MALAYSIA’S economy has long been reliant on cheap labour with many of its major industries like plantation, manufacturing, construction and services employing a high number of migrant workers.

       But with the tightness in the labour market and an increasing shift towards automation over the last two years, companies are looking at options to mechanise parts of their operations to reduce their reliance on manual labour as well as to increase efficiency.

       This can, perhaps, be seen more evidently in the manufacturing sector.

       According to Xteven Teoh, founder and managing director of automation solution company XTS Technologies Sdn Bhd, there is a growing urgency for companies to move up the value chain with cutting edge technology to pave the way for more local champions that can help deliver a modern and competitive manufacturing sector.

       Automation, in the context of manufacturing, is the use of technology to automate systems or production processes. The end goal is to drive greater efficiency by either increasing production capacity or reducing costs.

       Xteven Teoh qtcht

       Relying on cheap labour to help grow the manufacturing industry is increasingly not viable, notes Teoh, as regional countries such as Indonesia and Thailand are catching up as low-cost production hubs.

       However, he acknowledges that it is not necessarily easy for local producers to automate, given that most of them have rather small operations here.

       Factories in Indonesia, for example, are typically larger scale and more suitable for automation.

       “Some factories, especially among SMEs in Malaysia, may not have the scale to automate their operations,” says the founder.

       He opines that Malaysia is more suited as a regional distribution and logistics hub rather than a large scale manufacturing base. This is also because the country faces labour constraints and has a relatively small domestic market.

       Nonetheless, this shouldn’t stop local SMEs from pursuing automation and digitalisation to modernise their business.

       Based in Puchong, Teoh says XTS was founded in 2010 with the aim of offering solutions to SMEs who are increasingly seeing the value in deploying technological solutions to solve some of the long standing problems in the manufacturing sector.

       To help increase adoption rate, XTS is also looking to provide more affordable solutions through leasing options by working with equipment-leasing companies like ORIX Leasing Malaysia to help smaller companies automate.

       By lowering the cost, it would help ease the shift for companies that have been leveraging cheaper labour costs.

       Apart from the manufacturing sector, Teoh is also targeting to move towards providing solutions for warehousing operations, which he says is growing in tandem with the eCommerce boom. There have been quite a number of companies in the logistics sector that are starting to invest in automation.

       Currently, XTS counts some of the more advanced companies in Malaysia involved in automation as its customers including Pentamaster Bhd and Genetech Bhd.

       While these companies are mainly in the semiconductor and electronics industry, Teoh says XTS provides solutions across different industries.

       Notably, interest in automation, especially among Malaysian SMEs, has seen a marked increase in the past two years. However, he points out that there are still several issues that need to be addressed for the adoption rate to increase substantially.

       One of these issues is the question of supply of talent and expertise in the field of automation and design.

       Many SMEs say that they do not have the right people with knowledge in automation and digitalisation to drive its implementation within the company. Additionally, with larger companies willing to pay more, small businesses may lose out in the fight for relevant talent.

       According to Teoh, there is sufficient talent in the country to meet most of the industrialisation goals across various sectors and companies – provided companies and entrepreneurs can keep them in the country.

       Else, they can leverage solutions providers like XTS.

       With more than 60 designers and engineers on board, Teoh says XTS can cater to companies’ demands to scale up.

       It is also contributing to the development of expertise in the field by collaborating with Taylor’s and TAR College to introduce courses in automation and robotic designs, and with agreements to accept students for practical training and internship at XTS.

       Another issue that Teoh says requires some consideration is the need for data collection and digitalisation of systems before automation can be effective.

       The concept of Industry 4.0 (IR4.0) is often promoted as sophisticated automation systems with robotics and artificial intelligence capabilities.

       However, to get there, the processes within the operations need to be synched with data.

       “Otherwise, it will be just another machine driven process, which is actually just Industry 3.0.

       “We have set up a software development arm to help in this process, to link the machines with the ability to generate real time data to aid SMEs to attain better productivity and efficiency,” says Teoh.

       He explains that XTS functions also as a single system integrator and aims to help SMEs solve many of the challenges they face in their quest for automation. Some of the common challenges faced by small businesses include getting access to funding and navigating red tapes in applying for the necessary approvals.

       While jobs offered by multinational companies (MNCs) have proven to be lucrative, Teoh says the outfit is more eager to help local companies, particularly SMEs, to modernise.

       Nonetheless, servicing large companies and MNCs would bring in more resources for the company to scale.

       Over the next 24 months, Teoh aims to get the company listed on Bursa Malaysia and is working with an adviser towards this end.

       “The aim of the exercise is not so much about raising fresh capital, but it will provide us with the necessary assurance and give potential customers the confidence in our ability to deliver, which is currently lacking for us as a private entity,” he says.

       A public listed company status would also enable it to bid for larger sized contracts and more critical jobs including those from overseas. This will also help it expand its regional footprint.

       XTS is already fielding interest from regional investors from Singapore and Indonesia, though there is no firm investment plan yet by these external investors.

       The company expects to log in more than RM25mil in revenue next year, and aims to breach the RM50mil mark by the time it goes public – barring any unforeseen pandemic disruptions.

       Over the longer term, XTS hopes to grow its exports and overseas contracts to account for around 50% of its future revenue.

       Teoh is also considering merger and acquisition moves as he actively looks for ways to bolster its size and business volume.

       For now, Teoh still owns the majority stake in the company along with several minority shareholders who had invested in the company during the initial start-up stage.

       Given the need for a major shift in how businesses operate to realise the country’s goal of achieving high income nation status, Teoh believes XTS is well positioned to help usher in a new era of industrialisation for the country.