This Report is a result of PEIE’s annual Smart Manufacturing Conference held 15 – 16 April 2007 at the Crowne Plaza Hotel, Muscat, Sultanate of Oman.
PEIE's Marketing Department would like to acknowledge those that provided feedback on this Report, these include: Nick Pattison; Mark Eaton; Chris Ward-Brown; Chris Clark; Dr. Fabio Scacciavillani; S.Gopalan; Susie Houh and Amrou Al Sharif.
Goal
The overall goal of this Report is to identify activities that can strengthen the competitive performance of Oman’s manufacturing sector. In this regard, PEIE wishes to help Oman’s manufacturing sector develop the following characteristics:
Higher levels of awareness and investment in workforce development and stronger levels of demand for learning and skills support.
Improved awareness and application of innovative working practices across all areas of business operations. (emphasis on R&D)
Increased productivity levels.
Improved awareness of and access to international markets
Improved awareness of design, marketing and information communication technologies (ICT).
Access to an improved telecommunication infrastructure on PEIE estates that supports a modern, forward looking and innovative manufacturing sector.
A more positive image of manufacturing among young people.
Improvement of financial support services for the industrial sector.
Scope
This Report contains seven (7) conceptual issues which PEIE is asking a range of partners to comment on as part of a collaborative filtering process to help support the development of Oman’s manufacturing sector. This Report aims to create a collaborative national response to the seven (7) issues identified below and help sustain the development of the sultanate’s manufacturing sector.
1. Access to International Markets
2. Innovation & Design
3. Skills & Education
4. ICT & e-Commerce
5. Access to Finance
6. Image
7. Sites & Premises
Basic Manufacturing Figures
According to figures released by the Sultanate of Oman’s Ministry of Commerce & Industry, Directorate General of Industry: Industrial Statistics (Features of the Manufacturing Sector: Large & Medium Industries 2005) the number of large and medium-sized businesses with industrial registration - employing more than nine (9) workers - totalled 519, this represents a rise of 38% in 2005 versus 16% in 2004. In 2005, the manufacturing sector contributed 8.5% to GDP compared to 4.7% in 1995. Manufacturing is expected to contribute 15% of GDP by 2020.
In 2005 the total number of workers employed in Oman’s large and medium-sized manufacturing sector stood at 36,743, an increase of 5% on figures released for 2004. The number of Omani nationals employed in Oman’s large and medium-sized manufacturing sector totals 13,224, representing 38% of the sector’s workforce.
The Challenges
Oman-based manufacturers face a range of challenges in today's increasingly competitive environment. Some of these are external, for example, exchange rates, transport, communication and raw material costs, others are internal where manufacturers have the opportunity to take the initiative to drive change forward in areas such as innovation; design; marketing; training; finance; technology transfer; ICT; and logistics.
The challenges Oman’s manufacturing sector seeks to address should not be seen as threats, but rather as opportunities. Oman has many manufacturing success stories, where companies are competing internationally, not just on price, but by adding value using innovation, higher skills, investment and good business practice to create goods and services that people want to buy. From fibre optic cables, batteries, luxury perfumes, automotive spare parts, marble, furniture to food production, Oman has world class manufacturers. The challenge for the sector is for more companies to match the performance of the best.
1. Access to International Markets
International trade is an important economic activity for Oman, generating wealth, encouraging innovation, productivity and creating employment. However, despite recognising the opportunities afforded by international trade it is reasonable to believe that there are a significant number of Oman-based manufacturers that are failing to achieve their full international trading potential. The main reasons for this include:
o Insufficient export knowledge, market-entry advice and information.
o Lack of understanding of the available international trade services, market opportunities and the processes involved.
o Lack of skilled staff, particularly those with management, technical and marketing skills, to develop international markets.
o Limited access to appropriate finance.
o Language and cultural barriers.
o Confusion over how to deal with international paperwork.
o Belief that there are enough opportunities to trade in the domestic market.
For those manufacturers already buying and selling internationally, the biggest challenge facing them is finding the right partners and markets to do business with. Other challenges include: transactions, distributors and logistics/freight.
