China is coming for everything unless you land the first punch
A highly-skilled industry professional with a high-level of technical knowledge gained across multiple industry segments in the South African market. Passionate about helping people achieve their business goals while sharing his extensive knowledge to make the South African manufacturing industry globally competitive.
In South Africa, the direct tooling industry is a R15 billion market. The local tooling industry is, however, facing serious challenges as it has, to a large extent, failed to adopt the necessary technology and production efficiencies of its global counterparts. In South Africa, over the last 20 years our TDM industry has declined from a position of 80% local supply to 20%. Our local TDM industry represents just 1% of the global tooling market.
TDM has a direct influence over economic realities such as manufacturing output capacity, quality standard of a product produced, price competitiveness of the product produced, and the overall lifestyle cost of the product produced.
The TDM industry in South Africa is a critical support industry to the broader manufacturing sector. TDM has a direct influence over economic realities such as manufacturing output capacity, quality standard of a product produced, price competitiveness of the product produced, and the overall lifestyle cost of the product produced.
Research conducted across the South African TDM industry has shown that most firms struggle in the global market owing to intense external competition and internal shortcomings. The question remains: what can a South African TDM firm do to attain global competitiveness?
Companies that follow international best practices have adapted to a modern manufacturing environment and have embraced the principles of “Manufacturing in the 21st Century” that allow them to be competitive in the global arena. Despite not having a legal requirement to upgrade their equipment, as there is overseas, competitive manufacturers in SA have continued to invest in their equipment to maintain their advantage.
This tepid interest in on-going investment has resulted in there being fewer world-class manufacturing facilities in SA. This situation also been exacerbated by a lack of skilled labour, especially CNC operators and design engineers.
TREND 1 – Keep Up To Keep Ahead
The first trend that emerged was that successful toolmaking companies are doing things significantly different from those companies that are not keeping up with international best practices.
The latter have been slow to change and to embrace new ways of doing things. Successful companies on the other hand have adapted to a modern manufacturing environment and have embraced the principles of ‘manufacturing in the 21st Century’ that allow them to be competitive in the global arena.
Think beyond the borders of SA.
Tooling companies in SA that are aligned to international practices and are aware of what is happening in global markets, understand how to compete against imports from China and Europe. These companies know how to win contracts abroad whereas the less globally-attuned companies are confined within local boundaries and more importantly, don’t know where to find customers beyond our borders. One of the most important factors that emerged from the benchmarking is that successful customers have realised that to compete globally and successfully against imports, time-to-market is critical – something that has become their biggest differentiator. They therefore have altered their businesses to design, manufacture and deliver products fast and reliably to customers. This approach gives them the ability to compete on lead times – an aspect where imported tools are vulnerable. This is becoming even more important as more and more products deliver the same quality at the same price.
The benchmarking confirmed that the majority of South African companies are uncompetitive with lead times and due date reliability.
TREND 2 – Outsourcing Is The Answer To Profitability
Agile companies have outsourced all their non-core activities – which are time-consuming – to specialist manufacturers that can supply better quality products faster than they can make internally. Typically, these outsourced activities include grinding, hardening and the supply of components such as dies, back plates, pins and bushes, etc.
This approach requires a competent Project Management function that oversees managing the entire Supply Chain – to ensure that all the outsourced activities are delivered on time. In these companies, project management functions are critical to actively manage and optimise time-to-market to ensure that delivery due dates are met and that the company remains competitive on short lead times. The benchmarking confirmed that the majority of South African companies are uncompetitive with lead times and due date reliability. However, the lack of companies that can deliver on time creates more opportunities for those that do.
Competitive companies understand the importance of productivity and have started adopting the industrialised model.
Germany’s best-in-class companies have changed from a craftsman approach to an industrial manufacturing approach to toolmaking. The organisations are structured to maximise utilisation of assets and use them more productively. This includes run-time on machines (multiple shifts – even to the extent of running 24/7) and specialised operators that run one or even more machines of the same type for an entire shift. In contrast, less competitive companies in South Africa struggle to work more than a 40-hour week. There are real issues in terms of being able to provide adequate catering on extended shifts and safe after-hours transport. The end result is that even if labour is willing to work over-time, it is a challenge to do so.
