Manufacturing upturn: Gearing up for growth - and security risks

Despite optimism of recovery in a post-COVID-19 era, Singapore’s manufacturing sector continues to feel the pinch.

Ongoing geopolitical tensions from the Russia-Ukraine conflict and the lingering impacts of the pandemic have disrupted global supply chains, resulting in skyrocketing costs of operations. According to the latest business sentiment polls from the Economic Development Board (EDB), Singapore’s manufacturing outlook darkened for the April-September 2022 period, as rising costs put pressure on manufacturers to stay cautious.

Against this backdrop, it has become critical that manufacturers pivot to digital and innovate to stay ahead of the curve in the face of unforeseen disruptions.

The good news is we have seen an epochal shift with manufacturers embracing digital transformation. This is evident in the rapid acceleration of digitalisation through Industry 4.0 innovations that have revolutionised all aspects of manufacturing, from supply chain management to customer service.

This is especially important for Singapore, where manufacturing remains the economy’s lifeblood. The nation had previously set an ambitious target of growing its manufacturing sector by 50% by 2030, underscoring its importance.

With increasing investment in digitalisation in recent years, we have seen Singapore transform into a world-class manufacturing hub recognised for its cutting-edge technologies and expertise, with global industry leaders such as Shell, Micron, and Merck, choosing to set up shop here.

But while manufacturers reap the benefits of increased digitalisation - from smoother operations and enhanced productivity to greater customer-centricity - it also brings new risks and threats. 

With the recent surge in cyber incidents, cases of cyber breaches and compromised systems have dominated headlines week after week. High-profile local victims include a healthcare provider and a department store. 

With the rise of Industry 4.0 and the proliferation of smart factories, a good portion of manufacturing processes today are automated and reliant on digital technologies. This widened attack surface area presents a major challenge. In a cloud-connected manufacturing system, an attack on any single point of the network could potentially shut down operations.

The consequences of such an attack are dire, ranging from supply delays to higher operating costs, and ripple effects across the whole supply chain. Chubb’s Cyber Index data shows that the average value of a cyber claim is at an all-time high amid the increase in significant cyber incidents.

In addition, with the rise of hybrid working arrangements in a post-pandemic world, the risks of cyberattacks will only surge. As remote access to company networks increases, Singapore manufacturers need to implement risk mitigation strategies, robust protocols, good cyber hygiene and employee education initiatives to tackle the threat of attacks and better secure their businesses.

As manufacturers move away from manual, labour-intensive processes, they are adopting new-generation smarter technologies such as big data analytics, cloud computing, machine learning, and the Internet of Things.

These innovations allow them to increase efficiency, eliminate human error, reduce overall costs, and enhance worker safety, among other benefits. In addition, better access to logistics, production and sales data enables manufacturers to make informed business decisions and increasingly accurate risk and growth analyses. Not only are processes becoming increasingly digitised, but products themselves now have more technology embedded within.

Manufacturers further recognise the need to improve the overall customer experience via digitalisation. Product-only models are becoming a thing of the past as more manufacturers expand their offerings and integrate value-add services (such as installation, maintenance, and consulting) in a bid to diversify revenue streams and attract customers. Known as Manufacturing-as-a-Service, this expanded offering enables companies to contract out their manufacturing infrastructure and even offer aftercare services, beyond producing and selling products.

With the growing number of digital touchpoints across the overall manufacturing ecosystem and more electronically linked products and services, manufacturers are inadvertently exposing themselves to greater risk exposure and liability.

The industry needs to be conscious of vulnerabilities at various points in the product lifecycle – whether a digital malfunction, a cyber threat or a product or service failure. These could result in anything from unauthorised access to systems and data to complete operations shutdown, to serious financial injury and reputational damage, especially when a product recall or litigation is involved.

One common mistake manufacturers make in their digital transformation journey is simply adopting one application after another, without properly understanding how the layering of implemented technologies would work alongside other systems in the overall network.

This oversight is potentially dangerous as it puts the organisation in a compromising situation. A complicated network and no appropriate oversight across all applications and systems mean that one malfunction or cyberattack could trigger a domino effect across the whole digital infrastructure.

Simplicity is key here. Rather than rushing to adopt every latest innovation, manufacturers should evaluate their digital capabilities and see what makes sense based on the identified gaps and vulnerabilities.

Exciting opportunities abound in today’s digital-first environment, but so do risks. Manufacturers need to ensure that they are ready to tackle challenges and headwinds in the face of the next big crisis. By understanding the threat landscape and having sound risk mitigation strategies in place, Singapore manufacturers can futureproof their business and achieve sustainable growth as they embark on a strong recovery path.