Put IT together

Often an afterthought for regional manufacturers, IT adoption is increasing in the region. Eliot Beer looks at integration issues, and how valuable IT is to the industry.

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By  Eliot Beer Published  March 26, 2006

|~|hamdieh200a.jpg|~|Hamdieh: In other parts of the world IT is much more integrated into the entire production process.|~|Manufacturing in the Middle East has always had a slightly tenuous position, aside from the oil and gas sector and its associated industries. But manufacturing is now relatively strong in the region: Saudi Arabia boasted an annual manufacturing output of US$22 billion in 2005, and the sector makes up some 14% of the UAE’s gross domestic product, and 19% of Egypt’s*. New factories and assembly plants of increasing size are announced regularly throughout the region.

Despite this, industrial organisations operating in the region are always faced with certain challenges, such as the relative scarcity of raw materials, and the potentially long supply lines for components, and for their ultimate customers in the case of exports. IT clearly has the potential to assist in dealing with these challenges, and make processes overall that much more efficient, but to what extent are Middle Eastern manufacturers making use of modern technology?

“One of the biggest problems with IT in the manufacturing sector is that most companies have a clear separation between automation and management, and IT; each section has its own budgets, its own projects and procedures,” says Malek Hamdieh, head of IT at the Qatar Steel Company (Qasco). “Any integration between IT and the other functions is done on an ad-hoc basis rather than having IT build into the manufacturing process itself. In other parts of the world companies have gone through this a long time ago, and IT is much more integrated into the entire process.”

Hamdieh has guided Qasco’s IT department through a process of major change in the last few years; the company brought in a new ERP system in order to facilitate its ambitious growth plans for the next few years. Hamdieh has worked hard to integrate the new system into his firm’s processes, which was not always an easy process.
Despite his sceptical comments, however, he does see the role of IT changing, as manufacturers recognise its importance to the business. Hamdieh thinks that one day the separate IT sides of manufacturing organisations will merge with the rest of the company, but this will take some time to happen throughout the region.

Grant Mclennan, who has worked for SAP AG across a number of regions around the world, sees the region’s manufacturers as evolving in their use of IT as well. For him, though, the focus is on the – as he sees it – increasing complexity of the requirements from the vendor’s customers.

“A few years ago, we were seeing a lot of ERP systems coming in, with companies looking for basic automation,” says Mclennan. “Now, though, we’re seeing a little bit of a beginning of firms saying ‘We want to look at supply chain’, or ‘We want to look at production planning time and CRM’, and actually taking a more sophisticated look at their IT.”

At the same time, Mclennan does acknowledge this has been slow to come in comparison with other regions. He puts this down to a lack of external pressure on Middle Eastern manufacturers, which is now starting to change with the World Trade Organisation playing an increasing role in the region, and a greater focus on product quality and traceability also having an impact. SAP’s current focus in the sector, according to Mclennan, is on business processes – helping to build best practices into organisations – and he clearly sees this as fitting well with increasing the depth of IT integration.

Business intelligence vendor Cognos also sees the higher-concept end of IT as an area of interest for the more industrially-focused regional enterprises. The firm’s general manager for the Middle East, David Brierley, says that of Cognos’ 370 customers throughout the region, 50 are based in manufacturing, with 25 of these being new implementations within the last 18 months.||**|||~|mclennan200.jpg|~|Mclennan: Firms are starting to take a more sophisticated look at their IT.|~|“Typically the manufacturing firms which we deal with are large organisations which have started with inventory control,” says Brierley. “After they have dealt with that, they will move on to other areas of the business, but starts with the need to understand what is going on with their procurement and inventory processes. I’d say this was typical of every contract we have won in the region, for manufacturing.”

When asked if he thinks manufacturers are looking for specialised solutions, Brierley is quick to reject this. Even more so than firms such as SAP and Oracle, Cognos offers systems which are not geared towards a specific vertical sector. The BI vendor’s Middle East boss sees the appeal for his products as being universal, and perhaps more to do with the development of the company, rather than its industry.

“Fundamentally, all our customers have the same requirement: to understand what’s going on in the organisation; everyone needs to know the ‘story’ of their firm,” Brierley says. “Cognos is very much a horizontal company, we don’t offer vertical solutions, but then we don’t see ourselves as in competition with ERP vendors.”

One company which has made its name offering sometimes highly specialised manufacturing systems is Epicor Scala. According to its vice-president of sales for the EMEA region, Patrick Pando, Epicor’s policy is to target SAP and Oracle sites by supplying very specific and appropriate ERP products to end users with particular needs.

“Something I hear a lot, is ‘We wouldn’t be taking your system if you didn’t have the manufacturing-specific elements that you do’,” says Pando. “We can go to a company with a very particular need, and the overwhelming odds are, we’ve done it somewhere before. There was one case with a terracotta pot maker, who needed to factor in certain time constraints, for cooling and proofing; we actually found the functionality they needed in a system we had supplied to a baker – different industry, but a similar process.”

