It covers every stage of the ecosystem from producers to manufacturers, all the way through the supply chain to the retailer or caterer.
By Gerhard Hartman
The Fourth Industrial Revolution (4IR) is gathering speed across the world as manufacturers accelerate their plans to digitise their business processes.
Against a backdrop of global turbulence and slow local economic growth, South African manufacturers need to evaluate how they will prepare their businesses for the social and economic changes 4IR will ring in over the next decade.
The sector has been through a turbulent year with manufacturing output falling 3.6% year-on-year in November after contracting by 0.8% in October, according to StatsSA. Concerns about the slow pace of economic reform in South Africa, a looming downgrade to junk status and global trade wars mean that political and economic uncertainty is a daily reality.
The return of rolling blackouts – or Eskom load shedding – in December and January has further dampened local business confidence and threatens to sour the outlook for growth in the manufacturing sector.
Hopefully, we’ll hear more about how government will tackle these challenges in the President’s State of the Nation address and the Finance Minister’s budget speech in February. It’s clear, however, that in an increasingly competitive and digitised world, manufacturers will need to find new ways to optimise operations and stay competitive.
Despite the uncertainties ahead, many manufacturers are discovering new reasons to innovate, driven by macro-economic pressures, competition, supply chain shifts, sustainability efforts, and, of course, customer demands.
Here are three key movements that will shape global manufacturing in 2020.
Sustainability comes to the fore
Consensus is growing that there is far too much waste and pollution in the world. The Extinction Rebellion movement has been making waves worldwide. It’s mobilising people to rethink how we live our lives today and how we can change for a better tomorrow. This rising public awareness and understanding of the problems have had a dramatic impact on human behaviour.
Many consumers in the upper LSM bands are consciously using less plastic, demanding brands to reduce unnecessary packaging, and becoming more ‘energy smart’ in their everyday lives. Generation Z consumers are becoming less materialistic. They recycle clothes, hire bikes, and share car rides.
This behaviour is altering the global consumer’s expectations on the products they receive. People are no longer looking for fast churn to create more goods. Instead, they want better quality and longevity on the product lifecycle so goods can be reused or recycled.
In 2020, the shift from a linear economy (take, make, dispose) to a circular economy (reuse, repair and recycle) will take precedence in the industry. While not a new concept, the circular economy will soon hit its potential. This trend has yet to reach South Africa in a big way, but it will arrive over the next couple of years.
Food compliance – a global concern
A food system includes everything from farm to table. From food production to processing, distribution to consumption, every stage is integrated and has the ability to enhance – or damage – the environmental, economic, social and nutritional health of the ecosystem.
At the centre of all this is food traceability. It covers every stage of the ecosystem from producers to manufacturers, all the way through the supply chain to the retailer or caterer. Food traceability has been a top priority for food manufacturers and retailers for decades, yet consumers continue to be plagued by inconsistency in food quality standards.
In some cases, negligence over food hygiene, intolerances and allergens have resulted in life-threatening situations.
Consumers deserve to know where the food comes from and how it is prepared. Demand for greater transparency and quality control has reached new heights. The growing popularity for plant-based food only adds to the complexity.
South African food producers – especially exporters – need to take extra steps to ensure their production processes are of the highest quality to meet the latest food standards. Enhanced compliance and quality controls, together with tougher regulations, will place a renewed focus on food standards in 2020.
Create your own applications playlist
Gartner predicts that by 2023, 40% of professional workers will orchestrate their business applications like they do their music streaming services. In recent years, we have seen a shift in how organisations deliver their IT services, making them much more modular and customisable.
Until now, many businesses offered IT services as a ‘one size fits all’ approach. They expected employees to fit their job around what is available, and as a result of this, we have seen a rise in shadow IT where employees bring their own devices and applications to the workplace.
It may also be a reason for the weak productivity levels we have been talking about for so long. In addition, this model has also had the unintended consequence of putting increasing risk to the organisation’s data security. The knock-on effect is disruption to the business workflow.
Instead of restricting users from choosing their own way of working, businesses need to find new ways to provide effective IT services to employees. At the same time, they also need to enhance security and accessibility.
Enterprise Resource Planning (ERP) technologies offer businesses the ability to consolidate their data and business applications and give IT the capability to deliver their services in building block form. As a result, users can create their own individual ‘playlists’ of applications customised to their needs, empowering them to work more productively.
2020 will be a year of transformation for manufacturers—from global economic pressures such as tariff-wars and Brexit, social-shifts such as sustainability, transparency and data privacy, and local challenges such as load shedding.
Manufacturers are awake to the situation and making great strides, and as they embrace 4IR, so too will be the need to harness technology to meet the challenges of tomorrow.
Gerhard Hartman is the Vice President: Medium Business, Sage Africa & Middle East