A tale of two industries
The manufacturing sector is in crisis. How manufacturers respond to this scenario is largely determined by the business’ size, budget and priorities. Two industry insiders unpack the current state of play.
When I ask Johan du Toit, strategic sales executive for SYSPRO Africa, if the situation across the local manufacturing sector is bad, he pauses. Trying to find the right words to describe the challenges our manufacturers face, he explains that the sector as a whole is under tremendous pressure, due to electricity and water supply issues and a sharp rise in the costs of borrowing capital. “The sector is shrinking by about 7% per year as more and more people offshore and look for alternate ways to get goods manufactured.”
That being said, he points out that there are two “types” of businesses in the industry. “The larger manufacturers obviously respond to market pressures quite differently to the smaller and medium-sized businesses, simply because they have more capital to play with. So when you talk about industry innovation, the top 1% or 1.5% have the means and appetite to build entirely new factories that are fully robotic, fully automated and tech-enabled, but the rest do not,” he says.
For SMEs, the risks associated with committing to a digital path are far greater, because they can’t really afford to test products, as any initiatives they undertake have to bear fruit. “Remember that a lot of manufacturers already have a pretty well-oiled machine and are hesitant to have conversations about new strategies and processes, because they don’t want to do anything that could have a negative impact on this well-oiled machine. If the current way of working is paying the bills, it’s totally understandable that manufacturers are hesitant to even entertain the idea of challenging the status quo.”
Du Toit says that the innovation happening across the industry can be broken down into two categories. There is manufacturing innovation happening on the factory floor, such as robots, augmented reality and automated machinery. This innovation can also be seen across the product range that a manufacturer produces. Here, the return on investment is very tangible and visible, says Du Toit. And then there is innovation around the management of the business, which entails streamlining the business processes happening behind the scenes. Unfortunately, the manufacturing sector has traditionally been slower to adopt new tech to enhance the latter.
Even though they may have been willing to use digital tools and solutions to streamline their manufacturing processes and to improve the products they produce, the manufacturing sector isn’t at the forefront of adopting new technology to advance how they manage their business, he says. “In my opinion, this is because it’s very easy to witness the value of buying a new piece of manufacturing equipment, like a new milling machine, for example, because I can immediately see how my purchase improves processes around the product being manufactured. But the spending to improve other business processes is less visible and the ROI isn’t immediately tangible so it’s harder to justify this spend.”
According to Forrester Research, modern manufacturers must become quicker, smarter and greener to survive in a fastchanging world. Manufacturers across South Africa have a growing appreciation for modern technologies, but are only in the early stages of understanding, testing and implementing these tools, says Tiger Brands CIO Mohammed Gause. “We have so much more to learn on our journey,” he adds.
As one of the largest FMCGs in the country, Tiger Brands’ main focus is on connectivity, data and computational power. “This translates into exploring cloud computing as a means to assist with the distilling of enormous amounts of information, facilitating the connection between IT and operational technology (OT) and unlocking an environment of innovation. We’re also focussed on leveraging analytics and intelligence to identify revenue opportunities and efficiencies using the information and resources we have available to us today,” Gause says.
One way they hope to do so is by improving its source-to-product journey. Tiger Brands has earmarked manufacturing plants as being a critical step in its journey to refine its supply chain. “Establishing a foundation of IT/OT convergence and leveraging data insights to inform both plant operations and IT (demand and resource planning) will give us the operational efficiencies and product innovation we strive for,” says Gause.
FMCG manufacturers must stay up-to-date with the latest technological advancements, he adds. AI is one such advancement. By implementing AI-powered solutions, manufacturers can optimise their supply chain management, improve production efficiency and enhance customer experience.
“AI can also help manufacturers analyse consumer data so that they can identify trends and patterns, allowing them to make informed decisions about product development and marketing strategies,” he says. All of this increases profitability and gives manufacturers a competitive edge in the market. “We expect AI to highlight efficiency gaps in source dependencies (availability of ingredients, for example) and to guide us around resource planning and prioritisation within our supply chain,” Gause says.
But none of this can add value without the right people. As such, scouting for, building and upskilling talent is important for any modern FMCG business as more and more specialised technologies make their way into the back office and onto the factory floor. Gause believes building solid relationships with the right vendors is critical. What is clear from conversations with Gause and Du Toit is that the industry needs to think strategically, spend wisely and make decisions where they can see the best return on their investments. “We mustn’t forget that some of the greatest innovations come about during tough times. We’ve all heard that saying, ‘don’t let a good crisis go to waste’, and I firmly believe that we will do what we always do – embrace a ‘boer maak ‘n plan’ approach to innovation and come up with creative and unique ways to minimise the impact of the challenges we face,” says Du Toit.
* Article first published on brainstorm.itweb.co.za