Contents
1. INTRODUCTION
1
1.1 Company Background
3
1.2 Financial Review
5
2. TRIZ NINE WINDOW METHOD
8
3. TRANSFORMA TRANSFORM ATION PLAN
9
4. RESOURCES NEEDED
15
5. PROJECTED CASH FLOW FOR 5 YEARS
18
6. CONCLUSION
23
7. REFERENCES
24
1
1. INTRODUCTION
In this report, the term ‘Industry 4.0’ stands for the fourth industrial revolution. Other related terms include the ‘Industrial Internet’ or the ‘Digital Factory’, although neither takes as complete a view. While Industry 3.0 focused on the automation of single machines and processes, Industry 4.0 focuses on the endto-end digitization of all physical assets and integration into digital ecosystems with value chain partners. Generating, analyzing and communicating data seamlessly underpin the gains promised by Industry 4.0, which networks a wide range of new technologies to create value. Industry 4.0 digitizes and integrates processes vertically across the entire organization, from product development and purchasing, through manufacturing, logistics and service. All data about operations processes, process efficiency and quality management, as well as operations planning are available real-time, supported by augmented reality and optimized in an integrated network.
1.1. Company Background
The late Tan Sri Konosuke Matsushita founded the Matsushita companies. The Matsushita miracle began with his vision to contribute to the well-being of mankind by providing reasonably-priced products and services in sufficient quantities. Today that vision has turned into a giant global business in more than 130 countries around the world.
The famous brand name
‘Panasonic‘
is easily recognized. But behind this
popular household name and the extensive range of consumer durables that carry its label stands its manufacturer, the foundation of the brand’s success, Panasonic Manufacturing Malaysia Berhad – Berhad – PMMA. PMMA.
The PMMA story in Malaysia is an inspirational one made remarkable and reflected in its string of proud achievements that have successfully spanned two decades. Being the first plant to manufacture household electrical appliances in Malaysia, the Company confidently took on its parent company in Japan.
2
Throughout the years, the corporation has observed a swift progress from its humble start as producer of dry-cell batteries to Malaysia’s leading manufacturer of sophisticated electrical appliances.
Today, the Panasonic brand name has emerged as one of the most welcome and trusted brand names for electrical home appliances chosen by most Malaysian households. At Panasonic, we manufacture, operate, deliver, and maintain a series of product range with globally competitive models under the Panasonic brand name to the market, incorporating new features, enhanced capability and improved quality, and equally important, with our excellent after-sales-services.
Currently, PMMA has two plants in Malaysia for its operation:
Head Office/Main Plant No.3, Jalan Sesiku 15/2 Shah Alam Industrial Site 40200 Shah Alam Selangor Darul Ehsan Tel: 03-58915000 Fax: 03-58915108
Product Manufactured Rice Cookers, Slow Cookers, Electric Irons, Blenders, Home Showers, Juicers, Food Processor, Meat Grinder and Bidet.
3
Shah Alam II Plant
No.9, Jalan Pelabur 23/1 Shah Alam Industrial SiteSection 23 40300 Shah Alam Selangor Darul Ehsan Tel: 03-58915555 Fax: 03-58915551
Product Manufactured Electric Fans, Ceiling Fans, Ventilating Fans, Vacuum Cleaners and Dish Dryer.
1.2. Financial Review
The Company crossed the Ringgit 1 Billion sales mark for the first time in history, recording revenue of RM1.086 billion and it was the highest revenue in its 50 years of existence. This constitutes an increase of RM 155 million or 17% against the registered revenue of RM931 million in the previous year. The overall improvement in sales performance in the current year was mainly attributed to a favourable exchange condition, better performance from higher sales in the
4
domestic market after the implementation of Goods and Service Tax and the transfer of manufacturing and sales of certain rice cooker models from Thailand.
