The Third Asia Pacific Management Research Conference APMRC

The Third Asia Pacific Management Research Conference (APMRC 2019) Challenges of Industry 4. 0 to Vietnamese Textile & Garment Firms Dr. Nguyen Danh Nguyen Dean of School of Economics and Management Hanoi University of Science and Technology Bali, 11. 2019

Main content 1. Global and Vietnamese Textile and Garment Industry (TGI) 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global Textile and Garment Industry 4. Challenges of Industry 4. 0 to Vietnamese Textile & Garment Industry 5. Proposed solutions to overcome these challenges

These contents come from… Secondary research • Industry 4. 0 and their implications • Global and Vietnamese Textile and Garment Industry Empirical research Awareness, Readiness, Action Plan of Vietnamese Textile and Garment Practitioners to Industry 4. 0 February to May 2019, 92 companies responded survey and 30 C-level managers interviewed Challenges of Industry 4. 0 to Vietnamese Textile and Garment Firms and proposed Solutions

Global Textile and Garment Industry 5. 33 1. Global and Womenswear 3. 36 10. 97 Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI Menswear Luxury goods $3 Trillion Childrenswear 4. Challenges of Industry 4. 0 to 36. 62 20. 01 Sport footwear Vietnam TGI 5. Proposed Bridalwear solutions 23. 71

Three regions dominate world textile and apparel exports. 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 61. 2% 56. 1% 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Total Amount of Textiles and Clothes Exported by Country (US$ Thousand)

Value of the Apparel Market Compound Annual Growth Rate: 2018 -2022 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI Industry 4. 0 to Vietnam TGI 5. Proposed solutions Vietnam 4. Challenges of

Top Ten Exporters of Textile, 2018 ($billion USD and annual percentage change, %) 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Top Ten Exporters of Garment, 2018 ($billion USD and annual percentage change, %) 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Vietnamese Textile and Garment Industry 1. Global and Vietnamese TGI 2. Industry 4. 0 $36 15% 180 Billion VN exports countries 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to 5 th Largest Exporter Vietnam TGI 5. Proposed solutions Around 6000 textile & garment companies Employ 2. 5 million people

Country wise Export Share (in %) 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Industry 4. 0 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

The Industry 4. 0 Environment 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

9 Technology Pillars – Industry 4. 0 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Industry 4. 0 Framework 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

The key features of Industry 4. 0 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Interoperability: Cyber-physical systems are able to communicate with each other and people in real-time through the use of Io. T and Internet of Services Virtualization: Sensor data is connected through simulation models in a virtual environment Autonomous Management: Cyber physical systems make their own decisions by determining optimum decisions based on the collected and processed big data Real-Time Management: Collecting and processing data in a real-time fashion with distributed processing and big data approaches Industry 4. 0 to Vietnam TGI 5. Proposed solutions Internet of Services: Cyber physical systems deliver their services to people and other systems via Internet of Services Modular structure: Providing a modular structure to adapt to rapidly changing requirements

Industry 4. 0: Why we need it? 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Cost § Eliminate waste & losses § Eliminate hidden cost § Cost reduction Industry 4. 0 to Complexity § Sub-Nano technology § Cyber Physical System § Exponential technologies Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions § Personalize § Fast, Cheap, Quality § Total Customer Satisfaction Customer § Digitalization § Increase competitiveness § Globalization Competition

Industry 4. 0: Key Challenges Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to GOVERNMENT 1. Global and Attitude Skill Expertise Knowledge EDUCATION & TRAINING Vietnam TGI 5. Proposed solutions POLICIES o New emerging technologies (Augmented reality, Cyber Security, Io. T, Big Data Analytics, etc. ) o Multi discipline role and responsibilities to support the new revolution. o Lack on local expertise to create and provide new training program. o Develop ‘I LOVE TECHNOLOGY’ attitude and mind-set. o Lack on local content for system hardware and software. o Policy on Industry 4. 0 related research and development, security of integrated system, legal framework conditions, work, training and further education. o New Industry 4. 0 technology and skill transfer from overseas as part of pioneer status application. Localize hardware assembly. o High level nationwide Industry 4. 0 framework and review panel/board. o Digitalization in manufacturing technologies will require new incentive.

Industry 4. 0: Key Challenges 1. Global and Vietnamese TGI 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of INDUSTRY 2. Industry 4. 0 FRAGMENTED LAYOUT Industry 4. 0 to Vietnam TGI 5. Proposed solutions DATA SECURITY & PRIVACY o Merging the old and new system, techniques, machinery, protocols with complex protocols will be complicated. o Traditional IT infrastructure merging with new Io. T system integration will require massive reorg and reskill of the workforce. o Hackers and system attackers. o Manufacturing sector are more vulnerable to attack with interconnectivity through cyber physical system. o Require more white hacker to develop full proof security system as attacker continue to look for loop hole.

