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APAC manufacturing nearly at an AI tipping point

02 Apr 2019
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Microsoft Asia and IDC Asia/Pacific released findings specific to the manufacturing sector for the study, Future Ready Business: Assessing Asia Pacific's Growth with AI.

The manufacturing sector, which contributes to a significant proportion of Asia Pacific's GDP, continues to face rising competitive pressure due to growing costs and lower margins. 

Those organisations that have started to adopt Artificial Intelligence (AI) believe it will nearly double their competitiveness (1.8 times) in the next three years.

"Manufacturers in Asia Pacific are slowly, but surely, seeing the importance of adopting a digital strategy and latest technologies,” says Microsoft Asia manufacturing business lead Scott Hunter. 

“The Study found that 76% of manufacturing business leaders agree that AI is instrumental to their organisation's competitiveness in the next three years. To achieve supply chain excellence, and even develop new business models to address changing customers' needs, integrating AI for their business is a must. Organisations which fail to adopt an AI-first strategy risk being left behind in today's competitive market landscape.

"However, 59% of manufacturers have not adopted AI as part of their business today. This is a worrying sign for the industry that needs to thrive on innovation.”

For manufacturers that have started their AI journeys, the top three business drivers to adopt AI include higher margins, higher competitiveness and business agility, as well as better customer relationships and outcomes.

They are already seeing business improvements in the range of 17% to 24% today, and further improvements are anticipated in three years by at least 1.7 times. 

The biggest jumps are expected in driving accelerate innovation (2.0 times), and higher margins (1.9 times).

"The identified business drivers are a clear sign of how technology such as AI can create improved value by helping organisations gain insights, and better manage their operations in a highly complex environment," says IDC manufacturing insights research director Stephanie Krishan. 

"In fact, according to IDC FutureScape for Manufacturing and Implications for Asia Pacific (excluding Japan), half of the top 10 predictions are driven by data and AI-centric solutions or use cases, such as creating new ecosystems for automation, or even to put data at the center of their processes to drive speed, agility and efficiencies. This only points towards the fact that the future of manufacturing will be built upon data in order to deliver scalability and accelerate growth for the industry."

The Study also evaluated six dimensions contributing to the sector's AI readiness, three of which the manufacturing sector is lagging behind in, compared to Asia Pacific's overall readiness.”

  1. Strategy: Manufacturers need to have an AI strategy in place, and support a more distributed workforce
  2. Data: Manufacturers need to work on availability, quality and governance of existing data
  3. Culture: Traits required for AI adoption lacking in manufacturing organisations

More than half of the manufacturing workers and nearly half of the business leaders polled believe that cultural traits and behaviours are not pervasive in their organisation today. For example, 63% of workers and 57% of business leaders do not agree that employees are empowered to take risks, and act with speed and agility within the organisation.

"Manufacturers in the region must work on better integration of AI into their existing operations, including how data is used and processed. They need to build an AI-ready workforce that is agile and empowered to innovate," adds Krishan. 

"Only when manufacturers nail down its strategy and skills capabilities they can fully harness the full power of AI for their organisation."

The majority of business leaders and workers in the sector believe that AI will have a positive impact on their jobs.

62% of business leaders and 77% of workers believing that AI will either help do their existing jobs better or reduce repetitive tasks. However, according to business leaders, the skills required for an AI future are in shortage. 

The disconnect comes with employers' perception of their workers' willingness to reskill. 

"Business leaders are aware of the massive reskilling efforts required to build an AI ready workforce. However, 22% of business leaders felt that workers have no interest to reskill, but only 8% of workers feel the same. In addition, 48% of business leaders feel that workers do not have enough time to reskill, but only 34% feel the same way," says Hunter. 

"Business leaders in this space must prioritise reskilling and upskilling, dedicating employee's time for this to address skills shortage. Even as it may result in short term productivity impact as building an AI-ready workforce will result in greater gains in the future."