Regenerative manufacturing: Unlocking growth in Southeast Asia through design and AI

The rise of disruptive technologies, particularly artificial intelligence (AI), is reshaping the manufacturing landscape globally. For ASEAN manufacturers, this presents both a challenge and an opportunity. The report, titled, "Regenerative manufacturing: Unlocking ASEAN’s growth through design and AI", which was launched on 14 October 2024, explores how AI and innovative design can drive significant growth and sustainability in the region's manufacturing sector.
 

Global trends impacting manufacturing

Manufacturers today face a multitude of global trends that are reshaping the industry. The COVID-19 pandemic, natural disasters, and political instability have exposed the vulnerabilities of global supply chains. Additionally, there is increasing pressure from consumers and regulators for manufacturers to prioritise environmental, social, and governance (ESG) goals. These factors necessitate a shift from traditional manufacturing methods to more resilient, value-focused, and sustainable approaches.
 

ASEAN's manufacturing growth potential

The ASEAN manufacturing sector is poised for substantial growth, with an estimated annual increase of 6 per cent, reaching a gross output value of US$1.2 trillion (S$1.61 trillion) by 2030. This growth is driven by the region's competitive advantages, including a large labour pool, rich resources, strategic geographic location, and economic integration through agreements like the Regional Comprehensive Economic Partnership (RCEP). As global businesses reassess their supply chain strategies, ASEAN is well-positioned to become a major manufacturing hub.
 

Embracing regenerative manufacturing

Regenerative manufacturing is an approach that aims to create a profitable, resilient, and sustainable business model by rethinking traditional manufacturing processes. This involves leveraging AI to enhance operations throughout the value chain, from product design to supply chain management. The key goals of regenerative manufacturing include:

• Resilience: Achieving agility and adaptability to changing conditions
• Value-focused: Delivering optimal customer value at the lowest cost
• AI implementation: Using AI to streamline production processes and enhance value chain efficiencies
• Sustainability: Promoting product circularity and reducing carbon footprints
   

The role of AI and digital solutions

AI adoption in ASEAN is still in its early stages and generally underfunded, with Singapore being a notable exception. However, AI has the potential to significantly enhance product design, supply chain resilience, and sustainability. For example, companies like Infineon Technologies and Hyundai Motor Group are already implementing AI solutions to optimise their operations.
 

Strategic recommendations for ASEAN manufacturers

To capitalise on the opportunities presented by regenerative manufacturing, ASEAN manufacturers should focus on the following strategic areas:

1. Customer-first product design: Leveraging AI for sentiment analysis to understand customer needs and trends. This involves using natural language processing and machine learning algorithms to analyse large amounts of customer data and identify emerging trends.
2. Design to excellence (DtX): Incorporating strategies like design to value (DtV) and design to sustainability (DtS) to optimise the entire product life cycle. This means considering every phase of the product life cycle, from material choice to end-of-life disposal, to create products that offer the best value for money and are environmentally sustainable.
3. Embedding resilience in design: Using digital twins and AI to monitor and adapt to supply chain disruptions. This involves creating virtual representations of physical factory conditions to simulate and optimise production processes.
4. Platforming and late-stage customisation: Balancing standardisation with customisation to meet market demands efficiently. This strategy involves developing a common platform or base design that can be used across multiple products or models, allowing for efficient production while enabling customisation.

For example, Kearney supported an ASEAN-based semiconductor equipment manufacturer to reduce portfolio complexity and standardise product modules. By leveraging platforming and DtX principles, the client managed to reduce module complexity by 85 per cent, leading to >US$10 million (S$13.45 million) in cost savings, with an additional pathway to about US$4 million (S$5.38 million) revenue uplift identified.

And in the case of Airbus, it needed to design a better A320 partition that met its strict parameters and partnered with AI solutions provider Autodesk. Through generative design, thousands of design options were explored, providing Airbus an eventual product that was 45 per cent lighter and 8 per cent stronger than current designs.
 

Sector-specific opportunities

Certain sectors within ASEAN that are particularly well-positioned to benefit from regenerative manufacturing include:

• Electronics and semiconductors. Countries like Vietnam and Malaysia are set to benefit from the shift in global supply chains. For instance, Vietnam is becoming a significant hub for electronics manufacturing and assembly, while Malaysia is poised to grow as a major electronics manufacturing services (EMS) hub.
   

• Electric vehicle (EV) components. Indonesia and Thailand are emerging as key players in the EV battery market due to their raw material reserves and government incentives. Indonesia, with its large nickel reserves, is attracting significant foreign direct investment in EV battery production.
   

Three vital steps for manufacturers

The journey toward regenerative manufacturing will be iterative, evolving with continuous learning and adaptation. To kickstart this transformative process, ASEAN manufacturers should take three vital steps:

1. Reassess product design. Conduct a comprehensive review of current product designs and their downstream impacts across the supply chain. Collaborate with cross-functional teams to identify bottlenecks and opportunities for improvement, considering sustainability and circularity from the outset.
2. Elevate product design to involve C-suite. Foster a top-down culture of product innovation and excellence, involving top decision-makers in the design process. Executives should view product design as a core driver of business success and differentiation.
3. Develop a road map for product-led competitive advantage. Create a strategic road map that aligns product design, development, and manufacturing processes with business goals for sustainability and profitability. Ensure that every aspect of the design process is optimised for success.

By embracing these steps, ASEAN manufacturers can leverage AI and innovative design to capture growth opportunities, ensure long-term sustainability, and maintain a competitive edge in the evolving global market.
 

Soon Ghee Chua and Keat Yap are partners at Kearney, a leading global management consulting firm with deep-rooted expertise in strategic transformation. Soon Ghee is a Senior Partner based in Singapore, and Keat is the Asia-Pacific Co-lead, Operations and Performance, based in Kuala Lumpur, Malaysia.