BE READY FOR THE REVOLUTION
By TA News Bureau:
As the tyre industry races up to catch up with the stunning changes in the automobile industry, the only choice before it is to embrace the revolution in manufacturing. The digital transformation in production is the way the tyre industry can hope to remain in the reckoning and produce innovative tyres that electric vehicles of tomorrow require. Automation in such diverse areas of value creation will lead to enhanced efficiency in the production processes. It will unlock the power of manufacturing. Alasdair Gilchrist, who has spent over a quarter of century as an IT specialist handling data communication and Big Data among others, in an interview to Tyre Asia speaks of agile manufacturing to bring efficiency and business competitiveness. The future of the tyre industry will largely be based on its ability to adopt Industry 4.0 which is closely related to the Industrial Internet of Things. The author of Industry 4.0 told Tyre Asia says that initially, for every manual job lost another skilled job will be created as business transits to digital capability. He emphasises reskilling of workers as we go forward
Your book Industry 4.0 has raised many aspects of the Industrial Internet of Things. For the tyre and automotive industry, how is this going to affect as the 4th Industrial Revolution creeps in?
That is a very good question. The problem as I see it is two-fold: firstly we have the difference between the business objectives of the large multinational tyre producers that are digitally mature versus the small to medium producers. For the larger companies with the technology, budgets and knowledge then Industry 4.0 or its close relative the Industrial Internet of Things, makes perfect sense. By adopting the methodologies and business practices suggested by Industry 4.0 they can optimise their operations and increase their profitability by automation and supply chain efficiency. After all profits equals revenue minus operational cost. Therefore, I think we will see at the top end of the Asian tyre market strenuous moves to adopt Industry 4.0.
However, for small to medium producers of tyres or automobile parts the business drivers to automation are not quite so clear-cut i.e. wages are significantly lower than for their competitors. This slower uptake to automation comes down to the realisation of the harsh financial and business case, a robot or a cyber-physical system, such as a machine or even an entire factory, does not necessarily result in either capital expenditure or operational benefits. Therefore, what we are seeing is that small to medium businesses are still going with the model of buying the equipment and machinery they need to enter the market but augmenting the process with manual labour. They are benefiting where feasible with technology but filling the gaps through lower cost not just through low skilled labour but highly educated and well-trained employees. Thereby they are maintaining their labour cost advantage over competitors in the EU and the US while adopting state of the art technology where it is advantageous.
There are always genuine fears among workers that robotics and artificial intelligence will phase them out while political leaders are wary that Industry 4.0 could trigger unrest among workers that would destroy our society. How would you address these concerns?
Strangely, this was not so much a concern in the 80’s and 90’s when the lower paid manual workers were being replaced by machinery in heavy industry to relieve them from the drudgery, the dirty and perhaps dangerous work. The game change arose through Artificial Intelligence, whether that is embedded in robots or in software and it threatens the livelihood of contemporary professionals, knowledge workers, decision-making executives and even creative thinkers. As a result, we are considering mass job losses across the whole work spectrum and this is a major concern. After all human workers do identify with their work or career. Whether a person is a solicitor, teacher, doctor, welder or a janitor, commonly an initial social query is “what do you do?” Hence, should we replace the traditional workforce with AI augmented machines or software? What we do with the people who have lost their jobs, and how do they come to terms with this loss of identity?
The common solution that many executives propose is further training but if you can retrain a human worker cost-effectively and in such a short time would that job not be also ripe for automation?
The problem lies where one person loses other gains. Low skilled jobs will be replaced by higher earning and educated technology workers, and that opportunity will alone will allow them and the nation as a whole to escape the poverty trap. The industrialisation of China is a perfect example of how effective this can be. China and India have managed to produce an abundance of highly educated and skilled workers that are also relatively low paid yet are in demand around the world. However, we must not lose sight of those made redundant, those left behind, and we need to look to how we can lessen the blow for those unfortunate workers, whether they be manual or knowledge workers that inevitably will lose out when automation takes over.
One suggestion proposed in the West is the Universal Wage, which as a dividend payment is made to all citizens. However that comes under strong social resistance, especially in the US. If we reconsider and market the Universal Wage as being a right of each and every citizen regardless of wealth, as it is supposed to be, and if it is considered as a share in your nation’s wealth there will be more acceptability. And if we dub it as a notion that it is unemployment benefit or tied in some way to welfare payments, then it might just find acceptance and mitigate some of the financial hardships that future generations will face.
However, with the vast populations in Asia, for example India and China, and the very low level of ‘GDP per person’ it makes the Universal Wage proposal unfeasible or prohibitively expensive. Therefore, we need to look towards government initiatives such as ‘Make in China’ and ‘Make in India’. These initiatives will drive and provide economic, social and political support for the manufacturing industry to encourage the evolution towards digital transformation and automation. By providing incentives for Industry 4.0 and digital transformation projects, governments can – through tax free or preferential benefits – provide the incentive for established or start-up companies for a few years at least to invest in local labour.
