- From Blog Archive
Recession: Manufacturers cut costs, adopt other survival strategies - Punch
As the Federal Government embarks on measures to take the country out of economic recession, manufacturers have also been considering strategies aimed at overcoming the situation.
For most firms whose factory processes depend heavily on imported inputs, the escalating rate of the United States dollar against the naira has posed a huge challenge.
Investigation by our correspondent, however, showed that they had to restructure and reposition themselves to cope with the situation.
The Group Managing Director of Flour Mills, Mr. Paul Gbededo, told our correspondent that the firm, in anticipation of the situation, commenced a backward integration programme a few years ago to provide raw materials for its factory.
One of such projects, according to him, is the Thai Farms where most of the grains needed for production in the mills come from.
"We get most of our grains from there and when we need more, we buy from the local market," he said.
The President of the Manufacturers Association of Nigeria, Dr. Frank Jacobs, who urged manufacturers to look for ways of sourcing their raw materials locally to survive the high exchange rate, said at a forum in Lagos that local sourcing of raw materials among manufacturers had increased by about 25 per cent to 30 per cent.
Also, in an attempt to reduce the huge import bill on wheat, Honeywell recently empowered local farmers with finance and hybrid seedling to grow crops, which they could sell back to the factory.
For the Managing Director of Bennet Industries, Mr. Reginald Odiah, his strategy for survival is to visit popular Lagos electronics market, Alaba, buy up most of the substandard gadgets and reassemble them with some quality inputs for customers who want quality products.
Odiah, whose firm produced some of the light fittings in the country, said he had to shut down his production line because of the influx of substandard products.
"I cannot afford to keep full time workers; I only have people I call on whenever I have a job to do," he told our correspondent.
But the manufacturers have also examined other ways of surviving apart from cutting cost and sourcing raw materials locally.
At a recent special forum and end of the year programme of the Chemicals and Pharmaceutical Sectoral Group of MAN, which was tagged 'Survival strategy in a recessed economy - the case for chemical and pharmaceutical industry', the stakeholders agreed that it was time to think out of the box.
The Managing Director of Coleman Wires and Cables, Mr. George Onafowokan, who was a guest speaker at the event, outlined some of the strategies as cost control and waste elimination measures.
Cutting cost, according to him, transcends wage bill to lifestyle. "For instance, we don't have to change cars every year and this is a lifestyle change that has to start from the top management of industries," he added.
Another strategy, he said, was evaluating production synergies and processes.
Onafowokan highlighted the need for power management, adding that instead of investing in one main power source such as a huge 5,000KVA generator, the power source could be segmented into five generators of 1,000KVA each, which would mean cutting costs on diesel since all the five generators would not work simultaneously.
He said, "If you have multiple factories and you cannot run at full capacity because of raw materials and inventory shortfall, use a factory that gives you the greatest advantage.
"In our case, our factory in Ibadan has more power than Lagos, where we have been without public power supply for the past one year. What we do is to produce more in Ibadan and feed other outlets."
For the chemical importers, the stakeholders discussed the possibility of convincing suppliers to move their production base from China to Nigeria.