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1.1 Company Background 3

1.2 Financial Review 5








In this report, the term Industry 4.0 stands for the fourth industrial revolution.
Other related terms include the Industrial Internet or the Digital Factory,
although neither takes as complete a view. While Industry 3.0 focused on the
automation of single machines and processes, Industry 4.0 focuses on the end-
to-end digitization of all physical assets and integration into digital ecosystems
with value chain partners. Generating, analyzing and communicating data
seamlessly underpin the gains promised by Industry 4.0, which networks a wide
range of new technologies to create value. Industry 4.0 digitizes and integrates
processes vertically across the entire organization, from product development
and purchasing, through manufacturing, logistics and service. All data about
operations processes, process efficiency and quality management, as well as
operations planning are available real-time, supported by augmented reality and
optimized in an integrated network.

1.1. Company Background

The late Tan Sri Konosuke Matsushita founded the Matsushita companies. The
Matsushita miracle began with his vision to contribute to the well-being of
mankind by providing reasonably-priced products and services in sufficient
Today that vision has turned into a giant global business in more than 130
countries around the world.

The famous brand name Panasonic is easily recognized. But behind this
popular household name and the extensive range of consumer durables that
carry its label stands its manufacturer, the foundation of the brands success,
Panasonic Manufacturing Malaysia Berhad PMMA.

The PMMA story in Malaysia is an inspirational one made remarkable and

reflected in its string of proud achievements that have successfully spanned two
decades. Being the first plant to manufacture household electrical appliances in
Malaysia, the Company confidently took on its parent company in Japan.

Throughout the years, the corporation has observed a swift progress from its
humble start as producer of dry-cell batteries to Malaysias leading manufacturer
of sophisticated electrical appliances.

Today, the Panasonic brand name has emerged as one of the most welcome and
trusted brand names for electrical home appliances chosen by most Malaysian
households. At Panasonic, we manufacture, operate, deliver, and maintain a
series of product range with globally competitive models under the Panasonic
brand name to the market, incorporating new features, enhanced capability and
improved quality, and equally important, with our excellent after-sales-services.

Currently, PMMA has two plants in Malaysia for its operation:

Head Office/Main Plant

No.3, Jalan Sesiku 15/2
Shah Alam Industrial Site
40200 Shah Alam
Selangor Darul Ehsan
Tel: 03-58915000
Fax: 03-58915108

Product Manufactured
Rice Cookers, Slow Cookers, Electric Irons, Blenders, Home Showers, Juicers,
Food Processor, Meat Grinder and Bidet.

Shah Alam II Plant

No.9, Jalan Pelabur 23/1

Shah Alam Industrial SiteSection 23
40300 Shah Alam
Selangor Darul Ehsan
Tel: 03-58915555
Fax: 03-58915551

Product Manufactured
Electric Fans, Ceiling Fans, Ventilating Fans, Vacuum Cleaners and Dish Dryer.

1.2. Financial Review

The Company crossed the Ringgit 1 Billion sales mark for the first time in history,
recording revenue of RM1.086 billion and it was the highest revenue in its 50
years of existence. This constitutes an increase of RM 155 million or 17% against
the registered revenue of RM931 million in the previous year. The overall
improvement in sales performance in the current year was mainly attributed to a
favourable exchange condition, better performance from higher sales in the

domestic market after the implementation of Goods and Service Tax and the
transfer of manufacturing and sales of certain rice cooker models from Thailand.

With the improvement in revenue, the Company achieved a remarkable

combined profit before taxation of RM185 million for the year ended 31 March
2016, which was higher by 42% or RM55 million against the previous years
combined profit before tax of RM130 million.

While offering and pursuing a better life for an even wider range of customers,
the Company will also work to sustainably grow its corporate value to satisfy
shareholders, investors, customers, business partners, employees and all other
stakeholders. Apart from the new model development and upgrading of previous
models, the Company has also undertaken measures to expand on its
manufacturing capacity and capability. We invested in technologically advanced
facilities to cater for manufacture of new product range with enhanced features.

During the financial year under review, a wide range of rice cookers was
transferred from a Thailand factory to the Company. Previously, rice cookers
manufactured by the Company catered for the domestic market. With the
transfer, the Company is now expanding sales to other Asian markets such as
Vietnam, Hong Kong and Thailand. With effect from 1st April 2016, the Company
was placed under the purview of Appliance Company following the change in
regional reporting structure which aligned manufacturing companies to its
respective product segment.

