Mar 11, 2016
Industry 4.0 is lauded as the natural next step for the manufacturing industry, but its adoption, especially in Asia, has been slow. Despite the apparent benefits, the most important question remains—are Asian furniture manufacturers ready for Industry 4.0?
You would have seen it at international events, heard about it from leading machinery and software manufacturers and listened to presentations on the concept from market research agencies—Industry 4.0, the great next step forward for the manufacturing sector including the furniture making business.
It is easy to understand why there has been so much excitement over it in the past few years. In a much more connected world with big technological buzz words like Big Data and Internet of Things, Industry 4.0 seems like a natural next step for the manufacturing industry to move towards greater optimisation and customisation. Here is an opportunity for companies to deliver products that consumers want the exact way that they want them without incurring high production costs or tedious manufacturing processes. Everything can be done easily through high-speed data exchange with just a few clicks.
But away from global exhibitions and showcases, and at workshops in remote industrial areas far from the glamour of the modern urban Asian city landscape, Industry 4.0 seems like an idea that can be only be found in a science fiction movie. For a concept that emphasises on the importance of connectivity across the entire production cycle—from consumer (order) back to the consumer (delivery)—the lack of connectivity is hindering its implementation in Asia.
Of course, the global economic slowdown, especially in China, and the depreciation of Asia currencies against the US dollar have severely impacted the spending power of the people and the investments furniture makers can make.
In a way, if Industry 4.0 has come into the picture earlier when the economic outlook is still rosy and people has spare change in their pockets to indulge themselves, maybe the concept would have caught on better and faster. Now with the purse strings tightened, replacing a piece of functioning furniture is less important compared to other essentials, even when you can personalise it to fit your interior furnishing perfectly.
However, it is undeniable that the retail landscape is heading towards the digital route. Electronic commerce, or e-commerce, has seen robust growth over the last few years.
According to an insight report published by DBS, “hyper-connectivity and mass adoption of mobile technologies have made it easier for e-commerce companies to target consumers when they are looking for a particular product by tracking their online habits and itineraries.” The report also noted that many traditional retailers in Asia are finding it difficult to bring customers into their physicals stores.
With ever-increasing cost of rental, some retailers have also found it not cost-effective to invest in a store front considering the costs of furnishing and labour, as well as logistics of moving products from warehouse to and between retail outlets.
One of the obvious benefit of e-commerce is that furniture retailers, especially those who are also manufacturers, would be able to store their goods at a centralised location and dispatch them accordingly based on the order received.
However, even though consumers are spending more time and money on online shopping, some of their e-commerce habits are not favourable for the furniture industry.
First of all, a lot of spending is on relatively low priced items that help limit the amount of risks involved. In addition, online consumers usually look for brands that they can identify with (confidence factor) or products that they are familiar with or can gather customers’ reviews on.
For furniture, which are products that involved considerable investments and interaction, customers would prefer to see and touch the physical objects before making a purchase decision.
Another factor that significantly hinders the adoption of Industry 4.0 from the customer’s perspective is that most of consumers have little idea about furniture design, especially from the functionality perspective.
Regardless the customisation possibilities available, it would be useless if the customer do not know how to utilise the tools and what they can create with these tools.
In the end, ‘personalised’ and ‘customised’ products become mass produced furniture pieces with different ‘skins’ designed by customers and this would not be able to realise the full potential of the concept of Industry 4.0.
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From the manufacturers’ perspective, the lack of demand for such products and service is inertia that prevents them from moving into this next step of manufacturing.
Not many furniture manufacturers run on fully automated lines and in order to leverage on Industry 4.0, you need a completely connected production and communications at and between each stage. The amount of investment a manufacturer has to make is huge, but at the moment, the potential return seems limited.
Another consideration is that of capability. The furniture manufacturing sector is a somewhat ageing industry where old ideas and practices are still common place. One notable change in Industry 4.0 is the virtualisation of almost all the processes involved.
As a representative from SolidWorks said during a conference on Industry 4.0 in Singapore in 2014, the concept requires a shift in the skill set of the operators. Production will no longer hinge on physical skills, but competency with software.
The design is created virtually, the nesting of parts on a piece of raw material is performed virtually, the cutting, boring, drilling and assembly is done through digital input to the machinery and quality supervision is performed on the virtual space.
This means that in order for companies to benefit from Industry 4.0, they must have personnel who are trained to utilise the software. This present a big challenge for the furniture-making industry—attracting young talents with capabilities to join the work force.
It would be overly ambitious to ask furniture manufacturers to redesigned their current production processes and invest in expensive equipment just for Industry 4.0. But adoption of the concept need not start so big.
The term ‘production leasing’ has come into the spotlight in recent years as market participants in different industries try to shorten the distance between manufacturers and consumers.
The idea is that customers can order a product from a shop and the shop will then lease the production facilities from a plant to make the product for the customer.
Production leasing has come into prominence as the manufacturing sector move from mass production towards batch-size-one. In the past, in order for a shop to sell a particular product in a cost-effective way, the shop must ensure that it has sufficient demand from customers to enable mass production.
Now, batch-size-one production ensures that the cost of making one product is competitive enough against mass production and this is in essence what Industry 4.0 is about.
While continuing with their existing furniture production, manufacturers can establish links with designer houses or specialty shops to provide production leasing services to them. In a way, this is akin to ‘outsourcing’ the design and virtualisation component to these third parties, mitigating the impact on the lack of trained individuals.
Perhaps, the furniture industry can also take a page from the home furnishing sector. For the past two decades or so, there has been a strong focus on do-it-yourself (DIY), driven in a way by the desire for personalisation and customisation, as well as the removal of any middleman in between (which is similar to what customers can benefit from Industry 4.0). However, in recent years, with access to ever-growing amount of information and suppliers, consumers have find it a chore to go through and compare the options available to find the best solutions.
Eagle-eyed entrepreneurs in China saw the opportunity and created business to consumer home furnishing services. On the surface, they look just like any e-commerce portals with suppliers listing their products and services. What is different is that these service providers have created local consultation points that customers can visit to convey their requirements and ideas directly with a home furnishing advisor, who will then source for the materials and services they need from the portals.
Perhaps, that can a vision of the future for furniture manufacturers in Asia, where customers can visit a shop front or speak to a service representative online to detail the their needs. From that point on, the ‘consultant’ will help them conceptualise the requirements into a CAD drawing that can be fed to a manufacturing plant for production.
The designers or ‘consultants’ do not need to be furniture experts themselves, but must have the software skills to create the product virtually. The design can be passed to an expert with the manufacturing plant to discuss its feasibility and changes that are necessary.
This will provide a bridge between consumers and manufacturers and allow both parties to enjoy the benefits of Industry 4.0 without major effort in skill upgrade or heavy investments in new equipment or work force.
Most will agree that Industry 4.0 is the next developmental step for the manufacturing sector, but the move has been met with a lot of resistance especially in a traditional industry like furniture making that still relies on many old practices and values.
As with any kind of disruptive change, adoption cannot be centred on the revamping of the whole process, but necessary and simple changes that can be implemented to advocate the change. It is not about breaking habits, but optimising processes to cater to these habits.
The first area to look at is the current business models and how they can be evolved to match the current retail landscape without affecting current manufacturing practices.
Source: FDM Asia