Industry 4. 0: Key Challenges 1. Global and Vietnamese TGI 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of INDUSTRY 2. Industry 4. 0 BIG DATA Industry 4. 0 to Vietnam TGI 5. Proposed solutions CORPORATE (CULTURE, FINANCIAL, STRUCTURE) o More data scientist needed means more statistician with operational background. o More complex bid data analytics from industrial data source. Not typical consumer based data anymore and transforming into well structured data format. o Industry 4. 0 is about transforming the organization into new culture and promote technology as the way to move forward. Top management must endorse on it first before the rest follow. o Need more systematic master framework to ease the deployment plan.

Adoption of Technologies by Different Geographies Values for 2015 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Advanced Robotics US$ 35 bn. 4. Challenges of 5. Proposed solutions 63% 78% 40% 3% 15% 28% 27% 7% 5% 3 D printing US$ 5. 2 bn Industry 4. 0 to Vietnam TGI 20% Artificial Intelligence US$ 8 bn. Industry 4. 0 to Global TGI 14% 39% Wearables US$ 0. 7 bn. North America 40% Europe Asia- Pacific 13% 8% Others Data Source: World Economic Forum Presently, North America, Europe and some parts of Asia (China, Japan and South Korea) are leading in technology adoption 1%

World is already adopting this change… 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions How about Textile and Apparel Industry?

Impact of Industry 4. 0 to Global Textile & Garment Industry Video YIN USA Smart Factory Industry 4. 0 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Key levers that will reshape the textile industry 1. Global and Big Data Analytics • Collection and Analysis of large sets of data Vietnamese TGI • Used in making informed strategic and operational decision 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Artificial Intelligence • Machines which can think humanly • Can be used for consumer trend predictions, self diagnosing machines Industry 4. 0 to 3 D Printing • Creating 3 -D objects using Computer Added Design (CAD) • It is generally used in high-end fashion products Smart / Wearables Textiles • Intelligent textiles which can sense and react to environmental conditions • Used in textiles for health, military, defense, and sports Vietnam TGI 5. Proposed solutions Advance Robotics Internet of Things • Application of automation in business operations • Interconnected machines that can transfer data without human intervention • Extensive use possible in cut & sew industry • Automated monitoring of factory operations and predictive maintenance

Globally Companies are Already Gearing up for Textile 4. 0 Case-Study in po e On ü Factory in Izmir, Turkey produces 4 mn. pcs of garments annually ü It is investing heavily in robotics & automation of processes ü Goal: To create a digital twin of their facility. Strategy: Digitization, Automation, Robotics and finally Artificial Intelligence tm en ts Hugo Boss is aiming to run an entire factory as one “Suit Machine” with focus areas as: On tc e on po ne int ct a fo cce ra s ll s, de pa r Hugo Boss Digital Twin Strategy ü Hugo Boss is one of the forerunners of Textile 4. 0 Robotics 100 Data Collecting Robots collect Data from Man, Machine and Material Focus on IT & R&D Establishment of IT Department and Teckno. Lab Artificial Intelligence Artificially Intelligent Machine that can predict maintenance requirement, schedule lines etc. Layout of Digital Factory 3 D Space Planning (Robots and Drones working from above)

APPAREL 4. 0 For Production 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Packaging with Cyber Physical Systems Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Cutting Sewing Digital Information Transfer Buttoning Predictive Maintenance Ironing APPAREL 4. 0 for PRODUCTION Robotic Quality Control Intelligent Manufacturing Human. Robot Technology Collaboration in Cutting Department Quality control Packaging Shipment

APPAREL 4. 0 For Management 3 D Product Design Production Line Balancing Customer's Real. Time Order Tracking Real-Time Product Tracking Real-Time Employee Performance Management Real-Time Warehouse Management Human-Robot Technology Collaboration in Warehouse Management 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Real-Time Production Planning Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Real-Time Supplier Performance Management Sewing Training with Augmented Reality Training Robots with Kinect Technology

Requirement of Stakeholders in the value chain How will Industry 4. 0 benefit the textile industry • • • Manufacturers Brands Effective Planning • Sampling and Technical Inputs • Good Quality • Timely Delivery • Right Costs • Inventory Management Input Availability Better Productivity Training R&D inputs for Sampling Reduced Costs Customers • • Good Quality Right Price Instant Delivery Good After Sales Service How Textile 4. 0 can Address the Needs of Stakeholders? • Better flow of information across the value chain • Higher Productivity • Improved quality levels • Increased efficiency • Reduced cost • Reduced lead times • Better Service

Challenges of Industry 4. 0 Technical Challenges: - new and complex technologies, - shortage of experienced workers. 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI Privacy and security: Lack of a global standard: - digital data from smart factory environment - a standardized Industry 4. 0 maturity model - secure machine-to-machine protocols to protect data. - a standard roadmap to guide the firms and practitioners 4. Challenges of Industry 4. 0 to Initial investment cost: Social difficulties: Vietnam TGI - Technology 4. 0 and their integrations are very costly. - required more high-skilled complex jobs 5. Proposed solutions - Most apparel companies are SME enterprises. Challenges threats of unemployment.