PMMA Five Year Financial Trend (Source : PMMA Annual Report 2016)

PMMA Five Year Trend (Source : PMMA Annual Report 2016)


The theory of inventive problem solving (TRIZ) is a tool used for revealing and
solving creative problems in any field as well as developing creative thinking skills
and personalities (Altshuller, 2000). TRIZ has been shown to be an effective
problem-solving methodology since its development more than approximately 70
years ago. TRIZ enables people to adopt a dialectical thinking style, which guides
them to understand problems as systems, to first obtain a concept of the ideal
solution, and to promote the performance of products by solving contradictions.
Previous studies have integrated TRIZ with problem-solving tools in the
manufacturing industry.

In creating the current state map, TRIZs problem defining techniques, such as 9-
Windows could be very helpful, as in any problem situation there are numerous
elements in the context and definition that are not adequately explored. 9-Windows
method uses a tabular form having 3 x 3 boxes (or windows). The central box
represents the system in the present. The vertical axis represent the hierarchy of the
system (i.e., super-system, system, and sub-system) while the horizontal axis the
time (i.e., past, present, and future).


Semi Automation in
Fully manual factory Production Line and Material Smart Factory

Manual assembly by Parts assembly in production Cyber-physical Production

production operator line System (CPPS)

Production operator, Digital Twin, Cloud-

SUB Production operator, industrial
manual jigs and tools, solution, Production
SYSTEM robot, AGV, MRP software.
manual parts delivery. Machines.

The term industry 4.0 refers to a further developmental stage in the organization
and management of the entire value chain process involved in manufacturing
industry. Another term for this process is the fourth industrial revolution. The
concept of industry 4.0 is widely used across Europe, particularly in Germanys
manufacturing sector. In the United States and the English-speaking world more
generally, some commentators also use the terms the internet of things, the
internet of everything or the industrial internet. What all these terms and
concepts have in common is the recognition that traditional manufacturing and
production methods are in the throes of a digital transformation. For some time
now, industrial processes have increasingly embraced modern information
technology (IT), but the most recent trends go beyond simply the automation of
production that has, since the early 1970s, been driven by developments in
electronics and IT.

The widespread adoption by manufacturing industry and traditional production

operations of information and communications technology (ICT) is increasingly
blurring the boundaries between the real world and the virtual world in what are
known as cyber-physical production systems (CPPSs).

CPPSs are online networks of social machines that are organized in a similar
way to social networks. Simply put, they link IT with mechanical and electronic
components that then communicate with each other via a network. Radio
frequency identification (RFID) technology, which has been in use since 1999,
was a very early form of this technology.

Level Features Examples
Manufacturing system made
Smart Factory Located automated and smart
Level 5 (Green Ocean)
Across The Globe Virtually decision ( e.g, scheduling)
Controlled by System with remote visualization,
monitoring and control.
On the basis of Cyber-
Level 4 (Blue Ocean) Merging real and virtual
Physical Production System
Pioneering Invention world of production
Application of electronics
Level 3 (Blue Ocean) Programmable logic control
and IT to further automate
Concept Transfer system
Introduction of mass
Level 2 (Red Ocean)
production with the help of Assembly line
Non-linear System Change
electrical energy
Introduction of mechanical
Level 1 (Red Ocean) production facilities with the
Mechanical weaving loom
Linear System Change help of water and steam
Table 3.1: Five Level of Innovation in Production

3.1. Industry Overview

The Company remains steadfast on its vision to be the market leader for
electrical consumer products by strengthening product line-up and will
continue to engage with all relevant stakeholders. The international economic
and financial landscape is likely to remain challenging for 2016 and will likely
influence the prospects of the Malaysian economy. GDP is expected to grow
at a slower pace of 4 to 4.5%. In addition, a stronger Ringgit will have an
impact on the Companys export revenue which is mainly denominated in US
Dollars. Looking ahead, the Company is cautiously optimistic, in line with
gradual recovery of global economies although the outlook for certain
markets remains challenging. The tight labour market, inflationary cost
pressures and volatile foreign currency exchange continue to be key areas
that we will actively monitor to mitigate any adverse impact on our global

3.2. Transformation Components
The following four main characteristics of industry 4.0 demonstrate the huge
capacity that industry and traditional manufacturing have for change vertical
networking of smart production systems, horizontal integration via a new
generation of global value chain networks, through-engineering across the
entire value chain and the impact of exponential technologies

i) Vertical Networking of Smart Production System

This vertical networking uses cyber-physical production systems (CPPSs) to
enable plants to react rapidly to changes in demand or stock levels and to
faults. Smart factories organize themselves and enable production that is
customer-specific and individualized. This requires data to be extensively
integrated. Smart sensor technology is also needed to help with monitoring
and autonomous organization. CPPSs enable not only autonomous
organization of production management but also maintenance management
. Resources and products are networked, and materials and parts can be
located anywhere and at any time. All processing stages in the production
process are logged, with discrepancies registered automatically.