Recommendation
To help Oman-based manufacturers trade internationally, and in partnership with the Export Credit Guarantee Agency, the Oman Chamber of Commerce & Industry, the Ministry of Commerce & Industry and Oman Development Bank, PEIE proposes to launch and publicize an online guidance service on www.peie.om where manufacturers can access information on the issues mentioned above. The core of the service is to give a plain explanation of the processes involved in international trade. In brief, if trade barriers are removed, the number of Omani manufacturers trading overseas will increase.
2. Innovation & Design
Manufacturers are having to become more innovative in response to more sophisticated consumer expectations as customers demand, not just lower prices but higher quality and better designed products. Indeed, innovation is a vital ingredient for improved competitiveness and productivity within Oman’s manufacturing sector.
Improved commercialisation of products and services, better product and market diversification and a greater focus on product design to increase quality and differentiate from competitors are all acknowledged as critical success factors in improving innovation performance to create competitive advantage.
Innovation performance will be enhanced by improved recognition of the opportunities that it presents and the benefits it brings. Oman’s best manufacturers match the best in the world in new product development, innovative production processes, marketing and services. Far more Oman-based manufacturers need to match the performance of the best.
Innovation is a key issue for this Report, but it needs to be tackled in a way that has real meaning for manufacturers, particularly small firms. As a catch-all term, many manufacturers do not relate easily to innovation. They may identify more readily with terms such as product development, technological innovation, R&D and process innovation.
New technologies offer significant benefits to stimulating innovation but also underline the threat to competitiveness if Oman-based manufacturers fail to invest in them as rapidly as competitors in other parts of the world. To access the benefits of innovation, Omani manufacturers need greater guidance on what can be achieved with new technologies.
On an environmental note, Oman-based manufacturers need to be more innovative vis-à-vis environmental regulations and sustainable manufacturing. Today, these are not just moral issues for manufacturers, but also, potentially, rich and dynamic features which differentiate them commercially from competitors and provide new market opportunities. Domestic and international consumers are increasingly demanding more than a product - many look more closely at the manufacturer and what it stands for, for example, overcoming the 'throw away' culture, re-configuring products to be more environmentally friendly. It is in this regard that innovation plays an important role in how the manufacturer and its product(s) are perceived and received in the marketplace.
Recommendation
PEIE proposes to set-up Design 4 Manufacturing, an initiative that would bring together designers and manufacturers. Design 4 Manufacturing will build on the important relationship between designers and manufacturers and help manufacturers develop design briefs, source designers to fulfil the briefs, help designers to think about design from a manufacturer’s point of view and help both sides with marketing information. The Design 4 Manufacturing initiative would be supported by advice from the UK’s Design Council – helping PEIE demonstrate to manufacturers that good design can raise profitability and the quality of goods. In brief, Design 4 Manufacturing aims to help Oman-based manufacturers improve their competitiveness and find new markets by improving product design. Moreover, the initiative - through guidance from the Design Council - would encourage UK-based design firms to partner/mentor young Omani designers.
3. Skills & Education
Manufacturers under-invest in training. However, whilst a very large proportion of small manufacturers provide no training at all, those that do train undertake as much proportionally as larger firms. Most of those who do no training at all are generally absorbed with surviving from day-to-day and are therefore difficult to engage.
Skills needs include customer care, ICT, product assembly, marketing, design, strategy, management and team working. Although precise requirements vary from sector to sector, they are significant for their broadly generic, cross sectoral characteristics.
Skills and education issues of specific concern to Oman-based manufacturers include:
o Changing the mindset of employers towards management and workforce development, in effect, stimulating a culture change.
o Tailoring training programs that meet the needs of employers, particularly smaller manufacturers.
o Promoting the importance of training within the manufacturing environment to offer smaller firms a more flexible solution to workforce development.
o Promoting the role of Oman’s Higher Education in providing training and R&D support to manufacturers.
o Enabling young people to make informed decisions about a career in manufacturing by speaking to real people working within the sector.
o Adopting a long-term training and capacity building strategy for manufacturers
Recommendation
It is suggested that PEIE establish and support through the Oman Manufacturing Group (OMG) a Network of Manufacturing Ambassadors. The Network would be used to promote broader aspects of manufacturing within Oman’s schools and colleges. It would also be used for media purposes for frontline manufacturing stories.
