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Is Technology Enough to Help Singapore Manufacturing Compete with its SEA Neighbours?

08/05/2019

In the latest Cushman & Wakefield Global Manufacturing Risk Index 2019 report, Singapore was ranked number 5 in the top locations for global manufacturers seeking a politically stable base. Singapore’s regulatory climate along with sound intellectual property controls make it a favourable destination for manufacturers looking to operate a hub.

In terms of cost, though, Singapore was outranked by its Southeast Asian neighbours, namely Indonesia and Vietnam. This is of course, not a surprise.

Over the last decade or so, Singapore has been moving away from labour-intensive manufacturing operations to higher value supply chains involving more machines and more digitisation, thus paving the way for Industry 4.0.

Rankings must be taken into context – Singapore is bolstering its status as a manufacturing hub in the region. It may be expensive to manufacture goods here but the level of technological advancements and quality of talent is maturing to be a valuable resource for manufacturing bases in other parts of Southeast Asia (SEA).

Technology and Skills as Major Considerations

The issue of cost should be weighed against other considerations. The current measurement of the value of any manufacturing base across the globe will have to take into consideration the level of digitisation, automation, Internet of Things and the sophistication around the use of cloud technology. Cost is no longer a zero-sum game.

As manufacturing processes mature, the quality of talent underpinning the operation of factories, particularly smart factories, will have to be step up. Singapore can differentiate itself by harnessing talent – be it in data analytics, cloud computing, smart processes around production from cleaning, washing, painting, checking, sorting machine parts, artificial intelligence and all the technology powering smart machines, as well as the wider supply chain logistics. This talent pool can then be exported to other Southeast Asian markets.

And for as long as the geo political climate stays largely the same, the Southeast Asian markets of Indonesia, Vietnam and Thailand will continue to retain their value as relatively cheap labour sources. Against the lingering US-China trade tension, Indonesia rose 7 spots in the global index measuring cost. The looming US-China standoff has been a wake-up call for many global companies to seriously consider supply chain diversification into other low-cost alternatives in countries such as Vietnam and Indonesia. The ranking of Vietnam and Indonesia in the Manufacturing Risk Index continues to leapfrog as they both emerged as a clear winner from the trade tension.

Singapore will also be a key beneficiary in the transition to Industry 4.0 as the city-state continues to invest heavily in technology and innovation to keep pace with the rapid transformation in manufacturing.

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