Sector report: Lancashire's manufacturing supply chains

We brought members of Lancashire’s advanced manufacturing supply chain, industry and education specialists and professional services
representatives to at BAE Systems in Warton to examine the challenges and opportunities they face. The result is our in-depth sector report

Present:

• Rob Biddlecombe, Brabners
• Sam Butterworth, Buoyancy Aerospace
• Nicola Clayton, Blackburn College
• Melissa Conlon, AMRC North West
• Austin Cook, BAE Systems
• Virginia Cooper, MHA Moore and Smalley
• John Keen, RKMS
• Stephen Kelly, HycAero
• Paul Nicholls, Barclays
• Sean Redfearn, Red-Fern Media
• Wayne Richardson, AG Precision and Sons
• Charlie Rooke, Senior Aerospace Weston
• Andy Schofield, North West Aerospace Alliance
• David Stanley, ELE Advanced Technologies

Lancashire’s supply chains are on the cusp of a digital revolution that will dramatically alter the way they do business.

Data is set to play an increasingly important role in future manufacturing with the demand for more integrated and connected supply chains.

And suppliers that fail to respond to this new digital world will face real challenges remaining part of those chains, industry experts warn.

Austin Cook, defence giant BAE Systems’ principal technologist in emerging technologies and systems, says digital transformation is happening at speed with all OEMs (Original Equipment Manufacturers) now on the journey. He believes it is crucial that their supply chains also get on board.

He says: “When it comes to companies like ours, we are all trying to do similar things. We are trying to connect our supply chains into us so that we can share data and become more streamlined.”

And he believes that growing demand for connectivity means supply chain companies should be looking at all the information they can gather digitally from their production process to pass on to their customers as added value.

Austin says that information will become increasingly important, not just to ensure the quality of components but also to help on the journey to net zero.

He adds: “We are going to be looking at a much more digital future – digital integrated supply chains, connected supply chains.

“We are saying provide us with parts but give us additional value in the form of data that helps us understand where there is embedded carbon and to help us as part of our business transformation.”

Austin believes that suppliers are in a good position to monetise the digital information they can harvest, using the additional value supplied as a result to boost their own margins.

And, as a result of this transformation, he says: “The skills in the supply chains in order to respond to this are also going to change, in terms of how businesses respond to those hyper-connected networks and how they ultimately exploit them for customers and also for business growth.

“It will mean you are not just trying to recruit for the roles that you have had traditionally, you are trying to bring in new skills.”

Digital data will play a major role in future projects, such as Tempest and its work to produce the UK’s next generation supersonic stealth combat aircraft, which will be delivered through the Global Combat Air Programme, in partnership with Italy and Japan.

Austin predicts that in the future up to 90 per cent of the new products BAE Systems is looking at, including Tempest, will be created in the supply chain. Additive manufacturing and other emerging technologies will be harnessed to this end.

He points out that OEMs such as BAE Systems and civil aerospace giant Airbus have to be globally competitive, which is another reason why data will be so important moving forward, with the ability to provide both performance and capability information along with the ESG impact of the product featuring heavily when it comes to securing sales.

He says: “The net zero agenda will continue. Other countries and other governments will continue to push those agendas. We have to adapt if we are going to sell international products.”

Lancashire supply chain companies are already seeing the impact when it comes to securing new contracts.

David Stanley is finance director at Nelson based ELE Advanced Technologies, which makes components that go into jet engines.

He says that going through a recent bidding process with an aerospace company in France, one of the challenging questions the business faced was if it could provide the carbon footprint for the part it was looking to sell.

He says: “Sourcing decisions are going to be quite different in the future. It is really important to understand what you consume in terms of energy bills and also the travel for that part in terms of the supply chain.”

Sam Butterworth, integration engineer at Barnoldswick based Buoyancy Aerospace, which works for a range of major players in the sector, reveals the business faced a similar situation when pitching to an OEM at the Paris Air Show. He says: “We had to provide an ESG plan and it was crucial.”

As well as the digital transformation, this increasing focus on governance issues is already having an impact on Lancashire’s manufacturing and engineering.

Stephen Kelly, director at Burnley aerospace business HycAero, describes the growing need to provide information and reports to customers as a “hidden cost” and he adds: “Without complying we can’t do business with the likes of BAE Systems, Airbus and Rolls-Royce.”

