Sector Focus: Automotive – Demanding supply

Posted on 7 May 2013 by The Manufacturer

Recognising the negative impact of top heavy growth in the UK automotive sector.

In 2012 Tata-owned Jaguar Land Rover recorded record profits as it totted up revenues from the sale of 314,433 vehicles around the globe. Sales revenues were up £37% on the previous year and reports for first quarter performance in 2013 show that demand is not waning. Q1 brought JLR’s best ever quarterly sales performance with 115,000 cars sold worldwide.

But the unrelenting success of the car manufacturer is not without its negatives, a fact that Jose Lopes, JLR’s head of technical excellence, says the manufacturer is acutely aware of.

“We have to be mindful of the impact of growth on the supply chain,” he says. “Our growth will naturally attract people to come and work for us but we are aware that this has a potential negative impact on the supply chain. Particularly for smaller businesses that are effectively looking for off the shelf talent because they have little resource for training.”

Mr Lopes continues, “We will continue to grow. That is our priority. But this is unsustainable if we create a situation in which our suppliers are unable to meet the demands of the business.”

Taking action

To try and stem this problem and appreciate where pinch points in shared skills demand are most painful, JLR is working on a number of initiatives, both internal and collaborative. Key among these are JLRs Technical Accreditation Scheme (TAS) and its wider embodiment in the new Advanced Skills Accreditation Scheme (ASAS).

Lopes explains, “We launched TAS in 2010. The scheme is designed to allow JLR to grow its own talent in the technical skills it needs to support plant and business growth plans.”

Jo Lopes, Head of Technical Excellence, Jaguar Land Rover
Jo Lopes, Head of Technical Excellence, Jaguar Land Rover

“We have to be mindful of the impact of growth on the supply chain,” he says. “Our growth will naturally attract people to come and work for us but we are aware that this has a potential negative impact on the supply chain”Jose Lopes, head of technical excellence, Jaguar Land Rover

TAS is ambitious. Supported by leading UK universities, the training challenges employees to step up to masters level learning in targeted disciplines – but on a modular basis so that training can be managed in line with work.

The scheme has obvious benefits to JLR, increasing employee loyalty and capability and reducing succession risks but Lopes says it also benefits the supply chain. “It is difficult to recruit skilled engineers and TAS allows us to move people up the organisation so that we can recruit fresher, less experienced people – rather than compete for the small pool of ready-qualified highly skilled engineers which others may have a more immediate demand for or less resource to develop.”

TAS now offers 50 subject areas for study in disciplines including electronics and electrical engineering, process engineering, low carbon technologies and lean manufacturing – all of which are industry pinch points for skills, according to Lopes, since they are in high demand in most tiers.

Modules are drawn directly from leading post graduate engineering degree courses at partner universities and delivered either remotely or on campus in week long courses which include around 150 hours of personal study time. Lopes says all modules have been heavily subscribed with around 2000 completed since the launch of TAS in 2010.

Capacity and visibility

Of course, the ability of the UK automotive to compete for the growing business of OEMs like JLR is not only reliant on their ability to attract and retain skilled people, but also their ability to invest the manufacturing technologies and facilities they need to achieve the necessary quality, output and lead times OEMs require.

JLR knows that access to finance is a historical and present problem for UK manufacturing SMEs and Mr Lopes assures that the company is in constant discussion with the Department of Business Innovation and Skills, lobbying for the development of appropriate finance, funding and tax facilities to help its supply chain meet its requirements. “We have a long term relationship with BIS which is targeted at trying to ensure the supply chain has the working capital it needs to service our demand,” says Lopes.

One way in which JLR is getting its hands dirty with government to try and alleviate financial constraints on investment is through the Supply Chain Finance scheme. Launched last year, this scheme secured the support of a range of large companies across sectors. It assures their cooperation in informing banks of their approval of invoices, thereby prompting offers of lending at better rates to companies banks can see are part of a stable value chain. The scheme is in its early stages and reports on its effectiveness are expected later this year.

More recently, JLR, alongside Aston Martin and Toyota worked with the owner of Goodwood, Lord March to launch an online application for supply chain risk mitigation which includes a financial modelling tool for the early identification of potential weak links in the supply chain.

The motivation behind the creation of this online solution is the provide “collective security” for the UK automotive supply chain. JLR spends 60% of its material budget in the UK, but the majority of this is with global tier 1 suppliers. Visibility of tiers 2,3 and 4 is limited and this represents potential risks.

Therefore, other tools in the new application include a supply chain mapping tool to increase visibility of lower tiers and a portal with business information, from health and safety records to CSR performance and historical financial stability, on all suppliers to all the OEMs involved.

Prime Minister David Cameron visits Jaguar Land Rover's Solihull plant in December last year
Prime Minister David Cameron visits Jaguar Land Rover's Solihull plant in December last year

Sharing expertise

While other automotive OEMs in the UK share some of JLRs challenges over skills capacity in the supply chain, Lopes says that his organisation’s concerns are greater because of the wider skills window its UK operations cover. “JLR is unique among UK automotive OEMs in having everything from blue sky research through to production based in Britain. This increases our skills footprint and the areas where we have to consider the impact of growth on skills availability.”

This is one reason why JLR sought help from sector skills council Semta last year to extend its successful TAS programme, with its broad ranging, high level skills development offering, to its supply chain and the wider manufacturing community. The resultant Advanced Skills Accreditation Scheme took advantage of funding via the Employer Ownership of Skills pilot to open up the TAS model to all UK employers in the automotive and aerospace industries.

ASAS is now administered by Semta and will see its first module enrolments this September at the start of the new academic year. An employer panel, chaired by Lopes on behalf of JLR, gives input to ensure the best courses from the best sources are made available through the scheme.

The cost of funding an individual through an ASAS module is dependent on the discipline and the university involved in delivery.

Summing up, Lopes says that sharing expertise in training, taking advantage of employer-led funding structures like Employer Ownership of Skills and working closely with BIS and trade associations like SMMT to coral appropriate industry support is integral to JLRs ability to keep growing sustainably, profitably and without escalating risk.