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Contracting manufacturing economies, which are measured by PMI’s, would need to focus on building operational efficiencies, while waiting for manufacturing demand to improve.  Germany has already started to advocate adoption of Industry 4.0 across its industries to rejuvenate its economy –the health of which is reflected by PMI’s.

Purchasing Managers’ Indices (PMI) are economic indicators derived from monthly surveys of private sector companies. Singapore Institute of Purchasing and Materials Management publishes the Singapore Purchasing Managers’ Index (PMI) on a monthly basis.  Manufacturing activity in Singapore contracted for the sixth straight month in December 2015 amid a further decline in new orders and new export orders as well as production output.

The latest Purchasing Managers’ Index (PMI) reading released on Monday (Jan 4) came in at 49.5, an improvement from the November reading of 49.2. A reading above 50 means that the manufacturing economy is generally expanding, while a reading below 50 indicates contraction.

singapore pmi2

Adoption of Industry 4.0 can help in growth of Singapore’s PMI. ( Picture courtesy: Business Times)

Manufacturing activity in the electronics sector also contracted in December, with the PMI coming in at 48.9, a slight dip from November’s 49.0. This is the sector’s sixth consecutive month of contraction amid a further decline in new orders from domestic and overseas markets. According to Dr Tan Khay Boon, a senior lecturer at SIM Global Education, it is not surprising that the electronics segment remains the sector’s weakest link.

“It continues its declining trend with no clear turnaround in sight. It will require a large surge in external demand to take the manufacturing sector out of the woods,” he said. Production output contracted, but inventory expanded in the latest PMI.  The key here is to create a lot of flexibility and performance-orientation of existing manufacturing processes, he added.

Industry 4.0 comes into play in this context.  Industry 4.0 creates highly flexible production networks that allow for real-time optimization of the production process. This not only increases productivity, but it offers the possibility to produce individual goods for the costs of a mass product. In addition, the energy and resource consumption of factories can be reduced, which supports sustainable growth.

The importance of Industry 4.0 is already being realized in Germany.  For an economy that needs a sustained intervention of growth, Industry 4.0 is a boon to Singapore’s manufacturing economy.   Our own conversations with SIMTech, IDA and Singapore Manufacturer’s forum have led us to believe that Singapore’s manufacturing ecosystem have realized the importance of ‘being prepared’ to reskill the workers, create real-time and connected cyber-physical environment.

There are lot of advocacy groups now trying to create the buzz.  These positive signs are hopeful signs of the Singapore’s manufacturing economy’s push for Industry 4.0 – which is a proven ‘tonic for a better PMI index’.

-Ashok Subramanian

Ashok is a Business Strategist with Vegam Solutions and an IOT enthusiast. For more details email us at business@vegam.co

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