Pat Williams

Looking ahead to 2023 — the Year of the Rabbit in the Chinese zodiac — I think the plastics industry will need to move at pace and avoid any temptation to burrow and hide. Rather, it should stay alert and be nimble to take advantage of opportunities. I see a combination of economic, technological, and sustainability challenges we must face at both company and industry levels. The impact of COVID and the war in Ukraine have exposed weaknesses in supply chains. Digital technologies offer tremendous potential to adapt to new realities of restrictions on freedom of movement. The environmental impact assessment process now sits at the heart of decision making. These are challenges that we face both at our company levels and as an industry.

Distributed supply chains

We've seen multinational clients address the potential disruption of supply chains, caused by phenomena like COVID and the Ukraine war, by distributing production across more locations. Just-in-time supply chains, which often concentrate component production in one location, are now being decentralized and placed in proximity to customers. This is part of a longer-term trend toward allocating production across Asia Pacific. In 2020, a Gartner survey of supply-chain leaders showed that one-third of them plan to move at least a portion of their manufacturing out of China by 2023. However, we still see a lot of investment in China: For example, the $100-million Grundfos Changshu plant recently opened in the Changshu High-tech Zone, and Panasonic committed to a 10,000-m² facility in the Suzhou Industrial Park.

Distribution of the manufacturing supply chain across Asia is a familiar idea. Xerox, a Rosti Group client, started to look at diversifying manufacturing of its photocopier business by moving production of a copier module out of China and into Malaysia back in 2012. For Xerox, this involved the moldings, PCBs, harnesses, motors, and testing and integration — moving the entire supply chain. It went on to build out the manufacturing of eight modules in Southeast Asia.

The events of recent years have accelerated the trend to a point where every company I talk to recognizes the need to safeguard its manufacturing supply chain, even if it has yet to implement those plans. In the coming year, ensuring business continuity in the face of these shocks will remain a priority.

Digitalization of management information systems

One of the inherent risks of multiple site locations is the loss of control and information delivery to the management team. Fortunately, management information systems are now mature enough to address this risk. However, plastics manufacturers across Southeast Asia and China face a new reality — their management teams may be separated from the plant for long periods because of COVID-related travel restrictions.

As a result of this enforced separation, now more than ever, business leaders should be advancing and accelerating end-to-end digitalization across their organizations. I am talking about connectivity, the industrial internet of things (IIoT), and smart factories. These technologies have enabled manufacturers to collect and analyze thousands of data points at every stage of their manufacturing processes to help them make strategic decisions and achieve goals related to cost reduction, efficiency, safety, and innovation. According to a study from the MPI Group, as early as 2016, nearly one-third (31%) of production processes incorporated smart devices, and another third (34%) of manufacturers had plans to incorporate IIoT technology into their operations. Furthermore, in 2020 PWC issued a report stating that 98% of manufacturers surveyed expected to increase efficiencies with technologies such as augmented reality and predictive maintenance solutions.

Today I manage a regional business with real-time data from molding machines in China and Malaysia, providing complete visibility of what's running and what's not, real-time insights into utilization, outputs, and everything else. The data are pulled into dashboards from our Microsoft Dynamics 365 ERP system, which we implemented at the start of 2022. In Asia, we will see growing demand not just for remote working but also remote management enabled by digitalization and management information systems.

Sustainable manufacturing in Asia

Asia is taking sustainability seriously, and the plastics industry will have to take a responsible role at the national and plant level. Led by the priorities articulated at the COP26 and COP27 summits and UN Sustainability Goals, Asian governments are ensuring that industry safeguards the environment and populations by passing legislation that supports sustainability and lowers carbon emissions. For example, it is becoming more difficult to obtain licenses for setting up painting lines and doing cosmetic finishes. Non-compliance with regulations will be a barrier to entry for smaller and less professional operations, creating market opportunities for companies that are able to deliver sustainable development.

A 2020 Chatham House research paper, “Regional cooperation of green growth in Asia,” recognized that Asian countries struggle to balance the need for economic growth with protecting the environment. The report found it encouraging that China, Japan, and South Korea each declared separate carbon-neutral goals. It observed that potential areas of cooperation could include cross-border electricity transmission and the promotion of technology and the circular economy.

To obtain licenses across a diverse range of locations in Asia, companies in the plastics industry must have a coherent and consistent approach to sustainability. Government legislation will act as a barrier to winning and retaining business. However, McKinsey issued a report in 2020 that concluded, "Asia is well-positioned to capture the opportunities that come from managing climate risk effectively." Governments recognize that climate change requires regulation, but at the same time, the region is an incubator for many new clean-tech firms — electric cars, solar technology, and so forth — which create many new opportunities for the plastic injection molding industry. 

As a business leader, I have to look at the landscape and decide how best to lead my team. In my view, sustainability will be a crucial driver of the plastics industry in the mid to long term, after the impact of disease and war has been overcome. Companies that are not driving toward sustainability will be left behind.

In summary, next year will be characterized by regional distribution of production to reduce the risks associated with supply-chain disruption, the enterprise-wide deployment of management information systems, and adherence to ever more stringent environmental regulations. Leaders of companies in the plastics industry in Asia will need to be as durable and flexible as the materials they use to solve customers' problems.

As we usher in the Year of the Rabbit, it’s worth remembering that this animal is a symbol of patience and luck, two things that industry will need as it faces the challenges ahead.

About the author

Patrick Williams is the Senior Vice President of Asia Pacific for Rosti Group.