Pando’s view is that, while the ‘generic’ ERP systems offered by the big vendors are suitable for the majority of users, manufacturing firms often have such unique requirements that they need a more focused system. And while Epicor may not enjoy the cache – or the marketing budgets – of the SAPs and Oracles of the world, Pando claims the vendor is doing very nicely from its current niche focus; its Middle East customer list includes a major soft drink manufacturer, a large air conditioner maker, and a host of other significant firms.

But not everyone agrees with the Epicor view of manufacturers’ IT demands, quite aside from Oracle and SAP (ERP started in manufacturing, points out Ayman Abouseif, Oracle’s general manager for the Middle East and Africa). Qasco’s Hamdieh thinks that there are too many specialist systems targeting the manufacturing sector> Qasco opted for an Oracle system for its ERP implementation, because Hamdieh and the other key decision makers felt it would be more appropriate than a highly focused product.

||**|||~|brierley200a.jpg|~|Brierley: Typically the manufacturing firms we deal with are large organisations which have started with inventory control.|~|“We thought those specialist systems bring in their own complexities, which the generic ones do not have,” says Hamdieh. “And with those specialist systems it may be that you need to put in more customisation, because while it may be suitable for your industry, it may not be suitable for your organisation – although this is not necessarily always my personal view.”

For organisations which are comprised of a number of firms straddling several different industries – most common in the large family-owned conglomerates which are prevalent across the Middle East – the issue of whether to adopt a specialist or generic system is further complicated. Saji Oommen, group general manager for IT at the Al Batha group of companies, based in the UAE Emirate of Sharjah, seems to have striven hard for a system which would meet the needs of all the group companies.

“We have five manufacturing firms as part of Al Batha, and they along with the rest of the group run SAP,” he says. “The manufacturing firms are an important part of the group, so we put a lot of time into evaluating systems for their functionality in this area. We did look at a manufacturing-specific system, but decided it did not have the support or integration we needed. And in fact I have heard of several manufacturing firms opting for a particular solution, then moving to SAP because they needed the additional integration.”

On a global level, integration of disparate IT systems is shaping up to be a critical factor for manufacturers, as firms put increasing focus on joining together supply chain, planning and CRM systems – something which has been slow to happen even in the highly developed US economy, let alone anywhere else. Vendors are having to face up to the question of how well-integrated their products are, none more so than Oracle, which is facing tough questions over the workability of its Fusion release.

The database giant’s Middle Eastern head, Abouseif, brushes aside concerns about Fusion for the moment, and makes the point that regional firms which have thus far been slow in integrating their IT systems – or adopting systems at all – are actually at an advantage in many ways, compared to their counterparts elsewhere in the world who essentially filled the role of early adopters.

“If firms in the Middle East had gone to IT automation 10 years ago they would have taken the route of buying a range of niche solutions, and then spent the next 10 years trying to make them work together,” says Abouseif. “Then later they would have had to migrate to an integrated ERP system; manufacturers now can avoid this mistake.”||**|||~|oommen200b.jpg|~|Oommen: If you want to go beyond the basic level of automation, you need to deploy some advanced IT systems.|~|In some ways, then, regional firms in the sector have an edge on their larger – and presumably less agile – brethren in Europe, the US, and even the Far East. Abouseif points to industries requiring cheap gas relocating to Qatar, and building suppliers setting up in the UAE’s Ras Al-Khaimah, near to their raw materials and a major market in Dubai. Cognos’ Brierley even sees a future for Far Eastern manufacturers setting up facilities in the region, to take advantage of the business culture and resources such as energy.

Despite the advantages – and the potential – manufacturing in the Middle East has, IT still remains low on the agenda for many companies, according to Audeh Fawzi, management information systems (MIS) manager for Saudi Mechanical Industries (SMI), a maker of water pumps and other industrial equipment.

“I think for many companies in the region, they depend on production and sales to drive their businesses,” says Fawzi. “Their investment in IT is minimal, and it is very low on their list of priorities. At SMI I have made changes to this and brought in more IT systems, but I think most companies have not done this yet.”

Fawzi came to SMI from Epicor around eight months ago – and is therefore clearly spoken for on the issue of integration over specialisation. He has brought in a new LAN installation, additional servers, and is implementing a new Epicor Scala ERP system at the moment.

Speaking to Fawzi, and other IT managers in the manufacturing sector who have grasped the value of IT, it is easy to sense a degree of frustration in their peer companies’ unwillingness to do the same. With experience of a range of industries, Al Batha’s Oommen is definite on exactly how valuable IT can be to manufacturing.

“With ERP, most of the benefits come with using it in manufacturing firms, rather than trading companies, because you’re dealing with multiple dimensions, in terms of raw materials, sourcing, manufacturing processes, quality control, and then the logistics processes,” he says. “The control over the cost of the final product is much higher than in a trading situation, because the cost can be controlled in terms of how you plan your inventory, how you plan your production in terms of wastages, and then the distribution side later.

“IT largely contributes to these; if you want to go beyond the basic level of automation, you need to deploy some advanced IT systems,” Oommen concludes.||**||

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