It's no secret that British manufacturing has had a lot to smile about as of late. As production orders and exporting increases, Antony Bourne of IFS discusses how manufacturers can look beyond traditional produce and sell processes to maximise potential.
Last month, the Confederation of British Industry (CBI) released its latest monthly industrial trends survey, which revealed that manufacturers in the UK are enjoying another month of sector growth and the strongest rebound in two years. The latest Markit/CIPS purchasing managers’ index (PMI) also revealed that the sector is seeing its strongest growth in activity for two and a half years in August. Orders, especially for exports, have recovered strongly and the growth rate is expected to accelerate, with the buildings materials, electrical goods and metal manufacturing sectors seeing particularly robust growth.
One of the factors we see behind this positive growth is that the UK is increasingly being seen as a leading base for the added skills and intelligence being put into manufacturing processes. With exports and local demand increasing, we get the sense that the UK is increasingly looking inwards and wanting to help pull the country out of recession. We’re seeing more ‘made in Britain’ and ‘sourced in Britain’ statements, which is a clear pull on public heart strings to get out of our own mess. After all, us Brits are far more likely to buy products that are made in the UK.
Earlier this year, Alastair Sorbie talked about the reshaping of the UK manufacturing industry, which is helping fuel this economic revival. The Far East is still seen somewhat as a cheaper location for mass manufacture and general sub-assemblies, although rising freight and wage costs may see this soon change. In the meantime, final assembly is increasingly being handled on home shores, where greater product customisation and innovations are taking place, often referred to as individualise-to-order.
The potential of post-production services
Leading manufacturers across the world, such as Siemens and SKF, now make as much as half of their sales and profits not from producing things, but from providing post-production services to their customers and helping them get more out of the asset. Often, companies spend more money on repairing or servicing the product than they did to initially buy it, so it’s important that UK manufacturers tap into this opportunity to bring greater industry growth.
MacTaggart Scott, a privately owned Scottish engineering company that serves the naval defence and marine industries, is also placing more focus in services as part of its long term strategic planning. Defence industry products from MacTaggart Scott include aircraft elevators, arrestor gear and helicopter handling for surface ships, and periscope-raising equipment, retractable bow planes, hydraulic power plants and towed-array handling systems for submarines. These systems are mission-critical and responsible for the security and safety of military and civilian personnel, so it’s vital that they provide the immediate support and service of these assets following deployment.
In a design-to-order environment, MacTaggart Scott has recognised that its long term business success lies in the increased focus on customer relationship management and expansion of its capabilities in service management, including spares and repairs as a functionally independent operation.
We’re also seeing other drivers filter through from Europe that are helping fuel this manufacturing revival. One of these is the increased awareness and move to sustainable solutions, which are providing increased opportunities and revenue streams in this sector.
Norwegian business Tomra is a good example of a traditional manufacturer that has expanded its business into providing more sustainable service-based solutions, delivering recycling machines that enable customers to return used beverage containers for recovery and recycling. The company provides fast and efficient service to its 60,000 machines installed in 45 countries worldwide.
For the stores that use the machines, the importance of swift service cannot be underestimated. Research done in this area shows that consumers who return empties purchase up to 52 per cent more than other shoppers. For this reason, rapid resolution of faults and swift delivery of spares are crucial to the stores. This is where Tomra’s service organisation plays a critical role and this maintenance component is an increasing revenue stream for the organisation.
Operating in the UK
We’re now starting to see similar recycling initiatives filter through to the UK, where schemes which offer an incentive for recycling drinks containers are being introduced to help tackle Scotland’s litter problem. The Health Secretary Richard Lochhead is looking at the feasibility of taking up a deposit refund scheme which already operates in Sweden. It works by adding a small deposit to the cost of a drink which is refunded when the container is returned.
As with the example in Norway, this presents UK manufacturers with a way to deliver more sustainable solutions to their customers, while also delivering more post production maintenance and support for their products. This level of intelligence is often difficult to deliver from abroad, it often needs to be sourced locally so that any response can be made rapidly with a qualified engineer who has the correct knowledge. This ultimately improves the asset lifecycle for the customer and delivers added revenue streams for the manufacturer.
These are clearly areas that offer a chance for the UK’s industrial manufacturers to show off their competitive edge through that added intelligent layer in the final assembly stages, and will no doubt see the manufacturing sector bring greater growth in the future.