Making things more competitive
We brought our expert panel to Pendle Engineering to discuss the future of manufacturing and engineering in Lancashire and some of the key findings of MHA Moore and Smalley’s annual report on the state of the sector.
The MHA Moore and Smalley research shows growth has slowed in the sector. What can manufacturers, trade bodies and the government do to reverse this?
PW: We’ve had an extremely tumultuous three years since the Brexit referendum. As 2018 and 2019 came along people started thinking, ‘actually what’s going to be the implication of this?’ Uncertainty over when we would be leaving contributed to the slowing of every sector.
The issue was that we were only getting five or six weeks to put in place strategies that take normally months or years.
- Richard Slater – Lancashire Business View (Chair)
- Billy Beggs –University of Central Lancashire
- Melissa Conlon – AMRC
- Ginni Cooper – MHA Moore & Smalley
- Tim Daverage – Lantex Engineering
- Shakira Musarat – Barclays
- James Podevyn – Spiroflow
- Richard Richmond – Private Label Nutrition
- Chris Smith – Pendle Engineering
- Paul Williams –MHA Moore & Smalley
The first thing government can help in is by being clear in communicating what it thinks is going to happen in the run up to December 31. Businesses need certainty going forward.
Manufacturers themselves need to be prepared for what is coming and have a strategy to deal with things. They need to keep investing in the business and in people, they’re the scarcest resource.
CS: We actually grew last year. Our strategy is to just become excellent at what we do and concentrate on our own competitive advantage. It’s too difficult to predict what’s going to happen in the future, so as long as we concentrate on being the best version of ourselves, it stands us in the best possible stead.
That means becoming smarter with our production, so we’ve a major project underway to use shop floor data capture so we understand exactly how our factory is working in real time, delivering a better service ultimately to our clients.
TD: We struggled last year and it was around Brexit uncertainty. One of our biggest clients at the turn of the last calendar year decided not to order anything for three months until they saw what happened at the end of March. The way the government has behaved is so irresponsible towards businesses, because we’ve been left to pick up the pieces. We still don’t know what’s going to happen.
MC: With Brexit we’ve been very much looking internally at what’s happening in the country, we’ve not looked externally to see what’s happening all over the world. If you look at things like artificial intelligence, machine learning, we’re behind. We’re something like 83rd in the world in terms of automation. We need to be looking at what’s happening elsewhere and emulating that.
JP: It’s no secret that the UK is way behind other countries in terms of productivity and a lot of that down to the fact it has not invested in automation and has just thrown people at it, with zero hour contracts and cheap labour.
The points-based immigration system announced recently will probably end up being a bit of a ‘home run’ for the government. It’s actually forcing the hands of people. They are having to invest in equipment that will automate things and deliver production efficiencies.
MC: Manufacturing has been stockpiling cash because of the uncertainty. We’ve seen some reluctance to invest in new technologies.
One of the opportunities for manufacturers is that it is going to be harder to move goods around post-Brexit. The government can help manufacturers look at supply chains and how we can audit and review them. There is a big opportunity in terms of looking at more connectivity, looking at shifting supply chains around.
RR: We have invested and used the Made Smarter programme for a project to get more real-life data from machinery. I don’t think the government can do a great deal to be honest.
CS: Automation is a buzzword. But with that comes skill. If you’re buying a machine that you fully understand already then it’s probably not the right machine for you, because you should actually be looking to grow. It’s the easiest thing in the world at the moment to borrow money and buy a machine, the challenge is then making it work to add value to your company.
SM: It is about productivity and as a country we don’t compare well. Investment is key. China is looking at technology and advanced AI investment that is one and a half times the value of the rest of the world combined.
A lot of manufacturers know they need to move towards advanced technologies but are not sure what they need. They need support with analysis, assessment and getting the right technology, and then you’ve got skills as well. So it’s managing that technology as it’s invested into a business and how it’s used.
RR: When it comes to investing in machinery, we get to know the people we are buying from. Getting good support from them is very important. If you’ve no support, then you aren’t going to be running that machine very successfully
SM: I’m not sure businesses always know what is available out there in terms of support. Raising that awareness is probably where the trade bodies come in, to really get the message out there.
BB: People need a long-term strategy from the government. At the moment we seem to deal in three-year and five-year chunks.
Trying to make a widget ten per cent cheaper, ten per cent faster is not the answer. It should be, ‘What capability do we want to deliver at the end of the day? How do we get there? And here’s a proper plan of getting there.’
Working together, we’re now starting to influence the Lancashire industrial strategy and there are going to be proper things in there.
MS: Manufacturers want visibility of currency exposure, visibility of hiring skills and visibility of supply chains. If the government could help with that, it would go a long way.
The first thing government can help in is by being clear in communicating what it thinks is going to happen in the run up to December
JP: Whether people are looking to grow or are having labour problems, finding out what is available in terms of grants or equipment is so important. Government can help with that education, because there are so many things that people are just not aware of. You don’t know what you don’t know.
GC: Manufacturers are dealing with increased costs of production and raw materials, the costs of employing people, volatility in energy prices. It all adds to the struggle to maintain the bottom line. The way to combat that is to try and improve efficiency and effectiveness in the factory.
I head up our manufacturing and engineering team. The more people I know, such as the AMRC or the Made Smarter project, means I can help clients, putting them in contact with the right people.
Productivity measured by EBITDA per employee has declined. How do we become more productive and competitive?
CS: A lot of the conversation around productivity leans towards how efficiently you can make something, but that’s only part of the debate.
You can make more widgets if you like, but if you’re unable to compete on price then you’re going to get washed out.
When you’re in a position like the UK economy is now, where we’re being absolutely hammered by overseas lower cost labour, you’re losing out on price left, right and centre, yet you’re in this position where there’s so much uncertainty.
