DUBAI, UAE — The manufacturing sector in the Middle East is experiencing significant growth, with nations like Saudi Arabia, the UAE, and Egypt heavily investing in developing their manufacturing bases to diversify their economies.
In Saudi Arabia, the government is promoting the sector as a key component of its Saudi Vision 2030. The National Industrial Development and Logistics Program (NIDLP) aims to transform the country into an industrial powerhouse and a global logistics hub. This includes maximizing the potential of local content and embracing the 4th Industrial Revolution. According to Statista, Saudi Arabia’s manufacturing market output is projected to reach US$243.80 billion in 2023, with an expected compound annual growth rate of 5.77 percent from 2023 to 2028.
The UAE, through its ‘Operation 300bn’ strategy, seeks to boost the industrial sector’s contribution to the gross domestic product (GDP) to AED 300 billion (US $81.7 billion) by 2031. The government is also focusing on leveraging technologies like artificial intelligence to advance the sector.
Egypt’s government aims to increase the country’s industrial production from about EGP 3.6 trillion ($117 billion) in 2022-23 to EGP 4.3 trillion in its 2023-24 plan. The goal is to achieve an industrial output of about EGP 2.46 trillion by the end of 2026/25, up from EGP 1.83 trillion in 2023/2024, targeting an average annual growth rate of over 18 percent during the plan years.
Despite these developments, individual manufacturers are grappling with challenges such as persistent global inflation, supply chain disruptions, and rising customer expectations.
To overcome these challenges and capitalize on growth opportunities, manufacturers must understand the evolving landscape and embrace new digital strategies, transforming challenges into opportunities.
Five Predictions for Manufacturers in 2024:
- Continued Challenge in Rebalancing Business: While the manufacturing sector in the region is growing, it’s not immune to global challenges. Despite global indicators like supply chain performance, labor markets, and productivity gradually returning to pre-pandemic levels, issues like inflation, fiscal spending cuts, and geopolitical instabilities remain concerns for 2024. Investments in software and other digital technologies will be crucial for Middle East manufacturers to navigate this VUCA (volatility, uncertainty, complexity, and ambiguity) environment and maintain momentum.
- Acceleration in Smart Manufacturing Investments: Manufacturers will increasingly invest in smart manufacturing to protect long-term profitability. Key focuses will include implementing smart factory initiatives to meet business goals and using digital technology to enhance supply chain visibility, productivity, and connectivity with suppliers, partners, and consumers.
- AI as a Key Tool for Supply Chain Optimization: In response to pandemic-induced shortages, companies have shifted towards just-in-case inventory management, leading to storage space shortages and soaring warehouse rents. As the VUCA environment persists, more manufacturers will adopt a data-driven, agile approach that adjusts dynamically to real-time conditions. Investment in AI-enhanced supply chain management solutions will grow, helping manufacturers balance inventory costs and risks.
- Increased Spending on AI-Enhanced Supply Chain Management: Next year, spending on AI-enhanced supply chain management solutions is expected to rise. These solutions, which predict demand and risks while considering supplier reliability and transcontinental transportation risks, will be crucial in establishing market leaders.
- Automation to Resolve Warehouse Bottlenecks: In 2024, the focus will be on rationalizing warehouse capacity due to increased real estate prices and higher interest rates. Emphasis will be on optimizing capacity through automation. Warehouse Management Systems (WMS) will play a critical role in optimizing goods velocity, reducing errors, improving labor productivity, and optimizing storage. Integrating WMS with other supply chain solutions will accelerate in 2024, as companies seek agility, transparency, and increased productivity in their supply chains.
AI at the Forefront of Industry 4.0
AI is central to any Industry 4.0 transformation and is recognized as a key tool in redefining manufacturing boundaries. While 2023 was marked by the rapid development of Generative AI, surprising many with its speed of maturation, 2024 is expected to be the year when Gen-AI-related use cases reach maturity. This will involve Gen-AI collaborating with traditional predictive AI to unlock new productivity areas.
Four Key Use Cases Poised for Growth:
- Predictive Maintenance: AI-driven predictive maintenance has evolved beyond preventing breakdowns to orchestrating maintenance schedules for production optimization. The vendor landscape is expected to mature significantly, offering more solutions tailored to customer complexities and needs. The shift towards a servitization model by industrial equipment companies will further drive this trend.
- Dynamic Supply Chain Management: AI’s impact on inventory management and demand forecasting will extend to revolutionizing the entire supply chain, from demand management to last-mile delivery.
- Product Quality Enhancement with Cognitive Analytics: The use of AI-powered cognitive analytics for quality control is set to grow, especially with the integration of Gen-AI.
- Innovative Design with Gen-AI-Driven Creativity: Product design will undergo a transformation with Gen-AI-driven algorithms generating innovative concepts based on consumer preferences and market trends, speeding up design cycles and enhancing product relevance.
Ecosystems as the Focal Point
Ecosystem-centric thinking, which has gained significant traction in recent years, is expected to accelerate in 2024. Digital ecosystems vary in terms of partner numbers and offerings but share four characteristics: symbiotic, customer-centric, scalable, and focused.
Technology Partner Ecosystem: In digital transformation projects, the reliance on a single turnkey partner is giving way to a partner ecosystem approach. This shift is essential to manage the size and complexity of projects, emphasizing the adage, “No man is an island.”
Embracing the Platform Ecosystem: Leading manufacturers are shifting from product-centric to platform-oriented digital thinking. In this new era, composition platforms are becoming the backbone for agility and digital transformation. Manufacturers are increasingly favoring the flexibility of these platforms over traditional monolithic products.
Way forward
As we look ahead, the manufacturing landscape is set to continue evolving, navigating through the VUCA (volatility, uncertainty, complexity, and ambiguity) environment and leveraging the synergy of Industry 4.0 and AI in 2024.
This evolution goes beyond merely boosting productivity; it’s about fostering innovation, sustainability, and shaping a future that melds human creativity with technological advancement.
By embracing these developments, the manufacturing sector is poised to not only withstand near-term challenges but also emerge stronger in the ensuing decades.
Khaled AlShami is Vice-President, solution consulting, MEA, Infor.
The opinions expressed are those of the author and may not reflect the editorial policy or an official position held by TRENDS.