With the improvement in revenue, the Company achieved a remarkable combined profit before taxation of RM185 million for the year ended 31 March 2016, which was higher by 42% or RM55 million against the previous year’s combined profit before tax of RM130 million.
While offering and pursuing a “better life” for an even wider range of customers, the Company will also work to sustainably grow its corporate value to satisfy shareholders, investors, customers, business partners, employees and all other stakeholders. Apart from the new model development and upgrading of previous models, the Company has also undertaken measures to expand on its manufacturing capacity and capability. We invested in technologically advanced facilities to cater for manufacture of new product range with enhanced features.
During the financial year under review, a wide range of rice cookers was transferred from a Thailand factory to the Company. Previously, rice cookers manufactured by the Company catered for the domestic market. With the transfer, the Company is now expanding sales to other Asian markets such as Vietnam, Hong Kong and Thailand. With effect from 1st April 2016, the Company was placed under the purview of Appliance Company following the change in regional reporting structure which aligned manufacturing companies to its respective product segment.
5
PMMA Five Year Financial Trend (Source : PMMA Annual Report 2016)
PMMA Five Year Trend (Source : PMMA Annual Report 2016)
6
2. TRIZ NINE WINDOWS
The theory of inventive problem solving (TRIZ) is a tool used for revealing and solving creative problems in any field as well as developing creative thinking skills and personalities (Altshuller, 2000). TRIZ has been shown to be an effective problem-solving methodology since its development more than approximately 70 years ago. TRIZ enables people to adopt a dialectical thinking style, which guides them to understand problems as systems, to first obtain a concept of the ideal solution, and to promote the performance of products by solving contradictions. Previous studies have integrated TRIZ with problem-solving tools in the manufacturing industry.
In creating the current state map, TRIZ’s problem defining techniques, such as ‘9Windows’ could be very helpful, as in any problem situation there are numerous elements in the context and definition that are not adequately explored. 9-Windows method uses a tabular form having 3 x 3 boxes (or windows). The central box represents the system in the present. The vertical axis represent the hierarchy of the system (i.e., super-system, system, and sub-system) while the horizontal axis the time (i.e., past, present, and future).
PAST
SUPER SYSTEM
SYSTEM
SUB SYSTEM
PRESENT
FUTURE
Semi Automation in Fully manual factory
Production Line and Material
Smart Factory
Transport
Manual assembly by
Part’s assembly in production
Cyber-physical Production
production operator
line
System (CPPS)
Production operator, manual jigs and tools, manual part’s delivery.
Production operator, industrial robot, AGV, MRP software.
Digital Twin, Cloudsolution, Production Machines.
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3. TRANSFORMATION PLAN ACCORDING TO INDUSTRY 4.0 The term industry 4.0 refers to a further developmental stage in the organization and management of the entire value chain process involved in manufacturing industry. Another term for this process is the ’fourth industrial revolution’. The concept of industry 4.0 is widely used across Europe, particularly in Germany’s manufacturing sector. In the United States and the English-speaking world more generally, some commentators also use the terms the ’internet of things’, the ’internet of everything’ or the ’industrial internet’. What all these terms and concepts have in common is the recognition that traditional manufacturing and production methods are in the throes of a digital transformation. For some time now, industrial processes have increasingly embraced modern information technology (IT), but the most recent trends go beyond simply the automation of production that has, since the early 1970s, been driven by developments in electronics and IT.
The widespread adoption by manufacturing industry and traditional production operations of information and communications technology (ICT) is increasingly blurring the boundaries between the real world and the virtual world in what are known as cyber-physical production systems (CPPSs).
CPPSs are online networks of social machines that are organized in a similar way to social networks. Simply put, they link IT with mechanical and electronic components that then communicate with each other via a network. Radio frequency identification (RFID) technology, which has been in use since 1999, was a very early form of this technology.
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Level
Features
Examples Manufacturing system made
Level 5 (Green Ocean) Discovery
Smart Factory Located
automated and smart
Across The Globe Virtually
decision ( e.g, scheduling)
Controlled by System
with remote visualization, monitoring and control.
