Top of the food chain

Capacity development

This subject was championed throughout dinner by Mark Smith, worldwide supply quality leader at Cummins Turbo Technologies. Mr Smith explained to peers the challenges being faced by Cummins as it charges into an aggressive period of growth – targeting a step up from $1.2 billion turnover to $3bn by 2015. “How do we develop that supply chain to cope with our growth over the next three to four years?” he asked.

The allocation of capacity throughout the Cummins supply chain was revealed to be a major project. This included identifying suppliers, not only with appropriate capability, but also with shared values. “They must be organisations we feel we can partner with,” stated Smith.

In tandem with this, a push to encourage investment in enabling technologies was considered essential but challenging. Part of this challenge was linked to a perceived lack of awareness among SME suppliers of technology strategy – either as devised by prime customers or by government bodies like the Technology Strategy Board (TSB).

In addition, Brian Holliday, divisional director at Siemens Industry Automation, spoke of a comparative reluctance on the part of UK firms to invest in the technologies customers and government have identified as competitive necessities. Smith agreed saying, “Unfortunately for UK manufacturing, Asian manufacturers are more ready to come to the table with the cash and put in place the investments we are asking for.” Options for asset finance and exploitation of Capital Allowances in the UK were discussed as means to ease this problem but an overall feeling of risk aversion from UK suppliers was strongly expressed.

A third aspect of capacity and capability development in supply

chains was raised in relation to supply chain visibility. It was agreed by all participants that this could be much improved and was poorly understood by the industry as a whole. Tony Doran, European director of information systems at global bearings manufacturer NSK, said that his organisation was in the process of acquiring a comprehensive record of supplier data down to tier four or five in response to difficulties experienced in 2011 following the Japanese tsunami.

The reluctance of suppliers to share information was indentified but customer pressure was found to be pre-eminent. Clarity as to what action would be taken on the collated data and was lacking but its ability to improve risk management and assist in tracking total cost of ownership of products and assets in the supply chain were felt to be important.

Although not present at the dinner, Nick Lowe, MD at third party logistics provider Dachser, later said that a need for greater cost visibility was driving technological innovation and investment in firms like his own. “Our systems are now capable of reporting for a view of total acquisition costs – taking into account the sum of transactional costs but also overhead or administrative costs, even when services like warehousing are provided on a flexible basis and shared between companies.”

Skills development and competitiveness

Every attendee stated their concern about the development of technical skills in the supply chain and the disparity between primes, which attract thousands of applicants for a handful of apprenticeship roles, and the difficulties faced by less well known companies in attracting talent was noted.

Brand obscurity was seen to be a factor here and there was a feeling that more could be done to market the importance of the UK supply chain in the success of large organisations. A suggestion that ‘near miss’ apprentices could be redeployed more effectively into the supply chain was welcomed but in order to be effective the need for a dedicated mechanism, tracking supplier skills needs and matching them to appropriate candidates, was identified.

Mr Holliday shared that Siemens is in the early stages of developing just such a system. “We are keen to explore the avenue of training apprentices for other companies,” said Holliday. “We [referring to the group] don’t have a problem recruiting thanks to the strength of our brands, but others do.” However, Holliday did have a caveat. “Government must realise that businesses like Siemens cannot fund the whole cost of initiatives to get more skills into the supply chain. We can fund training for our own needs but not for the greater needs of the supply chain.”

The issue of UK skills led on to discussion of what differentiates the UK as a manufacturing location. Jeff Kennelly, operations leader at GE Aviation, maintained that quality and the pedigree of British engineering would always set British aerospace apart from global competitors but others were less confident that this historical virtue could be relied upon.

“We will not continue to excel in areas such as aerospace and automotive if we have ignored all our component suppliers,” stated Holliday. “China has a clear intent to build capability in advanced manufacturing and while we are having a discussion over planning laws and whether automating a factory will cost jobs, in China they have poured the cement and bought the robots. The time gap for them to overtake us is much shorter than most seem to think.”

Alignment

In seeking to understand how the supply chain for high value manufacturing in the UK might work better a number of international comparisons were made.

It was felt that most European nations showed far more alignment between local and national government practices and headline policies to support manufacturing. Germany in particular was held up as an exemplar and Ben Wright, director of purchasing and logistics at McLaren Automotive, said that its source its specialist composites from mainland Europe was influenced by the fact that the supplier site was offered attractive loans from local government. By contrast the UK government was generally felt to be missing opportunities to support greenfield builds or factory expansion. Planning laws were mentioned several times as a hindrance to the growth of capacity throughout the UK supply chain.

In a pragmatic turn of conversation however, Mr Doran emphasised that business should not wait for government alignment, but take responsibility for coalescing businesses around common needs. Alan Duncan, automotive and industry expert at IBM, agreed and referred to the Sunderland manufacturing community as an example of how this could be done.

He said: “Nissan were looking for a local concentration of skills, whether it be component manufacturing, engineering or sales and marketing, so that they could have a feeling of stability in that area. This led to us working to create a cloud which suppliers can engage with on a low cost basis. This has allowed the creation of a region which is built around capability in electric vehicles. But it was business that drove this work, not the council or government.”

TM would like to extend its thanks to IBM for its sponsorship of this event.