If we are to raise the economic impact realised through available training and R&D, we need to raise the profile of the available resources and knowledge Oman has that can benefit manufacturing and identify where such resources reside. It is suggested that a domestic database of training, research and R&D resources be developed, maintained and placed on http://www.peie.om/
Promoting manufacturing to young people and generating media interest is important to the future success of Oman's manufacturing sector. Therefore, PEIE recommends that a Manufacturing Week be created - this would coincide with the Ministry of Commerce’s Day of Industry – and consist of school and college visits to industrial estates; students to experience managing a production facility; PEIE’s annual Smart Manufacturing Conference; radio and TV interviews with leading manufacturers; manufacturing podcasts; a student product design competition; an exhibition of final year tertiary projects related to manufacturing; and a B-2-C exhibition of Omani products.
4. ICT & e-Commerce
It is apparent that manufacturers are failing to invest sufficiently in technology, causing them to lose productivity and market share. A wider integration of ICT by manufacturers throughout Oman would significantly contribute to improve effectiveness and productivity and could potentially revolutionise and maximise processes and firms in a number of key sectors. Indeed, research clearly links ICT with productivity.
Recommendation
To harness the potential of ICT in manufacturing it is suggested that a Network of ICT advisers be formed - this could be achieved through the Information Technology Authority and PEIE’s ICT partners.
A Network of ICT advisers would deliver front line advice to manufacturers to help them understand the use of ICT, to help them open up new markets, gain new business, improve chances of trading internationally, use e-Commerce for commercial advantage - such as with customer orders and financial transactions made electronically - customer information management and reducing running costs.
In addition, ICT advisers would help manufacturers keep up with the latest technologies, such as broadband, Bluetooth and WiFi, providing expert, impartial and, importantly, jargon-free advice on exploiting them to the best advantage for manufacturers.
Broadband Internet access will continue to play a pivotal role in helping Oman’s manufacturers fully exploit ICT. As the service becomes increasingly available in the sultanate, ICT advisers would be on-hand to show manufacturers the benefits the technology has for their business and, importantly, help manufacturers successfully use the technology.
In addition to the broad ICT themes outlined above, there would also be a demand from Oman-based manufacturers for PEIE in partnership with the Network of ICT advisers to organize events/training programs around the following topics:
o Consumer Packaged Goods (CPG): Helping CPG manufacturers free up cash through operational excellence so they can invest in new innovative products.
o Enterprise Resource Planning: Helping manufacturers become more collaborative and integrate entire operations and extend their supply chain.
o Supply Chain: Helping manufacturers understand supply chain integration, visibility and collaboration to increase response time, decrease production, distribution and channel costs, and increase customer satisfaction, service and response time.
o Product Lifecycle Management: Helping manufacturers focus on product lifecycle management (PLM) environment for end-to-end collaborative PLM business and the IT issues involved in this process.
o Radio Frequency Identification (RFID): Low risk RFID solutions that enable standards-based, next-generation supply chain functionality.
5. Access to Finance
Finance is readily available. The problem is that manufacturers (mainly small manufacturers) do not come forward with adequate proposals. Indeed, business plans submitted to banks (commercial and development) are often vague in nature. Further work is required on educating manufacturers on the process of applying and securing finance. On the other side, traditional banking practices are not adequate to spur and sustain new companies because the risk management of green field projects cannot be done through commercial lending practices. Finally, entrepreneurs face too much red tape and therefore the launch of new businesses is mired by regulatory hurdles that hamper the entrepreneurial spirit.
Recommendation
It is suggested that PEIE take the lead in developing a clear overview of all the finance schemes available to Oman-based manufacturers and ensure that the services and products offered, and the conditions that apply, are effectively communicated to manufacturers. This could be achieved in print and on the web (www.peie.om)
Through the proposed Task Groups (see below) it is suggested that PEIE brings the various finance stakeholders together to develop a joint agenda to help finance Oman-based manufacturers. The key stakeholders in this process would include:
o SME Department at the Ministry of Commerce & Industry
o Commercial Banks
o Business Angels
o Private Equity Investor Networks
o Venture Capital Funds
o Oman Development Bank
6. Image
Despite the renaissance of Oman’s economy the image of the sultanate’s manufacturing industry still lags behind the reality.
