Competitive complacency

Posted on 13 Dec 2013 by The Manufacturer

Being a high value manufacturer is not a competitive differentiator in the global market – or if it is, it won’t remain so for long says Jane Gray.

Jane Gray, Editor, The Manufacturer magazine

‘Advanced’ and ‘high value’ are terms which are used too freely and without thought or understanding when referring to the reputation and competitive differentiation of UK manufacturing.

This is not to say that many manufacturing companies in the UK have not worked hard to develop advanced and high value operations.  But there is a worrying tendency toward complacency in thinking that these characteristics will – or do – make UK manufacturing distinct from that of other nations. Is China still really a ‘low value’ manufacturing nation? Is it likely that it is content to remain so?

The danger of encouraging a flimsy superiority complex in UK manufacturing that its clever production techniques and products set it apart from the rest of the world is exacerbated by the way in which politicians have taken to dropping the words ‘advanced’ and ‘high value’ into every paragraph of any speech which seeks to show support for the rebalancing of the economy.

But manufacturers should be wary of using the words in with the same throw away attitude.

Being a high value manufacturer is not a competitive differentiator in the global market – or if it is, it won’t remain so for long.

China has targeted growth in high value manufacturing as part of its current five year plan and it has put powerful policies in place to develop the skills and technology base required to make it happen. According to research from Professor Andy Neely, director of the Cambridge Service Alliance China is also developing its understanding of services delivery alongside manufacturing and at a faster rate than British industry, thereby expunging another so called UK differentiator – customer centricity.

Furthermore, developing economies with ambition to become advanced manufacturing nations have the resources to create high value manufacturing enterprises on a scale which could leave our wealth on undeniably high value, but often rather small advanced manufacturing companies high and dry in the global market place.

This was made abundantly clear during my recent trip to India to learn more about Tata Group and its ever expanding empire of businesses.

While visiting Tata’s watch and jewellery factories – owned by Titan, a Tata Group business – an intriguing story of innovation and market diversification was uncovered.

Titan Precision Engineering has had help from Western OEMs in getting up to speed with regulation and compliance for aerospace supply.

Having mastered the precision engineering skills needed to make watch parts consistently to tolerances of less than 1 micron a group of engineers at Titan put forward an idea for the formation of an independent subsidiary which could concentrate on honing hard earned precision engineering capability for a wider and more demanding range of applications (That’s right, an employee led-innovation – the UK is not alone in valuing and ‘empowering’ its workforce to drive innovation and improvement).

Titan Precision Engineering was founded in 2007 and has since enjoyed 30% year on year growth.

It now generates $40m in revenues and employs 600 people, 80% of whom are engineers.

It works with global clients like Rolls Royce, Pratt and Whitney and Parker Hannifin to assist with precision engineering and automation solutions.

Its first global clients have been instrumental in helping Titan PE get up to speed on the demanding compliance and regulatory environment that is part and parcel of being an aerospace supplier and the company has a clear target to grow to five times its current size in the next five years.

Sridhar NP, head of business development at Titan PE, told journalists visiting Titan’s operations that he feels this is possible because companies like Boeing, to which Titan PE is a second tier supplier, are experiencing increased demand for expensive to make planes – particularly in Asia.

This means that they are looking both to reduce the cost of manufacture and increase volumes. “British forms are very well known for their high quality, high precision engineering,” said Mr NP. “But we know that many precision engineering firms in the UK are quite small. Tata has the resources to provide precision engineering services on a much larger scale and in India we can do it at a lower cost.”

This statement should act as a wake-up call to high value manufacturing SMEs on two levels – Being high value doesn’t make you special, and running a lifestyle business without ambition to invest and grow is not a sustainable proposition if you want to supply growing sector primes.