Swedish Firm Brings ERP to Malaysia’s Manufacturing SMEs
By Regina Hoo, Lee Siu MingEYEING ENTREPRISES
As businesses aim to increase productivity and decrease cost, having a reliable enterprise resource planning (ERP) system is one way to ensure production factors are efficiently incorporated and utilised.
An ERP system functions dually as the core for business information processing, and as the backbone of the information systems landscape.1 A survey conducted with 151 local firms2 found that ERP systems are highly sought after in Malaysia, but its complex nature deters many from pursuing its adoption. This degree of complexity varies according to company size and industry, and small and medium enterprises (SMEs) especially may find the process of putting a proper ERP system in place an arduous task.
Enter MONITOR ERP, or MONITOR, for short. With its latest G5 product, which is optimised for manufacturing companies, it could just be the thing that Penang’s 5,000-odd SMEs need to streamline their processes and improve production, freeing them to move a step up.
MONITOR has its origins in Sweden, where it enjoys 40% market share. This leading ERP system for manufacturing SMEs was founded in 1974 in Hälsingland, and it has since expanded its operations to eight countries. In Malaysia, it has offices in Penang and KL; both currently serve about 50 manufacturing SMEs of almost equal proportions. Interestingly, most of its local SME clients are from the metal, plastics, and electrical and electronics industries.
MONITOR’S foray into Penang began in 2013, and it has since grown to a 38-person strong team boasting a software development unit, allowing opportunities for knowledge transfer and the training of local talents. Out of the many digitally savvy cities in the region, the company has chosen Penang as its Asean headquarters for myriad reasons – among them connectivity, a broad customer base, a ready talent pool and, of course, Penang’s liveability.
Daniel Häggmark, managing director of MONITOR, spearheaded the company’s move to Penang, and notes the close network local SMEs have with each other. “I was moved to Singapore in 2009 for a big project. There, I met a businessman from Penang who said there are a lot of SMEs here which he could connect me with.
“It’s quite amazing how you have some very big multinational companies (MNCs); and some of our clients supply purely to these MNCs. The linkages and close-knit relationship between businesses in Penang, especially companies involved in various chambers of commerce and business associations, help to accelerate the flow of information on business technologies among SMEs. It was not hard to convince our late founder to do something here.”
Aemulus Corporation and Atnesis are among MONITOR’s clients. Aemulus observes that it is now able to seamlessly scale capacity, and that the management of resources and tracking status have become easier for planning, forecasting and issue predicting.
Atnesis, on the other hand, notices a decrease in inventory levels, while production workflow has become more transparent and manageable. Planning is done with more clarity and resources are better managed as well.
MONITOR’s local market segment really took off about two years ago in what Häggmark describes as the “snowballing” effect of customers’ growth, a result of the company strengthening its focus on manufacturing SMEs. “There is also a lack of competitors for our market segment in Malaysia,” he says.
The relatively low labour cost in Asean countries such as Malaysia, the Philippines and Thailand contributes to a lower adoption rate of the ERP system among SMEs. Häggmark offers an anecdotal example: “Labour cost for an operator in Sweden, as compared to Malaysia, may be up to 20 times higher; and this prompts a greater need for businesses to employ ERP systems in their operations to ensure that every process within their business – from sales, purchasing, stock management, production planning, shop floor, WIP control, distribution and all the way to finance – are more lean and efficiently managed.”
Häggmark notes some differences in client demands over the years. “When I moved here in 2013, not many were talking about cloud computing. Some asked, but they were apprehensive back then – as though they didn’t want to put confidential data up in cloud – but I think the awareness of it is different now. People understand that it is safer to store things in cloud than in the factory or a server somewhere. Everybody’s asking for it today.”
MONITOR is also effective in reducing wastage, and Häggmark observes some crucial changes with clients who have adopted the system. “Some say it has entirely changed their work culture – there is less blaming of each other. Without a system, when you start to have a lot of different products, different combinations, maybe thousands of different part numbers or raw materials, it’s very hard to manually have an overview of what you have in your stock. And when you don’t have a good overview, it’s basically impossible to tell the customer when you can deliver your orders, often resulting in late deliveries which have a big negative impact on your business.
“If this is the case, then one must create a lot of buffers to be safe – they might produce a lot and put it to stock so that when the customer calls, they can say they can deliver next week. But I think with how everything is changing now, we expect to order something and have it delivered by tomorrow, and with choices, such as different colours and so on – pretty much how people order things online today. It’s the same for Manufacturing SMEs as well – it becomes much more difficult for them because of this shift in behaviour. It’s all the more important to have full control of processes, especially in inventory and stock management.
To encourage Malaysian companies to embrace Industry 4.0, various initiatives are undertaken by the public and private sectors, especially in the areas of automation and digitalisation; and though government efforts via the Industry 4WRD Readiness Assessment are laudable, Häggmark opines that at times, weaknesses do tend to lie in the core content.
Topics such as artificial intelligence and machine learning may augur well for MNCs and local large companies; SMEs, however, may find that the core topics of ERP systems, readiness to automate and machine integration to be more in line and relevant with their businesses.
With Penang’s average manufacturing sectoral GDP of between 5.4% and 6.9% in the years of 2014-2017, it is expected that there will be continued demand for upgrading among SMEs in the manufacturing industry. The International Monetary Fund has also advocated for Malaysia to increase its productivity in line with the country’s aspiration to be a high-income nation.3
With Penang’s lengthy industrial experience and deep pool of SMEs directly supporting the manufacturing industry, the need for the ERP system to make more well-informed day-to-day business decisions will increasingly be in demand.
1974 – Founded Åke Persson in a small village called Ytterhavra in the north-west of Hälsingland, Sweden.
1982 – First generation of MONITOR released for computer type ABC 800.
1987 – Second generation of MONITOR released; DOS-based and for PC.
1992 – The first installation outside Sweden takes place in Poland.
1997 – The fourth generation of MONITOR is released, this time for Windows. MONITOR is now a complete ERP system.
2000 – 36 employees. 450 customers.
2013 – MONITOR makes its entrance in Malaysia with two clients and one employee.
2016 – The fifth generation of MONITOR, called MONITOR G5, is released during the fall. 160 employees and more than 3,000 customers worldwide.
2019 – MONITOR sets up its Asean headquarters in Penang. Over 50 Malaysian clients and 38 employees locally
Read more about Daniel Häggmark here.
1Kurbel, K. E. (2016). Enterprise resource planning and supply chain management. Springer-Verlag Berlin Heidelberg.
2 Supramaniam, M., & Kuppusamy, M. (2010). ERP system implementation: A Malaysian perspective. Journal of Information Technology Management, 21(1), 35-48.
is the deputy editor of Penang Monthly.
Lee Siu Ming
is a senior analyst at Penang Institute, and believes in the Latin phrase Audi alteram partem, loosely translated as “Listen to the other side".