Globally, the manufacturing sector plays a significant role in driving economic growth, job creation, and lifting people out of poverty. In the wake of the COVID-19 pandemic, however, global manufacturing output has been in decline and Kenyan manufacturers say they are now prioritising cost reduction, increasing revenue, retaining jobs, and improving cash flow. At the same time, with the Fourth Industrial Revolution underway, manufacturers are being pushed to embrace technological development – or risk losing business to more technologically advanced competitors.
Cloud technologies offer manufacturers a solution to this, providing speed, agility, cost savings, and innovation advantages that could accelerate the recovery of the manufacturing sector as well as increase Kenya’s global competitiveness. The African Continental Free Trade Area, Kenya-USA Free Trade Area, Kenya-UK Free Trade Area, and the European Union, under the Economic Partnership Agreements, all present enormous export opportunities for our country, but our manufacturing sector cannot fully capitalise on these global markets without undergoing significant digital transformation.
In 2008, the Kenyan government launched Kenya Vision 2030 with a long-term national development strategy to transform Kenya into a globally competitive industrial hub. Under the Big Four Agenda, the government hopes to increase the manufacturing sector’s contribution to Kenya’s GDP to 15% by 2022.
The Competitive Industrial Performance Index Report (2020), which benchmarks our ability to produce and export manufactured goods competitively, ranked Kenya 115th out of 152 countries. While this places us as a leader in East Africa, Kenya’s manufacturing sector still has a long way to go – and the pandemic has not made things easier. In May 2020, a KAM-KPMG survey showed that 53% of manufacturers were operating below 50% capacity during the pandemic. Although manufacturing’s contribution to GDP decreased from 7.8% in 2018 to 7.5% in 2019, the sector also saw an increase from KSh. 690.6 billion to Ksh. 734.6 billion in value added over the same period – largely due to increased output in the manufacturing of transport equipment, chemicals, and chemical products and pharmaceuticals.
The Kenya Association of Manufacturers developed the Manufacturing Priority Agenda 2021 to accelerate the recovery of Kenya’s manufacturing sector, with enhanced digitalisation as one of the seven key agendas to “enhance productivity, induce innovation, and enhance resource efficiency”.
The future of manufacturing
In the past, the prevailing winning strategies for manufacturers were large production sites, long product life-cycles, vertical integration, and a heavy investment in costly on-premise systems. But the face of manufacturing has changed, and today’s manufacturers do not only compete by the size and scale of their operations, but also by their speed and agility. For example, many plants today are distributed across the globe and dependent on a constantly fluctuating global supply chain, which necessitates more flexible and data-driven approaches to supply chain management.
As is the case in most other sectors, the future of manufacturing now belongs to those who can successfully adopt technologies such as machine learning and automation, big data, or IoT. Cloud systems enable these forward-facing technologies, which is why 46% of respondents in Africa’s manufacturing sector, according to a study by World Wide Worx, reported an increased spend on cloud services.
Why manufacturers are using the cloud
Efficient manufacturing is about accomplishing more with fewer resources without compromising on quality. It is also about effectively managing communication between suppliers and distributors, streamlining production schedules through real-time and insight-driven monitoring, and minimising operational costs.
Cloud technologies play directly into all of this, and while some of these capabilities are possible with on-premise systems, cloud-based systems are much faster and more cost-effective to roll out, enable easier customisation and flexibility, allow for scalability, and open the door for innovation. Manufacturers often compete in highly regulated industries where being first-to-market is crucial, and cloud computing is making it possible for them to reduce the time it takes to conduct strategic sourcing, quality audits, supply chain management, optimisation, and more accurate forecasting.
Developing scalable manufacturing intelligence across various plants can be achieved at a much lower cost and with greater accuracy using cloud systems, which can provide real-time insights into production performance using one central dashboard. Cloud-based monitoring systems also allow production processes to be fine-tuned actively and with greater accuracy, making it easier to identify bottlenecks and make configuration changes from any location.
Legacy enterprise resource planning (ERP) systems that do not run in the cloud were not designed for complex compliance reporting requirements, which is becoming increasingly important in the manufacturing sector. Cloud computing is making it possible to integrate these legacy systems with the cloud and define entirely new metrics and performance indicators.
Unlocking Africa’s potential
As industries and businesses adapt to working in the digital-first world, digital transformation has become critical to success. Cloud technologies have become a pillar of the modern business world, and the manufacturing sector is certainly no exception. To accelerate the growth of Kenya’s economy through improved manufacturing capabilities, we need to follow international trends and take advantage of all the opportunities that cloud has to offer.
Francis Wainaina is a Senior Product Manager at SEACOM East Africa.