For example, if national governments are willing to support tyre producers to locate to perhaps a rural area with high unemployment through the offer of grants or loans that will enable the business to establish a presence within the community then it can be a win-win situation. Consequently, as the company becomes a major employer or benefactor to the local community, many of the technology fears can be overcome. For if a manufacturing company can relocate to cheaper land and then re-invest the cost savings in the technology and importantly in further education (local schools and colleges) they will become an integral part of the community. This alone will allay the initial fears, for it is only through higher education and provision of meaningful and productive work that we can expect the next generation to escape the traps of poverty or the fear of automation.
As a person who has been living in Thailand and knows the pulse of Asia, tell us how Industry 4.0 could be introduced without raising anxiety and fears among the people, particularly in highly populated China and India?
Well, if we consider for example the tyre and automotive parts business, then Industry 4.0 will not have necessarily a detrimental net effect on the social well-being of the nation. Initially, for every manual job lost another skilled job will be created perhaps not locally. Asian students are in big demand as a both local and foreign manufacturer’s transit to a digital capability. Therefore, as the demand for manual processes gradually recedes and technology comes to the fore there is a path for the next generation to follow. The issue is how you balance the job lost to the job gained as it is unlikely to be the same individuals that are capable of performing both roles. Therefore, we must find a way to provide meaningful work for displaced workers as well as provide the technology education and further training, and career advancement for new recruits.
Governments and industry should also be more aware of the impending challenges that perhaps future high levels of unemployment and ironically a shortage of skilled labour will present. Hence, we would like to see initiatives such as in Thailand where the government have actively supported the automotive business: one was the first time buyer scheme that provided subsidised purchase of the first car, which also resulted in a boom of production and consequently higher demands for replacement tyres. Similarly, to encourage major producers they have encouraged the adoption of Industry 4.0 methodologies and actively encouraged them in becoming a hub for the production of radial tyres for the aero industry. As a result we are seeing tyre producers take advantage of Asia’s natural abundance of raw materials, which along with low tax regimes for foreign or local companies, create products that create value for the nation. By supporting tyre producing companies the government enables tyre producers to contribute to the economic and industrial development of the country and also importantly to provide the potential work opportunities and career advancement and wealth creation of the nation’s citizens.
However, for incoming multinational companies to setup and employ local talent it must exist at least potentially in the first place. Hence, we need to start educating and training today’s schoolchildren so that they have the necessary skills for employment in tomorrow’s industry. We importantly have also to stress the necessity that learning is a life-long endeavour; it appears that there may well not be a job for life – the harsh truth is that the velocity of change means that the job you train for today may well be antiquated tomorrow.
With the imminent introduction of autonomous vehicles and 3-D printing of tyres and auto parts, what are the emerging scenarios of the mobility scene, particularly in Asia?
Within Asia, the two-wheel tyre segment is still probably the largest market and 2/3rds of that are replacement tyres. The advent of autonomous vehicles is probably most likely not going to change that dynamic as most autonomous vehicles entering the market will likely to be expensive and initially the demand may be driven by novelty or limited editions. What is more likely to appear in the near future is autonomous self-driving vehicles as public services rather than as private cars, so it will be via public transport, public taxis, buses or light/heavy duty industrial trucks that will probably have a significant impact on the tyre and automotive parts industry. The issue is that the more autonomous vehicles that come on the road under a management umbrella –say a company fleet, a hire-company or a taxi firm – then they are more likely to deal with the manufacture’s preferred supplier for tyres, typically on advantageous contract rates. Consequently, small medium tyre or parts producers will feel the squeeze as the bigger operators can use volume sales to protect their market share. As a result fleet and contract hire companies will deal with larger multinational suppliers of standard and autonomous cars. The price conscious consumer market producers may find it difficult to compete.
However, small and medium businesses that adopt Industry 4.0 methodology can also take advantage of this dynamic situation for there will still be for many years and for generations, privately-owned vehicles especially the two wheel segment – all those mopeds in Vietnam, Cambodia and Thailand are not going to disappear overnight. The advantage that can be had here is because the price conscious customer or the smaller volumes and job lots might not be so attractive, cost-effective or financially efficient to the larger producers. In this context the smaller producers may well benefit through a more agile approach to manufacturing, such as ‘make to order’.
Where the ‘make to order’ process becomes important is through the use of technologies such as 3-D printers where any custom design can be designed, coded, printed (produced) cost-effectively even for very small job lots. Therefore, we are likely to see small, medium tyre producers adopt 3-D printing technology in order to gain agility; they can produce custom designs, say those white walled USA 1950’s style tyres. These producers will have the flexibility and the incentive to operate at low job lot sizes.
However, technology can always be a double-edged sword: All tyre producers regardless of size could get affected. Hence the need to have strong Intellectual Property rights (IP). The proliferation of 3-D printing devices across industry and even into the consumer’s home means that objects, tyres and automobile parts, become digital files that are as easily shared over the internet as music or video. Therefore, despite companies benefiting from 3-D printing providing cheap and efficient proto-typing, there will be the issue with information leakage. Asia after all has not always taken the lead in protecting IP, but perhaps it might have to re-evaluate its position in order to protect its own innovation and business assets.