Application of Industry 4. 0 in Vietnamese TGI § Ha Noi Textile and Garment Jointstock Corporation 1. Global and Vietnamese TGI 2. Industry 4. 0 § Nam Dinh Textile and Garment Jointstock Corporation Notable companies § Phong Phu International § VINATEX 3. Impact of § Viet Tien Garment Joint-stock Corporation Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Area § § § § RFID Sewbot Horizontal and vertical system integration ERP Digital marketing, Consumer-driven garment design, Additive manufacturing 3 D printing technologies

Challenges to Vietnamese Textile and Garment Industry Internal High cost Complexity 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI Risky Lack of Knowledge Lack of motivation to change Lack of skilled labour 5. 00 4. 50 4. 43 4. 23 2. 92 4. 18 4. 06 4. 29 4. 00 3. 65 3. 43 3. 12 2. 62 4. 60 4. 53 3. 71 3. 54 3. 50 3. 00 4. 14 3. 92 3. 85 4. 00 4. 43 3. 24 3. 00 3. 71 3. 35 2. 76 2. 71 3. 00 2. 88 2. 35 2. 50 2. 00 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions 1. 50 1. 00 0. 50 0. 00 Spinning Weaving Dyeing Garment To what extend do the firm agree that they face these challenges to adopt Industry 4. 0

Challenges to Vietnamese Textile and Garment Industry 1. Global and Policy/ Institution Lack of information Lack of experts Infrastructure 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of External 6. 00 Vietnamese TGI 2. Industry 4. 0 Lack of R&D ecosystem 5. 00 4. 69 4. 31 4. 00 3. 92 4. 00 5. 00 4. 57 4. 54 4. 14 4. 71 4. 65 4. 53 4. 29 4. 38 3. 86 4. 65 4. 88 4. 56 4. 13 4. 31 4. 44 4. 10 3. 47 3. 00 2. 00 Industry 4. 0 to Vietnam TGI 5. Proposed solutions 1. 00 0. 00 Spinning Weaving Dyeing Garment To what extend do the firm agree that they face these challenges to adopt Industry 4. 0

Challenges to Vietnamese Textile and Garment Industry Infrastructure and R&D activities Institutions 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Technological challenges Managerial challenges Financial challenges Human resource challenges Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Global standards Skillful human resource and Social difficulties

Industry 4. 0 means: ØDigitalization Technological challenges ØDisruptive Innovation ØAutomation and Interconnection ØAI and Robotic ØBig Data ØIncreasing organizational complexity in the manufacturing system challenges to the current technological system of Vietnamese Textile and Garment firms (most of machine are old-fashion and hard to be integrated in smart manufacturing system, lack of synchronized database system)

Spinning firms Weaving firms Management system 5 5 4 4 3 Technological challenges 3 Human Resource 2 1 Machine Human Resource 2 Dyeing firms 0 Supply chain management Management system Readiness to Industry 4. 0 Management system Garment firms 3 2 1 Supply chain management R&D 5 4 Human Resource Machine 1 0 R&D Management system 5 4 3 Machine 0 Human Resource 2 1 Machine 0 R&D Supply chain management R&D Supply chain

Managerial challenges Industry 4. 0 requires 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions • new managerial approach, new business model, • touch skills and qualifications concerning e. g. problem-solving skills, failure analysis, big data analysis • the ability to deal with constant changes and completely new tasks • courage, confidence, pioneering spirit and the readiness to take risks • high-tech knowledge

Human resource challenges Most of Vietnamese technical staff and workers lack of skills and professionals in: 1. Global and Vietnamese TGI • Automation • IT 2. Industry 4. 0 • Data analytics 3. Impact of • Information security Industry 4. 0 to Global TGI • Foreign languages Distribution of Vietnamese TGI labor by qualifications 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Worker Manager Total High school 87. 31 32. 00 84. 40 Vocational Undergraduate Graduate 9. 49 3. 17 0. 03 30. 15 35. 87 1. 98 10. 60 4. 90 0. 10 Total 100 100

