Made in UAE
UAE’s manufacturing industry doesn’t have a long history. Over three-four decades ago, there were hardly any manufacturers in the region. The focus back then was more on oil based industrial activities because of the abundance of the same. However, in recent times, with low oil prices prevailing for a long time, the UAE Government has begun to encourage non-oil businesses to further contribute to the region’s GDP.
One such contributor is the manufacturing industry. Presently contributing to 11% of the total GDP, the Government is hoping it would increase to 25% by 2025. As mentioned in the UAE Economic Vision 2030, the region is witnessing a rise in industrial activities to achieve sustainable economic diversification. For manufacturers, however, the trends have skewed towards collaboration more than competition in the recent years.
“The profit margins across the board have gone down due to the increasing costs and competition,” says Kunal Vadhani, CEO of AAB Industries LLC. “Hence, the need to be lean and asset light has become very very important for every manufacturing company. The key is to not try and do everything by yourself but rather focus on your core competency and outsource the rest. This is the time to collaborate rather than compete.”
With an influx of manufacturers in the region thanks to facts like cheap labour, access to global markets, sea ports and easy land transportation, and over that the advancement of technology have transformed manufacturing into a competitive industry. However, as Kunal mentions, it has also created opportunities for collaboration based on individual expertise. There is a sharp decline in the ‘one stop shop’ concept in the industry with most entrepreneurs understanding the value and benefits of collaboration.
Technology has made this process much easier. Meenaxy Vashisht, Founder of Go Organic, says: “Previously we had to do everything manually. We had to find suppliers manually and also find places to sell our goods on our own. Now, things have changed. We have multiple options in terms of food delivery apps, getting connected to supermarkets and hypermarkets easily and stocking products on their shelves. It is a lot less time consuming and complex.”
However, Kunal feels differently. According to him, the impact of technology is felt more in the B2C sector of manufacturing instead of B2B. “To be honest, it hasn't disrupted our industry to a very large extent. Yes, the machinery has become faster and more efficient and hence it has actually made things better for us as now we can produce much more in the same amount of time and with a higher level of precision.” While the manufacturing process has acquired an increased momentum, the overall quantity required hasn’t changed much over the last few years. The challenge now is to create new needs or impress existing customers with additives. For instance, Kunal says: “…what it is making us do is innovate a lot more with the packaging so the products look and feel even better.”
Another repercussion of advanced technology is the subsequent skill gap which is somehow being felt in the larger B2B segment of the industry. While industrialisation has become a national priority, according to reports the kind of jobs that need to be filled are no longer the traditional ones, in labs or factories for instance. Instead, they are jobs that necessitate the use of computers, data, coding and analytical skills. This dramatic shift has resulted in a skills gap as the requirement for manufacturing workers to understand and operate 4IR machinery and technologies increases. Consequently, an effort to shift skills towards vocational training and digitalisation is essential, is already on the rise, and will intensify in 2019.
“In terms of skills adaptability, we all do have to stay in tune with the newest trends in technology not just for Production but even for Sales & Marketing,” says Kunal. “All our employees receive regular training on the machines they use and I myself learn about the newest trends in the industry so I can ask the right person in our team to take it up and master it. We as an organization believe that learning and development is the key to success in any business.”
Where Kunal has invested in up-skilling his employees and himself, Meenaxy has decided to walk a different route. “I don’t like to disturb the existing process and so when new requirements come, I hire new employees who can take up those tasks. So, while technological advancements have not heavily impacted our manufacturing process, for everything else around it like IT management and more, we believe in hiring new talent who know what they need to do.”
Despite all the training in place, Kunal does not feel that one can completely witness a zero skill gap. “With this ever changing business environment and the technology changing quicker than one can learn and master, I believe there is always a skill gap. It is important stay nimble and adapt the right skill at the right time rather than try and learn everything. The key to prospering in this quickly changing scenario is to have the right team. Skills can be learnt, but you need the right people with the right attitude to do so.” Meenaxy seconds the thought and is especially impressed with the millennials and believes in giving them a chance because what they can do with their mindset is totally different from what traditional workers could or can do.
On the external front of development, the Government has been providing increased support too. Recently, many new manufacturing units have been set up and foreign direct investments have also been welcomed. Currently, Abu Dhabi is emphasizing on heavy industries, as they have inexpensive energy sources; while the Emirates of Dubai and Sharjah are focused on light industries and service sectors. The setting up of the Dubai Industrial Park spread over an area of 55 square kilometers, currently housing over 680 companies; speaks for the bar set by the UAE. The manufacturing sector in Abu Dhabi witnessed a growth of 6 per cent in 2018 with 42 new industries starting production with an investment of Dh12.3 billion to boost non-oil GDP, according to the latest report released by the Industrial Development Bureau of the Department of Economic Development (DED)
Meenaxy, however, feels that despite all the provisions, the business scenario hasn’t changed much for the manufacturers. “Honestly, it was much easier to do business back then than today. The laws are becoming more stringent with taxes being levied leading to weaker cash flows. The Government should definitely look into relaxing financial laws in order to encourage business regionally.”
On the way forward, Kunal comments that innovation is what would drive the future of manufacturing. “We just have to find newer and more innovative ways of running a business. This is no longer a time for businesses which have been run the same way for decades. If we do not adapt, we cannot survive. So I would say, stay sharp, take calculated risks and grow in measured steps rather than exponentially. I am a believer of growing slowly and steadily in Business, unless you have an innovative product, then you can grow exponentially.”