17 January 2012
Declaration of independence
Fed up after decades in the political wilderness, a resurgent UK manufacturing sector says going it alone offers the best route to glory in 2012. Max Gosney reports on the revolutionary spirit surfacing at WM's Outlook roundtable
Enter 2012 and manufacturers have come over all James Dean. Rebellious factory managers believe they're best off going it alone as a turbulent year looms, according to WM's Manufacturing Outlook roundtable debate, held in London last month. "When all is said and done, it's our strategies that will drive us forward irrespective of government policy," said Richard Brown of Hi-Tech Mouldings.
This independent streak, honed by years in the political wilderness, is having an empowering effect, Brown explained. "We see the future as rosy. We're in a recession but we're growing because we prepared for it. If you manage your company well and focus on all the elements that go into the business, you will survive, you will grow and you will come through it."
And manufacturers believe they've got their tactics just right. Defensive game plans combining superhuman operational efficiency with financial self-sufficiency are ensuring manufacturers thrive as the economy stutters. "In engineering, we're very good at looking inwards to where we can save money," said Mick Jones, factory manager at Eschmann Equipment. "To a certain extent we drive our own destiny. We've learned the hard way in the last 20 years. We've learned through kaizen that it doesn't take a massive step to be successful."
In some ways, British manufacturers resemble a patient who's overcome a nasty bout of flu. When another outbreak looms, there's a confidence about seeing it off again. The optimism is bolstered by faith in the healing powers of medicine – and for manufacturing the elixir of choice is undoubtedly continuous improvement.
"There's definitely going to be an element of survival of the fittest," explained Gary Winstanley, supply chain director of Siemens Mobility in Poole. "All of the things we talk about in terms of continuous improvement – as well as helping you do doing things better – ensure you can respond to your customer better. If you can get that right, you have a good chance of being here when everyone else has dropped away."
The mentality contrasts vividly with the high street. Manufacturers are putting heart and soul into recession proofing their businesses. Yet retailers stake their survival solely on the external force of market demand. "The retail industry has a very short-term strategy," commented Mark Bown, head of CI at Cummins. "Their strategy is based upon current stocks. They're advertising to get rid of what they already have. And, longer term, that strategy doesn't pay."
Manufacturing-led techniques like CI are foreign entities when the defining business metric is units sold not saved, added Bown. "I tried to help someone whose retail business had hit some difficulties. I offered him CI and said I could help reduce his costs. But he said, 'I don't need help reducing costs, I've been in the business for 30 years and know exactly how it works. What I need is someone to sell the product.' He just couldn't see it and three years later he folded."
Others in retail could follow suit unless they covert to the CI cause, said Julian Bond, R&D engineering manager at Parafix Tapes and Conversions. "There are factors outside their control, but if they had an effective CI programme it wouldn't be as bad... Those of us who implement rigorous CI programmes... are finding a saving here and a saving there. Whether a small one or a large one, it all comes back to the bottom line on the spreadsheet."
However, there's also palpable relief among manufacturers that they're not exposed to the consumer market as directly as retailers. "All the doom and gloom you read about in the press is about the consumer market," remarked Nick Bion of perforating specialist Robert Bion. "But we don't supply to consumers."
Instead many UK manufacturers serve niche sectors protected from the buying whims wreaking havoc on the high street. For example, Robert Bion, like so many SMEs, serves larger operators further up the supply chain. These smaller operators are enjoying a resurgence as the big fish – chastened by rising transport and material costs in far flung lands – look to source from suppliers closer to home. Bion said: "Last year steel was cheaper in the UK than China. If you go back 20 years, steel was two thirds of the cost in the Far East and there was no way a company like ours could compete with that because our added value was maybe a third. Now they're paying the same price, it's changed the game."
Domestic SMEs are finding the new rules much to their liking, added Bond of Parafix. "It seems people no longer want just a product. They want everything that surrounds it – help with the design, for example. You can't beat being able to go to your supplier and sit down and thrash it out. You can't do that with an office in India or China. That's a big benefit for us all in the UK."
And a weakening pound is also paying dividends for export orders. Delegates manufacturing products from medical equipment to moulding components reported flourishing trade overseas. It all lends a somewhat parochial air to talk of a recession, said Bown of Cummins. "It's like when the Americans have their World Series and there is only one nation involved. We're talking about a world recession that doesn't actually exist globally. China and India are massive and are growing and expanding."
Yet a rising tide of reasons to be cheerful is being kept in check by an undercurrent of caution, warned Roger Jeary, director of research at union Unite. "Real growth in manufacturing in this country is going to come from SMEs and if we haven't got a funding mechanism that allows them to invest, then we're going to continue along on this plateau."
Banks claim they are all too keen to inject the investment capital so badly needed. However, there's a historic disconnect between finance house and factory, said Jones of Eschmann. "It's a case of chicken and egg. You almost need to have the business to prove the plan to the bank. It's a catch 22. That's why British engineering has said 'we'll invest in ourselves to go into that market'."
It's an independent spirit that also reigns in relations with the government. Frontline managers claimed Westminster had delivered little in the last 18 months bar rhetoric. David Cameron's City-saving veto over the EU treaty showed where Westminster's true love lies, according to delegates. Not a single manufacturing representative felt the Prime Minister would do the same for them. Not that anybody is reaching for a violin – manufacturers are revelling in their role as outsiders, bullish that the qualities that have kept them apart from the rest in the past will help to keep them in front in the future.