Level 4 (Blue Ocean)
Merging real and virtual
Pioneering Invention
world of production
Level 3 (Blue Ocean) Concept Transfer
Level 2 (Red Oc ean) Non-linear System Change
Application of electronics and IT to further automate production
On the basis of CyberPhysical Production System (CPPS) Programmable logic control system
Introduction of mass production with the help of
Assembly line
electrical energy Introduction of mechanical
Level 1 (Red Oc ean)
production facilities with the
Linear System Change
help of water and steam
Mechanical weaving loom
power.
Table 3.1: Five Level of Innovation in Production
3.1. Industry Overview The Company remains steadfast on its vision to be the market leader for electrical consumer products by strengthening product line-up and will continue to engage with all relevant stakeholders. The international economic and financial landscape is likely to remain challenging for 2016 and will likely influence the prospects of the Malaysian economy. GDP is expected to grow at a slower pace of 4 to 4.5%. In addition, a stronger Ringgit will have an impact on the Company’s export revenue which is mainly denom inated in US Dollars. Looking ahead, the Company is cautiously optimistic, in line with gradual recovery of global economies although the outlook for certain markets remains challenging. The tight labour market, inflationary cost pressures and volatile foreign currency exchange continue to be key areas that we will actively monitor to mitigate any adverse impact on our global
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3.2. Transformation Components The following four main characteristics of industry 4.0 demonstrate the huge capacity that industry and traditional manufacturing have for change vertical networking of smart production systems, horizontal integration via a new generation of global value chain networks, through-engineering across the entire value chain and the impact of exponential technologies
i)
Vertical Networking of Smart Production System
This vertical networking uses cyber-physical production systems (CPPSs) to enable plants to react rapidly to changes in demand or stock levels and to faults. Smart factories organize themselves and enable production that is customer-specific and individualized. This requires data to be extensively integrated. Smart sensor technology is also needed to help with monitoring and autonomous organization. CPPSs enable not only autonomous organization of production management but also maintenance management . Resources and products are networked, and materials and parts can be located anywhere and at any time. All processing stages in the production process
are
logged,
with
discrepancies
registered
automatically.
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Amendments to orders, fluctuations in quality or machinery breakdowns can be dealt with more rapidly. Such processes also enable wear and tear on materials to be monitored more effectively or pre-empted. All in all, waste is reduced.
Concept for the realization of the CPPS. (Source : Thomas, 2017)
11
Explanation of the concept scheme.
Example of product flow through Cyber-Physical Production System. (Source: Roland,2015)
12
ii)
Horizontal Integration Via a New Generation of Global Value Chain Network
Similar to networked production systems, these (local and global) networks provide networking via CPPSs, from inbound logistics through warehousing, production, marketing and sales to outbound logistics and downstream services. The history of any part or product is logged and can be accessed at any time, ensuring constant traceability (a concept known as ’product memory’). This creates transparency and flexibility across entire process chains – from purchasing through production to sales, for example, or from the supplier through the company to the customer. Customer-specific adaptations can be made not only in the production but also in the development, ordering, planning, composition and distribution of products, enabling factors such as quality, time, risk, price and environmental sustainability to be handled dynamically, in real time and at all stages of the value chain. This kind of horizontal integration of both customers and business partners can generate completely new business models and new models for cooperation representing a challenge for all those involved.
iii)
Through-engineering across the entire value chain.
This engineering occurs seamlessly during the design, development and manufacture of new products and services. New products need new and/or modified production systems. The development and manufacture of new products and production systems is integrated and coordinated with product life cycles, enabling new synergies to be created between product development and production systems.
Characteristic of this through-engineering is that data and information are also available at all stages of a product’s life cycle, enabling new, more flexible processes to be defined from data via modelling to prototypes and the product stage.
