CONTRIBUTORS
INCORPORATING COLD CHAIN flexibility and agility that businesses need to foster growth and industry stability .
THE IMPORTANCE OF MANUFACTURING South Africa ’ s manufacturing industry contributes 14 % to gross domestic product ( GDP ) with the food and beverages division accounting for 25 % of total manufacturing activity . Like most other industries , manufacturing has been severely impacted by Covid-19 restrictions , which has had a knock-on effect through all related industries such as distribution , logistics , transportation , and warehousing , while also severely hampering import and export activities .
Reviving the manufacturing sector is a critical step toward securing South Africa ’ s economic recovery , as an increased manufacturing capacity can reduce our reliance on imported goods . The more we can manufacture and consume locally , the better for our own economy . Additionally , the level of skills required make this the ideal industry for increased youth employment , another major challenge in South Africa where 46,3 % of people aged 15 – 34 years are without jobs .
POTENTIAL FOR GROWTH While currently underdeveloped , the manufacturing industry ( particularly the food and agri-manufacturing sector ) has exceptional potential for growth . This will strengthen our economy and attract foreign investment . How can businesses in this industry fast track their recovery and the development of their manufacturing capacity ? By capitalising on the benefits offered by BPO , manufacturing enterprises can externalise their non-core functions in order to reduce costs , while gaining flexibility and increasing output through enhanced productivity . For example , outsourcing the distribution of products will enable manufacturing plants to focus on their core function , while productivity will be enhanced by having more ‘ hands on deck ’ to get orders fulfilled efficiently .
SOUTH AFRICA ’ S UNIQUE CHALLENGES Although we ’ ve always been at the forefront of manufacturing in terms of knowhow , skills and ingenuity , the manufacturing industry is hindered by high labour costs , strong unions , uncertain labour conditions and red tape .
Compared to other countries , the cost of permanently employing workers is too high , which is why certain companies choose to disinvest from South Africa or not to invest with us at all . This high wage cost means that it becomes cheaper for South African businesses to import certain goods than it is to produce locally .
There is a direct correlation between high wages , output , and the bottom line . Employed permanently , labour is a fixed cost . If there is a labour disruption , the business output is decreased which affects the ability to manage business costs , such as wages . The South African steel industry is also currently in distress as the cost of labour here makes it cheaper to import steel from China , which prompted the industry to request government intervention in the form of an import tax .
OVERCOMING RISK THROUGH EXTERNALISATION Addressing labour challenges and risks in the manufacturing industry is a huge stress for enterprises . Utilising BPO is a strategic move that shifts the labour risk from the manufacturing business to a trusted outsourcing partner . This means looking at the actual processes in the manufacturing and distribution of the products and identifying opportunities for BPO .
In this industry , variability is key to
Paul Einerhand | Unsplash
The food and beverages division accounts for 25 % of total manufacturing activity .
survival , either as a startup , or for an enterprise seeking to become more agile in the manufacturing space . Shifting the previously fixed cost of labour to a variable cost ( one that ’ s based on output ) is a solid way to increase operational efficiency with predictable costs , which leaves only rental and equipment as the major fixed business costs . Not only does this shift the cost of labour , but it also removes labour-related risks and compliance issues from the business itself .
By outsourcing non-core components of the manufacturing value chain , businesses can make available the capacity and resources to focus on product innovation and service growth to develop international competitiveness . Here , a trusted outsourced provider partners with businesses in the industry to become a key enabler .
By providing variability that is based on mutual trust and collaboration , the BPO partner proactively increases efficiencies by identifying challenges in manufacturing processes and rapidly developing solutions . The outsourcing solutions will align with strategic imperatives of unlocking the agility and flexibility to respond rapidly to changing market demands . CLA
There is a direct correlation between high wages , output , and the bottom line .
36 www . coldlinkafrica . co . za COLD LINK AFRICA • May 2022