Monday, December 5, 2022

Kenya’s answer to the age of adaptation, The Manufacturing Survey

Kenya Manufacturing Survey 2021

The Need for Research.

The article presents the findings of research done by SYSPRO and the Institute of Certified Public Accountants Kenya (ICPAK). The survey investigates how Chief Financial Officers (CFOs) in the country’s manufacturing industry are adapting to the new age of Covid-19. The ICPAK CEO noted that the pandemic necessitated innovation to resettle in the disrupted global economy.

The financial sector, particularly, is undergoing changing trends, especially in technology. Workplace culture is also adapting to a new norm (SYSPRO & ICPAK, 2021). Covid-19 provided a powerful reminder of the necessity for risk management and corporate strategy.

CFOs need to be innovative to develop new skills that make their organizations remain relevant amid the changing industry structure. This change necessitated a need for research to investigate how firms in Kenya are adapting to new changes. The manufacturing survey 2021 study attracted over one hundred participants (SYSPRO & ICPAK, 2021).

All these were financial leaders working for larger manufacturing companies in the country. SYSPRO and ICPAK analyze how manufacturing firms are performing following a challenging financial year in 2020. They also analyze responses from CFOS towards the challenges faced.

Findings.

Kenya and Covid-19.

The manufacturing study uses a survey from the Kenya Bureau of Statistics to analyze the country’s manufacturing industry growth. The sector suffered a decreasing demand for products both locally and globally. Compared to 2019’s 2.5%, 2020 only recorded a 0.1% overall growth. The food and beverage sector has managed to sail through the pandemic contributing 46.3 percent to Kenya’s exports in 2020. It also had a 14.3% growth.

However, other sectors such as electronics and metal fabrication sectors have barely survived the pandemic. For instance, just 7% of the firms reported an “already recovered” market climate, while 36% predicted that recovery could happen in 2023 and beyond. 2% are confident their businesses will never recover (SYSPRO & ICPAK, 2021).

Manufacturers in Kenya finding digital investment unprofitable

Although half the industry is managing well, only 1% is thriving, and 2% claim they are just surviving. Businesses claim the situation is due to supply chain challenges and a lack of funding to source new technology to adapt to the changing climate.

More than half say that there has been no government support looking for extra funding through other resources such as third-party finance lenders (SYSPRO & ICPAK, 2021). Globally, the situation puts Kenya’s manufacturing industry on an uneven playing field since other firms in the market are recovering through stimulus programs and government incentives.

The Age of Innovation.

The immediate global response towards Covid-19 impacts has been diversifying for technology adoption. However, the survey shows that Kenya’s technological implementation has been relatively slow. Instead, the manufacturing firms almostare relying on conventional cost-cutting measures.

Most companies are moving towards discretionary spending, eighty percent of the industry. 40.70% opted for debt collection in an attempt to recover previous revenues as emergency stimuli. Some industries are going as far as controlling inventory costs by reducing stock levels to manufacture as necessity arises (SYSPRO & ICPAK, 2021).

Most CFOs in the sector have a strategy for cash flow control in 2022. However, they still want to adopt the global approach, with 40% planning to invest in research and development (R&D).
CFOs that are expecting to diversify overwhelmingly preferred Enterprise Technologies.

70% claim they are committed to investing in BI, ERP, and ERM. Fifty-eight percent believe that re-modelling distribution networks to boost business-to-business (B2B) transactions is essential for business recovery (SYSPRO & ICPAK, 2021). The support for supply chain re-development arises from the country’s reliance on raw resources for the food and beverage industry. Kenya’s traditional approach has not been a failure.

The research shows that, while internationally, CFOs in the manufacturing industry immediately embraced diversification as a mitigation strategy, Kenya’s capability to survive through the pandemic demonstrates there is no superior responsive approach. The country’s strategy may not be viable in the long term but has been a successful short term strategy

The Digital Desire.

Overall, the manufacturing industry desires to grow technologically. However, the main setback has been the uncertainty in return on investments (ROI). The research finds that forty-four percent is eager to invest in ERP systems.

Within the next five years, 38% have a plan for business intelligence, with 37% planning to expand to e-commerce. There is hope for the industry to shape up technologically, with 27% investing in migrating to cloud storage and 29% having an initiative in digital security (SYSPRO & ICPAK, 2021).

With the sector primarily depending on raw material supply, these initiatives will improve supply chain enhancing decision-making. Businesses will maximize efficiency by eliminating obstacles leading to the optimal use of human resources.

However, even with the set strategic plans, the industry is experiencing prevailing technical and financial restrictions. For instance, when asked about their ROIs, the playing field is more of a hit and miss. 30% are generating returns, while 28% have no ROI. This uncertainty creates an atmosphere of indecision as some firms opt to wait for a precise approach.

Covid-19 is already straining these firms, and uncertain returns are significant risks businesses cannot afford. The survey finds this ambiguity as the primary reason for the industry’s sluggish adoption of diversified technology (SYSPRO & ICPAK, 2021).

The Future.

CFOs agree that the pandemic has renewed the emphasis on risk management in strategic management for organizations. Their recommended strategies align with global approaches. For instance, the research shows that 76% of respondents say risk management is a skill the industry will need to acquire to remain globally competitive. 72% are keen on adapting creative business solutions. 71% think they have to improve on their strategic business knowledge. 53% want a digitalized and automated manufacturing industry.

Therefore, Kenya’s manufacturing industry is in line with the global sentiment on the sector’s future. The industry expects a digital future that will emphasize modernizing processes and distribution protocols. The pandemic re-established the need for business flexibility (SYSPRO & ICPAK, 2021). 2020 was proof that rigidity will only drag growth, and companies should adapt to new trends rapidly.

However, business sustainability does not entirely depend on global approaches. Kenya’s case is proof that businesses can thrive if they identify and nurture their unique potential. Additionally, investing in the right skills for a firm will always be beneficial to companies in the manufacturing industry.

Conclusion

The article is successful in answering its research problem. The concern was that even with the Covid-19 impacts, Kenya’s manufacturing industry has been slow in diversifying its technology. The research can find several challenges in the industry, leading to the problem. Kenya stands out to the rest of the world in countermeasures to Covid-19 impacts.

Kenya’s manufacturing sector mainly depends on food and beverage, which is why its responsive measures were conventional cost reduction tactics and improving supply networks. The manufacturing setup is different, and therefore, it experiences disparities.

Additionally, setbacks such as lack of government support and uncertainty on ROIs on technology investment enhanced the problem. However, the article fails to identify solutions to this ambiguity. Although the industry is witnessing success in Kenya’s traditional methods, the need for digital diversification still exists both locally and globally.

Technology innovation will revolutionize manufacturing and supply chains internationally. Long-term strategies implemented throughout the world threaten to force migration from Kenyan businesses. Therefore, there is an urgent need for research that identifies solutions to identified problems in the article.

Reference

SYSPRO, & ICPAK. (2021). Reigning in Industry 4.0 KENYA’S ANSWER TO THE AGE OF ADAPTATION, The Manufacturing CFO 4.0 2021 Survey. [Ebook]. SYSPRO.

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