Last week saw SYSPRO, and Strathmore university launched a report on the ‘State of Manufacturing in Kenya’.
SYSPRO is a global provider of industry-built Enterprise Resource Planning (ERP) software for manufacturers and distributors and together with Strathmore University, they drew the report from close to 100 companies in 12 sectors of the production and manufacturing industry in Kenya.
Manufacturing contributes to 9.2% of Kenya’s GDP. it is forecasted that by 2030, it will contribute upto 20% of Kenya’s GDP. So how do we get there and what is hindering the growth in the manufacturing industry?
As mentioned before, the main things that ails the industry are:
- Lacks access to an efficient and effective labour force
- inadequate infrastructure
- political uncertainties
- corruption
- high cost of power
- poor business environment
The Report
Most manufacturing companies are medium size (56%) but small and medium make up 77% of the population sample (World Bank, 2003). According to the Kenya Association of Manufacturers (KAM) , the Food and Beverages Sector has a 22% Membership
Financing
Most financing is self-funding schemes e.g., bank loans, invoicing and shares. 60% of companies invest more than half to three quarters in expansion.
Reasons for capital financing:
- New Product and development
- Advertising and marketing
- /Software/ Computer Systems
| Capital Investment Area | Count |
| New Product Development | 47 |
| Advertising and Marketing | 42 |
| Hardware and Software | 32 |
| Computer Systems | 32 |
| Packaging and Processing | 27 |
| Operations Technology Systems | 27 |
| Market Niche Products | 26 |
So how is the state of automation?
Only 53 companies had plans to upgrade their hardware and software
Challenges posed to their upgrading plans:
- software costs was a major hindrance.
- hardware costs followed technical skills and expertise gap
| Expenditure on ICT and Automation | Count (%) |
| Hardware Machinery | 70 |
| Customer Relations Management | 51 |
| Enterprise Resource Planning (ERP) | 48 |
| Other Application Software e.g. Accounting, Payroll | 42 |
Desirable objectives for ICT and Automation
Most desirable objective considered for recent automation project was to improve business efficiency followed by improvement in product quality
| Desirable Objectives | Count (%) |
| Improve Business Efficiency | 83 |
| Improve Product Quality | 78 |
| Reduce Downtime | 56 |
| Reduce Production Time | 55 |
| Reduce Staff Costs | 52 |
| Improve Cycle Time | 48 |
| Improve Staff Health and Safety | 46 |
Value Chain
Approximately 70% of the companies were involved in manufacturing and production with the least being support and product traceability of the value chain.
Only about 46 % of companies run full 8 hours a day while 47% run between 6 to 8 hours.
50% of companies run 3 to 5 days a week thus may affect 24 hour economy envisioned
| Value Chain Domain | Count (%) |
| Manufacturing and Production | 70 |
| Distribution and Movement | 49 |
| Inventory Management | 35 |
| Valuation and Costing | 31 |
Potential future ICT and Automation areas?
Top three areas earmarked as future ICT improvement areas:
- Upgrading of ICT infrastructure e.g., internet/intranet, security;
- Company Financial or accounting software; and
- Warehouse management systems.
| Future Automation Improvement Areas | Count (%) |
| Upgrading ICT Infrastructure e.g., Internet, Intranet, Security etc. | 52 |
| Company Financial or Accounting Software | 50 |
| Warehouse Management Systems | 39 |
| Time / Attendance / Workforce Labour Management | 38 |
| Enterprise Resource Planning (ERP) | 33 |
Where are ERPs applied in Manufacturing Industry?
33 companies had not installed ERP Systems leaving 63 of the rest having installed ERP Systems with 10 companies not using any hardware or machinery.
| Production Domain | Count (%) |
| Inventory Management | 52 |
| Manufacturing and Production | 42 |
| Valuation and Costing | 36 |
| Movement and Distribution | 36 |
| Requirements Planning (MRP) | 34 |
| Order and Replenishment | 24 |
| Planning and Forecasting | 24 |
Barriers for ICT and Automation?
26% of the respondents consider:
- Better training for technology partners locally would minimize barriers to implementation.
- Improved availability of technologies locally
- Making automation and robotics technology cheaper
- Availability of skilled / technical workers
| Barriers to Automation and Robotics Technology | Count (%) |
| High costs associated with Automation and Robotics Application | 32 |
| Updating the Technologies is difficult and expensive | 22 |
| Lack of Implementation Technical Skills | 21 |
| Technologies not available locally in the Industry | 19 |
| Government Policies e.g. Tax Exemptions, Bans etc. | 16 |
So, how can companies increase manufacturing production?
It is noteworthy that provision of qualified or trained personnel would be suitable for increasing manufacturing production in the industry, followed by provision of exemptions, grants and subsidies and purchase guarantees.