In particular, there is a lack of awareness and understanding among students, teachers and parents of what Oman’s modern manufacturing sector looks like and the potential it offers for rewarding career progression. Many people see manufacturing as noisy and dirty and yesterday’s industry. For example, oil and gas, tourism, banking and public sector employment present, on the face of it, more exciting and rewarding opportunities for young Omanis. There is also a particular need to attract more women into manufacturing. Whilst numbers have grown the proportion of women in manufacturing is still low.
Whilst the modern face of manufacturing has undoubtedly changed, its image has not kept up with this change. This message needs to be reinforced with a wide range of key target groups which include: policy makers in the public sector, the media, students, parents, teachers and investors. Oman’s manufacturers have an important role to play in helping to change perceptions; more self-promotion is needed and firms need to engage more with the education sector.
Recommendation
An information campaign – consisting of events such as OMG seminars as well as print and web based activities - is required to change the out-dated perception of the sultanate’s manufacturing sector as being low paid, low skilled, dirty, unimaginative, with poor working conditions and bad prospects. The reality is closer to a clean working environment, with good career prospects, rising skill levels and rising pay levels. The target audiences would not only be the potential workforce but also those in a position to advise and influence them, including parents, teachers, university staff and high-profile public sector figures.
7. Sites & Premises
Manufacturing has become increasingly mobile and firms have many options on where to locate, both within Oman and internationally. In this regard, there are several issues which confront manufacturers:
o The availability of hi-tech infrastructure to meet the needs of modern manufacturing.
o The provision of fit for purpose premises for manufacturing start-ups, inward investors and businesses seeking to expand.
o The physical environment on PEIE industrial estates where many manufacturers operate and the need to improve their appearance and security.
o The planning regime and the need to strengthen links between PEIE and its tenant base to address issues of concern.
Recommendation
PEIE already carries out an annual tenant feedback questionnaire. However, response rates are poor. A more aggressive approach is required to circulating the questionnaire, collecting data and responding to tenant needs.
Taking the Discussion Forward
Partnerships
PEIE maintains strong domestic and international links with stakeholders actively involved in the manufacturing sector. It is through these links that we propose to take this Report forward.
Notable examples include PEIE’s current links to: Cambridge University and the Institute for Manufacturing; Coventry University; Middle East College of Information Technology; Waljat Colleges of Applied Sciences; Sultan Qaboos University; OCIPED; GOIC; Information Technology Authority; Hewlett Packard; Omania e-Commerce; Nawras; Cisco; SAP Arabia; Microsoft; Ericsson; Oracle; Khimji Permoglaze; Omani Marble; Jotun; Oman Cables Industry; Al Watan; Gulf Industry; Times of Oman; Oman Economic Review; Agility; Oasis Water; Oman Cables Industry; Reem Batteries; Al Buraimi Group; Infocomm Group; Videocon; Al Mudhish; GroFin Oman; Future Pipe Industries; and Muna Noor Manufacturing & Trading.
OMG Working Groups
Through OMG, it is suggested that six (6) Task Groups be established to oversee the development and implementation of the issues raised in this Report. The Groups will consist of public sector members, manufacturers and private sector partner organisations.
Activities are broken down into six (6) Task Groups:
1. Skills & Education
2. ICT & e-Commerce
3. Innovation
4. Design
5. Sector Image
6. Finance & International Trade
OMG Working Groups would not work in isolation - an important feature of the key issues which they will tackle and the actions which will arise is their ability to interconnect. Therefore, the six Task Groups will work in effect as a team to ensure that actions are closely co-ordinated.
Milestones
The principal milestones for this Report are:
Assemble six (6) Task Groups, agree terms of reference, modus operandi etc: September 2007
Formal launch: Oman Manufacturing Group meeting with Minister of Commerce & Industry and CEO, PEIE: October 2007
First Report from the six (6) Task Groups: January 2008
