Smart tech and changing face of manufacturing

Manufacturing around the world is changing rapidly. The processes, equipment and systems used to design and produce everything from automobiles to common household items are undergoing dramatic changes in response to new customer needs, competitive challenges and emerging technologies. Nigeria is import dependent for many products that can be produced locally with the right technology. The situation in Nigeria reflects continued dependence on conventional methods of operation by many manufacturers and has thus led to low competitiveness and domination of the market by imported goods. Is Nigeria ready for global market as the geography of Global Value Chains continues to shift? FEMI ADEKOYA writes.

Rapid technological advancements make fragmenting of activities in all stages of a production value chain increasingly possible. Some segmented activities can be performed in different locations worldwide and reintegrated again into global value chains and global production networks.

Recent advances in information systems, business practices, engineering techniques and manufacturing science now enable companies to produce new and better products more quickly and at a much lower cost than ever before. This makes it increasingly difficult for nations like Nigeria to get into the game of quality manufacturing. Advanced Manufacturing Technology (AMT) is an effort to minimize this effect and slip Nigeria inside as one of the players.

According to the United Nations Industrial Development Organisation (UNIDO), deploying a fast track approach of building industrial capabilities starts with an in-depth analysis of the relative strengths of domestic industries and key structural factors, and the various options for linking to domestic and foreign sources of technology and knowledge.

In essence, leveraging productivity gains from this approach assumes strategic decisions on the choice of needed technology and on the specific means of knowledge acquisition. What is crucial for such a strategy to work is to address a variety of issues related to mechanisms of learning and mastery.

While stakeholders in the real sector are clamouring for increased protectionism, development agencies believe that participating in the production systems of global value chains (GVCs) and global production networks (GPNs) broadens the scope for getting gains from an open trade and investment regime, and thus diminishes pressures for protectionism.

Specifically, UNIDO noted that participating in GVCs can help developing country producers to enter foreign markets, earn more foreign currencies, diversify their exports, and most importantly to get new skills, knowledge and technology—all considered as key factors for productivity enhancement and growth.

“Latecomer firms from developing countries can exploit the advantage of their late arrival to tap into new technologies, rather than having to reproduce the entire previous technological trajectory. They can accelerate their uptake and learning efforts, engaging in collective, purposive and directed efforts to use the relationships with foreign partners in GVCs and GPNs to get the right technology and knowledge, and to learn and create new capabilities, capturing the externalities of collective learning.

“Through using various forms of collaborative processes and intermediary institutions’ services to help with the process, they can bypass some of the organizational inertia that holds back their more established competitors.

“This route of integrating in the global economy exposes a host country’s macroeconomic and business conditions to the stronger competitive pressures, stimulating a country to make better physical infrastructure and utilities, and to create a more business-friendly environment. Once a participating country starts reaping the benefits from these opportunities, trade- and investment distortion policy measures become a less attractive option”, UNIDO explained.

Emphasising the need to embrace smart manufacturing, National Agency for Science and Engineering Infrastructure (NASENI) stated that the manufacturing sector in Nigeria is not making the expected contribution to the GDP, while there is an inherent high level of importation.

For Nigeria to be ranked among the 20 richest countries by 2020, NASENI stated that the use of Advanced Manufacturing Technology (AMT) for economic prosperity is the way out.

“This is a paradigm shift from conventional manufacturing technology, for global competitiveness of industrial products, hence rapid industrial development. This mechanism for wealth generation could deliver the following results – increased industrial productivity to reduce importation of goods, equipment, raw materials and services that translates to increase in Gross Domestic Product (GDP), Gross National Income per capita (GNI), and reduction in the fleeing of foreign exchange; export of goods, equipment, raw materials and services that generate foreign exchange; while the combination of results 1 and 2 can generate value added employments with the capacity for living wages, as well as boost the performance of manufacturers”, NASENI explained.

The World Economic Forum noted that the increasing importance of global production chains is reflected in the rising trade in intermediate inputs, which now represent more than half of the goods imported by OECD economies and close to three-fourths of the imports of large developing economies, such as China and Brazil.

To the Managing Director of the Bank of Industry (BoI), Rasheed Olaoluwa, deployment of smart technology in production processes holds the ace in promoting locally made goods in the global market.

Hitherto, the BoI boss had stated that for Nigerian industrial firms to surmount some of their technological challenges as well as reduce dependence on importation of machinery and technology transfer, they need to promote reverse engineering culture as a viable alternative.

According to the bank, over-dependence on technology transfer or importation of industrial machines would further limit the country’s potential of developing local competencies and industrialization.

Olaoluwa noted that while a lot of developed countries are adopting smart manufacturing and robotics, many Nigerian manufacturers are using outdated equipment therefore hampering the competitiveness of locally produced goods in comparison with imported ones.

While stressing the need to embrace new technologies, UNIDO in its report on inserting local industries into global value chains, noted that emerging global business scene has continued to present new challenges for developing countries and their enterprises.

According to UNIDO, many developing countries need to learn from the Asian experience by exploring dynamic production and export structures, with rising shares of technology-intensive products.

“Although these successful Asian countries had similar industrialization patterns, they have followed different strategies and policies to improve their supply-side capacities and to successfully compete in GVCs and GPNs. An important common feature of the successful East Asian countries is their active government involvement in and support of the catch-up process. This ranged from the protectionist trade and investment policies but less strict intellectual property regimes; to direct and indirect subsidies; to fostering local skills and infrastructure development and domestic research effort combined with the establishment of the intermediary institutions for supporting the innovation and learning efforts of firms”, the report explained.

To bridge the technology gap, Nigeria, using the Asian example may need to implement policies assuring macroeconomic stability; policies ensuring resource allocation in accord with dynamic comparative advantages; policies assuring rapid accumulation of physical and human capital; successful agricultural development; enforceable rules and regulation on commerce; competent bureaucracy; and a recognition of the need to support the innovation and learning needs of manufacturing sector.