Moreover, less competitive companies also have toolmakers that work on different machine types during a shift. This approach leaves the other machines standing idle, thus not utilising equipment to their capacity.
The more competitive companies on the other hand understand the importance of productivity and have started adopting the industrialised model.
TREND 3 – Know Who Your Customers Are And Where Your Jobs Are Coming From
Struggling TDM companies in general do not know where their new jobs are going to come from. More successful toolmaking companies, in contrast, have a very sophisticated, pro-active marketing approach with proper marketing plans with the market segmented in detail. They know their customers intimately (co-designing products with them, forward integration with the customer), and have a very clear strategy on what they should be doing (markets and products) and what they should not be in.
They don’t passively wait for customers to walk through the door but rather knock on doors.
TREND 4 – Upskilling Is The Answer To Improved Productivity
An important aspect governing competitiveness of toolmaking is skills. In Germany, practically 0% of the workforce in toolrooms is unskilled. In contrast, the average for South Africa is close to 30%.
More successful companies in South Africa were found to have a much higher skilled labour component in the workshop – with the top South African companies also having a 0% unskilled rate. German companies also have a significantly higher proportion of higher skilled (other than artisans) personnel with tertiary qualifications (30%) than the South African average (8%). Again, the successful South African companies follow this trend.
TREND 5 – Act Like A German
German companies invest the equivalent of 150% of depreciation annually in new equipment, whereas the average for South Africa is less than 50%.
A very interesting comparison that was revealed by the benchmarking was that German companies have a far superior Investment Policy as they re-invest significantly more than South African companies. German companies invest the equivalent of 150% of depreciation annually in new equipment, whereas the average for South Africa is less than 50%. The implication is that German companies keep renewing their asset and technology base to be competitive, whereas South African companies, in general, are falling behind in technology. The successful companies in South Africa have adopted the German model and keep re-investing funds to have state of the art equipment and technology.
Other factors that emerged from the benchmarking are:
South African toolmaking companies have a far lower labour cost per working hour than the German companies. This, however, was negated by lower productivity from these workers and higher other input costs (for example material costs – steel in South Africa is twice as expensive as in Germany). As a result South African companies are not as profitable as German companies.
South African toolmaking companies tend to make different products with an emphasis on smaller lower-end technology tooling. They also offer fewer services (design, try-out, ramp-up monitoring and after-sales service like maintenance). South African companies have not kept abreast of the latest technologies on offer and are lacking in equipment productivity and automation.
Other than the skills differences, South African companies have artisans that are relatively old whereas German companies have a significantly higher percentage of apprentices in the toolrooms to counter the ageing problem. Absenteeism in South Africa is also significantly higher than in Germany.
Finally, the work processes by German toolmaking companies were found to be more advanced than their South African counterparts. The quotation process in South Africa is long, not scientific, inaccurate and the actual cost versus quoted price is typically not measured. Modern design processes are not used (3D parametric design, simulation, CAD/CAM) and process stability is low-based on number of try-out cycles, assembly overtime, and total overtime hours. Local assembly areas in particular are problematic, compared to German companies as they are not ergonomic and are generally badly organised.
It’s clear that the ‘way we’ve always done business’ is no longer a profitable model.
There is much work to be done to make the South African TDM industry a competitive and global proposition. It’s clear that the ‘way we’ve always done business’ is no longer a profitable model. But as critical support industry to manufacturing, there is a huge opportunity for those businesses with an eye on the future to prosper and give China a run for their money.
Geo Stott and Company is a multi-disciplinary manufacturer, specialty steel wholesaler and project management company. The company’s head office is based in Johannesburg, South Africa. The company started trading as 1911 and is arguably one of the oldest continuously operating steel product manufacturers in South Africa.
Over the years the company has grown from an open die forge shop to a multifaceted manufacturing entity with several manufacturing divisions and subsidiary companies which offer a comprehensive range of steel goods and related services.