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3 Ways you can beat the odds in contract manufacturing
14 September 2016
BizConnect

It is no surprise that South African manufacturing is generally thought of as uncompetitive. After all, we must put up with some pretty serious challenges and restrictions. But, perhaps it’s time to dust ourselves off and make our own luck.

So what are these challenges, and how do we beat them? High input costs in the form of expensive raw materials, components, labour and electricity are largely to blame. A high cost base across the board leads to a relatively small market share for most South African manufacturers.


 

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With enough volumes, local manufacturers would be able to start competing on cost, but without investing in the right technologies and skills they cannot deliver the required volumes, and so they stay small; a vicious circle that is very tough to break out of.


Here are three tips on how you can navigate the challenges facing the manufacturing sector:

1. Ride out the storm

As tough as things are for the manufacturing sector, the fact remains that investments in market development, quality, efficiency and the attainment of volumes are not negotiable. They guarantee survival.

Systems-related investments, for example, eliminate time and material wastage, whether it is more sophisticated surface mounting robotics, more efficient supply chain management, better inventory management or more intimate customer relationship management.

2. Pick your battles wisely

So, what should smaller manufacturers do if they shy away from the risk of high investments to support predominantly contract-based work?

Picking your battles is the first step to overcoming that. Use existing strengths to carve a niche in a promising field with good volumes and margins that presents a higher barrier to entry. It can be as obvious as televisions, telephones or energy devices, or it can be a simpler, more visionary focus, such as Internet-based technologies used to monitor and control devices in the cutting-edge field of the Internet of Things.

Begin by picking one or two winning products and pouring heart and soul into developing them and your capacity and capability to produce them – beyond the reach of anyone within a thousand-mile radius.

After that, go about process improvements incrementally and within your current means, getting ever closer to zero waste.

3. Focus on developing markets

Once you have the capabilities that will enable you to compete on equal terrain, tell the world about them. Effective marketing is the simplest way of maximising volumes.

As businesses mature, black economic empowerment (BEE) is another sure-fire way of increasing your share of the addressable market in South Africa.

With economic conditions weakening, I foresee market attrition and consolidation. If you want to remain a winner, you need foresight to pursue the right investments and business directions; while constantly improving efficiencies and opening up ever greater addressable market areas.

For more information contact Duncan Pollock, Grand Tellumat Manufacturing, +27 (0)21 710 2911, dpollock@grandtellumat.com

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