How are manufacturers navigating today’s challenges to optimise long term success and competitiveness? Jane Gray reviews findings and feedback from The Manufacturer’s annual conference.
From economic outlook and government industrial policy through to focused advice on energy strategy, productivity improvement and the exploitation of social media in business, the Manufacturer Director’s Conference 2012 (MDC2012), on November 21, offered insight and provoked debate.
The event was attended by almost 300 manufacturers and representatives from trade bodies, academia and supporting service organisations. Feedback reports that the speakers were strong, the networking beneficial and that the opportunity to exchange experiences and knowledge with peers – during what is an uncertain but potentially very exciting time for British industry – was relished by delegates.
The event was opened and chaired by Professor Sir Mike Gregory of Cambridge University’s Institute for Manufacturing, who welcomed delegates and joked that the last time manufacturing had been fashionable in the UK “I was wearing flares”.
Sir Mike urged delegates to seize the opportunities of the day in networking and asking pressing questions of speakers. He said that there is much for the manufacturing sector in the UK to be optimistic about if it can learn to exploit its assets and better understand its globalised marketplace.
Ross Walker, senior economist at Royal Bank of Scotland helped to clarify this environment with an overview of EU and global growth prospects. Mr Walker warned delegates of a growing dichotomy between European markets and those in developing economies where growth rates have broadly held up through the recession (see box). Walker played down concerns over slowing growth in China saying that it was expected.
This led to an analysis of the UK’s export performance and strategy. Walker termed UK export growth as “disappointing” given the advantage of a weak sterling. He admitted that this was closely linked to weak world trade but said that it was also a fault of where UK companies are broadly aiming to export to.
As well as drawing attention to growing distinctions between the health of European economies and those in the developing world, Ross Walker, RBS, noted “clear signs of contagion [from the eurozone crisis] in semi-core countries such as France and Belgium”.
Even Germany’s confidence is being effected said Walker – and he is not alone in noting these worrying signs that the instability in Greece, Spain and Italy are starting to spread.
As MDC2012 took place, an article in The Economist termed France a “time-bomb in the heart of Europe,” and warned that its lack of business-friendly policy and the very high proportion of GDP reliant on public spending could lead to a complete disintegration of its economy as early as the New Year. “Because of the failure to balance a single budget since 1981, public debt [in France] has risen from 22% of GDP then to over 90% now,” said the author.
Lee Hopley, chief economist at manufacturers’ organisation EEF does not deny the outlook is grim. “[The French] have recently had their own ‘Heseltine Review’ of competitiveness led by former EADS Chairman Louis Gallois and the conclusions were stark. Their share of global trading is falling, costs are rising and the government is faced with twin deficits – current account and public finances,” she observed.
Should France’s economy fail could core nations like Germany afford similar intervention to that arranged for Greece to maintain the euro community? If not, what would the fallout be for UK manufacturers feeding into French markets or supported by French supply chains?
Ms Hopley commented: “For UK companies involved in supply chains through French industry prospects are probably sector dependent”. Focusing on aerospace and the strong core of pan- European production in EADS, Hopley reassured: “The order pipeline there looks pretty solid because of demand from the Middle East and Asia. Therefore the domestic issues in France are very unlikely to be a major factor for UK manufacturers.”
Pondering what might be done to forestall such a disaster as a French economic collapse, Ms Hopley echoed the words of Lord Digby Jones at The Manufacturer of the Year Awards (p26) saying: “Europe needs to focus on how it competes [collaboratively] in the new global economic landscape.”
While it would be fair to say this economist’s insight into global GDP outlooks, inflation and consumer spending was not received enthusiastically by delegates, feedback did admit the importance of acknowledging macroeconomic conditions when planning day-to-day operations.
Perhaps Mr Walker’s most important observation was on what he termed “the great hope for British recovery” in the balance sheets of “non-financial corporates”. Walker said that UK corporates are sitting on “unprecedented cash piles”, and that until they can be moved to start spending and investing “UK growth will remain around 1% at best.”
But the institution most often charged with responsibility for growth is government and, stepping into the spotlight at MDC2012 the new minister for business and enterprise Michael Fallon assured that every department in government is now “a department for growth.”
His assurances fell on a dubious audience however, and Tom Crotty, director at speciality chemical manufacturer Ineos Group and chairman of sector skills council Cogent said that he saw “you [Mr Fallon] and Vince [Cable] as voices crying in the wilderness”. Mr Crotty asked what more could be done to break down silos in government and bring key departments behind manufacturing.
Mr Fallon assured that a forthcoming Growth and Infrastructure Bill being formed in collaboration between BIS and five key departments will deliver further on this. He also said that Lord Heseltine’s recent growth review has been fully acknowledged by government and that its advice, including devolution of power from central government into the regions, has influenced the Chancellor’s Autumn statement.
Moving away from policy and economy the final two keynote speakers at MDC2012 spoke with firsthand experience and passion on the challenges facing UK manufacturing.
Brian Davidson, non-executive chairman and former CEO of Crown Paints gave pragmatic but encouraging insight into the potential to transform the prospects of apparently failing manufacturing businesses.
Mr Davidson was firm in his advice to failing firms saying that many manufacturing owners and managers are still “in denial about the business environment returning to that of 2007”.
“[Other Parties] see that if [the industrial strategy] is going to work then it has to be longer term. And let’s be fair – some of the changes we have seen in the turnaround of automotive didn’t suddenly start in May 2010” – Michael Fallon, Minister for Business and Enterprise
Without a doubt the most moving presentation of the day was the last keynote from Richard Noble OBE, founder of the inspirational Bloodhound supersonic car project.
