RBS: Getting ahead to stay ahead

Posted on 6 Feb 2013

Foresight and the conviction to act will be two defining characteristics of the most successful manufacturing companies this decade. In this article – part of a series focused on manufacturing growth strategies - Peter Russell, head of manufacturing & industrials at Royal Bank of Scotland, outlines how new production techniques and processes will help set manufacturers free from traditional economic paradigms and make the UK manufacturing sector a global pace setter for product innovation and customisation.

New thinking required to gain pole position

Supported by RBS

With UK manufacturing output falling in 2012 and growth forecasts having been reduced to 1.5% for 2013 (CBI, November 2012), it would come as no surprise if an air of resignation permeated manufacturers’ boardrooms.

However, encouragingly, it seems that the country’s manufacturers are not ready to accept the status quo. “They are striving to replace the sense of pervading gloom with a vibrant image of an industry that is already applying new thinking to strengthen its global competitiveness,” comments Roy Bawden, director manufacturing & industrials at RBS.

Confidence among UK business leaders is increasing. Eight out of ten (82%) businesses responding to a recent RBS survey confirmed they expect their turnover to grow over the next five years. By comparison, less than 8% believe their turnover will shrink. This goes along with the sentiment that investment budgets must not be cut, but – on the contrary – that additional funds are necessary to get ahead of the competition (RBS The Future of UK High Value Engineering 2012).

Additional pressure arises from the fact, that, so far, a depreciating pound has helped to shield the UK’s competitiveness.

This is unlikely to be sustained in the medium term and, as a result, early investment to achieve a sharp improvement in productivity and development of new products that deliver a USP in any chosen market and at a competitive price is needed.

“Considering all these factors, a growing number of manufacturers are looking for an accelerator that will speed growth beyond ‘traditional’ business expansion strategies such as simple product diversification, new export markets and recruiting new talent”, Bawden observes.

New production processes leave economies of scale behind

Skills and commercialising innovation in nanotechnology, 3D printing and composite materials will all give UK manufacturing an edge on its global rivals, but it is also the new wave of smart design systems and intelligent machinery that will power the country’s factories of the future.

Ian Nelson, Head of Origination at Lombard, part of RBS Group, observes, “These new machines will revolutionise manufacturing, accelerating the speed of production, while providing greater flexibility and reliability. The introduction of this new technology has led to fresh thinking around production paradigms such as economies of scale and how new production equipment could help overcome cost scenarios that have so far limited product development and productivity.”

Design technologies, including 3D CAD and advanced production techniques are helping drastically reduce the time necessary to bring products to market. In the past, manufacturers not only had to consider direct costs such as raw material, machine time and operator costs, but especially ‘up front’ costs deriving from developing a component or product, a production-ready technology and the necessary tools required.

These costs were significant, only further increased by waste while tuning and testing the process before full production commenced. Because of these high set-up costs, it was often impractical to set up for less than ten or twenty thousand units of the same product – economies of scale had to be achieved in order to cover costs and make money.

The imperative of customisation

Boosting efficiency through new production processes will be vital as the UK strives for growth but this will not be enough to beat the competition on its own.

Other ingredients will be needed including a relentless focus on innovation and a willingness to adopt new thinking towards product design. For example, putting Beta versions quickly into consumers’ hands, then ironing out flaws and adding new features in future models will become much more important than spending long periods designing a perfect product.

Future generations of products will evolve faster, with rapid iterations in design and far tighter collaboration between designers, manufacturers and their customers.

Bottom line benefits from both ends

As outlined, production costs, but in particular up-front costs, can be dramatically reduced by implementing new automated production processes. This will allow manufacturers to more easily and more quickly change features in order to produce different products or product variations.

Very often new production equipment helps to reduce electricity usage and material waste too – both considerable cost drivers. Furthermore, costs for inventory decrease if components can be made in time through flexible machinery only once the customer order comes in rather than having to be pre-produced.

Corporate revenues clearly benefit from additional income streams that manufacturers can achieve by launching new products more quickly and with cost efficient customisation which permit new markets to be targeted. Cirrus Laser, a leading UK laser cutting and water jet cutting company, following this strategy they commissioned a new state of the art machining centre. The machinery enabled increased production and the use of larger scale and more varied materials that opened new markets. At the same time, the new centre required less maintenance than the old one and halved electricity usage – all of which has driven a favourable impact on profitability.

Survey results show that UK manufacturers have indeed refocused on production processes whilst planning their R&D budgets in order to improve the bottom line, with 43% of companies concentrating on this area over the next five years (RBS The Future of UK High Value Engineering 2012). Ian Nelson, points out that businesses are recognising the importance of investment in new production equipment and processes, while protecting the capital required for all-important R&D, as well as increased focus on training and developing skill in the next generation. “An increasing number of companies appreciate that their success relies on investment across each of these areas in order to secure their long-term future in the global market place.”

Now is the time

The need to maintain competitiveness and deliver growth in the future means that manufacturers need to act now to override traditional cost scenarios in order to be able to offer customised products at a competitive price for new markets. It is not only top tier manufacturers but also suppliers of any size that need to rise to the technology challenge to ensure they stay competitive within their supply chains and can meet the current and future needs of OEMS.

Want further insight into how manufacturers are gearing up? Visit www.rbs.co.uk/futureofukhve.