Human resource challenges § Most of Vietnamese technical staff and workers lack of skills and professionals 1. Global and Vietnamese TGI 2. Industry 4. 0 § Lack of Industry 4. 0 knowledge § Resist changes Industry 4. 0 to § Technical staffs worry they can not master new technology, lack of motivation to study new things Global TGI § Manual labor worry they will loose their job 3. Impact of 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Financial challenges 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions The implementation of all the pillar of industry 4. 0 requires huge amount of investment Most Vietnamese firms are SMEs Lack of financial capability

Institutions 1. Global and Vietnamese TGI Lack of policy on Industry 4. 0 related research and development, security of integrated system, legal framework conditions, work, training and further education. 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI Lack of incentives (tax, financial support) for the costly and risky investment in application of Industry 4. 0 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Lack of guidelines and roadmap for the implementation and development

Infrastructure • Hardware 1. Global and • Software Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions • Interconnection • Security

R&D activities Proportion of Vietnamese Textile and Garment have specialized R&D division/ department • R&D budget 1. Global and Vietnamese TGI No R&D activities division R&D is a subset another division Spinning - 92. 3% 7. 7% 100. 0% Weaving 14. 3% 42. 9% 100. 0% - 58. 8% 41. 2% 100. 0% Garment 21. 2% 48. 5% 30. 3% 100. 0% Total 10. 0% 62. 2% 27. 8% • R&D ecosystem • R&D human resource Specialized Total R&D division 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI Dyeing 5. Proposed solutions 100. 0%

R&D activities Proportion of R&D budget in earning before tax of Vietnamese Textile and Garment firms <1% Spinning Weaving Dyeing Garment • R&D budget 1. Global and Vietnamese TGI 2. Industry 4. 0 • R&D ecosystem • R&D human resource 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions No investment <1% 1 -3% 3 -5% 5 -10%

Skillful human resource 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions § The country faces tough competition from Cambodia and Bangladesh, as their labour wages are lower than that of Vietnam. Labour cost is not Vietnam’s competitive advantage anymore § New competitive advantage should focus on skillful human resource, ability of quick responses, and capability to adopt Industry 4. 0 While § Talent shortages increase overtime

Skillful human resource 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Source: Manpower Survey 2018

Skillful human resource 1. Global and Vietnamese TGI 2. Industry 4. 0 Skills required for Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions Source: Manpower Survey 2018

Social difficulties • Changes in the world of work • Worries about job losses (high proportion of manual labor in TGI 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to • Shuffle labor market and training system • Technological and business-driven innovative solutions are not going to be enough. Social innovation Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions https: //timreview. ca/article/1117

Global standards 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions • A lack of standards and norms with regard to interface technologies • Vietnamese companies are adapting to the standard of the large company they supply difficult for Vietnamese companies to join value creation networks with different standards and norms, thereby constraining their room to manoeuvre

How Vietnamese Companies will move towards Textile/ Apparel 4. 0? 01 Proactive in experiments with technology through pilots 02 Gradually upgrading information technologies and systems 03 Develop a talented workforce through proper training 04 Collaboration and Integration (horizontal and/or vertical, research units, …) 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Firms perspectives Industry 4. 0 to Vietnam TGI 5. Proposed solutions

Government perspectives 1. Global and Vietnamese TGI 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions • Establish vision, roadmap and guidelines towards Industry 4. 0 for firms, especially SMEs. • Tax incentives for companies pursuing Industry 4. 0 • Financial support • Technical support i. e. criteria for appropriate technology, steps to implement, … • Upgrade ICT infrastructure system in national-wide • Give a push to enhance value-adding capabilities of the apparel manufacturers, develop their own brands, become original design manufacturers (ODMs) rather than function only as subcontractors. • Orient training system focusing on skills required by Industry 4. 0 • Build and develop ecosystem for R&D and technology transfer

Conclusion • Overview of Industry 4. 0, global and Vietnamese Textile and garment industry 1. Global and Vietnamese TGI • Benefit and challenges of Industry 4. 0 to Vietnamese Textile and garment firms • Solutions from firms and government perspectives 2. Industry 4. 0 3. Impact of Industry 4. 0 to Global TGI 4. Challenges of Industry 4. 0 to Vietnam TGI 5. Proposed solutions “You cannot wait until a house burns down to buy fire insurance on it. We cannot wait until there are massive dislocations in our society to prepare for the Fourth Industrial Revolution. ” Robert J. Shiller, 2013 Nobel laureate in economics, Professor of Economics, Yale University The important thing is to understand the challenges and find out the solutions to overcome them

The Third Asia Pacific Management Research Conference (APMRC 2019) Challenges of Industry 4. 0 to Vietnamese Textile & Garment Firms THANK YOU FOR YOUR ATTENTION Questions and Answers! Dr. Nguyen Danh Nguyen Dean of School of Economics and Management Hanoi University of Science and Technology Bali, 11. 2019