Amendments to orders, fluctuations in quality or machinery breakdowns can
be dealt with more rapidly. Such processes also enable wear and tear on
materials to be monitored more effectively or pre-empted. All in all, waste is

Concept for the realization of the CPPS. (Source : Thomas, 2017)

Explanation of the concept scheme.

Example of product flow through Cyber-Physical Production System.

(Source: Roland,2015)

ii) Horizontal Integration Via a New Generation of Global Value
Chain Network
Similar to networked production systems, these (local and global) networks
provide networking via CPPSs, from inbound logistics through warehousing,
production, marketing and sales to outbound logistics and downstream
services. The history of any part or product is logged and can be accessed at
any time, ensuring constant traceability (a concept known as product
memory). This creates transparency and flexibility across entire process
chains from purchasing through production to sales, for example, or from
the supplier through the company to the customer. Customer-specific
adaptations can be made not only in the production but also in the
development, ordering, planning, composition and distribution of products,
enabling factors such as quality, time, risk, price and environmental
sustainability to be handled dynamically, in real time and at all stages of the
value chain.
This kind of horizontal integration of both customers and business partners
can generate completely new business models and new models for
cooperation representing a challenge for all those involved.

iii) Through-engineering across the entire value chain.

This engineering occurs seamlessly during the design, development and
manufacture of new products and services. New products need new and/or
modified production systems. The development and manufacture of new
products and production systems is integrated and coordinated with product
life cycles, enabling new synergies to be created between product
development and production systems.

Characteristic of this through-engineering is that data and information are

also available at all stages of a products life cycle, enabling new, more
flexible processes to be defined from data via modelling to prototypes and the
product stage.

iv) Acceleration Through Exponential Technologies
Industry 4.0 already requires automation solutions to be highly cognitive and
highly autonomous. Artificial intelligence (AI), advanced robotics and sensor
technology have the potential to increase autonomy further still and to speed
up individualization and flexibilisation. AI cannot only help to plan driverless
vehicle routes in factories and warehouses more flexibly, save time and cost
in Supply Chain Management (SCM), increase reliability in production or
analyse big data, but can also help to find new construction and design
solutions or enhance the cooperation between humans and machines to the
point of services.

The question of resources is key for companies facing the digital transformation
to industry 4.0. Of particular importance in this context are the appropriateness of
their existing IT infrastructure and the availability of the necessary talent and
skilled employees.

4.1. IT Infrastructures
Industry 4.0 requires existing installations to be adapted and, in some cases,
entirely new types of IT infrastructure. Diverse systems need to be networked
and to learn to communicate with each other, and new communications
networks need to be developed from scratch.

Although MES software (MES = Manufacturing Execution Systems, also

known as Manufacturing Operations Management, MOM) is a critical element
in the manufacturing IT landscape, a completely new generation of MES is
required to cope with the new challenges created by Industry 4.0. The
following are the main characteristics MES needs to support in order to make
Industry effective

The first step is to analyze the current state of all systems. The aim is not to
superimpose the new solutions and technologies of industry 4.0 on existing

structures, but rather to identify the most meaningful approach and to
establish where existing systems and networks can be built on.
A range of systems in differing business segments, such as research and
development, procurement and purchasing, production, warehousing and
logistics, marketing, sales and services, need to be taken into consideration
with regard to networking.

This will be a major challenge for manufacturing companies, although the

priorities set by differing business segments in relation to the digital
transformation to industry 4.0 will vary.

Very large manufacturing companies and multinational groups often have to

harmonise and network their existing IT infrastructure systems rather than put
entirely new systems in place; unless new exponential technologies allow for
an exchange of existing ERP systems with manageable effort and justifiable
risk. Some smaller and medium-sized manufacturing businesses are better
placed to develop entirely new structures from scratch.

4.2. Talent
The digital transformation to industry 4.0 will bring new challenges for many
employees. Creative working processes, such as strategic planning or
research and development, will have a greater need for the skills required to
identify, introduce and implement the new and innovative business
opportunities offered by industry 4.0.

New business models and new models for cooperation constitute the real
added value of industry 4.0, however, this is not always apparent. Space for
creativity needs to be established. This is a challenge for senior
management: exploiting the new, innovative business opportunities offered
by industry 4.0 is not always easy while running a business on a day-to-day
basis. To answer the questions how companies can learn and how change
can be managed will be of key importance for senior management.