It takes serious bravery to go to your loyal customers and ask for more money when you’re already facing the risk that at any point a customer will look overseas.
It’s about really looking at what productivity means. It’s all well and good being able to make things quicker or more efficiently but if you haven’t got the customer, or if you haven’t got the cost structure right, then it’s all for nothing.
We need to stop comparing ourselves to China and start thinking about what works for us. China is now going through their equivalent of the industrial revolution, we went through ours more than 100 years ago, it took us decades.
We’re now in a modern era where its industrial revolution is taking months rather than years. If we carry on trying to compete with China in terms of development pace, we’ll simply fall short.
What we need to do is concentrate on what we’re good at as a country, which is skills development, internal investment, and also harnessing the support locally in the communities that we’re in to drive ourselves forward.
BB: Britain is brilliant at innovation. China is rubbish at it. What we have to do is work out what we’re really good at, how to do it well and take all the things that are standard out of it, so it doesn’t matter where you put it in the world, we’re still going to be the best.
We need to sit down now and ask where the emerging markets are. How do we get there? What do we need to invest in? What kind of people do we need to train?
We have engineers who design things and we’ve shop floor guys who make them. In between is the ‘manufacturing engineer’, the person that’s got knowledge of machines, of production and costs and all that. These are the people that make our life easier and we don’t train them.
MC: Yes, and that is evolving, it is now digital manufacturing engineers, and you look at that in terms of skills and ask: is there a course at university?
We need to be looking at what’s happening elsewhere and emulating that
GC: You can only control what you can control, certain industries are more labour intensive than others and the costs of employing people are just going in one direction, so it’s trying to manage that. Investment in people is key.
RR: We’re constantly building and buying new machines, putting new processes in place. Productivity is really rising but we have other challenges where the skills of the people using the machines are not as good as they should be.
TD: Textiles is hit in terms of competing against places like Bangladesh, Pakistan and China. We have seen with Brexit that people are looking for a ‘Made in the UK’ product. A lot of people are finding imports are not to the same standard that we can manufacture. We’re looking for smaller, more bespoke orders and getting more money for them.
We have seen in trade shows this year that people are looking for that and they’re looking to order less, instead of buying 25,000 units from China they’ll buy 5,000 units in the UK.
RR: That’s exactly where we are, small bespoke orders. We’ve got digital technology when it comes to printing labels that gives us a lot more flexibility than a bigger manufacturer.
JP: When it comes to ‘Made in Britain’, although I’ve got no stats to back this up, I wonder if it is an increasing attitude. If that’s the case that’s probably one of the only good things that might come out of Brexit with regards to people thinking, ‘Do you know what, I will buy British’.
CS: You cannot tell your customers how to think, how to behave, it’s all about trying to shape that conversation to sort of explain the relative merits of a local supply chain. We’re trying to introduce the carbon argument into that now, but that’s difficult in terms of values in a spreadsheet.
SM: We’ve still got to be competitive. We are in a global economy so that competitiveness has to be there, whether that is through how good our machines are or how good the skillset is.
We’ve just got to leverage what we’ve got. We are innovative, brand Britain still sells very well.
PW: Productivity comes down a lot of the time to the right people doing the right thing, having that chance to step back and say, ‘Is that person the best person to do that? Is their time being utilised the best way?’ Harnessed with that is looking at the technology and asking, ‘Are those people skilled up enough? What is the best way of getting those people trained, what sort of resources are available?’
BB: We spend a lot of time, we research, develop, we do all the hard work in this country and then we give it to China, or India or Taiwan or somewhere and get them to make it, and then wonder why we’re not getting good productivity.
Skills shortages remain an issue, where’s the talent going to come from?
CS: The type of skills we will need are going to evolve and change. We’ve got to understand where we want to be in the next five, ten years, because trying to replace a skills shortage that exists right now is not the right thing to do.
It’s about trying to predict where your company’s going to be in the next five years, or ten years, take on the apprentices to fit that need at that point in time, and then develop them through workplace experience to that point.
We’ve just got to leverage what we’ve got. We are innovative, brand Britain still sells very well
MC: As manufacturers we must go to the educators with a single voice. We need to sit round the table with them, help with the development of courses and tell them what skills should be on there. We’ve got a duty to do that. It’s all well and good moaning and saying ‘well actually your curriculum’s not fit for purpose’ but we’ve got to try and inform that curriculum.
JP: We already have the talent in Lancashire and the North West. It’s a hotbed of engineering talent with good quality universities. We need to get young people involved at an early age; it is doing some of these careers talks, it is taking on apprentices, it is taking on graduate engineers.
CS: There is a huge amount of effort being put in by universities locally to drive high level skills, it’s awareness and access to that.
SM: It’s about skills for the staff but also at leadership level. Big manufacturers have big training facilities, it’s how they can support the supply chain in terms of developing skills with the technology they’ve got. There should be more collaboration.
BB: I’ve worked eight years at a university now after 38 years in industry, and there is a massive gulf between what is perceived industry wants and what industry needs. I don’t know how to bridge that. Maybe you make it compulsory for academics and teachers to do one week a year in industry.
You cannot train a businessman to become an engineer, but you can train an engineer to become a businessman.
GC: The idea of a job for life these days is a little bit old-fashioned, people do want to have various different skills, so it’s listening to those employees and asking where they think we can make improvements, where they see themselves and what can be done to support them and give them new skills?
We’re talking about getting talent in from schools and colleges, but if we look within the business and work with our existing people, retraining them, we could get more out of them, and they could also have a better work-life balance.
- The MHA Moore and Smalley Annual Manufacturing Report 2019/20 is available to download at https://mooreandsmalley.co.uk/sectors/manufacturing-and-engineering
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