Nampak Limited · JSE:NPK
Nampak — GIBS Presentation (September 2015)
19 slides from Nampak's conference presentation, Sep 16, 2015
Slide 1: The cost of complexity in manufacturing
The cost of complexity in manufacturing André de Ruyter Nampak CEO 16 September 2015
Slide 2: Simplify, standardise, save
Simplify, standardise, save “Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius - and a lot of courage - to move in the opposite direction.” - Ernst Schumacher
Slide 3: Manufacturing's contribution to GDP fallen from 24% to 13%
Manufacturing’s contribution to GDP fallen from 24% early 1980’s to 13% in 2015 3 › For SA’s stage of development, manufacturing should contribute double to GDP › South Africa’s manufacturing growth lagging other emerging markets › Reasons are many: » Increased competition from imports » Increased l
Slide 4: Wages are increasing, and productivity is falling
Wages are increasing, and productivity is falling 4
Slide 5: Electricity costs are increasing above inflation
Electricity costs are increasing above inflation 5 Source: PowerOptimal
Slide 6: But Eskom is still relatively cheap…
But Eskom is still relatively cheap… 6 Electricity consumption tariffs, 2015 25 20 15 USc\kWh 10 5 0 Source: statista
Slide 7: Availability of skills a problem, apprentices in decline
Availability of skills a problem apprentices in decline 7 Number of apprentices 12000 10000 8000 6000 4000 -75% 2000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: Moleke, 2006 Neither SETAs nor industry has bridged the gap
Slide 8: Decline of manufacturing correlates closely with reduction in jobs
Decline of manufacturing correlates closely with reduction in jobs 8 › Since 1989, SA manufacturing has shed half a million jobs – as share of GDP has shrunk › If manufacturing were to have an appropriate share of GDP for SA’s developmental stage (28 – 32%), a theoretical 800 000 to 1,1 million jobs
Slide 9: Government's reaction
Government’s reaction 9 › IPAP I and II › Section 12I of Income Tax Act › Manufacturing Competitiveness Enhancement Programme › Competition Commission investigations › Structural challenges remain » Labour inflexibility » Collective bargaining » Skills shortages exacerbated by visa challenges » Infr
Slide 10: Current rate of investment will not get us there
Current rate of investment will not get us there 10 50 45 40 35 30 China: Gross capital formation (% of GDP) 25 Germany: Gross capital formation (% of GDP) 20 South Africa: Gross capital formation (% of GDP) 15 10 5 0 Source: World Bank statistics
Slide 11: Demand from local consumers will not create impetus for growth
Demand from local consumers will not create impetus for growth 11 Source: SA Reserve Bank Consumer demand unlikely to compensate for inefficiencies
Slide 12: Getting back to the basics of manufacturing
Getting back to the basics of manufacturing Reducing waste and increasing efficiencies 12 › Pre-1994 the manufacturing sector organisations developed into bloated and inefficient organisations, shielded by protectionism › Consequences of generations of autarky; complexity, waste and inefficiencies w
Slide 13: Inbound complexity leads to inbound waste
Inbound complexity…. leads to….. inbound waste • Excess inventory • Grades • Time and effort • Gauges to manage • Suppliers suppliers and • Transport deliveries • Payment • Greater risk of • Moulds stock revaluation | 13
Slide 14: Manufacturing complexity leads to manufacturing waste
Manufacturing complexity…. leads to… manufacturing waste | 14 • Excess “critical” • Designs & spares SKUs (Stock • Excess waiting Key Units) time and WIP • Equipment • More headcount and OEMs to cope with skill • Skill and job changes • Frequent • Job changes = changeovers spoilage = waste • Poor •
Slide 15: Nampak addressing complexity through operations excellence and investing to compete
Nampak addressing complexity through operations excellence and investing to compete | 15 › Nampak DivFood reducing current lines and presses from 199 to around +/-100 with an investment of about R330 mn reducing complexity and improving efficiencies » Food division: 47 current line and presses, equi
Slide 16: Nampak addressing complexity through marketing excellence
Nampak addressing complexity through marketing excellence | 16 › Divfood embarked on a project to rationalise customers and SKUs (Stock Key Units) in 2014 » Reduce active customer accounts by 180 (reduction since project inception at 100) » Reduce SKU’s by 1227 (reduction since project inception 771
Slide 17: Conclusion
Conclusion 17 › South Africa manufacturing is increasingly facing headwinds from high energy costs, high labour costs and sluggish GDP growth rates › The long term viability of the sector under threat as a result of a policy of autarky that introduced complexity, waste and inefficiencies › Structura
Slide 18: Simplify, simplify, simplify!
18 Simplify, simplify, simplify! - Henry David Thoreau
Slide 19: Thank you
Thank you