Asia’s supply chain 4.0: Thriving in the fourth Industrial Revolution

Ten years ago, Andrew Ng, a leading artificial intelligence (AI) expert, shared his thoughts on AI’s past and future during an interview at Raffles Institution in Singapore. At the time, AI was still a relatively new concept, and people were just beginning to understand its potential to transform industries and simplify tasks.

Ng reflected on what first drew him to the field. “I thought it was astounding that you could write computer programs that would learn by themselves,” he said. “The idea of building intelligent machines to take over routine work amazed me.” This early fascination led him into AI, a field he has been dedicated to ever since.

Ng is the founder of DeepLearning.AI, an educational technology company focused on AI and machine learning, and he also co-founded Coursera, an online learning platform. His work has centered on building intelligent machines, and now some of that work is being applied to education. It is beginning to reshape how people learn.

Today, a full ten years since that conversation, AI has now moved from theory to real-world applications, transforming not just education but many other fields, including supply chains and logistics. AI is moving faster than ever, and it drives change across Asia.

It is part of the so-called Industry 4.0. Often called the Fourth Industrial Revolution, this new wave brings automation, the Internet of Things (IoT), advanced data analytics, big data, blockchain, 3D printing and more to the forefront of industries. Nowhere is this revolution more visible than in Asia, home to many of the world’s leading manufacturing hubs.

Across the region, factories are getting smarter, supply chains more transparent, and logistics smoother. But what does this really mean for Asia, and what challenges lie ahead?

Supply chain 4.0: Transforming logistics in Asia

Industry 4.0 is the integration of digital technologies that link the physical and digital worlds to create smarter and more efficient systems. It is an evolution marked by the widespread use of technologies like IoT, AI, 3D printing and big data to make supply chains more flexible and responsive.

For supply chain management, Industry 4.0 represents a monumental shift. Traditional systems are giving way to interconnected networks of machines, sensors and software that can make decisions in real-time. This means less guesswork, fewer delays and a more consistent flow from production to the final customer.

The promise of Industry 4.0 is potent in Asia’s manufacturing base, where it can have an impact on the global economy. As the global supply chain is shifting, many manufacturers worldwide are aiming to cut risks, manage costs, strengthen resilience and tap into new markets.

In their bid to avoid relying on a single source, many manufacturers are now looking toward Southeast Asia, where the region’s rising role as a manufacturing hub is clear in the changes taking place. Southeast Asia is on the frontlines to harness the promise of digital factories and smart production systems.

READ: Chinese companies turn to SEA amid China’s economic, regulatory challenges

Intel has invested over $7 billion in a new chip-packaging and testing plant in Malaysia to increase production in response to the global semiconductor shortage. This underscores a reality of the modern digital supply chain: they’re a web of shifting connections, and each one has the power to make or break the whole.

“Malaysia is a very, very critical location in Intel’s supply chain where we are not only doing manufacturing, assembly, and testing products, but we also have design,” says Intel’s Keyvan Esfarjani, executive vice president and chief global operations officer in an interview.

Recently, the company has decided to postpone the startup of the factory. This is due to low demand and ongoing losses totaling $2.8 billion from its foundry in the second quarter of 2024 according to an Intel report. In an email to Singapore’s Business Times, Intel has stated that it will time the startup based on market conditions.

Indonesia and Vietnam are also leading the charge in manufacturing and trade shifts, as clear from foreign direct investment (FDI) and export numbers, according to a report from McKinsey & Company.

In 2023, Indonesia pulled in about $33 billion in greenfield manufacturing FDI, while Vietnam attracted around $16 billion. Their exports hit $290 billion and $440 billion, respectively. Meanwhile, China, expected to stay a production powerhouse, helps drive these changes, with its manufacturers moving their operations into Southeast Asia, the report added.

Upskilling for Asia’s supply chain future

Automation now handles routine tasks in supply chains. Yet, these new technologies require a workforce adept in digital tools, data analysis, and machine learning. Across Asia, nations are launching programmes to retrain workers for success in this evolving digital landscape.

Singapore is investing heavily in upskilling its people. The government has rolled out various programmes to support the digital transformation of its industries, especially through the Economic Development Board’s plan to reshape manufacturing with Industry 4.0.

As digitalisation and deep tech innovation redefine the industrial sector, Singapore’s commitment to research and development (R&D) and talent cultivation aims to make its manufacturing sector smarter, greener and more connected. This strategic focus positions Singapore to seize growing opportunities in Asia and solidifies its status as a hub for global companies.

