SINGAPORE (Dec 11): Daniel Tay’s office is a hotchpotch of everything he loves ­— an extensive collection of Chinese teapots, a Japanese sword he purchased from a travelling salesman, a pastry chef’s apron — but it is on the apron that Tay is building his future. “People think I am stupid [making cheesecakes in Singapore],” he says, “but manufacturing can work here. It costs a bit more, but you will have the branding [to charge a premium].”

The 47-year-old founder of local food manufacturer Foodgnostic is fitting out a $5 million cheesecake factory in Senoko. He estimates that he will need only 15 staff to make 10,000 cheesecakes a day in the new and highly automated 16,000 sq ft facility. He wants to sell the cakes in retail outlets across Southeast Asia and China, and take Foodgnostic public in three years.

Founded in 2013, Foodgnostic is a private-label food manufacturer with a factory in Kampong Ampat. It is famous for durian and Milo dinosaur cheesecakes, and counts global coffee houses among its clients. Foodgnostic currently needs five employees to make a batch of 1,000 cheesecakes, but Tay wants to make the process much more efficient. “I will work with robotics specialists to come up with machines that can unmould cakes, for instance.”

Resistance to change In a city state such as Singapore, where labour is expensive, the automation that Foodgnostic is pursuing would seem to be a no-brainer. In fact, Tay is in the minority. A Singa­pore Business Federation survey in December last year found that 64% of small and medium-sized enterprises (SMEs) have not made significant adjustments to adapt to technological change and disruption.

Chee Feng Ping, section head of mechatronics at Temasek Polytechnic’s school of engineering, says most small and medium-sized manufacturers are still in what she calls the “Industrial 3.0” era. They have some form of automation on their production lines, but have yet to adopt auto­nomous robots or sensor technology. “[They are] rather resistant to changes or they are clueless about how to begin on the route to digitalising their business,” she says. “The main challenge could be not having the bandwidth to focus on making a change, amid the ‘firefighting’ of daily operations to survive.”

Ravi Kumar, associate provost at Nanyang Technological University’s President’s Office, says one in two local SMEs is not optimistic about its future. Rising costs, short factory leases and a tight labour market have left many small businesses struggling to stay afloat.

The government is trying to nudge the country’s 8,000-odd manufacturers into automating and digitalising their factory lines. Manufacturing makes up 20% of the country’s GDP, with a total output of $270.5 billion in 2016, a higher percentage than in many developed nations. So the success of the sector has significance for the national economy. Manufacturing output has been rising, up 14.6% y-o-y in October. But for the country’s manufacturers to remain competitive, they will need to become more productive and efficient.

Difficulties of investing Manufacturers who spoke to The Edge Singapore for this story say investing in automation is more difficult than it seems. “It is very nice to hear the term Industry 4.0,” says Emily Sim, sales and marketing manager at timber and wood panelling maker NS Trading. “A lot of the machines in Germany do not need human intervention. But they take up a lot of space, which we cannot spare. And it would cost us tens of thousands just to move them if our lease ends.”

Sim says she spent two years looking for a suitable robotics solution for her facility. Eventually, she settled on two digitally controlled machines that allow NS Trading to produce more intricate designs without human intervention. She projects the robots will add only marginally to annual sales. She also worries about whether she will be able to fully utilise them. Like many small and medium-sized manufacturers, NS Trading is not a main contractor. This means it has limited order visibility.

Singapore’s small size may also limit the attractiveness of extensive automation. Andrew Kwan runs a 300,000 sq ft food factory at Buroh Lane. Commonwealth Capital provides end-to-end manufacturing, logistics and retail services for 25 brands and 80 F&B outlets, including PastaMania, Swissbake and The Soup Spoon. Even with a nine-digit annual revenue, Kwan says it may not make sense to automate some parts of his business. For instance, staff currently pick and pack some small items manually because volumes are not significant enough to warrant automation. Commonwealth Capital does, however, use an automated storage and retrieval system that can retrieve and store more than 5,600 large pallets. It also has an automated muffin production line that requires just two staff to operate. “There are only so many stomachs [in Singapore] you can fill,” Kwan says. This is unlike larger markets such as Japan, where a single food production factory might support 800 outlets.”

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Taking chances Some industry watchers say the solution to these issues would be for local SMEs to expand their customer base. “[These technologies] can [help SMEs] market the capability of the business and get more customers,” says NTU’s Kumar. “I believe this since I am on the board of a global B2B SME that has invested in robotics in their US and Indian factories to instil a sense of confidence and capability in their multinational customers. This has raised the number of customers and revenues for this company.”

Two local SMEs are already investing in new techonologies. JEP Precision Engineering, which makes airplane engine casings, has invested $35 million in a new 200,000 sq ft factory at Seletar Aerospace Park that employs new flexible manufacturing technologies. New machines allow engineers at JEP to quickly shift from producing one type of component to producing another — a process that could previously take up to a day.

“Flexible manufacturing allows us to cater for customers who want small volumes,” says CEO Soh Chee Siong. “For instance, demand for our landing gear components varies from four pieces  to 32 pieces a month.” With the new system, Soh expects to see a 25% saving in machine utilisation and a 30% reduction in workforce requirements.

At Udders, an ice cream maker, founder Wong Peck Li has been scouring Italy for the best ice cream making machines. She now has her eyes set on a dining-table-sized ice cream machine that can mix, pasteurise and pack ice cream into cups. She is hoping that the new device can cut man hours at Udders by 50% and raise the production rate by five times, which could allow the ice cream maker to court more clients.

Udders currently operates five outlets under its own brand and supplies its ice cream to Gardens by the Bay, JP Pepperdine and Singapore Airlines. Wong admits that buying the new ice cream machine is a risk. The investment involved is in the hundreds of thousands, while not all Udders’ customers sign long-term contracts. But she is ploughing ahead anyway. “We are at a point where we cannot produce any more ice cream without incurring higher labour costs,” she says. “It is a chicken-and-egg situation. So, we decided to bite the bullet.”

Far from the forefront of technology The other option for many of Singapore’s struggling manufacturers would be to simply close shop and move to a cheaper location. After all, it would only make sense to stay if the high cost of operating here can be justified by a higher return.

Manufacturers such as Tay and Kwan say Singapore’s strict food safety standards do allow them to command a premium. The city state also has favourable tax policies. For instance, Tay says, the raw ingredients used to make cheesecakes would be 30% more expensive if he were to operate out of Malaysia due to import taxes.

However, new technologies are coming to the market that may help even the smaller manufacturers become more productive. Mike Geyer, director of emerging technology at Autodesk, says the computer-aided design software company is working with partners to bring new manufacturing tools into the market. “What we are trying to do is to compress the functions so that you can do more functions in less space. If you can get one robot to perform multiple functions on a single piece in a single place, from picking tools to printing to laying carbon fibre, [then you don’t need a few machines to create one product],” he explains on the sidelines of Autodesk’s annual conference, Autodesk University. “This is still in very early stages,” he says, “but if it works, we can get away from the non-scalable manufacturing process. In three to five years, you will see massive adoption.”

Autodesk is also testing out virtual reality gear that allows staff to remotely operate robot systems. This means that one worker can command several robots with just a headset and handheld consoles. Training employees to use such VR tools would be easier than teaching staff to code automated systems. “These new technologies can create more small factories,” Geyer says.

Local manufacturers say they are aware of the new technologies that are coming to the market but they remain worried about affordability. The time may come, however, when affordability becomes a secondary issue.  Says Chee of Temasek Polytechnic: “New technologies are emerging rapidly. And if we do not embrace them and reap the benefits, these changes could overwhelm us and render us archaic.”

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