, bottom-up approaches to transformation – from physical plant changes, |to integration of big data – cost efficiencies are cited as proof of i4.0 transformation.

Companies may see their bottom lines increase in the short term, but KPMG has found that individual initiatives are proving to cost more and yield less in the longer term when a business has to correct its course due to the incredible pace of change experienced by the manufacturing industry.

Tidarat Chimluang, head of industrial markets at KPMG in Thailand, said that many companies in the country are struggling to keep up with the pace of change and making the necessary technological adoption to reach industry 4.0. This is especially true in the agricultural and food processing industry, a staple industry of Thailand.

According to a study done by the University of the Thai Chamber of Commerce, less than 3 per cent of small businesses and less than 5 per cent of medium-sized businesses in the industry are considered part of the digitally-focused 4.0 era.

The hope is that the government’s Thailand 4.0 scheme will help push industry in the right direction. Importantly, companies must realise they need to prepare for the future, envision a big-picture strategy that best suits their firm and make the firm agile for change.

KPMG suggests manufacturers define what the organisation needs to look like tomorrow in order to be competitive or disruptive. 

With that in mind, they should design a strategy with a detailed plan and create a culture that supports wholesale change. Organisations with that foundation are well placed to lead the change we are seeing in industrial manufacturing today. “If manufacturers aren’t well on their i4.0 journey by 2020, they will have a problem keeping up with new market entrants,” said Tidarat. “They don’t have to have completed the journey, but they must have the foundation in place: a strategic approach, a holistic plan of transformation and the right culture to embrace change.” 

 

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