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iv)
Acceleration Through Exponential Technologies
Industry 4.0 already requires automation solutions to be highly cognitive and highly autonomous. Artificial intelligence (AI), advanced robotics and sensor technology have the potential to increase autonomy further still and to speed up individualization and flexibilisation. AI cannot only help to plan driverless vehicle routes in factories and warehouses more flexibly, save time and cost in Supply Chain Management (SCM), increase reliability in production or analyse big data, but can also help to find new construction and design solutions or enhance the cooperation between humans and machines to the point of services.
4. RESOURCES NEEDED The question of resources is key for companies facing the digital transformation to industry 4.0. Of particular importance in this context are the appropriateness of their existing IT infrastructure and the availability of the necessary talent and skilled employees.
4.1. IT Infrastructures Industry 4.0 requires existing installations to be adapted and, in some cases, entirely new types of IT infrastructure. Diverse systems need to be networked and to learn to communicate with each other, and new communications networks need to be developed from scratch.
Although MES software (MES = Manufacturing Execution Systems, also known as Manufacturing Operations Management, MOM) is a critical element in the manufacturing IT landscape, a completely new generation of MES is required to cope with the new challenges created by Industry 4.0. The following are the main characteristics MES needs to support in order to make Industry effective
The first step is to analyze the current state of all systems. The aim is not to superimpose the new solutions and technologies of industry 4.0 on existing
14
structures, but rather to identify the most meaningful approach and to establish where existing systems and networks can be built on. A range of systems in differing business segments, such as research and development, procurement and purchasing, production, warehousing and logistics, marketing, sales and services, need to be taken into consideration with regard to networking.
This will be a major challenge for manufacturing companies, although the priorities set by differing business segments in relation to the digital transformation to industry 4.0 will vary.
Very large manufacturing companies and multinational groups often have to harmonise and network their existing IT infrastructure systems rather than put entirely new systems in place; unless new exponential technologies allow for an exchange of existing ERP systems with manageable effort and justifiable risk. Some smaller and medium-sized manufacturing businesses are better placed to develop entirely new structures from scratch.
4.2. Talent The digital transformation to industry 4.0 will bring new challenges for many employees. Creative working processes, such as strategic planning or research and development, will have a greater need for the skills required to identify, introduce and implement the new and innovative business opportunities offered by industry 4.0.
New business models and new models for cooperation constitute the real added value of industry 4.0, however, this is not always apparent. Space for creativity needs to be established. This is a challenge for senior management: exploiting the new, innovative business opportunities offered by industry 4.0 is not always easy while running a business on a day-to-day basis. To answer the questions how companies can learn and how change can be managed will be of key importance for senior management.
Digitization increases also the importance of new technical skills, notably in
15
the case of operating activities and mechanical working processes in production, purchasing and warehousing and logistics. New, processdependent systems making greater use of technology may prove to be a major challenge for existing employees. In some cases, employees require retraining or further training in operating these new applications if they are to make full use of them.
To succeed with Industry 4.0, we should consider new approaches to recruiting that focus on capabilities, rather than qualifications determined by degrees and roles. Because employees will be working on a greater variety of tasks unrelated to their core education, recruiters will often have to look beyond formal degrees to identify workers with the relevant skills for specific roles.
4.3. Connectivity, Sensing and Mobile Advanced
manufacturing
environments
have
had
highly
integrated
connectivity for a long time (example, some of the more sophisticated semiconductor facilities have RFID transponders in the material containers and the equipment has bidirectional communication through interfaces, exposing readings from sensors, alarms or reports or allowing recipes to be externally selected or downloaded.
Now, Industry 4.0 is creating a true demo-cratization of such connectivity, allowing it to be widespread in manufacturing facilities of different sophistication levels. Two elements contribute : i)
The IoT, in the industrial world called IIoT (industrial Internet of Things) translates into very low cost hardware and lean OS (such as Windows 10 IoT running on a Rasberry Pi), allowing true connectivity with equipment not requiring heavy system and interface.
ii)
Passive identification and location tags allow all shop-floor resources (CPPS) to hold their positioning coordinates. The MES needs logically autonomous entities to store this location data and show it in real-time interactive maps.
