Technological innovation can be Manufacturing SA’s saviour

Within a mere five to ten years, certain industries employing tens of thousands of people – from clothing manufacturers to car dealerships – could start disappearing from the South African business landscape in the face of technological advances, a manufacturing forum in Sandton heard on Wednesday, 20 August.

At a Frontier Forum seminar hosted jointly by the IDC and Deloitte professional services group, Deloitte Africa Manufacturing Leader and Director Karthi Pillay said that the future of manufacturing would see numerous disruptive innovations leading to low cost products being no longer manufactured in low-wage countries such as China and Bangladesh but will be printed online and delivered.

Google has piloted the first driverless car (using SIM cards and GPS technology), a still-futuristic technology that nonetheless may ultimately result in massive change for the logistics, transportation and vehicle finance markets. Mr Pillay said that in future people may no longer be obliged to own a vehicle but could simply use their mobiles to book the use of a driverless car for each particular trip, “or as people are already doing, use their mobiles to share a ride to their next destination”.

“There are massively exciting developments on the horizon in manufacturing, and these changes will impact all supporting parts and service providers. Given the scale of the impending change, I question whether South Africa is concentrating anywhere near enough on where manufacturing is headed. Certainly, public discussions are focused primarily on the issues of here and now. I fear that without dedicated action about future, our economy will be considerably worse off in 10 years’ time, as our competitors overtake us in the race to innovate,” said Mr Pillay at the forum. The forum brought together representatives from business, government and labour to discuss the way forward for manufacturing in South Africa.

“Future jobs in successful economies will be high-tech jobs, not low-tech. To this end, Deloitte is globally spending time working with leading universities, and the public and private sectors in various countries to understand and shape the future of manufacturing, and what this means for local economies such as South Africa. We have no option but to play in this space – the only question is how soon we do so,” said Mr Pillay.

“Ten years ago nobody anticipated how Google would utterly change the way in which people access information. A similar scale of change will overtake numerous industries over the next five to ten years, leaving people and policymakers of today unable to ascertain how those industries will look in the future, said Roy Campbell, partner at Deloitte and Leader: Forest, Paper Pulp and Packaging Industry.

“Technology is about to dematerialise many bricks-and-mortar industries, by taking a physical activity and transforming it online. People already order their books, music and even groceries online, but the same is about to occur with clothing and motor vehicles, as the next wave, with many more to follow.”

The major underlying trend in innovation is that manufacturing is shifting from a philosophy of making goods that have to be on-sold, to far more intense, real-time market research which results in factories making exactly what consumers are asking for, with far shorter lead times and often making to order – especially in the case of automobiles.

Mr. Campbell pointed to global Deloitte research which highlighted that South Africa has been in a “different space” to more developed countries. Whereas ‘talent-driven innovation’ was the no.1 concern globally, locally it was ranked a lowly 7th. Conversely, local market conditions only rated 8th globally, but 2nd in South Africa.

“South African business needs to become more cognisant of what the global drivers of competitiveness are, as Deloitte’s Global Competitiveness survey sees South Africa slipping. The 2013 Deloitte Global Competitiveness Survey ranked South Africa as 24th for manufacturing competitiveness (22nd five years ago) and predicted a further slide to 25th position in the next five years,” said Mr Campbell.

Bronwyn Kilpatrick, Manufacturing Automotive Leader: Assurance Partner at Deloitte, said that the sector that had succeeded most in growing its share of GDP was Automotive. This was the result of a supportive regulatory regime being put in place, and the cooperation of all stakeholders and manufacturers in a united effort. This model could succeed for other sectors, including agricultural products.

“Admittedly, the automotive industry is at the forefront of innovation, but it is an example of an industry that planned for the future rather than the ‘here and now’,” she said.

Mr Pillay concluded: “It is of course important that we focus on addressing the issues that relate to the ‘here and now’, and we must do so aggressively, but we must also do so, with a robust understanding of the future of manufacturing. We must leverage of our country’s wealth of experience and skills and this includes our universities and research institutes, to anticipate the future of manufacturing, and more importantly select areas where South Africa could dominate”.

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