The Greater Bay Area (GBA) concept is one of the most exciting prospects for the future economic development of Hong Kong in recent years and has particular relevance for the manufacturing and technology industries. The economic scope of the GBA is substantial, with a population of roughly 68 million people and a GDP of about US $1.5 trillion. Among major cities in the catchment area, Hong Kong’s status as a key financial and commerce hub will undoubtedly support growth in the GBA. In fact, one of Hong Kong’s roles of is to actively participate in taking the lead in helping develop the regional supply chain as a trusted, open, integrated and international platform.
The Tokyo Bay Area can help to illustrate the benefits of an integrated supply chain operating within an economically integrated bay area. The area is home to a third of Japan’s population and generates a third of its GDP. The Tokyo Bay Area has proved very successful in building up a strong manufacturing supply chain and an interconnected industrial belt, making use of the advantages of constituent areas. The government has adopted a top-down approach to ensure that the region enjoys balanced growth and that the nation’s resources are efficiently allocated. It also combines the resources of finance, research and development (R&D), manufacturing and corporate headquarters within the region, which has helped Japan become a world-leading center for advanced manufacturing. These are key lessons that the GBA can learn from the Tokyo Bay Area.
To build an integrated, advanced supply chain, a holistic bay area strategy, however, is only part of the equation. If the GBA wants to be successful, it is critical to have enterprises adopt the very latest technologies to advance product design and production. The Economist Intelligence Unit (EIU) has recently conducted research which provides valuable insight into how the technology supply chain is advancing across the world. The report, entitled “Prioritisation and precision: How artificial intelligence and design thinking will transform technology production”, is sponsored by HONOR, a global smartphone brand under the Huawei Group.
Coupling AI with design thinking
Traditionally, product design and production belong to two separate departments within the technology industry. However, our study finds two major developments in technology hardware production dynamics: the adoption of advanced innovations such as artificial intelligence (AI), and a growing adherence to design thinking. These developments are giving executives in the technology industry opportunities to experiment, optimize and boost agility, particularly as product design grows in importance within the production process.
According to our study, which surveyed technology hardware industry executives around the world, 58% of respondents believe that AI will bring change to production innovation, more so than other emergent technologies, including big data and cloud computing. Executives expect the foremost benefit from AI will be better product design, as AI will give companies the tools to automate the prioritization of customer design preferences with greater precision. It will also lead to greater supply-chain segmentation, helping to make production more efficient overall.
In a more holistic sense, product design and supply-chain management are tightly interlinked today in the technology industry and are likely to become more so. The spreading influence of design thinking—cited by 82% of executives in the survey as growing in importance in the technology hardware industry—and adoption of advanced technologies are helping drive this trend. Eighty-one percent of surveyed executives also believe that innovation in supply-chain operations can bring about changes in product design.
Tightening integration between product design and supply-chain teams
In our report, David Simchi-Levi, professor of engineering systems at the Massachusetts Institute of Technology, cites as an example the ability of PC suppliers to manufacture and deliver components on demand, which has enabled final producers to modularize the devices and enhance their customization capabilities. Simchi-Levi likens the technology industry’s tightening integration of product design and supply-chain teams to their already-close integration in the fashion industry, in which products also have a fleeting lifecycle and operate at lightning speed. In the fashion industry, supply chain, product design, sales and sometimes even procurement people sit together to make sure new product designs consider supply, demand and other challenges. It is increasingly the same in high tech, where such integration is now a requirement.
According to Shantanu Bhattacharya, professor of operations management at Singapore Management University and another report interviewee, the interlinkage of product design and supply-chain management in the technology industry is likely to grow as design cycles become more compressed and technology products increasingly customised. Design thinking’s laser focus on customer preferences leads to the development of enhanced customization capabilities, which in turn ratchets up pressure on suppliers to operate with greater speed and flexibility.
The modern supply chain is integrating the product design and manufacturing at the same time as customization is becoming more precise and lifecycles shorter. That creates a unique opportunity for Hong Kong to play a vital role in the integrated supply chain within the GBA. As responding quickly to customer preferences is becoming increasingly important, Hong Kong can leverage its position as an international information and commerce hub and use the latest technologies such as AI, the Internet of Things and big data, to provide timely inputs to the design and manufacturing cycle. Hong Kong should act as an innovation center and immerse itself into the supply chain. There are plenty of opportunities to collaborate with R&D and manufacturing leaders in the GBA and support them with insights and market intelligence.
Michael Gold is senior editor at the Economist Intelligence Unit.