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Figure 4.1: CPS and CPPS in plant setting.
5. FIVE YEARS PROJECTED CASH FLOW
Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, limited period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.
The cash from operating activities is compared to the company's net income. If the cash from operating activities is consistently greater than the net income, the company's net income or earnings are said to be of a "high quality". If the cash from operating activities is less than net income, a red flag is raised as to why the reported net income is not turning into cash.
Some investors believe that "cash is king". The cash flow statements identify the cash that is flowing in and out of the company. If a company is consistently
17
generating more cash than it is using, the company will be able to increase its dividend, buy back some of its stock, reduce debt, or acquire another company. All of these are perceived to be good for stockholder value.
Table 5.1: Cash flow activities
Operating activities
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating activities section identifies the cash flows involved with these activities by focusing on net income and the changes in the current assets and current liabilities.
Investing activities
Investing activities involve the purchase and/or sale of long-term investments and property, plant, and equipment. For example buying the machines, tools, and upgrade facility layout.
Financing activities
This section of the cash flow statement reports changes in balances of the long-term liability and stockholders' equity accounts, such as:
1. Proceeds from issue of share capital 2. Proceeds from long-term borrowings
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3. Interest paid
Table 5.1 : Statement of Profit and Loss for PMMA from 2015-2016 and projected value from 2017-2021. STATEMENT OF PROFIT & LOSS Revenue
2015 RM(‘000) 931020
2016 RM(‘000) 1086735
2017 RM(‘000) 1266735
2018 RM(‘000) 1456735
2019 RM(‘000) 1656735
2020 RM(‘000) 1866735
2021 RM(‘000) 2086735
Cost of sales
-750365
-841380
-921380
-1001380
-1081380
-1161380
-1241380
Gross profit
180655
245355
345355
455355
575355
705355
845355
5173
5383
5593
5803
6013
6223
6433
-51182
-60907
-61272
-61640
-62010
-62382
-62756
-32027
-34922
-35132
-35342
-35554
-35768
-35982
-1394
-1198
-1205
-1212
-1220
-1227
-1234
101225
153711
253339
362963
482584
612201
751815
19273
22410
22746
23087
23434
23785
24142
Share of results of associated com.
9335
9051
9323
9602
9890
10187
10493
Profit before tax
129833
185172
285408
395653
515908
646173
786450
Tax expense
-30295
-38272
-57082
-79131
-103182
-129235
-157290
Net profit
99538
146900
228326
316522
412726
516939
629160
Other operating income Distribution and marketing cost Administrative expenses Other operating expenses Results from operating activities Finance income
19
Table 5.2 : Statement of cashflow for PMMA from 2015-2016 and projected cashflow from 2017-2021. STATEMENT OF CASHFLOW Cashflow from operating actitities Profit before tax
2015 RM(‘000)
2016 RM(‘000)
2017 RM(‘000)
2018 RM(‘000)
2019 RM(‘000)
2020 RM(‘000)
2021 RM(‘000)
129833
185172
285408
395653
515908
646173
786450
25433
23393
21393
19393
17393
15393
13393
-write-offs
351
866
1266
1666
2066
2466
2866
-gain /loss on disposal
1145
-110
500
500
500
500
500
Movement in provision of liabilities Interest income
-2266
-2527
-2727
-2927
-3127
-3327
-3527
-19273
-22410
-24410
-26410
-28410
-30410
-32410
Share of results
-9335
-9051
1000
1100
1200
1300
1400
Forex loss/gain
-1692
1079
1179
1279
1379
1479
1579
Gain/loss on derivative finantial
4300
-9169
4300
4300
4300
4300
4300
Operating profit before changes in working capital Changes in working capital: Inventories
128496
167243
287909
394554
511209
637874
774551
-21609
4057
4066
4075
4084
4093
4102
-3356
-50517
-3360
-50521
-3364
-50525
-3368
19234
32050
36850
41650
46450
51250
56050
122765
152833
325465
389758
558379