A&G Precision and Sons is a family run business based in Preesall with more than 30 years’ experience in the manufacture of complex machined components for a wide range of sectors, including military and civil aerospace.

Commercial director Wayne Richardson talks of the same challenges: “At the moment we’ve got Airbus asking for information, BAE Systems  asking for the same information through a different portal, with Rolls Royce after the same. It is a very disjointed way of doing things.

“Every large organisation needs to measure their supply chain. At the moment we are feeding this information in three or four different directions and that’s the cost.”

Ginni Cooper, partner at accountants MHA Moore and Smalley, says: “It is great to be part of the supply chain but it does bring pressures when it comes to ESG and carbon.

“Our larger clients are getting used to that, they understand they have got reporting requirements. For smaller businesses it is about educating them that it is coming down the road for them as well.” What is coming down the road for the supply chain is more compliance and governance, according to Rod Biddlecombe, partner and environmental lawyer at legal firm Brabners.

He says: “Next year or the year after the Corporate Sustainability Due Diligence Directive is going to be introduced in the EU.

“That is going to put a real focus on businesses within the EU, looking outside their own businesses towards their supply chain and ensuring they are complying with their environmental, social and governance requirements.

“Even though we are not in the EU, what is happening in Europe is going to have a real impact. If we want to trade in Europe we are going to have to comply with their regulations.”

When it comes to net zero, he adds: “There is a direction of travel and it is towards increased regulation.

“We are seeing an increased requirement for directors’ reporting on greenhouse gases and carbon emissions. The circular economy is being promoted as well.”

John Keen, managing director of Blackpool headquartered training and consultancy business RKMS, works with a range of supply chain businesses focusing on risk and compliance management. He says: “We look at compliance as a positive, a lot of people look at it as a cost.

“At the moment net zero is an expense to everybody but it is also a massive opportunity, the sort of savings that can be made there.” He adds: “We help clients achieve standards.

The need to measure their carbon footprint and produce a road map to get onto frameworks is a massive trend that we are seeing.”

Digital agency Red-Fern Media, based in Burnley, also works closely with companies on their digital transformation and growth.

Managing director Sean Redfearn sees that transformation and the ESG agenda as the central issues facing manufacturers in the supply chain. He says: “It is about understanding what the data needs to be and where it needs to go. The challenge for manufacturers further down the supply chain is how they will hook into that infrastructure when it is in place.”

And he adds: “We are seeing a lot of changes around how companies are approaching ESG. They see it as an opportunity to tell that story, to separate it out, to help get investment and funding.”

Ginni Cooper also believes businesses should use the reports in their statutory accounts to shout loudly about what they are doing really well when it comes to ESG.

When it comes to digital transformations there is support out there for Lancashire firms.

Melissa Conlon, commercial director of AMRC North West says £500,000 is being invested in creating a ‘supply chain demonstrator’ at the Samlesbury facility.

She explains: “This is a physical demonstration to help supply chain companies understand how they provide information upstream and downstream, how they extract information from their physical assets and the type of data the larger companies are actually looking for.

That will help them remain in the supply chain and also show what digital transformation they have got to through to provide the information.

“We want companies to come in and say, ‘I’m not at this stage yet but I need to adopt this and it will then keep me in the supply chain for businesses such as BAE Systems’.

“Because what we don’t want is any of this work going out of the county. It is about trying to help our manufacturers understand what the requirements will be of them going forward.”

Andy Schofield chairs the North West Aerospace Alliance (NWAA) and has been involved in recent cross-sector work looking at the opportunities and importance of manufacturing in Lancashire and the wide region.

He says: “Quite clearly, we are good at what we do around manufacturing. What we need to do is be better at what we do and we need to transform to a future world.

“What that means is getting ready for all the opportunities, whether they are in aerospace, defence, space, automotive or energy.

“There are a whole series of growth opportunities coming forward over the next few years. If we stand still we are out of the game, it is as clear as that.

“We need to attract manufacturing and engineering work into the region by developing skills, technologies and all those aspects. There is a massive opportunity. Equally, what comes with that is a big challenge, particularly across the supply chain.”