Simon Griffiths, Area Director at the recently formed Manufacturing Advisory Consortium (MAC), looks back on an eventful, though tough, year that has seen manufacturing become the saving grace of the UK economy.
“When I sat down twelve months ago to write a few words on what 2011 would bring I paraphrased Mark Twain and said predictions are difficult, particularly about the future, and how right that was!
Very few industry analysts could have looked into their crystal balls and seen the tragic circumstances that occurred in Japan and Thailand and few could have predicted the severe crisis currently taking hold of the Eurozone.
“What was reasonably clear was that growth in the UK was going to be slow, much slower than other recent recessions, driven not only by poor domestic demand but also a sluggish global feel that is still proving difficult to shake. Remaining upbeat, we have seen the last three quarters result in positive growth territory – but only just.
Yet amongst this rather unstable marketplace, we have been privy to some rather more encouraging news for West Midlands and UK manufacturing. Jaguar Land Rover (JLR) has continued its amazing transformation, first announcing its new engine plant in Wolverhampton and more recently 1000 new jobs at Solihull.
“At the same time, BMW has confirmed the extension of the Hams Hall engine plant, Toyota will build the new Auris at Burnaston and Nissan has joined the party with new production in Washington in the North East.
“There are other signs coming out of industry, which gives hope for 2012 and particularly for our local manufacturers.
Early in 2011 we all saw the horrific images coming from Japan as a result of the earthquake and tsunami and this had a relatively quick impact on a number of manufacturing supply chains around the world who had to bring production to a halt due to lack of parts…primarily electronics.
This set warning bells ringing and these bells returned later in the year when floods came to Thailand – again having significant repercussions on global supply chains.
To add to this we have seen sterling consistently 20-30% more competitive than 5 years ago and with fuel prices climbing significantly, this all points to a growing need to source products closer to home…either bringing back manufacturing to the UK, or the relatively new phrase “near shoring” (bringing production back closer to home, but not quite in the same country).
So what should manufacturers do to maximise the chance of success?
I was surprised when we entered the recent recession how few firms actually had strong business strategies and a clear understanding of why customers purchased their products or processes.
And so when they saw low volumes they did not know how or where to sell their products outside their current client base. Maybe more importantly a number had seen substantial organic growth with one or two key customers.
Whilst it is always critical to have good relationships and be able to build business on the back of this, it does always bring some dangers with it and some firms had fallen into the trap of having 70, 80 or even 90% of their order book with one source.
This leaves it at risk should volumes drop with that one customer, or even in the case of MG Rover go out of business.
It is important to have a reasonable spread of business – much more than 50% with one customer should start alarm bells ringing for both supplier and customer alike. So I would highly recommend that every company looks clearly to its forward strategy. Where does it want to be and why? What are its key strengths and weaknesses? What are its competitors doing? Where will the market begin growing or declining? And so on.
The good news for West Midlands manufacturing is that the new ‘MAS’ service is very much focused on boosting sales and working with companies to ensure ‘growth’ in existing and new markets.
Delivered by the Manufacturing Advisory Consortium (a collective of Grant Thornton, Pera, WM Manufacturing Consortium and MAS SW Ltd), the new offer comes into force on January 2nd and is promising to generate £1.5bn of growth in the sector, create 23,000 jobs and safeguard a further 50,000.
We are delighted that the Government has recognised the need to continue to provide expert support to manufacturers and in a way that keeps our advisers on the ground and doing what they do best which is working inside companies.
The specific focus – as I’ve already mentioned – is on driving growth through strategic and technical support for SMEs developing advanced manufacturing capabilities and creating high value jobs.
It is about enabling business improvements with manufacturers operating in global supply chains and directly linking them with the Apprenticeship programme that will drive a minimum of 1250 apprentices each year – a vital injection of youth into an industry that is suffering from an ageing workforce.
Companies can tap into a wide range of assistance, ranging from a direct phone hotline and business reviews to training and supply chain development. There is also the opportunity to access part-funded, in-depth support where an adviser and specialist will work with manufacturers to achieve major step-changes or a transformation in how they operate.
So will 2012 be a good year for manufacturers? A definite ‘maybe’ – it is unlikely that we will witness strong growth next year, but laying the foundations now and continuing to invest in people, processes and products will reap dividends in the longer term.”
(Reproduced with permission of Russ Cockburn of Danks Cockburn PR)