642692
831335
-27803
-33652
-65093
-77952
-111676
-128538
-166267
Rework cost paid
-1798
-50
-48
-46
-47
-39
-41
Warranty paid
-1451
-2289
-2176
-2157
-2058
-1987
-1804
Employee welfare scheme paid
-101
-132
-158
-184
-210
-236
-262
91612
116710
257990
309419
444388
511892
662961
Adjustment for: Property, plant and equipment -depreciation
Trade and other receivables Trade and other payables Cash generated from operations Tax paid
Net cash generated from operating activities
20
2500000
RM (‘000) 2000000
1500000 Revenue Net profit
1000000
500000
0 2015
2016
2017
2018
2019
2020
2021
Figure 5.1: Revenue and Net Profit of PMMA for Year 2015-2016 and projected value for the year 2017-2021.
Table 5.1 and table 5.2 represents the projected statement of cash flows and statement of profit/lost for PMMA. The total revenues for the first five years are as follows. In 2017, the revenue is projected to be at RM1.266 billion. The revenue for PMMA will continue to growth at a very progressive rate to reach the value of RM2.086 billion by 2021. The net profit will follow the incremental trend of revenue. This is resulting from the investment that the company made to become a digital enterprise. After five years, net profit is projected to be at the value of RM629.2 million. According to the recent research, company expect to reduce operational cost by 3.6% p.a., while increasing efficiency by 4.1% annually. High level of cost reduction are expected. As a result from continuous cost reduction, PMMA will expect its net profit to be increased steadily.
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6. CONCLUSION
At the end of this transformation process, the success of this program will enable PMMA to become true digital enterprises, with physical products at the core, augmented by digital interfaces and data-based, innovative services. This digital enterprise will work together with customer and suppliers in industrial digital ecosystem.
Industry 4.0 revolution will not only change PMMA as individual company, but the overall market dynamics a whole range of industries will also be changed. Thus, the company will need to continue its investment in digital technologies such as sensors or connectivity devices and on software and applications like manufacturing execution systems. To keep up with the global trend, we will need to transform PMMA’s business model and operation according to the trend.
For the top management of PMMA , the biggest challenge isn’t the technology, it is the people. The technologies are rapidly becoming a commodity, the success of this transformation program will largely depends on how well the leaders define, lead, and communicate the transformation. PMMA will need the workforce with the right skill-sets. A greater use of robotics and computerization will reduce the number of jobs in production and assembly but will increase the demand for IT solution architects and design interface R&D.
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7.
REFERENCES
1. Industry 4.0 at McKinsey Model Factory, 2016
2. Industry 4.0: Building The Digital Enterprise, PWC 2016
3. Industry 4.0 : Challenges and solutions for the digital transformation and use of exponential technologies, Deloitte 2017. 4. Man and Machine in Industry 4.0, The Boston Consulting Group, 2015. 5. Panasonic Manufacturing Malaysia Berhad (PMMA) Annual Report, 2016 6. Understanding the implications of digitisation and automation in the context of Industry 4.0, Frank Teuteberg, 2016. 7. A Categorical Framework of Manufacturing for Industry 4.0 and Beyond, Jilian Qin, 2017. 8. TheDigital Twin: Realizing the Cyber-Physical Production System for Industry 4.0, Thomas Uhhleman, 2017. 9. Towards Industry 4.0 - Standardization as the crucial challenge for highly modular, multi-vendor production system, Stephen Weyer, 2015. 10. Understanding TRIZ through the review of top cited publications, Leonid Checchurin, 2017.
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