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Going SMART: is It a Must or a Myth?

The cost of upgrading to ‘Industry 4.0’ is an obstacle for some Thai factories 

The global economy is undergoing rapid changes caused by the 4th industrial revolution. AI, the Internet of Things (IoT), automation, and cloud-based technologies are disrupting factory operations and the roles of traditional workers.

Factories are becoming more high-tech, with a strong push towards ‘Industry 4.0’. The Thai Government provides financial subsidies and tax incentives for SMART technology projects. These programmes are promoted by key organisations such as the Department of Industrial Works, the Digital Economy Promotion Academy (DEPA), and the Eastern Economic Corridor development scheme (EEC), among others.

But despite the incentives, budget concerns remain a significant obstacle for businesses to implement SMART factory technology. Multinational companies are more well-equipped to upgrade their operations than small- and medium-sized domestic businesses.

I’ve talked with managers from many Thai factories who want to adopt Industry 4.0 technology, but their projects have been delayed or deferred, mainly because of the high cost of investment involved. While basic industry standards such as 5S and Safety First are within reach, upgrading to a SMART manufacturing facility seems to become less of a priority after management crunches the numbers.

“I’m interested in going to Industry 4.0, but I cancelled the project and delayed after I saw the price from the vendor. I’d rather invest in making improvements to my product, rather than spending that money on the SMART process,” said one MD in the garment manufacturing business.

A lack of knowledge and access to new technologies is another key factor. Because global organisations have the resources to attract better talent, multinationals can develop technologies internally. The transformation to SMART technology is faster and easier for bigger organisations who can share knowledge, resources, and case studies globally. The economy of scale is a big advantage.

Most small- and medium-size factories in Thailand are family-owned business. They may not have people in-house who understand how to transform their facility into a SMART factory. The younger generation is well educated and ready to take on the challenge, but often they are not the executive decision makers.

The competition for talent in the global marketplace is intense right now. Smaller industrial factories often fail to land the most promising, technologically qualified candidates, who find start-ups and jobs in the IT sector more attractive.

Business leaders also have questioned the Thai educational system. They are concerned that the skills and competencies of graduates are not keeping up with the demands of the modern market.

“We need engineers who are hands-on, with programing knowledge and a good command of English,” said an HR manager working in the aviation sector.

The Thai companies I have seen that successfully upgrade to SMART Factories have one thing in common. They always start small, with one prototype unit: only later do they expand the rollout of SMART technology.

The policies and guidelines needed to drive technological transformation must come from the owner or top management to make it happen. Transformation is not always prohibitively expensive, especially if SMEs seek out the most suitable technologies.