Indonesia’s strategic roadmap — “Making Indonesia 4.0” — promises to future-proof the nation’s competitiveness by focusing on five key manufacturing industries, namely food and beverages, textiles, automobiles, electronics and chemicals.

The roadmap is expected to accelerate the Indonesian economy by 1 to 2 percent by 2030, with annual gross domestic product growth rates of between 6 and 7 percent. At the same pace, the manufacturing sector is expected to contribute 21 to 26 percent of the national GDP and create 7 million to 19 million new jobs.

In moving toward these ambitious targets, the government continues to organize forums and discussions as well as targeted programs to raise awareness on the role of I4.0 and to prepare the industry to compete in the I4.0 ecosystem. However, there is a need to accelerate the efforts and build the momentum for visible action and impact. Speed is critical, as the uptake of I4.0 is happening at a fast rate, and businesses that are slow in adoption run the risk of losing their competitive edge.

The benefits of I4.0 are real. The deployment of I4.0 mechanisms in a typical manufacturing set-up can reduce costs by 20 percent, change-over time by 20 to 60 percent, ramp-up time by 50 to 60 percent and raw material costs 2 to 5 percent.

For example, smart robotics and big data analysis can improve efficiency and product quality. Infineon — a German semiconductor manufacturer — uses chip data to find patterns of product failures at the production process. This predictive quality control mechanism leverages product analytics to increase quality and minimize waste. As a result, the company achieves reduced failure rates, improved processes and reduced production costs.

ThyssenKrupp, for instance, uses a real-time mechanism to identify product status in production line to increase transparency in the order progress. With this technology, consumers can make better purchase decisions based on delivery date and continuously track their products. Such product optimization allows the company to save on overhead costs, increase tools utilization and monitor the entire manufacturing process.

We have also seen massive cost savings with predictive maintenance for food processing and packaging companies. A large European producer of dairy products achieved 27 percent cost savings by creating new data transparency using data trackers and holistic real-time Overall Equipment Effectiveness (OEE) tracking in all lines of products.

Beyond technological advancements, I4.0 is also about innovative products and services, disruptive business ecosystems and high-income jobs in new emerging areas of analytics, data analysis, design and modelling, among others. I4.0 can also boost traditional industries, transform small and medium enterprises (SMEs) and decrease income gaps. If companies adapt a systematic and business-driven approach to I4.0, they will be able to increase production capabilities, improve efficiency, drive productivity, create more jobs and enhance the overall competitiveness of the industry and the nation.

According to a BCG survey among 750 leading industrial companies, 85 percent believe they can benefit

from I4.0 and 74 percent plan to implement I4.0 over the next five years, but only 25 percent of them have already achieved their I4.0 related targets in the previous year.

A holistic approach is critical, including a reskilling revolution to help improve the quality and competencies of human capital as the industry matures with the deployment of advanced technologies. Similarly, it will be critical to deploy support plans to equip SMEs with the right skills and knowledge, so that they do not lag behind large companies when it comes to technology adoption and innovation for growth. This is to say that people and skills will continue to be instrumental in driving I4.0 transformation and success, even more than technology itself.

For the successful implementation of I.4, we need to tackle six key areas. The first of these is awareness. We need greater awareness and understanding of the benefits and the development of clear I4.0 strategies across industry, government and academia or skills-training.

Second is funding. There is a need to develop clear business cases for I4.0 adoption, where early adopters can see very attractive returns that can “fund the journey”.

Third is standards. It will be critical to adopt new “digital standards” that are relevant and ready for implementation.

Fourth is security. Rapid adoption and leadership will not be achieved until digital security threats are adequately resolved.

Fifth is skills. Industry, government and academia or skills-training institutes must come together to develop long-term strategies and policies.

Sixth is social Impact. It is also important to deliberate at all levels how society retrains and educates people and deals with short to medium impacts to deliver longer-term net gains.

In conclusion: With the right foundation, policy or strategy, ecosystem and capability, Indonesia is prepared to move toward the implementation of I4.0. The priority is to start making “real” progress fast, with “physical” outcomes, to amplify the momentum and accelerate adoption.

This means establishing a central team that will coordinate program implementation across ministries and the private sector, establishing the right infrastructure, including I4.0 model factories that people can visit and see, and building capabilities with large-scale skills development and SME enablement programs, and also support to selected companies in creating successful lighthouses in priority sectors.

Edwin Utama is a partner and managing director at BCG Jakarta. Lucas Chaumontet is a principal at BCG Jakarta.

Popular

Volcano erupts in North Sulawesi, hundreds evacuated

Dubai roads, airport reel from floods after record rains

Ramadan boosts consumer confidence, retail sales