The nation seeks to create a world-class manufacturing ecosystem to become a hotspot for advanced manufacturing. In the 2021 Bloomberg Innovation Index, Singapore ranked third in manufacturing value added. According to the EDB, this momentum around Industry 4.0 has drawn major global suppliers like ABB and Siemens to set up Advanced Manufacturing Centres of Excellence in Singapore.

Moreover, Singapore boasts a highly skilled and adaptable workforce, ranking second in the 2022 Global Talent Competitiveness Index. Through national initiatives like the SkillsFuture Series in Advanced Manufacturing, the government collaborates with industry leaders and educational institutions to equip its workforce with the skills for advanced manufacturing.

Building trust in supply chains

With the advent of IoT and blockchain technologies, companies can now track and monitor products from the manufacturing stage through to delivery. This transparency can minimize errors, reduce risks and guarantee compliance with international standards, particularly in the food and pharmaceutical industries.

For instance, Singapore’s the GrowHub Innovations Company has introduced a blockchain-powered food traceability platform aimed at increasing transparency within the agricultural ecosystem of the Asia-Pacific region.

GrowHub CEO Lester Chan said in an interview that consumers are becoming more informed about their food choices, including their ethical origins and environmental impact.

“Consumers today are savvier than ever before and keenly interested in the origins and ethical footprint of the food they consume. They want to make purchases that align with their values. This heightened consciousness has exposed the lack of transparency that has permeated the food industry,” Chan said.

Meanwhile, Japan’s Mitsubishi Logistics has utilized blockchain technology to ensure clients can verify that products are maintained under appropriate conditions throughout the supply chain.

In collaboration with Takeda, they implemented the ML Chain data platform in January 2022, which visualized temperature control and location data for pharmaceutical products.

This initiative aimed to enhance quality control by sharing temperature and location information among various stakeholders in the distribution process while ensuring reliability through blockchain technology.

“We will continue to develop and expand the functionality of our data platform using blockchain and other cutting-edge technologies and will work together with Takeda and other companies to ensure a stable supply of pharmaceuticals while maintaining quality in pharmaceutical logistics,” senior manager executive officer Hitoshi Wakabayashi said.

Harnessing AI and analytics

Advanced analytics and AI can now optimize inventory control, demand forecasting and transportation logistics. With AI-driven platforms, companies anticipate market changes, manage logistics better and cut down on overproduction and stockouts. This boosts efficiency. AI tools help businesses predict consumer and customer demand accurately to make supply chains more responsive.

This year, Chinese e-commerce giant Alibaba announced plans to further expand its overseas operations. They are deploying an AI-powered sourcing tool for their business-to-business customers in the U.S. This move shows the company’s aim to diversify its supply chain, even amid ongoing geopolitical tensions between Washington and Beijing. Such steps reflect a broader trend of companies using AI to navigate complex global supply chains.

Aside from diversification, tech giant IBM proposed that supply chain leaders using AI-driven workflows gain resilience that leads to increased revenue growth and profitability. This approach, called a “smarter” supply chain, relies on intelligent workflows fuelled by data-driven decisions. These workflows improve forecast accuracy by 20 to 30 percent and can make quick responses to disruptions, the report added.

IBM also proposed the five key trends, including dynamic computing, personalised customer experiences, self-learning operations, agile models and transparent & ethical networks. These elements are based on its AI-driven workflows to improve supply chain responsiveness and flexibility. Companies can build resilient and adaptable supply chains ready for expected changes and unforeseen challenges by harnessing AI, predictive analytics and automation.

Challenges

Implementing Industry 4.0 technologies is not without challenges. The initial investment can be high, and the learning curve is steep. In less developed parts of Asia, inadequate infrastructure can slow adoption. Cybersecurity also remains a concern, with interconnected systems hypothetically vulnerable to attacks.

For supply chains, the challenge lies in balancing the costs and benefits. Smaller companies may struggle, while large corporations might afford to overhaul their systems. And as companies digitize, they open themselves up to cybersecurity threats that can disrupt entire supply chains.Industry 4.0 is reshaping trade and logistics across Asia, bringing speed in delivery time and transparency among better customer experience. However, its success hinges on overcoming challenges, from training a skilled workforce to addressing cybersecurity. As the Fourth Industrial Revolution unfolds, Asia’s supply chains are adapting and setting a new standard for the global economy.