• Wednesday, February 21, 2024
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BusinessDay

Manufacturers evolve strategies to remain afloat

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Amid harsh operating business environment in the country, manufacturing companies are gradually changing strategies to beat stiff competitions and challenges in the sector. This is geared towards ensuring that they do not go under, findings have revealed.

In the area of power, checks revealed manufacturers lost confidence in the Power Holding Company of Nigeria (PHCN) before its eventual unbundling and privatisation. Months after handover to generation and distribution companies, they are still paying little attention to the new investors, owing to total loss of confidence.

Both multinational/large-scale and medium-scale concerns have increased their spending on power generation through the acquisition of private transformers and large generating sets, according to findings.

BusinessDay recently interacted with a cross section of manufacturers, all of who stated that they were no longer keen at external or public power supply, having acquired gigantic generators to run their businesses without interruption.

This measure has become necessary because power outages during production of certain types of goods often result in their outright destruction.

‘’I am in the business of chemicals and waterproof production. Once power is off, the entire process is interrupted and goods destroyed. So I am now 100 percent dependent on generators which also come with increased production costs ,’’ said Elochukwu Madu, a medium-scale manufacturer said, in an chat.

The situation also extends to multinationals who have, for long, adopted  relatively cheaper sources of power. Babatunde Odunayo, executive vice chairman/ chief executive officer of Honeywell Flour Mills Plc recently confirmed this position when he said, ‘’we generate 15mega watts (MW) of power by ourselves which is 15,000KVA of power in order to run this business 24 hours a day. If your power comes from the public power supply system, your production will be low while your overhead will be high.’’

Apart from power, it was found that some manufacturers are now diversifying to some other areas, for which they were never known at their inception.  Few, especially those in the medium-scale category, also resort to imports of certain types of finished products due to stiffer competition with bigger firms. BusinessDay stumbled on one of these manufacturers who stated that it was a strategy aimed at ensuring that his business did not run into cash flow difficulties.

Sachet water manufacturers are not left out, as some are making arrangements to switch over to bottled water production, following concerns that the Federal Government will ban the product owing to health concerns. Since mid 2013, there have been concerns that the FG would ban light weight non-biodegradable plastics, which would mean that sachet water would be completely phased out.

“I am making arrangements to produce bottled water in case of policy change, But my concern is cost of beginning the business,” said a sachet water manufacturer in Lagos, who does not want his name in print.

Moreover, a close look at manufacturers’ financial statements revealed that there is now increased consciousness to reduce cost of production, even with increased sales/revenue. Industry-wide, many firms are bringing down operating costs by concentrating expenditure on most necessary items.

“We adopt strict and prudent cost-saving strategies which keep costs low through supply chain efficiency in other areas of our entire operation ,” Bala Yesufu,  head, corporate and governmental relations, Cadbury Plc told BusinessDay.

Findings have also revealed that some companies, particularly those in manufacture of plastics in the South-East part of Nigeria, are cooperating in technical areas. Hence staff with specialised skills can be drafted to other firms to train staff of competitors in the industry. However, this was restricted to a certain class of manufacturers, who are concentrated and are willing to form clusters.

By:  ODINAKA ANUDU