Mr Noble has become a ubiquitous speaker at industry events as the collaborative manufacture of the car which aims to exceed 1000 miles per hour progresses apace. However, the update delivered at MDC2012 moved even those who had heard Mr Noble speak many times before.
One delegate, Richard Lloyd, global manufacturing director at Accolade Wines said: “I have heard Richard speak several times but today was somehow different again. Truly his presentation made me determined to do something different [on schools engagement and outreach to young people] in our business.” Dr John Homewood, a lean expert formerly of Tata Steel, exclaimed over Twitter that the presentation was “Bloody inspiring!”
Cross party consensus
Following his presentation to delegates at MDC2012 Michael Fallon talked to Tom Moore about government interdepartmental tensions, aligning a remit for growth and gaining cross-party support for the Coalition industrial strategy. Here’s an excerpt from the interview.
TM: As we approach the end of this government’s term in a couple of years, what will BIS be doing to encourage Labour and other partners to get behind the industrial strategy announced by the Business Secretary in September?
MF: They see that if this is going to work at all then it has to be a longer term strategy. And let’s be fair – some of the changes we have seen in the turnaround of automotive didn’t suddenly start in May 2010. They started earlier, actually under a previous Conservative government which attracted Nissan to come to the North East in the 1980s and then followed through with Toyota coming to the Midlands in the 1990s. That’s a very good example of how you need a long term policy that both parties can support. Vince Cable’s door and mine are open to anybody, from any party, who wants to get behind the industrial strategy and support it.
The Bloodhound SSC has now visited over 5,300 schools to inspire young people with a desire to enter manufacturing and engineering careers – bridging damaging skills gaps. Mr Noble’s presentation importantly highlighted that these skills gaps are not only in core engineering competencies, but also crucially in IT – a fundamental part of business today but a subject which is drastically undersubscribed. Cisco, a partner to Bloodhound SSC says that there are 100,000 skilled IT positions in Europe unfilled today due to lack of skills.
“This is simply not competitive,” stated Noble.
The challenge of supplying the skills needed for today’s and tomorrow’s industry is massive. But Bloodhound is making serious inroads into addressing it. Just look to the fact that the University of West England, a supporter of the project, has doubled its engineering intake since becoming involved.
In the round
Running as fringe events to MDC2012 a number of sector specific roundtable discussions also took place on November 21.
Bringing together sector representatives from trade bodies, government and industry, these round tables provided focussed insight into challenges and potential solutions to industry issues.
The sectors covered were: Automotive, Advanced Engineering, Composites, Food and Drink and Power Generation.
Findings from these round tables will be compiled for a Sector Reflection report and published in February 2013.
Dick Elsy, CEO of the HVM Catapult attended both the Automotive and Advanced Engineering roundtables and said: “These debates were excellent. Input was focussed thanks to some accomplished chairing. I look forward to seeing the reports.”
Following the keynote presentations, delegates at MDC2012 attended a range of more focused conference sessions and workshops which homed in on key issues around business strategy, investment and productivity.
A stream of interactive workshops garnered particularly positive feedback. Peter Robertson, COO of food manufacturer Dailycer UK, said of the Toyota Production System workshop for process improvement, “The best part of this was a breakout to share real experiences. The session gave me some ideas and a structure to proceed.”
In a workshop exploring the use of social media in manufacturing businesses, GE Aviation, the maintenance, repair and overhaul arm of GE’s UK business, was praised as a leader in this field. GE Aviation uses From the Factory Floor albums to promote staff engagement, and give customers visibility of shop floor processes.
For manufacturers weighing up which social media platforms are worth getting involved in, Danny Bermant of Brainstorm Media, who hosted the workshop, claimed LinkedIn is 277% more effective in generating business than other social media platforms.
MDC2012 was the fifth annual conference sponsored by Royal Bank of Scotland. Peter Russell, head of manufacturing at the bank comments on what he feels had changed, and what had not, in the attitude of manufacturers at this year’s event.
“The sessions on energy and environment were well attended and delegate questions reflected what we see in the wider market as rising interest in the subject of energy.
It is now clearly in the top three to five issues on boardroom agendas and there is an acknowledgement that while steps have often been taken to reduce consumption and increase efficiency – such as changing light bulbs and looking at voltage optimisation – these steps are not enough. Presentations and questions showed that there is a will to push further in mitigating exposure to energy costs.
Exploring the use of waste products as a source of energy is one way in which companies are attempting to find further protection from energy costs. Both presentations in this section of the conference mentioned this. It was clear however, that there is a lot more RBS can and should be doing to communicate the opportunities and promote confidence in the fact that companies are already finding solutions to fund investment and source new technologies to further reduce energy costs. I saw a lot of people making notes in these sessions and I doubt anyone went away without having learnt something useful to take back to their business.
With regards to the sessions on finance, I didn’t sense from the questions that there was any more enthusiasm for buy-in or buy-out solutions to growth than there has been for the last few years. No one present admitted to being involved in a MBO or similar. This is indicative of a mindset, particularly in the mid-market, in which businesses are still looking inwards. They are looking at cost cutting, efficiency and maintaining market share as opposed to looking outward for expansion. More MBO activity in the sector would be a welcome indicator of greater confidence and focus on growth.”
Powerpoint presentations from all the sessions at MDC2012 are available to delegates on the event website: www.themanufacturer. com/mdc2012. Requests from non-delegates to access these assets should be sent to g.gilling@ sayonemedia.com