Digitization increases also the importance of new technical skills, notably in

the case of operating activities and mechanical working processes in
production, purchasing and warehousing and logistics. New, process-
dependent systems making greater use of technology may prove to be a
major challenge for existing employees. In some cases, employees require
retraining or further training in operating these new applications if they are to
make full use of them.

To succeed with Industry 4.0, we should consider new approaches to

recruiting that focus on capabilities, rather than qualifications determined by
degrees and roles. Because employees will be working on a greater variety
of tasks unrelated to their core education, recruiters will often have to look
beyond formal degrees to identify workers with the relevant skills for specific

4.3. Connectivity, Sensing and Mobile

Advanced manufacturing environments have had highly integrated
connectivity for a long time (example, some of the more sophisticated
semiconductor facilities have RFID transponders in the material containers
and the equipment has bidirectional communication through interfaces,
exposing readings from sensors, alarms or reports or allowing recipes to be
externally selected or downloaded.

Now, Industry 4.0 is creating a true demo-cratization of such connectivity,

allowing it to be widespread in manufacturing facilities of different
sophistication levels. Two elements contribute :
i) The IoT, in the industrial world called IIoT (industrial Internet of Things)
translates into very low cost hardware and lean OS (such as Windows
10 IoT running on a Rasberry Pi), allowing true connectivity with
equipment not requiring heavy system and interface.
ii) Passive identification and location tags allow all shop-floor resources
(CPPS) to hold their positioning coordinates. The MES needs logically
autonomous entities to store this location data and show it in real-time
interactive maps.

Figure 4.1: CPS and CPPS in plant setting.


Cash flow is the movement of money into or out of a business, project, or financial
product. It is usually measured during a specified, limited period of time.
Measurement of cash flow can be used for calculating other parameters that give
information on a company's value and situation.

The cash from operating activities is compared to the company's net income. If the
cash from operating activities is consistently greater than the net income, the
company's net income or earnings are said to be of a "high quality". If the cash from
operating activities is less than net income, a red flag is raised as to why the
reported net income is not turning into cash.

Some investors believe that "cash is king". The cash flow statements identify the
cash that is flowing in and out of the company. If a company is consistently

generating more cash than it is using, the company will be able to increase its
dividend, buy back some of its stock, reduce debt, or acquire another company. All of
these are perceived to be good for stockholder value.

Table 5.1: Cash flow activities

Operating activities

The activities involved in earning revenues. For example, the purchase or

manufacturing of merchandise and the sale of the merchandise including marketing
and administration. In the statement of cash flows the operating activities section
identifies the cash flows involved with these activities by focusing on net income and
the changes in the current assets and current liabilities.

Investing activities

Investing activities involve the purchase and/or sale of long-term investments and
property, plant, and equipment. For example buying the machines, tools, and
upgrade facility layout.

Financing activities

This section of the cash flow statement reports changes in balances of the long-term
liability and stockholders' equity accounts, such as:

1. Proceeds from issue of share capital

2. Proceeds from long-term borrowings

3. Interest paid

Table 5.1 : Statement of Profit and Loss for PMMA from 2015-2016 and projected
value from 2017-2021.
STATEMENT OF 2015 2016 2017 2018 2019 2020 2021
PROFIT & LOSS RM(000) RM(000) RM(000) RM(000) RM(000) RM(000) RM(000)
Revenue 931020 1086735 1266735 1456735 1656735 1866735 2086735
Cost of sales -750365 -841380 -921380 -1001380 -1081380 -1161380 -1241380

Gross profit 180655 245355 345355 455355 575355 705355 845355

Other operating 5173 5383 5593 5803 6013 6223 6433
Distribution and -51182 -60907 -61272 -61640 -62010 -62382 -62756
marketing cost
Administrative -32027 -34922 -35132 -35342 -35554 -35768 -35982
Other operating -1394 -1198 -1205 -1212 -1220 -1227 -1234

Results from 101225 153711 253339 362963 482584 612201 751815

operating activities
Finance income 19273 22410 22746 23087 23434 23785 24142
Share of results of 9335 9051 9323 9602 9890 10187 10493
associated com.