"It's the leaders of industry who will move us forward, not government policy or anything else," concluded Brown of Hi-Tech Mouldings. "If we're not reinvesting in people, infrastructure and growth, it won't happen... It's our responsibility and I'm upbeat about where we're going." n
How do you view your prospects for 2012? Is your factory under a cloud or is it a beacon of excellence? Let us know:?email email@example.com
reasons to be cheerful
WM's Manufacturing Outlook survey, and the subsequent roundtable debate, showed factory managers in buoyant mood about business prospects for 2012. Here are six reasons why the sector is all smiles despite the threat of a double dip recession.
- Nouveau niche
Manufacturing engine components might lack the glamour of making designer handbags. But when recession strikes you know whose corner you would rather be in. UK manufacturers have a forte in niche, yet technically advanced products, in aerospace, medical, electrical, automotive and food and drink sectors. It affords us an element of protection when the public starts to pull on the purse strings. The same can't be said for Designer Handbags Inc, whose fate rests on the dwindling disposable income of Joe and Jane Public.
- Don't believe everything you read
Close your eyes and try to remember the last good news story you read in a newspaper or heard over the airwaves. Struggling? Well you're not alone. Tragedy, disaster and despair sells. Hence much of the positivity surfacing behind the factory gate is attracting minimal interest in the national media. "It's only good press if you can say bad things are happening," said Julian Bond of Parafix. "So you get BAE making lots of redundancies attracting a lot of press coverage. But I've not heard much about Jaguar's new engine plant and all of the support and infrastructure that will require which will boost British industry."
- In CI we trust
Continuous improvement is akin to a manufacturing cult. Believers claim salvation through following the teachings of King Kaizen and his lean disciples. It's certainly worked miracles for many domestic manufacturers who've converted during the prolonged crisis endured by UK industry over the past 20 years. Businesses claim CI has transformed operational prowess, with firms slashing profit-draining waste and empowering workforces to drive up quality. The real test of faith is still to come though, say site managers. Companies that refuse to ditch improvement programmes even with a bleak economic backdrop will be the ones who enter the kingdom of success first come the recovery, the Outlook roundtable heard.
- Reverse swing
An economic slump does not automatically mean a drought in orders. Greater caution among buyers can actually become an opportunity for some, according to Gary Winstanley of Siemens Mobility. "Our customers are becoming much smarter about who they deal with. It's not just about the price any more; they're looking at whether you are going to be here in a year's time and they're looking at whole-life costs." The trend is for OEMs to repatriate business with local suppliers in reaction to rising shipping costs and fears over the instability of global supply chains.
- Built of BRIC
A solid manufacturing business is built on BRIC according to economic experts – not the red sort, but exports to Brazil, Russia, India and China. These BRIC countries will account for 40% of world GDP growth in 2012 according to PwC research. And while the West laments the eurozone crisis, the BRIC young guns are expanding. It means a much-hyped global recession is far from certain, with emerging economies offering shelter from the stagnation of the old order.
- Wily old veterans
Battle-hardened manufacturers won't drop to their knees at the first hint of an economic slump. Businesses are buoyed by the fact they have taken on previous recessions and won. Pragmatism will be key, said Bruce Farrar, works engineering manager at Marshalls. "My company has always made money in the bad times by improving the processes and putting the investment in." Efficiency will be critical, added Colin Larkin, plant manager at Case New Holland. "We'll be more profitable selling fewer units because we're bringing cost price down all the time. That's what we've focused on the last three years."
quotes of the day
"I wonder whether I'll see the start of the regrowth of industry in my lifetime. Britain was and still is a manufacturing country. We're rich because we put labour and material together, it's nothing to do with McDonald's or financial services."
Bruce Farrar, works engineering manager, Marshalls
"The order book is full but you're all sitting there wondering what's going to happen with the situation in Italy, Greece and Ireland." Colin Larkin, plant manager, Case New Holland
"Most of our customers are so busy, their workshops are so full, they're trying to optimise throughput and ensure the best use of their resources. I don't know why they're so busy but that's the number one enquiry we get – to talk about scheduling and capacity planning."
Colin Reardon, managing director, Tricon Systems
"To a certain extent we drive our own destiny. We've learned the hard way in the last 20 years. We've learned through kaizen that it's not a massive step to being successful."
Mick Jones, factory manager at Eschmann Equipment
"All the doom and gloom you read about in the press is about the consumer market. But we don't supply to consumers."
Nick Bion, managing director, Robert Bion
"The companies that had the foresight to improve their facilities and workforce will ride it out. Those that are going to be reactive when it happens won't."
Richard Brown, operations director, Hi-Tech Mouldings
"Real growth in manufacturing in this country is going to come from SMEs and if we haven't got a funding mechanism that allows them to invest then we're going to continue along on this plateau."
Roger Jeary, Unite
"I recently heard a financial services spokesperson saying the sector made up the majority of exports for the UK – no it doesn't. We're 12% of the economy and we export 55%: I just think the PR message isn't right." Mark Bryant, Business Growth Fund
UNITE The Union
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