Profit before tax 129833 185172 285408 395653 515908 646173 786450
Tax expense -30295 -38272 -57082 -79131 -103182 -129235 -157290
Net profit 99538 146900 228326 316522 412726 516939 629160

Table 5.2 : Statement of cashflow for PMMA from 2015-2016 and projected cashflow
from 2017-2021.
STATEMENT OF 2015 2016 2017 2018 2019 2020 2021
CASHFLOW RM(000) RM(000) RM(000) RM(000) RM(000) RM(000) RM(000)
Cashflow from
operating actitities
Profit before tax 129833 185172 285408 395653 515908 646173 786450
Adjustment for:
Property, plant and
-depreciation 25433 23393 21393 19393 17393 15393 13393
-write-offs 351 866 1266 1666 2066 2466 2866
-gain /loss on disposal 1145 -110 500 500 500 500 500
Movement in -2266 -2527 -2727 -2927 -3127 -3327 -3527
provision of liabilities
Interest income -19273 -22410 -24410 -26410 -28410 -30410 -32410
Share of results -9335 -9051 1000 1100 1200 1300 1400
Forex loss/gain -1692 1079 1179 1279 1379 1479 1579
Gain/loss on 4300 -9169 4300 4300 4300 4300 4300
derivative finantial

Operating profit 128496 167243 287909 394554 511209 637874 774551

before changes in
working capital
Changes in working
Inventories -21609 4057 4066 4075 4084 4093 4102
Trade and other -3356 -50517 -3360 -50521 -3364 -50525 -3368
Trade and other 19234 32050 36850 41650 46450 51250 56050

Cash generated from 122765 152833 325465 389758 558379 642692 831335
Tax paid -27803 -33652 -65093 -77952 -111676 -128538 -166267
Rework cost paid -1798 -50 -48 -46 -47 -39 -41
Warranty paid -1451 -2289 -2176 -2157 -2058 -1987 -1804
Employee welfare -101 -132 -158 -184 -210 -236 -262
scheme paid

Net cash generated 91612 116710 257990 309419 444388 511892 662961
from operating


RM (000)


Net profit


2015 2016 2017 2018 2019 2020 2021

Figure 5.1: Revenue and Net Profit of PMMA for Year 2015-2016 and projected value
for the year 2017-2021.

Table 5.1 and table 5.2 represents the projected statement of cash flows and
statement of profit/lost for PMMA. The total revenues for the first five years are as
follows. In 2017, the revenue is projected to be at RM1.266 billion. The revenue for
PMMA will continue to growth at a very progressive rate to reach the value of
RM2.086 billion by 2021. The net profit will follow the incremental trend of revenue.
This is resulting from the investment that the company made to become a digital
enterprise. After five years, net profit is projected to be at the value of RM629.2

According to the recent research, company expect to reduce operational cost by

3.6% p.a., while increasing efficiency by 4.1% annually. High level of cost reduction
are expected. As a result from continuous cost reduction, PMMA will expect its net
profit to be increased steadily.


At the end of this transformation process, the success of this program will enable
PMMA to become true digital enterprises, with physical products at the core,
augmented by digital interfaces and data-based, innovative services. This digital
enterprise will work together with customer and suppliers in industrial digital

Industry 4.0 revolution will not only change PMMA as individual company, but the
overall market dynamics a whole range of industries will also be changed. Thus, the
company will need to continue its investment in digital technologies such as sensors
or connectivity devices and on software and applications like manufacturing
execution systems. To keep up with the global trend, we will need to transform
PMMAs business model and operation according to the trend.

For the top management of PMMA , the biggest challenge isnt the technology, it is
the people. The technologies are rapidly becoming a commodity, the success of this
transformation program will largely depends on how well the leaders define, lead,
and communicate the transformation. PMMA will need the workforce with the right
skill-sets. A greater use of robotics and computerization will reduce the number of
jobs in production and assembly but will increase the demand for IT solution
architects and design interface R&D.


1. Industry 4.0 at McKinsey Model Factory, 2016

2. Industry 4.0: Building The Digital Enterprise, PWC 2016

3. Industry 4.0 : Challenges and solutions for the digital transformation and use
of exponential technologies, Deloitte 2017.

4. Man and Machine in Industry 4.0, The Boston Consulting Group, 2015.

5. Panasonic Manufacturing Malaysia Berhad (PMMA) Annual Report, 2016

6. Understanding the implications of digitisation and automation in the

context of Industry 4.0, Frank Teuteberg, 2016.

7. A Categorical Framework of Manufacturing for Industry 4.0 and Beyond, Jilian

Qin, 2017.

8. TheDigital Twin: Realizing the Cyber-Physical Production System for Industry

4.0, Thomas Uhhleman, 2017.

9. Towards Industry 4.0 - Standardization as the crucial challenge for highly

modular, multi-vendor production system, Stephen Weyer, 2015.

10. Understanding TRIZ through the review of top cited publications, Leonid
Checchurin, 2017.